UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 25, 2005
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Pre-Paid Legal Services, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Oklahoma
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(State or Other Jurisdiction of Incorporation)
001-09293 73-1016728
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(Commission File Number) (IRS Employer Identification No.)
One Pre-Paid Way
Ada, OK 74820
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(Address of Principal Executive Offices) (Zip Code)
(580) 436-1234
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On July 25, 2005, Pre-Paid Legal Services, Inc. (the "Company") issued a
press release announcing its earnings and operating results for the three and
six months ended June 30, 2005. A copy of the release is included as an exhibit
to this report.
Item 9.01 Financial Statements and Exhibits
The following exhibits are included with this report:
Exhibit No. Description
99.1 Company Press Release dated July 25, 2005
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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Randy Harp, Chief Operating Officer
Date: July 25, 2005
For Immediate Release Company Steve Williamson
Monday, July 25, 2005 Contact: (580) 436-1234
Pre-Paid Legal Announces Second Quarter 2005 Financial Results
Membership Revenue Up 10% and Commissions Up 31%
ADA, OK, July 25, 2005 - Pre-Paid Legal Services, Inc. (NYSE:PPD) announced
financial results for the second quarter and six months ended June 30, 2005.
Membership revenues increased 10% to a record $97.1 million vs. $88.1 million.
Primarily due to a 31% increase ($9.2 million) in commissions, second quarter
net income decreased 32% to $6.9 million vs. $10 million for the 2004 second
quarter. Diluted earnings per share decreased 27% to 44 cents vs. 60 cents.
Diluted earnings per share declined less than net income due to the 5% decrease
in diluted shares outstanding.
First half 2005 membership revenues increased 8% to a record $189.6 million vs.
$174.9 million for the first half of 2004. Primarily due to a 20% ($11.6
million) increase in commissions, net income for the first six months of 2005
decreased 23% to $15.8 million vs. $20.6 million for the first six months of
2004. Diluted earnings per share decreased 19% to $1.00 vs. $1.24. Diluted
earnings per share declined less than net income due to the 6% decrease in
diluted shares outstanding.
To put the decline in net income in perspective it is appropriate to review our
accounting method. During 2005 we had meaningful increases in new membership
sales and "add-on" Identity Theft sales. We expense commission advances in the
first month. Increased sales thus reduce current earnings but increase future
earnings as the revenues are earned and recorded without the corresponding
commissions.
Net cash from operations for the six months ended June 30, 2005 vs. 2004
remained unchanged at approximately $21 million. We invested $11.6 million
during the first six months of 2005 repurchasing 335,000 shares at an average
price of $34.69. We also paid out $12.4 million in dividends. Since April 1999,
we have repurchased 9.4 million shares, investing $222.5 million at an average
per share cost of $23.64. Shares outstanding have been reduced by approximately
35%. At June 30, 2005 we owed $19.7 million on our stock purchase line of
credit, $16.4 million on our line of credit for our new office building and $2.2
million on our aircraft loan, and had unpledged cash and investment balances
exceeding $41.9 million.
Second quarter 2005 membership fees increased 5% vs. the first quarter of 2005.
Associate services revenues increased approximately $133,000. Associates
services and direct marketing expenses decreased approximately $1.1 million.
Membership benefits represented 35% of membership fees in both periods.
Commissions were 40% vs. 34% of membership fees respectively due to growth in
new membership sales and "add-on" Identity Theft sales. General and
administrative expenses represented 13% and 12% of membership fees respectively.
We will conduct a conference call to present the second quarter results on
Wednesday, July 27, 2005, 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 (719) 457-2698. Audio replay will be available beginning at
12:00 p.m. Eastern Time on July 27, 2005 and will run through midnight
Wednesday, August 3, 2005 by dialing (719) 457-0820; passcode for the replay is
7519483. 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.
We expect to file our quarterly report on Form 10-Q for the period ended June
30, 2005 later this week.
About Pre-Paid Legal Services
We believe our products are one of a kind, life events legal service plans. Our
plans provide for legal service benefits provided through a network of more than
50 independent law firms across the U.S. and Canada, and include 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. We have an identity
theft restoration product we think is also one of a kind due to the combination
of our identity theft restoration partner and our provider law firms. More
information about us and our products can be found at our homepage at
http://www.prepaidlegal.com.
Forward-Looking Statements
Statements in this press release, other than purely historical information,
regarding our future plans and objectives and expected operating results,
dividends and share repurchases 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 our 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 us with the Securities and Exchange Commission,
including (among others) those listed in our Form 10-K, Form 10-Q and Form 8-K,
and include the risks that our membership persistency or renewal rates may
decline, that we may not be able to continue to grow our memberships and
earnings, that we are dependent on the continued active participation of our
principal executive officer, that pending or future litigation may have a
material adverse effect on us if resolved unfavorably to us, that we could be
adversely affected by regulatory developments, that competition could adversely
affect us, that we are substantially dependent on our marketing force, that our
stock price may be affected by short sellers, that we have been unable to
increase significantly our employee group membership sales, that our active
premium in force is not indicative of future revenue as a result of changes in
active memberships from cancellations and additional membership sales and that
we may have material weaknesses in our internal control environment. Please
refer to pages 38 and 39 of our 2004 Form 10-K and pages 8 and 9 of the
Company's March 31, 2005 Form 10-Q for a more complete description of these
risks. We undertake no duty to update any of the forward-looking statements in
this release.
PRE-PAID LEGAL SERVICES, INC.
Financial Highlights (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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2005 2004 2005 2004
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Revenues:
Membership fees.................................................... $ 97,093 $ 88,120 $ 189,597 $ 174,870
Associate services................................................. 7,175 5,918 14,217 12,475
Other.............................................................. 1,351 1,391 2,700 2,693
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105,619 95,429 206,514 190,038
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Costs and expenses:
Membership benefits................................................ 33,710 30,449 66,431 59,735
Commissions........................................................ 38,820 29,591 70,497 58,863
Associate services and direct marketing............................ 7,963 6,704 17,059 14,307
General and administrative......................................... 12,337 10,904 23,436 20,950
Other, net......................................................... 2,326 2,505 4,967 4,690
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95,156 80,153 182,390 158,545
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Income before income taxes........................................... 10,463 15,276 24,124 31,493
Provision for income taxes........................................... 3,610 5,270 8,323 10,865
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Net income........................................................... $ 6,853 $ 10,006 $ 15,801 $ 20,628
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Basic earnings per common share...................................... $ .45 $ .61 $ 1.02 $ 1.24
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Diluted earnings per common share.................................... $ .44 $ .60 $ 1.00 $ 1.24
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Weighted average number of shares:
Basic.............................................................. 15,397 16,485 15,480 16,619
Diluted............................................................ 15,670 16,558 15,754 16,692
Net cash provided by operating activities............................ $ 3,620 $ 3,873 $ 21,038 $ 20,841
Net cash provided by (used in) investing activities.................. $ 6,049 $ (2,135) $ 3,162 $ (6,785)
Net cash used in financing activities................................ $ (6,977) $ (4,472) $ (27,897) $ (17,998)
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