PRE-PAID LEGAL SERVICES,® INC.
prepaidlegal.com
Serving North America's families since 1972
November 2, 2001
To Pre-Paid Legal Associates, Provider Attorneys & Home Office Staff:
Your Company, Pre-Paid Legal Services, Inc., is a stronger, better company today than it was 12 months ago. While the price of the company's stock has been under pressure, our sales associates, provider law firms and home office staff have risen to the occasion. We are a company that continues to grow, having enjoyed increased membership revenues for 34 consecutive quarters- 8 ½ years.
The past year has not been "normal times" for our Company. We have undergone one of the most vicious, continuous and well-organized short seller attacks that we as the management of Pre-Paid Legal Services, Inc. have ever witnessed or ever imagined possible.
To illustrate the magnitude of the negative campaign consider:
Pre-Paid Legal Services, Inc. has 21 million shares of stock issued and eligible to trade on the New York Stock Exchange. In addition to the 21 million shares of stock issued by Pre-Paid Legal Services, Inc., short sellers have issued an additional 7.9 million shares of Pre-Paid stock by selling into the market 7.9 million shares they did not own and are actually non-existent.
If short sellers sold these 7.9 million shares short at $40.00 per share, they have collected more than $300 million in cash less commissions and at some point they have to buy those shares back and replace them, since they didn't actually exist when they sold them. If they can drive the price of the shares down to $10.00, their $30.00 per share profit amounts to more than $230 million. That's how much negative press is worth to them.
Short sellers develop relationships with the media as a method of distributing negative information about the company they are shorting and attempt to drive down the price of the shares so they can generate a huge profit. Although the negative press and all the "negative spin" articles have undoubtedly had an impact on the price of our stock, the company continues to remain strong, provide a valuable, unique quality service to more than 1.2 million families.
But we're still standing strong and the best is yet to come!
Consider the following dozen points pertaining to our Company - no doubt an irritation to those who would be detractors. The Company has:
Self-funded commission advances of more than $100 million on the sale of 714,677 memberships during the past four quarters;
Repurchased in the last twelve months 1,239,991 shares of Company stock for $26.8 million on the open market without incurring debt;
Cash flow from operations was $22 million for the year ended December 31, 2000 and $24.5 million for the nine months ended September 30, 2001;
Cash and investments at present of $44 million;
Continued to recruit associates, numbering 105,537 during the last four quarters;
Total memberships in force exceed 1.2 million as of September 30, 2001;
Have 34 consecutive quarters - 8 ½ years - of increased membership revenues;
Opened two new states and two new Canadian provinces during the past year and now offer memberships in 48 states and four Canadian provinces;
Using accounting methods approved by the Securities and Exchange Commission, net income has increased consecutively for the last five years to more than $20 million in 2000;
Retention rates of the memberships have remained steady;
We employ over 600 dedicated Oklahoma workers and are in the process of constructing a new $30 million home office on 87 beautiful wooded acres just to the south of Ada. We are helping to keep good jobs and good people in our state;
Focus of the company remains on delivering quality legal services. The market need and acceptance for our product has never been greater.
Most importantly, Pre-Paid Legal Services, Inc. continues to add new members and new sales associates and generate increased positive cash flow. In contrast to many other companies, we are in a hiring mode. Our provider firms continue to add both support staff and attorneys. Our corporate staff continues to grow, exceeding 600 employees, and is looking forward to occupying our new $30 million home office complex currently under construction.
United, we rise. We have risen above the challenges of the past year and eagerly look forward to the continued growth and expansion of our great Company in the days, weeks, months and years to come.
Harland Stonecipher
Founder, Chairman of the Board and CEO
Pre-Paid Legal Services, Inc. |
