Pre-Paid Legal Announces 2010 Third Quarter Results
Net Income Up 46%; Earnings Per Share Up 63%
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<p>ADA, Okla., <span class="xn-chron">Oct. 25</span> /CNW/ -- Pre-Paid Legal Services, Inc. (NYSE: PPD) announced results for the third quarter ended <span class="xn-chron">September 30, 2010</span>. Net income for the third quarter of 2010 increased 46% to <span class="xn-money">$15.9 million</span> from <span class="xn-money">$10.8 million</span> for the prior year's third quarter primarily due to a <span class="xn-money">$7.6 million</span> decrease in commissions, an <span class="xn-money">$811,000</span> decrease in membership benefits partially offset by a <span class="xn-money">$3.1 million</span> increase in provision for income taxes. Diluted earnings per share increased 63% to <span class="xn-money">$1.61</span> per share from 99 cents per share for the prior year's comparable quarter due to an increase in net income of 46% and a 10% decrease in the weighted average outstanding shares. Membership fees in the third quarter of 2010 decreased slightly to <span class="xn-money">$105.3 million</span> from <span class="xn-money">$105.4 million</span> for the same period last year.</p>
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<p>In the first nine months of 2010, membership fees increased <span class="xn-money">$1.5 million to $319.3 million</span> vs. <span class="xn-money">$317.9 million</span> for the first nine months of 2009. Net income for the first nine months of 2010 increased 17% to <span class="xn-money">$51.1 million</span> vs. <span class="xn-money">$43.7 million</span> for the first nine months of 2009 primarily due to the <span class="xn-money">$1.5 million</span> increase in membership fees, a <span class="xn-money">$1.8 million</span> increase in associate services revenue, <span class="xn-money">$5.2 million</span> decrease in commissions, a <span class="xn-money">$1.5 million</span> decrease in membership benefits, a <span class="xn-money">$1.4 million</span> decrease in associate services and direct marketing cost and a <span class="xn-money">$1.8 million</span> decrease in general and administrative expenses partially offset by a <span class="xn-money">$5.2 million</span> increase in provision for income taxes. Diluted earnings per share increased 30% to <span class="xn-money">$5.13</span> vs. <span class="xn-money">$3.95</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 increased 10% to <span class="xn-money">$53.5 million</span> for the first nine months of 2010 from <span class="xn-money">$48.4 million</span> for 2009. During the first nine months of 2010, we returned <span class="xn-money">$13.9 million</span> to shareholders through the repurchase of 286,455 shares of common stock, at an average per share price of <span class="xn-money">$48.56</span>. Since <span class="xn-chron">April 1999</span>, we have returned <span class="xn-money">$471.8 million</span> to shareholders through the purchase of 15.4 million shares, average price of <span class="xn-money">$30.66</span> per share, and <span class="xn-money">$17.1 million</span> in dividends for a combined total of <span class="xn-money">$488.9 million</span> representing more than 100% of our net earnings during the same timeframe. At <span class="xn-chron">September 30, 2010</span>, we had <span class="xn-money">$23.6 million</span> of debt outstanding and <span class="xn-money">$75.2 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">$31.9 million</span> for share repurchases and/or dividends.</p>
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<p>Third quarter 2010 membership fees decreased <span class="xn-money">$1.5 million to $105.3 million</span> from <span class="xn-money">$106.7 million</span> for the second quarter of 2010. Associate services revenues decreased during the 2010 third quarter by <span class="xn-money">$393,000 to $6.1 million</span> from <span class="xn-money">$6.5 million</span> for the 2010 second quarter and associate services and direct marketing expenses decreased by approximately <span class="xn-money">$1.0 million</span> during the same period. Membership benefits totaled <span class="xn-money">$35.2 million</span> in the third quarter of 2010 compared to <span class="xn-money">$35.9 million</span> for the 2010 second quarter and represented 33.4% and 33.6% of membership fees for the respective periods. Commissions to associates totaled <span class="xn-money">$29.1 million</span> in the 2010 third quarter compared to <span class="xn-money">$29.2 million</span> for the 2010 second quarter and represented 27.6% and 27.4% of membership fees for the respective periods. General and administrative expenses decreased <span class="xn-money">$115,000</span> during the 2010 third quarter to <span class="xn-money">$12.3 million</span> compared to <span class="xn-money">$12.4 million</span> for the 2010 second quarter and represented 11.7% of membership fees for both periods.</p>
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<p>We will conduct a conference call to present the third quarter results on <span class="xn-chron">Wednesday, October 27, 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 (720) 545-0046. Audio replay will be available beginning at <span class="xn-chron">10:30 a.m. Eastern Time</span> on <span class="xn-chron">October 27, 2010</span> and will run through midnight <span class="xn-chron">Wednesday, November 3, 2010</span> by dialing (706) 645-9291; conference ID for the replay is 15768290. 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">June 30, 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)
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<p> (Dollars and shares in 000s, except per share amounts)</p>
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Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
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Revenues:
Membership fees $105,255 $105,435 $319,314 $317,856
Associate services 6,103 7,624 20,627 18,814
Other 697 888 2,475 2,790
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112,055 113,947 342,416 339,460
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Costs and expenses:
Membership benefits 35,180 35,991 106,713 108,209
Commissions 29,069 36,676 87,840 93,023
Associate services and direct
marketing 6,593 7,827 19,694 21,132
General and administrative 12,329 12,613 37,075 38,918
Other, net 2,232 2,361 6,839 6,495
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85,403 95,468 258,161 267,777
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Income before income taxes 26,652 18,479 84,255 71,683
Provision for income taxes 10,785 7,648 33,116 27,960
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Net income $15,867 $10,831 $51,139 $43,723
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Basic earnings per common
share $1.61 $.99 $5.14 $3.96
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Diluted earnings per common
share $1.61 $.99 $5.13 $3.95
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Weighted average number of
shares, as adjusted:
Primary 9,850 10,967 9,954 11,048
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Diluted 9,866 10,983 9,969 11,061
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Net cash provided by
operating activities $19,150 $12,893 $53,450 $48,409
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Net cash provided by (used
in) investing activities $(3,241) $2,477 $(1,973) $(3,263)
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Net cash used in financing
activities $(13,264) $(5,554) $(32,773) $(32,794)
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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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