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: February 23, 2004
(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)
One Pre-Paid Way
Ada, Oklahoma 74820
(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 February 23, 2004
Item 12. Results of Operation and Financial Condition
On February 23, 2004, Pre-Paid Legal Services, Inc. (the "Company") issued
a press release announcing its earnings and operating results for the three
months and year ended December 31, 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: February 23, 2004 Randy Harp, Chief Operating Officer
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Company Press Release dated February 23, 2004
For Immediate Release Company Steve Williamson
Monday, February 23, 2004 Contact: (580) 436-1234
Pre-Paid Legal Announces 2003 Year End Results
- - -
2003 Membership Revenues Up 7%; Net Income Up 11% and EPS Up 25%
- - -
ADA, OK, February 23, 2004 - Pre-Paid Legal Services, Inc. (NYSE:PPD),
today announced results for the fourth quarter and year ended December 31, 2003.
Net income for the fourth quarter of 2003 decreased 13 percent to $8.4 million
from $9.7 million for the prior year's fourth quarter due to $4.2 million of
incremental costs (in excess of the related revenue recognized) related to the
sale of more than 94,000 Identity Theft Shield memberships in the 2003 fourth
quarter period compared to none in the 2002 comparable period. Diluted earnings
per share decreased 4 percent to 49 cents per share from 51 cents per share for
the prior year's comparable quarter due to decreased net income of 13 percent
partially offset by an approximate 9 percent decrease in the weighted average
number of outstanding shares. Membership revenues increased 6 percent to $84.2
million from $79.3 million for the same period last year.
Net income for the full year of 2003 increased 11 percent to $39.9 million
from $36.0 million for 2002. Diluted earnings per share for 2003 increased 25
percent to $2.27 per share from $1.82 per share for the prior year due to
increased net income of 11 percent and an approximate 11 percent decrease in the
weighted average number of outstanding shares. Membership revenues for 2003 were
up 7 percent to $330.3 million from $308.4 million for the prior year marking
the eleventh consecutive year of increased membership revenue.
Net cash provided from operating activities was unchanged at $52 million
for 2003 and 2002, despite the approximate $7.3 million negative cash flow
resulting from sales of Identity Theft Shield memberships which commenced in the
2003 fourth quarter. During 2003 the company repurchased 2.1 million shares of
its stock for $48.3 million at an average share price of $22.70. Since April
1999, the Company has repurchased 7.6 million shares for $173.4 million, or an
average price of $22.74 per share, and reduced the number of shares outstanding
at the end of 2003 to approximately 16.8 million shares. At December 31, 2003,
the Company had $23.6 million outstanding of the $25 million previously
announced stock purchase line of credit and $19.8 million of its $20 million
line of credit for its new office construction. Previously advanced funds of
$10.8 million remain available to purchase additional shares. At year-end, the
Company had $47.4 million in cash and cash equivalents and unpledged
investments.
Fourth quarter 2003 membership fees increased from the third quarter to
$84.2 million vs. $82.7 million. Associate services revenue declined during the
2003 fourth quarter from the third quarter by approximately $229,000. Associate
services and direct marketing expenses also decreased by $302,000 from the third
quarter. Membership benefits totaled $28.9 million in the fourth quarter of 2003
compared to $28.0 million for the third quarter and represented 34% of
membership fees for both periods. Due to increased commissions related to the
sale of Identity Theft Shield memberships which began during the 2003 fourth
quarter, total commissions to associates per new membership sold during the
respective quarters were $198 per membership for the three months ended December
31, 2003 compared to $169 for the third quarter of 2003. General and
administrative expenses during both the 2003 fourth and third quarters were $9.9
million and represented 12% of membership fees for each period.
In the fourth quarter of 2003, the Company added 153,501 new members and
33,068 new sales associates vs. 169,350 new members and 29,555 new sales
associates in the same period of 2002. For the year ended December 31, 2003, the
Company added 671,857 new members and 108,557 new sales associates vs. 773,767
new members and 155,663 new sales associates added during 2002. Active
memberships as of December 31, 2003, increased 3 percent to 1,418,997 from
1,382,306 at December 31, 2002, marking the eleventh consecutive year of
increased active memberships. Effective January 1, 2004, and in order to provide
additional tools and classroom training to the new sales associate, the Company
has increased the cost to become a Fast Start sales associate to $249 from $99
which was in effect for December 2003 and $149 which was in effect for October
and November 2003.
The Company will conduct a conference call to present the year end results
on Wednesday, February 25, 2004 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) 981-5517. Audio replay will be available beginning
at 11:30 a.m. Eastern Time on February 25, 2004 and will run through midnight
Thursday, March 4, 2004 by dialing (719) 457-0820; passcode for the replay is
463571. The presentation will be available on the web site indefinitely by
selecting "Earnings Calls" under the "Investor Relations" section. Questions may
be submitted prior to the call via email to investor@pplsi.com.
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 September 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)
(Dollars and shares in 000s, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2003 2002 2003 2002
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Revenues:
Membership fees.............................................. $ 84,199 $ 79,339 $ 330,322 $ 308,401
Associate services........................................... 5,804 9,919 25,704 37,418
Other........................................................ 1,324 1,231 5,287 4,804
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91,327 90,489 361,313 350,623
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Costs and expenses:
Membership benefits.......................................... 28,894 26,825 111,165 103,761
Commissions.................................................. 30,412 27,700 115,386 119,371
Associate services and direct marketing...................... 7,109 10,111 28,929 32,566
General and administrative................................... 9,894 9,387 36,711 33,256
Other, net................................................... 2,290 1,717 8,546 6,685
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78,599 75,740 300,737 295,639
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Income before income taxes..................................... 12,728 14,749 60,576 54,984
Provision for income taxes..................................... 4,336 5,089 20,669 18,970
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Net income..................................................... $ 8,392 $ 9,660 $ 39,907 $ 36,014
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Basic earnings per common share................................ $ .49 $ .51 $ 2.28 $ 1.83
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Diluted earnings per common share.............................. $ .49 $ .51 $ 2.27 $ 1.82
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Weighted average number of shares:
Basic.............................................................. 17,161 18,975 17,530 19,674
Diluted............................................................ 17,278 19,061 17,599 19,764
Net cash provided by operating activities...................................................$.. 51,900 $ 52,073
Net cash used in investing activities.......................................................$..(38,589) $ (11,074)
Net cash used in financing activities.......................................................$..(12,710) $ (34,431)
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