Earnings Release!
Pre-Paid Announces Record Fourth Quarter Results
ADA, Okla.--(BUSINESS WIRE)--Feb. 10, 1999--Pre-Paid Legal Services, Inc. (AMEX:PPD - news; ''Company''), today reported record results for the fourth quarter and for the year ended Dec. 31, 1998.
As a result of the 1998 fourth quarter acquisition of TPN, Inc. (''TPN'') that was accounted for as a pooling of interests, all prior periods have been restated to include the operating results of TPN.
Additionally, the Company had not previously recognized any tax benefits relating to its pre-1996 NOLs and certain other carryforwards since management concluded that it was unlikely it would generate sufficient taxable income to realize the benefits before they expired.
However, the Company had taxable income for 1998 and the Company's tax expense for 1998 was reduced in the fourth quarter to reflect management's current estimate of the actual and anticipated utilization of these NOLs and other carryforwards. Due to this reduction in tax expense, fourth quarter earnings were increased $3.5 million, or 15 cents per diluted share.
Net income for the fourth quarter of 1998 rose 491 percent to $11,914,000 from $2,016,000 for the prior year's period, while combined revenues rose 14 percent to $42,952,000 from $37,724,000 for the prior year's period. As a result of increased sales of legal memberships, membership premiums increased 44 percent to $32 million for the 1998 quarter from $22 million during the comparable quarter of 1997 while TPN product sales decreased 62 percent to $4 million from $12 million for the respective periods.
Earnings per share, diluted, increased 525 percent to 50 cents per share from 8 cents per share for last year's comparable quarter. The fourth quarter of 1997 contained an adjustment related to TPN's deferred tax assets that resulted in additional tax expense of $1.9 million, or 8 cents per diluted share.
Net income for all of 1998 increased 72 percent to $30,210,000, or $1.26 per diluted share, from $17,523,000, or 74 cents per diluted share, for 1997. As a result of increased legal service membership sales, membership premiums increased 43 percent to $110 million for 1998 from $77 million during 1997 while TPN product sales decreased 33 percent to $28 million from $41 million. The increase in membership premiums more than offset the decline in product sales resulting in combined revenues for 1998 of $160,392,000, a 20 percent increase from $133,404,000 for the prior year.
While combined revenues increased 20 percent in 1998, primarily as a result of new memberships written, cash flow exceeded cost of operations and acquisition of new business and resulted in positive cash flow from operations of $10,651,000 for 1998 of which $3,264,000 was generated during the fourth quarter.
''The continued rapid growth and expansion of our Company validates our belief in the need for our product and the acceptance of it by the large, virtually untapped market that exists,'' said Pre-Paid Chairman Harland Stonecipher. ''We estimate the size of the market for legal services plans to be $15 to $25 billion in size. We have just begun.''
Pre-Paid Legal Services, develops, underwrites and markets legal service plans nationally. The plans provide for or reimburse legal service benefits, including unlimited attorney consultation, will preparation, traffic violation defense, automobile-related criminal charges, letter writing, document preparation and review and a general trial defense benefit. More information can be located at the Company's homepage on the World Wide Web (www.pplsi.com).
PRE-PAID LEGAL SERVICES, INC.
Financial Highlights (Unaudited)
(Amounts in 000's, except per share, membership and associate amounts)
Three Months Ended Year Ended
12/31/98 12/31/97 12/31/98 12/31/97
Revenues:
Membership premiums $ 31,560 $ 21,930 $110,003 $ 76,688
TPN product sales 4,341 11,532 27,718 41,070
Associate services 5,445 3,366 17,255 12,143
Interest income 695 526 2,576 1,689
Other 911 370 2,840 1,814
-------- -------- -------- --------
42,952 37,724 160,392 133,404
Costs and expenses:
Membership benefits 10,210 7,022 36,103 25,132
TPN product costs 3,646 8,313 17,967 27,017
Commissions 6,962 4,729 24,261 16,717
General and
administrative 3,930 6,633 21,841 20,311
Associate services and
direct marketing
expenses 4,220 3,290 14,738 11,431
Depreciation 919 724 2,944 2,026
Premium taxes 298 196 1,206 866
-------- -------- -------- --------
30,185 30,907 119,060 103,500
Income before income
taxes 12,767 6,817 41,332 29,904
Provision for income
taxes 853 4,801 11,122 12,381
Net income 11,914 2,016 30,210 17,523
Less dividends on
preferred shares 3 3 10 13
Net income applicable to
common shares $ 11,911 $ 2,013 $ 30,200 $ 17,510
Basic earnings per common
share $ .51 $ .09 $ 1.29 $ .76
Diluted earnings per
common share $ .50 $ .08 $ 1.26 $ .74
Weighted average number
of shares, as adjusted:
Basic 23,483 23,377 23,449 23,127
Diluted 23,812 23,731 23,906 23,575
New membership sales 118,779 75,636 391,827 283,723
New sales associates
recruited 29,207 14,260 75,737 58,121 |
