Pre-Paid Legal Announces 2010 Second Quarter Results
Net Income Up 4%; Earnings Per Share Up 15%
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<p>ADA, Okla., <span class="xn-chron">July 21</span> /CNW/ -- Pre-Paid Legal Services, Inc. (NYSE: PPD) announced results for the second quarter ended <span class="xn-chron">June 30, 2010</span>. Net income for the second quarter of 2010 increased 4% to <span class="xn-money">$16.5 million</span> from <span class="xn-money">$15.8 million</span> for the prior year's second quarter. Diluted earnings per share increased 15% to <span class="xn-money">$1.65</span> per share from <span class="xn-money">$1.44</span> per share for the prior year's comparable quarter due to an increase in net income of 4% and a 9% decrease in the weighted average outstanding shares. Membership fees in the second quarter of 2010 increased 1% to <span class="xn-money">$106.7 million</span> from <span class="xn-money">$105.5 million</span> for the same period last year.</p>
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<p>First half 2010 membership revenues increased 1% to <span class="xn-money">$214.1 million</span> vs. <span class="xn-money">$212.4 million</span> for the first half of 2009. Net income for the first six months of 2010 increased 7% to <span class="xn-money">$35.3 million</span> vs. <span class="xn-money">$32.9 million</span> for the first six months of 2009. Diluted earnings per share increased 19% to <span class="xn-money">$3.52</span> vs. <span class="xn-money">$2.96</span>. Diluted earnings per share increased more than net income due to a 10% decrease in the weighted average number of outstanding shares.</p>
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<p>Net cash provided from operating activities decreased 3% to <span class="xn-money">$34.3 million</span> for the first half of 2010 from <span class="xn-money">$35.5 million</span> for 2009. During the first half of 2010, we returned <span class="xn-money">$5.4 million</span> to shareholders through the repurchase of 123,807 shares of common stock, at an average per share price of <span class="xn-money">$43.41</span>. Since <span class="xn-chron">April 1999</span>, we have returned <span class="xn-money">$463.2 million</span> to shareholders through the purchase of 15.2 million shares, average price of <span class="xn-money">$30.43</span> per share, and <span class="xn-money">$17.1 million</span> in dividends for a combined total of <span class="xn-money">$480.3 million</span> representing more than 100% of our net earnings during the same timeframe. At <span class="xn-chron">June 30, 2010</span>, we had <span class="xn-money">$28.1 million</span> of debt outstanding and <span class="xn-money">$70.1 million</span> in cash and cash equivalents and unpledged investments and had availability pursuant to our lending agreements to spend approximately <span class="xn-money">$26.7 million</span> for share repurchases and/or dividends.</p>
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<p>Second quarter 2010 membership fees decreased <span class="xn-money">$581,000 to $106.7 million</span> from <span class="xn-money">$107.3 million</span> for the first quarter of 2010. Associate services revenues decreased during the 2010 second quarter by approximately <span class="xn-money">$1.5 million to $6.5 million</span> from <span class="xn-money">$8.0 million</span> for the 2010 first quarter and associate services and direct marketing expenses increased by <span class="xn-money">$2.0 million</span> during the same period. Membership benefits totaled <span class="xn-money">$35.9 million</span> in the second quarter of 2010 compared to <span class="xn-money">$35.7 million</span> for the 2010 first quarter and represented 34% and 33%, respectively, of membership fees for the two periods. Commissions to associates totaled <span class="xn-money">$29.2 million</span> in the 2010 second quarter compared to <span class="xn-money">$29.5 million</span> for the 2010 first quarter and represented 27% and 28%, respectively, of membership fees for the two periods. General and administrative expenses increased <span class="xn-money">$142,000</span> during the 2010 second quarter to <span class="xn-money">$12.4 million</span> compared to <span class="xn-money">$12.3 million</span> for the 2010 first quarter and represented 12% and 11%, respectively, of membership fees for both periods. The <span class="xn-money">$142,000</span> increase in general and administrative expenses included increases in employee cost and consulting fees which were partially offset by decreases in accounting fees, bank service charges, legal expenses and telecommunications fees.</p>
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<p>We will conduct a conference call to present the second quarter results on <span class="xn-chron">Friday, July 23, 2010</span>, at <span class="xn-chron">8:30 a.m. Eastern Time</span>. The conference call will be webcast on the investor relations' page of <a href="http://www.prepaidlegal.com">www.prepaidlegal.com</a> or may be accessed by dialing (970) 315-0440. Audio replay will be available beginning at <span class="xn-chron">11:30 a.m. Eastern Time</span> on <span class="xn-chron">July 23, 2010</span> and will run through midnight <span class="xn-chron">Friday, July 30, 2010</span> by dialing (706) 645-9291; conference ID for the replay is 79886196. 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 <a href="mailto:[email protected]">[email protected]</a>.</p>
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<p>About Us - 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 independent law firms across the U.S. and <span class="xn-location">Canada</span>, 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 our products and us can be found at our homepage at <a href="http://www.prepaidlegal.com">www.prepaidlegal.com</a>.</p>
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Forward-Looking Statements
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<p>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 founder and Chairman, that pending or future litigation may have a material adverse effect on us if resolved unfavorably to us, that we may have compromises of our information security, that during an economic downturn in the economy consumer purchases of discretionary items may be affected which could materially harm our sales, retention rates, profitability and financial condition, 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 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 have repurchased more than half our outstanding shares over the past years. Please refer to pages 16 - 19 of our 2009 Form 10-K and pages 7 and 8 of our <span class="xn-chron">March 31, 2010</span> 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.</p>
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PRE-PAID LEGAL SERVICES, INC.
Financial Highlights (Unaudited)
(Dollars and shares in 000s, except per share amounts)
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Three Months Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
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Revenues:
Membership fees $106,739 $105,516 $214,059 $212,421
Associate services 6,496 5,908 14,524 11,190
Other 895 969 1,778 1,902
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114,130 112,393 230,361 225,513
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Costs and expenses:
Membership benefits 35,851 36,013 71,533 72,218
Commissions 29,245 29,335 58,771 56,347
Associate services and direct
marketing 7,554 6,502 13,101 13,305
General and administrative 12,444 12,922 24,746 26,305
Other, net 2,227 1,845 4,607 4,134
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87,321 86,617 172,758 172,309
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Income before income taxes 26,809 25,776 57,603 53,204
Provision for income taxes 10,323 9,985 22,331 20,312
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Net income $16,486 $15,791 $35,272 $32,892
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Basic earnings per common
share $1.65 $1.44 $3.52 $2.97
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Diluted earnings per common
share $1.65 $1.44 $3.52 $2.96
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Weighted average number of
shares, as adjusted:
Primary 9,975 10,980 10,007 11,091
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Diluted 9,989 10,993 10,021 11,104
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Net cash provided by operating
activities $7,617 $5,855 $34,300 $35,516
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Net cash provided by (used in)
investing activities $2,199 $(2,181) $1,268 $(5,740)
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Net cash used in financing
activities $(8,374) $(6,757) $(19,509) $(27,240)
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For further information: Steve Williamson of Pre-Paid Legal Services, Inc., +1-580-436-1234 Web Site: http://www.prepaidlegal.com
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