SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: October 27, 2003
(Date of earliest event reported)
Pre-Paid Legal Services, Inc.
(Exact name of registrant as specified in its charter)
(Commission File No. 1-9293)
Oklahoma 73-1016728
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
321 East Main Street
Ada, Oklahoma 74821-0145
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (580) 436-1234
Item 7. Financial Statements and Exhibits
The following exhibits are included with this report:
Exhibit No. Description
99.1 Company Press Release dated October 27, 2003(1)
(1) This Exhibit is not to be deemed filed as it is being furnished with this
report pursuant to the instructions to Item 12 of Form 8-K.
Item 12. Results of Operation and Financial Condition
On October 27, 2003, Pre-Paid Legal Services, Inc. (the "Company") issued a
press release announcing its earnings and operating results for the three months
ended September 30, 2003. A copy of the release is included as an exhibit to
this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRE-PAID LEGAL SERVICES, INC.
By: /s/ Randy Harp
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Date: October 27, 2003 Randy Harp, Chief Operating Officer
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Company Press Release dated October 27, 2003 (1)
(1) This Exhibit is not to be deemed filed as it is being furnished with this
report pursuant to the instructions to Item 12 of Form 8-K.
For Immediate Release Company Steve Williamson
Monday, October 27, 2003 Contact: (580) 436-1234
Pre-Paid Legal Announces Third Quarter 2003 Financial Results
EPS Up 17%, Net Income Up 5%, and Membership Revenue Up 4%
ADA, OK, October 27, 2003 - Pre-Paid Legal Services, Inc. (NYSE:PPD), today
announced financial results for the third quarter and for the nine months ended
September 30, 2003. The Company released production results earlier this month.
Net income for the third quarter of 2003 increased 5 percent to $9.4 million
from $9.0 million for the prior year's third quarter. Membership revenues
increased 4 percent to a record $82.7 million from $79.6 million for the same
period last year. Diluted earnings per share increased 17 percent to 54 cents
per share from 46 cents per share for the prior year's comparable quarter due to
increased net income of 5% and an approximate 10% decrease in the weighted
average number of outstanding shares.
Net income for the first nine months of 2003 increased 20 percent to $31.5
million from $26.4 million for the first nine months of 2002. Diluted earnings
per share for the 2003 nine-month period increased 35 percent to $1.78 per share
from $1.32 per share for the prior year's comparable period. Membership revenues
for the first nine months of 2003 were up 7 percent to $246.1 million from
$229.1 million for the prior year period.
Net cash provided from operating activities for the nine months ended
September 30, 2003 increased 1 percent to $39.6 million from $39.0 million for
the comparable period of 2002. Net cash provided from operating activities for
the three months ended September 30, 2003, decreased 27 percent to $11.3 million
from $15.5 million for the comparable period of 2002. At September 30, 2003, the
Company had cash and investment balances exceeding $34 million after spending
$34.1 million during the first nine months of 2003 to repurchase 1.6 million
shares of its stock at an average share price of $21.48, including $1.9 million
during the third quarter of 2003 to repurchase 86,100 shares at an average share
cost of $22.63. Since April 1999, the Company has purchased 7.1 million shares
at a cost of $159.3 million, or an average share cost of $22.47. The stock
buyback initiative has reduced the number of outstanding shares by approximately
30 percent to approximately 17.3 million shares outstanding. During the third
quarter the Company repaid all previous advances outstanding pursuant to a stock
purchase line of credit. At September 30, 2003, the Company had $17.6 million
outstanding on its $20 million line of credit for its new office construction
and had immediate availability of $25 million for further treasury stock
purchases pursuant to additional financing announced last month.
Third quarter 2003 membership fees increased slightly to $82.7 million from
$81.9 million for the second quarter of 2003. Associate services revenues
declined during the 2003 third quarter by approximately $405,000 to $5.9 million
from $6.3 million for the 2003 second quarter while associate services and
direct marketing expenses increased by $61,000 during the same period.
Membership benefits totaled $28.0 million in the third quarter of 2003 compared
to $27.6 million for the second quarter and represented 34% of membership fees
for both periods. Total commissions to associates per new membership sold during
the respective quarters were $169 per membership for the three months ended
September 30, 2003 compared to $166 for the second quarter of 2003. Primarily
due to increased legal fees associated with ongoing litigation and bad debt
expense, general and administrative expenses during the 2003 third quarter
increased to $9.9 million compared to $8.9 million for the second quarter of
2003 and represented 12% and 11% of membership fees, respectively, for each
period.
The Company will conduct a conference call to present the third quarter
results on Wednesday, October 29, 2003, at 8:30 a.m. Eastern Time. The
conference call will be webcast on the investor relations' page of
www.prepaidlegal.com or may be accessed by dialing (913) 981-5533. Audio replay
will be available beginning at 11:30 a.m. Eastern Time on October 29, 2003 and
will run through midnight Thursday, November 6, 2003 by dialing (719) 457-0820;
passcode for the replay is 788959. The presentation will be available on the web
site indefinitely by selecting "Earnings Calls" under the "Investor Relations"
section.
The Company expects to file its quarterly report on Form 10-Q for the three
months ended September 30, 2003 later this week.
About Pre-Paid Legal Services
Pre-Paid Legal Services develops and markets legal service plans across
North America. The plans typically provide for legal service benefits, including
unlimited attorney consultation, will preparation, traffic violation defense,
automobile-related criminal charges defense, letter writing, document
preparation and review and a general trial defense benefit. More information can
be located at the Company's homepage on the worldwide web at
http://www.prepaidlegal.com.
Forward-Looking Statements
Statements in this press release, other than purely historical information,
including those statements above regarding future stock repurchases and
additional funding arrangements, regarding the Company's future plans and
objectives and expected operating results, and statements of the assumptions
underlying such statements, constitute forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. The
forward-looking statements contained herein are based on certain assumptions
that may not be correct. They are subject to risks and uncertainties incident to
the Company's business that could cause actual results to differ materially from
those described in the forward-looking statements. These risks and uncertainties
are described in the reports and statements filed by the Company with the
Securities and Exchange Commission, including (among others) those listed in the
Company's Form 10-K and Form 10-Q, and include the risks that the Company's
membership persistency or renewal rates may decline, that the Company may not be
able to continue to grow its memberships and earnings, that the Company is
dependent on the continued active participation of its principal executive
officer, that pending or future litigation may have a material adverse effect on
the Company if resolved unfavorably to the Company, that the Company could be
adversely affected by regulatory developments, that competition could adversely
affect the Company, that the Company is substantially dependent on its marketing
force and that the Company's stock price may be affected by short sellers.
Please refer to pages 37 and 38 of the Company's 2002 Form 10-K and pages 8
through 10 of the Company's June 30, 2003 Form 10-Q for a more complete
description of these risks. The Company undertakes no duty to update any of the
forward-looking statements in this release.
PRE-PAID LEGAL SERVICES, INC.
Financial Highlights (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues:
Membership fees.................................................... $ 82,695 $ 79,583 $ 246,123 $ 229,062
Associate services................................................. 6,033 9,363 19,900 27,499
Other.............................................................. 1,296 1,213 3,963 3,573
90,024 90,159 269,986 260,134
Costs and expenses:
Membership benefits................................................ 27,956 26,620 82,271 76,936
Commissions........................................................ 28,443 31,064 84,974 91,671
Associate services and direct marketing............................ 7,411 7,732 21,820 22,455
General and administrative......................................... 9,896 8,529 26,817 23,869
Other, net......................................................... 2,175 2,539 6,256 4,968
75,881 76,484 222,138 219,899
Income before income taxes........................................... 14,143 13,675 47,848 40,235
Provision for income taxes........................................... 4,705 4,718 16,333 13,881
Net income........................................................... $ 9,438 $ 8,957 $ 31,515 $ 26,354
Basic earnings per common share...................................... $ .54 $ .46 $ 1.79 $ 1.32
Diluted earnings per common share.................................... $ .54 $ .46 $ 1.78 $ 1.32
Weighted average number of shares:
Basic.............................................................. 17,335 19,312 17,654 19,909
Diluted............................................................ 17,405 19,349 17,705 20,028
Net cash provided by operating activities............................ $ 11,294 $ 15,511 $ 39,575 $ 39,045
Net cash used in investing activities................................ $ (10,010) $ (3,827) $ (21,822) $ (9,363)
Net cash used in financing activities................................ $ (3,020) $ (8,797) $ (26,122) $ (30,895)