UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 1-9293
______________________________________________________________
PRE-PAID LEGAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1016728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
321 E. Main
Ada, Oklahoma
74820
(Address of principal executive offices)
(405) 436-1234
(Registrants' telephone number, including area code)
______________________________________________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of October 15, 1996:
Common Stock $.01 par value 21,577,361
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in 000's, except par values)
ASSETS
September December
30, 1996 31, 1995
-------- --------
(Unaudited)
Current assets:
Cash.................................................. $ 15,129 $ 14,489
Held-to-maturity short-term investments............... 500 500
Accrued contract income............................... 1,286 1,038
Commission advances - current portion................. 8,157 3,923
-------- --------
Total current assets................................. 25,072 19,950
-------- --------
Held-to-maturity investments.......................... 1,176 500
Investments pledged................................... 2,772 2,766
Commission advances................................... 18,318 8,548
Property and equipment, net........................... 2,258 2,202
Other................................................. 2,017 1,663
-------- --------
Total assets........................................ $ 51,613 $ 35,629
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Contract benefits..................................... $ 1,832 $ 1,547
Accounts payable and accrued expenses................. 611 646
Contingency reserves on trust preparation services.... - 130
-------- --------
Total current liabilities............................ 2,443 2,323
Deferred income taxes................................... 8,404 3,566
-------- --------
Total liabilities................................... 10,847 5,889
-------- --------
Stockholders' equity:
Preferred stock, $1 par value; authorized 400 shares;
issued and outstanding
as follows:
$3.00 Cumulative Convertible Preferred Stock,
authorized 5 shares; 5 shares outstanding;
liquidation value of $84 .......................... 5 5
Special preferred stock, $1 par value; authorized 500
shares, issued and outstanding in one series
designated as follows:
$1.00 Non-Cumulative Special Preferred Stock, 38 and
45 shares authorized, issued and outstanding at
September 30, 1996 and December 31, 1995,
respectively; liquidation value of $501 and $602 at
September 30, 1996 and December 31, 1995,
respectively....................................... 38 45
Common stock, $.01 par value; 100,000 shares
authorized; 22,323 and 21,513 issued at September 30,
1996 and December 31, 1995, respectively............. 223 215
Capital in excess of par value........................ 39,809 37,757
Retained earnings (deficit)........................... 2,868 (6,105)
Less: Treasury stock at cost; 747 shares.............. (2,177) (2,177)
-------- --------
Total stockholders' equity........................... 40,766 29,740
-------- --------
Total liabilities and stockholders' equity.......... $ 51,613 $ 35,629
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in 000's, except per share amounts)
(Unaudited)
Nine Months Ended
September 30,
-------------------
1996 1995
-------- --------
Revenues:
Contract premiums..................................... $ 35,941 $ 21,953
Associate services.................................... 4,246 2,166
Interest income....................................... 960 1,028
Other................................................. 1,763 1,039
-------- --------
42,910 26,186
-------- --------
Costs and expenses:
Contract benefits..................................... 12,459 7,446
Commissions........................................... 8,104 5,458
General and administrative............................ 4,501 2,977
Associate services and direct marketing expenses...... 3,354 1,974
Depreciation.......................................... 394 353
Premium taxes......................................... 276 171
-------- --------
29,088 18,379
-------- --------
Income before income taxes.............................. 13,822 7,807
Provision for income taxes.............................. 4,838 2,654
-------- --------
Net income.............................................. 8,984 5,153
Less dividends on preferred shares...................... 11 121
-------- --------
Net income applicable to common shares.................. $ 8,973 $ 5,032
======== ========
Earnings per common and common equivalent share......... $ .40 $ .25
======== ========
Earnings per common share - assuming full dilution...... $ .40 $ .24
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in 000's, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
--------------------
1996 1995
--------- --------
Revenues:
Contract premiums..................................... $ 13,376 $ 8,086
Associate services.................................... 1,392 957
Interest income....................................... 363 348
Other................................................. 629 349
-------- --------
15,760 9,740
-------- --------
Costs and expenses:
Contract benefits..................................... 4,621 2,836
Commissions........................................... 3,063 1,872
General and administrative............................ 1,703 1,120
Associate services and direct marketing expenses...... 1,132 784
Depreciation.......................................... 128 122
Premium taxes......................................... 107 62
-------- --------
10,754 6,796
-------- --------
Income before income taxes.............................. 5,006 2,944
Provision for income taxes.............................. 1,752 1,001
-------- --------
Net income.............................................. 3,254 1,943
Less dividends on preferred shares...................... 3 3
-------- --------
Net income applicable to common shares.................. $ 3,251 $ 1,940
======== ========
Earnings per common and common equivalent share......... $ .15 $ .09
======== ========
Earnings per common share - assuming full dilution...... $ .15 $ .09
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in 000's)
(Unaudited)
Nine Months Ended
September 30,
--------------------
1996 1995
--------- --------
Cash flows from operating activities:
Net income.............................................. $ 8,984 $ 5,153
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 394 353
Provision for deferred income taxes.................. 4,838 2,654
Provision for associate stock options................ 318 -
Increase in accrued contract income.................. (248) (283)
Increase in commission advances...................... (14,004) (6,552)
Increase in other assets............................. (354) (619)
Increase in contract benefits........................ 285 83
Decrease in accounts payable and accrued expenses and
contingency reserves.............................. (165) (258)
-------- --------
Net cash provided by operating activities........... 48 531
-------- --------
Cash flows from investing activities:
Additions to property and equipment................... (450) (440)
Purchases of investments.............................. (1,082) (5,978)
Maturities of investments............................. 400 1,403
-------- --------
Net cash used in investing activities............... (1,132) (5,015)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common and preferred stock...... 1,735 6,586
Dividends paid on preferred stock..................... (11) (121)
-------- --------
Net cash provided by financing activities........... 1,724 6,465
======== ========
Net increase in cash and unpledged cash equivalents..... 640 1,981
Cash and cash equivalents at beginning of period........ 14,489 9,512
-------- --------
Cash and cash equivalents at end of period.............. $ 15,129 $ 11,493
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest................................ $ 1 $ 9
======== ========
Cash paid for taxes................................... $ - $ 18
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The consolidated balance sheet as of September 30, 1996, the related
statements of operations for the three-month and nine-month periods ended
September 30, 1996 and 1995 and the statements of cash flows for the nine-month
periods ended September 30, 1996 and 1995 are unaudited; in the opinion of
management, they include all adjustments necessary for a fair presentation of
such financial statements.
These financial statements and notes are prepared pursuant to the rules
and regulations of the Securities and Exchange Commission for interim reporting
and should be read in conjunction with the Company's financial statements and
notes included in the 1995 annual report on Form 10-KSB. Certain
reclassifications have been made to conform to current year presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST NINE MONTHS OF 1996 COMPARED TO FIRST NINE MONTHS OF 1995
The Company reported net income applicable to common shares of $9.0
million, or $.40 per share, assuming full dilution, for the nine months ended
September 30, 1996 compared to $5.0 million, or $.24 per share, for the
comparable period of 1995. As a percentage of total revenues, net income
applicable to common shares was 21% in the nine months ended September 30, 1996,
up from 19% in the comparable period of 1995. The increase in the net income for
the 1996 period is attributable to increases in all revenue categories except
interest income during the nine period of 1996 as compared to the same period of
1995.
Revenues rose 64% to $42.9 million from $26.2 million for the prior
year's comparable period. Income before income taxes for the first nine months
of 1996 increased 77% to $13.8 million, or 32% of revenues, from $7.8 million,
or 30% of revenues for the comparable period of 1995. Other income increased
from $1.0 million to $1.8 million primarily from higher membership enrollment
fees.
Contract premiums totaled $35.9 million during the first nine months of
1995 compared to $22.0 million for the same period of 1995, an increase of 63%.
The increase in Contract premiums was primarily the result of increased new
Contract sales resulting in a higher number of active Contracts in force. New
Contract sales during the first nine months of 1996 were 142,429 compared to
75,469 during the 1995 period, an increase of 89%. At September 30, 1996, there
were 273,211 active Contracts in force compared to 186,669 at September 30,
1995, an increase of 46%. Contract premiums and their impact on total revenues
in any period are determined directly by the number of active Contracts in force
during any such period. The active Contracts in force are determined by both the
number of new membership Contracts sold in any period together with the
persistency, or renewal rate, of existing Contracts. The Company's overall
Contract persistency rate varies based on, among other factors, the relative age
of total Contracts in force. From 1981 through the year ended December 31, 1995,
the Company's annual Contract persistency rates, using the foregoing method,
have averaged approximately 76%.
Associate services revenue increased from $2.2 million for the first
nine months of 1995 to $4.2 million during the same period of 1996 as a result
of higher new associate enrollments. New associates enrolled during the first
nine months of 1996 were 54,228 compared to 33,916 for the same period of 1995,
an increase of 60%. Future revenues from associate services will depend
primarily on the number of new associates enrolled, but the Company expects that
such revenues will continue to be largely offset by the direct and indirect cost
to the Company of providing associate services and other direct marketing
expenses.
Interest income decreased 7% to $960,000 during the nine months ended
September 30, 1996 from $1.0 million for the comparable period of 1995 as a
result of interest accrued in the 1995 period of $187,000 pertaining to
previously outstanding notes receivable. Interest income would have otherwise
increased as a result of increases in the average investments outstanding and
higher interest rates on investments. At September 30, 1996 the Company had
$19.6 million in cash and investments compared to $18.3 million at September 30,
1995.
Contract benefits totaled $12.5 million for the first nine months of
1996 compared to $7.4 million for the same period of 1995, an increase of 67%.
However, the loss ratio for the 1996 period of 35% was approximately the same as
the 34% for the comparable period of 1995 and should remain near 35% as the
portion of active Contracts which provide for a capitated benefit continues to
increase.
Commissions were $8.1 million for the first nine months of 1996
compared to $5.5 million for the same period of 1995, but decreased, as a
percentage of Contract premiums, from 25% to 23%. Commission expense, as a
percentage of Contract premiums, should remain at or near 25% or less of
Contract premiums in future years as a result of changes in the commission
structure for Contracts sold after March 1, 1995.
<PAGE>
General and administrative expenses during the 1996 and 1995 nine month
periods were $4.5 million and $3.0 million, respectively, and represented 13%
and 14% of Contract premiums for such periods. These expenses are expected to
continue to decrease when expressed as a percentage of Contract premiums as a
result of certain economies of scale pertaining to the Company's operations.
Associate services and direct marketing costs increased to $3.4 million
for the first nine months of 1996 from $2.0 million for the same period of 1995
but were generally consistent as a percent of total revenues (8% for each year)
and include the costs of providing associate services and marketing costs other
than commissions which are directly associated with new Contract sales.
Due to property and equipment additions during the latter part of 1995
and the first nine months of 1996, depreciation increased from $353,000 during
the first nine months of 1995 to $394,000 for the first nine months of 1996.
The Company's expense ratio for the first nine months of 1996 was 37%
compared to 41% for the comparable period of 1995 resulting in a combined loss
and expense ratio of 72% for the first nine months of 1996 compared to 75% for
the same period of 1995. The combined ratio does not measure total profitability
because it does not take into account all revenues and expenses.
The Company has recorded a provision for income taxes of $4.8 million
(35% of pretax income) for the first nine months of 1996 compared to $2.7
million (34% of pretax income) for the same period of 1995. The 1996 and 1995
provision reflect the Company's expectation that it more likely than not will
not be able to realize the future tax benefit of its net operating loss
carryforwards primarily as a result of tax deductions attributable to expected
levels of commissions to be paid on new Contract sales..
Dividends paid on outstanding preferred stock during the first nine
months of 1996 were $11,000 compared to $121,000 during the same period of 1995.
This decrease is attributable to the conversion of the outstanding shares of
$2.40 Cumulative Convertible Preferred Stock issued during June and July, 1994
in conjunction with a public unit offering. This series of preferred stock
automatically converted to common stock pursuant to its terms on February 27,
1995.
THIRD QUARTER OF 1996 COMPARED TO THE THIRD QUARTER OF 1995
The results of operations in the third quarter of 1996, compared to the
third quarter of 1995, reflect increases in revenues and expenses primarily as a
result of the same factors discussed in the comparison of the first nine months
of 1996 compared to the first nine months of 1995.
Total revenues increased 62% or approximately $6.1 million to $15.8
million in the third quarter of 1996 compared to $9.7 million in the third
quarter of 1995, primarily as a result of increase in Contract premiums The
Contract premium increase of approximately 65% primarily resulted from an
increase in the average number of active Contracts during the third quarter of
1996 compared to the similar period of 1995.
Contract benefits totaled $4.6 million in the 1996 third quarter
compared to $2.8 million in the 1995 third quarter and resulted in a loss ratio
of 35% for both periods. The Company's expense ratio for the third quarter of
1996 was 37% compared to 39% for the 1995 third quarter resulting in a combined
loss and expense ratio of 72% for the third quarter of 1996 compared to 74% for
the same period of 1995.
The above factors resulted in a 1996 third quarter net income
applicable to common shares of $3.3 million, or $.15 per share assuming full
dilution, compared to $1.9 million, or $.09 per share, for the third quarter of
1995.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Consolidated net cash provided by operating activities was $48,000 for
the first nine months of 1996 compared to $531,000 for the 1995 period. The
decrease of $483,000 in cash provided by operations during the first nine months
of 1996 compared to the same period of 1995 resulted primarily from commission
advances related to the increase in new membership enrollments.
The Company had consolidated working capital of $22.6 million at
September 30, 1996, an increase of $5.0 million compared to consolidated working
capital of $17.6 million at December 31, 1995 and an increase of $3.7 million
compared to September 30, 1995 working capital of $18.9 million.
The Company has an unsecured revolving credit agreement with Bank One,
Texas under which the Company may borrow up to $5 million, as determined by the
borrowing base defined by the agreement, through July, 1997. The borrowing base
is determined by a formula based on 80% of the net cash flow from certain of the
Company's Contracts that have been in existence for 18 months or more. At
September 30, 1996, the borrowing base was $5.0 million. Under the agreement,
the interest rate, at the option of the Company, is at the bank's base lending
rate or an adjusted London interbank rate and is determined at the time of
borrowing. Interest is to be paid monthly and any outstanding principal, unless
converted to an 18 month term loan upon the occurrence of certain events, comes
due in its entirety on July 1, 1997. The agreement contains restrictions which,
among other things, require maintenance of certain financial ratios, restrict
encumbrance of assets and creation of indebtedness, and limit the payment of
dividends. To date, the Company has not borrowed under the bank credit
agreement.
The Company advances significant commissions at the time a Contract is
sold. During the nine months ended September 30, 1996 the Company advanced
commissions of $19.7 million on new membership sales compared to $10.5 million
for the same period of 1995. Since approximately 92% of Contract premiums are
collected on a monthly basis, a significant cash flow deficit is created at the
time a Contract is sold. This deficit is reduced as monthly premiums are
remitted and no additional commissions are paid on the Contract until all
previous commission advances have been fully recovered. Commission advances were
subsequently reduced by commission earnings of $5.2 million and $3.9 million for
the nine month periods ended September 30, 1996 and 1995, respectively. The
Company has recorded an allowance of $3.1 million to provide for estimated
uncollectible balances which includes an increase in the allowance of $475,000
during the nine months ended September 30, 1996.
The Company believes that it has significant ability to finance
expected future growth in Contract sales based on its existing amount of cash
and cash equivalents at September 30, 1996 ($15.1 million) and the unused
revolving credit agreement availability of $5.0 million.
Although the Company is the operating entity in many jurisdictions, the
Company's subsidiaries serve as operating companies in various states which
regulate Contracts as insurance or specialized legal expense products. The most
significant of these wholly-owned subsidiaries are Pre-Paid Legal Casualty, Inc.
("PPLCI") and Pre-Paid Legal Services, Inc. of Florida ("PPLSIF"). The ability
of PPLCI and PPLSIF to provide funds to the Company is subject to a number of
restrictions under various insurance laws in the jurisdictions in which PPLCI
and PPLSIF conduct business, including limitations on the amount of dividends
and management fees that may be paid and requirements to maintain specified
levels of capital and reserves. In addition PPLCI will be required to maintain
its stockholders' equity at levels sufficient to satisfy various state
regulatory requirements, the most restrictive of which is currently $3 million.
Additional capital requirements of either PPLCI or PPLSIF will be funded by the
Company in the form of capital contributions or surplus debentures.
<PAGE>
PART II - OTHER INFORMATION
ITEM. 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed as part of this Form 10-Q:
No. Description
--- -----------
3.1 Amended and Restated Bylaws of the Company
11.1 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K: There were no reports on Form 8-K filed by the
Company during the quarter ended September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and 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.
Date: October 28, 1996 /s/ HARLAND C. STONECIPHER
Harland C. Stonecipher, Chairman
Date: October 28, 1996 /S/ RANDY HARP
Randy Harp, Chief Financial Officer
(Principal Financial Officer)
Date: October 28, 1996 /S/ KATHY PINSON
Kathy Pinson, Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
No. Description
- -------- ------------------------------------------
3.1 Amended and Restated Bylaws of the Company
11.1 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
BYLAWS
OF
PRE-PAID LEGAL SERVICES, INC.
(As Adopted November 5, 1987)
(As Amended June 27, 1996)
<PAGE>
TABLE OF CONTENTS
TO
BYLAWS
OF
PRE-PAID LEGAL SERVICES, INC.
(an Oklahoma corporation)
(As Adopted November 5, 1987)
(As Amended June 27, 1996)
ARTICLE I - SHAREHOLDERS.....................................................
Section 1.01. Annual Meeting.......................................
Section 1.02. Special Meetings.....................................
Section 1.03. Notice of Meetings...................................
Section 1.04. Quorum...............................................
Section 1.05. Organization.........................................
Section 1.06. Conduct of Business..................................
Section 1.07. Proxies and Voting...................................
Section 1.08. Stock List...........................................
Section 1.09. Notice of Shareholder Nomination and
Shareholder Business................................
ARTICLE II - BOARD OF DIRECTORS..............................................
Section 2.01. Number and Term of Office............................
Section 2.02. Vacancies............................................
Section 2.03. Regular Meetings.....................................
Section 2.04. Special Meetings.....................................
Section 2.05. Quorum...............................................
Section 2.06. Participation in Meetings by Conference Telephone....
Section 2.07. Conduct of Business..................................
Section 2.08. Powers...............................................
Section 2.09. Compensation of Directors............................
ARTICLE III - COMMITTEES.....................................................
Section 3.01. Executive Committee..................................
Section 3.02. Other Committees of the Board of Directors...........
Section 3.03. Conduct of Business..................................
ARTICLE IV - OFFICERS........................................................
Section 4.01. Generally............................................
Section 4.02. Chairman of the Board................................
Section 4.03. Vice Chairman of the Board...........................
Section 4.04. Chief Executive Officer..............................
<PAGE>
Section 4.05. President............................................
Section 4.06. Vice Presidents......................................
Section 4.07. Secretary............................................
Section 4.08. Treasurer............................................
Section 4.09. Delegation of Authority..............................
Section 4.10. Removal..............................................
Section 4.11. Action with Respect to Securities of Other Corporation
ARTICLE V - STOCK............................................................
Section 5.01. Certificates of Stock................................
Section 5.02. Transfers of Stock...................................
Section 5.03. Record Date..........................................
Section 5.04. Lost, Stolen or Destroyed Certificates...............
Section 5.05. Regulations..........................................
ARTICLE VI - NOTICES.........................................................
Section 6.01. Notices..............................................
Section 6.02. Waivers..............................................
ARTICLE VII - MISCELLANEOUS..................................................
Section 7.01. Facsimile Signatures.................................
Section 7.02. Corporate Seal.......................................
Section 7.03. Reliance upon Books, Reports and Records.............
Section 7.04. Fiscal Year..........................................
Section 7.05. Time Periods.........................................
ARTICLE VIII - INDEMNIFICATION...............................................
ARTICLE IX - AMENDMENTS......................................................
CERTIFICATE OF SECRETARY.....................................................
<PAGE>
BYLAWS
OF
PRE-PAID LEGAL SERVICES, INC.
(As Adopted November 5, 1987)
(As Amended June 27, 1996)
ARTICLE I - SHAREHOLDERS
Section 1.01. Annual Meeting
An annual meeting of the shareholders, for the election of
directors to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be held at such
place on such date, and at such time as the Board of Directors shall each year
fix, which date shall be within thirteen months subsequent to the later of the
date of incorporation or the last annual meeting of the shareholders.
Section 1.02. Special Meetings
Special meetings of the shareholders, for any purpose or
purposes prescribed in the notice of the meeting, may be called by the Board of
Directors or by the Chairman of the Board or the President or at the written
request of the holders of not less than one-tenth of all shares entitled to vote
at the meeting and shall be held at such place, on such date, and at such time
as they or he shall fix.
Section 1.03. Notice of Meetings
Written notice of the place, date, and time of all meetings of
the shareholders shall be given, not less than ten nor more than sixty days
before the date on which the meeting is to be held, to each shareholder entitled
to vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the Oklahoma
General Corporation Act or the Certificate of Incorporation). Notice of a
special meeting of the shareholders shall also state the purpose or purposes for
which the meeting is called.
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the place, date,
and time thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 1.04. Quorum
At any meeting of the shareholders, the holders of one-third
of all of the shares of the stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law or by the Certificate of Incorporation.
If a quorum shall fail to attend any meeting, the chairman of
the meeting or the holders of a majority of the shares of the stock entitled to
vote who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
Section 1.05. Organization
Such person as the Board of Directors may have designated or,
in the absence of such a person, the highest ranking officer of the corporation
who is present shall call to order any meeting of the shareholders and act as
chairman of the meeting. In the absence of the Secretary of the corporation, the
secretary of the meeting shall be such person as the chairman appoints.
Section 1.06. Conduct of Business
The chairman of any meeting of shareholders shall determine
the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
in order.
Section 1.07. Proxies and Voting
At any meeting of the shareholders, every shareholder entitled
to vote may vote in person or by proxy authorized by an instrument in writing
filed in accordance with the procedure established for the meeting.
Each shareholder shall have one vote for every share of stock
entitled to vote which is registered in his name on the record date for the
meeting, except as otherwise provided herein or required by law or by the
Certificate of Incorporation.
All voting, except where otherwise required by law or by the
Certificate of Incorporation, may be by a voice vote; provided, however, that
upon demand therefor by a shareholder entitled to vote or his proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the shareholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes
cast, and except as otherwise required by law or by the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Notwithstanding the provisions of this Section 1.07, any
action required or which may be taken at any annual or special meeting of the
shareholders may be taken without a meeting, without prior notice or a vote, if
a consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action of a meeting at which
all shares entitled to vote thereon were present and voted. Such written consent
or consents shall be filed with the minutes of the proceedings of the
shareholders. Prompt notice of the taking of corporate action without a meeting
by less than unanimous written consent shall be given to those shareholders who
have not consented in writing.
Section 1.08. Stock List
A complete list of shareholders entitled to vote at any
meeting of shareholders, arranged in alphabetical order for each class of stock
and showing the address of each such shareholder and the number of shares
registered in the name of each shareholder, shall be open to the examination of
any shareholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting
during the whole time thereof and shall be open to examination by any
shareholder who is present. The list shall presumptively determine the identity
of the shareholders entitled to examine the stock list and to vote in person or
by proxy at the meeting and the number of shares held by each of them.
Section 1.09. Notice of Shareholder Nomination and Shareholder Business (Adopted
June 27, 1996)
At a meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. Nominations
for the election of directors may be made by the Board of Directors or by any
shareholder entitled to vote for the election of directors. Other matters to be
properly brought before the meeting must be: (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, including matters covered by Rule 14a-8 under the Securities Exchange
Act of 1934, as in effect from time to time; (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors; or (c)
otherwise properly brought before the meeting by a shareholder, as provided
below.
A notice of the intent of a shareholder to make a nomination
or to bring any other matter before the meeting shall be made in writing and
received by the Secretary of the corporation not more than 150 days and not less
than 90 days in advance of the annual meeting or, in the event of a special
meeting of shareholders, such notice shall be received by the Secretary of the
corporation not later than the close of the fifteenth day following the day on
which notice of the meeting is first mailed to shareholders.
Every such notice by a shareholder shall set forth:
(a) the name and residence address of the shareholder of the
corporation who intends to make a nomination or bring up any other
matter;
(b) a representation that the shareholder is a registered
holder of the corporation's voting stock and intends to appear in
person or by proxy at the meeting to make the nomination or bring up
the matter specified in the notice;
(c) with respect to notice of an intent to make a nomination,
a description of all arrangements or understandings among the
shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations
are to made by the shareholder;
(d) with respect to notice of an intent to make a nomination,
such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had each nominee been nominated by the Board of
Directors of the corporation; and
(e) with respect to notice of an intent to bring up any other
matter, a description of the matter, and any material interest of the
shareholder in the matter.
Notice of intent to make a nomination shall be accompanied by
the written consent of each nominee to serve as director of the corporation, if
so elected.
At the meeting of shareholders, the Chairman of the meeting
shall declare out of order and disregard any nomination or other matter not
presented in accordance with this section.
ARTICLE II - BOARD OF DIRECTORS
Section 2.01. Number and Term of Office
The number of directors who shall constitute the whole board
shall consist of not less than three nor more than twenty-four members with the
exact number to be fixed from time to time by the Board of Directors. The
directors shall be divided into three classes, designated Class A, Class B, and
Class C, as nearly equal in number as possible, with the term of office of the
Class C directors to expire at the 1988 annual meeting of shareholders, the term
of office of the Class B directors to expire at the 1989 annual meeting of
shareholders, and the term of office of the Class A directors to expire at the
1990 annual meeting of shareholders. At each meeting of shareholders following
such initial classification and election, the number of directors equal to the
number of class whose term expires at the time of such meeting shall be elected
to hold office until the third succeeding annual meeting of shareholders. Each
director shall hold office until his successor is elected and qualified, or
until his earlier resignation or removal.
Whenever the authorized number of directors is increased
between annual meetings of the shareholders, an affirmative vote of 80% of the
directors then in office, although less than a quorum, shall be required to
elect such new directors for the balance of a term expiring at the annual
meeting of shareholders at which the term of the class to which they have been
elected expires and until their successors are elected and qualified. Any
decrease in the authorized number of directors shall not become effective until
the expiration of the term of the directors then in office unless, at the time
of such decrease, there shall be vacancies on the board which are being
eliminated by the decrease.
Section 2.02. Vacancies
If the office of any director becomes vacant by reason of
death, resignation, retirement, disqualification, removal from office or other
cause, such vacancy may be filled only by the affirmative vote of 80% of the
directors remaining in office, although less than a quorum, and each director so
chosen shall hold office for a term expiring at the annual meeting of
shareholders at which the term of the class to which such director has been
elected expires and until his successor is elected and qualified.
Section 2.03. Regular Meetings
Regular meetings of the Board of Directors shall be held at
such place or places, on such date or dates, and at such time or times as shall
have been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
Section 2.04. Special Meetings
Special meetings of the Board of Directors may be called by
any two of the directors then in office or by the chief executive officer or
President and shall be held at such place, on such date, and at such time as
they or he shall fix. Notice of the place, date, and time of each such special
meeting shall be given each director by whom it is not waived by mailing written
notice not less than three days before the meeting or by telegraphing or
personally delivering the same not less than eighteen hours before the meeting.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 2.05. Quorum
At any meeting of the Board of Directors, one-third of the
total number of the whole board, but not less than two directors, shall
constitute a quorum for all purposes, unless or except in the event that a board
of one is authorized in which case one director shall constitute a quorum. If a
quorum shall fail to attend any meeting, a majority of the directors present may
adjourn the meeting to another place, date, or time, without further notice or
waiver thereof.
Section 2.06. Participation in Meetings by Conference Telephone
Members of the Board of Directors, or of any committee
thereof, may participate in a meeting of such board or committee by means of
conference telephone or similar communications equipment that enables all
persons participating in the meeting to hear each other. Such participation
shall constitute presence in person at such meeting.
Section 2.07. Conduct of Business
At any meeting of the Board of Directors at which a quorum of
the directors is present, business shall be transacted in such order and manner
as the board may from time to time determine, and all matters shall be
determined by the vote of a majority of the directors present, except as
otherwise provided herein or required by law or by the Certificate of
Incorporation. Action may be taken by the Board of Directors without a meeting
if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 2.08. Powers
The Board of Directors may, except as otherwise required by
law or by the Certificate of Incorporation, exercise all such powers and do all
such acts and things as may be exercised or done by the corporation, including,
without limiting the generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind,
negotiable or non-negotiable, secured or unsecured, and to do all
things necessary in connection therewith;
(4) To remove any officer of the corporation with or without
cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers and
agents of the corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers and agents of the
corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent
with these bylaws, for the management of the corporation's business and
affairs.
Section 2.09. Compensation of Directors
Directors, as such, may receive, pursuant to resolution of the
Board of Directors, fixed fees and other compensation for their services as
directors, including, without limitation, their services as members of
committees of the directors.
ARTICLE III - COMMITTEES
Section 3.01. Executive Committee
The Board of Directors, by a vote of a majority of the whole
board, may designate an Executive Committee to serve at the pleasure of the
board and shall elect a director or directors to serve as the member or members
of the Executive Committee, designating, if it desires, other directors as
alternative members who may replace any absent or disqualified member at any
meeting of the Executive Committee. The Executive Committee, except to the
extent as it may be restricted from time to time by the vote of a majority of
the whole board, may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but the Executive Committee shall have no power or authority in
reference to amending the Certificate of Incorporation (except in connection
with the issuance of stock as authorized by resolution of the Board of
Directors), adopting an agreement of merger or consolidation, recommending to
the shareholders the sale, lease or exchange of all or substantially all of the
property and assets of the corporation, recommending to the shareholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and unless authorized by resolution of the Board of
Directors, the Executive Committee shall have no power or authority in reference
to declaring a dividend or authorizing the issuance of stock. In the absence or
disqualification of any member of the Executive Committee and any alternate
member in his place, the member or members of the Executive Committee present at
the meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 3.02. Other Committees of the Board of Directors
The Board of Directors, by a vote of a majority of the whole
board, may from time to time designate other committees of the board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the board and shall, for those committees, elect a director or
directors to serve as the member or members, designating, if it desires, other
directors as alternative members who may replace any absent or disqualified
member at any meeting of the committee. Any committee so designated may exercise
the power and authority of the Board of Directors to declare a dividend or to
authorize the issuance of stock if the resolution which designates the committee
or a supplemental reso lution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
Section 3.03. Conduct of Business
Each committee may determine the procedural rules for meeting
and conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the total committee members
shall constitute a quorum unless the committee shall consist of one or two
members, in which event one member shall constitute a quorum; and all matters
shall be determined by a majority vote of the members present. Minutes of each
committee meeting shall be prepared, approved by the chairman of the meeting and
filed with the Secretary of the corporation. Action may be taken by any
committee without a meeting if all members thereof consent thereto in writing,
and the writing or writings are filed with the minutes of the proceedings of
such committee.
ARTICLE IV - OFFICERS
Section 4.01. Generally
The officers of the corporation shall consist of a Chief
Executive Officer, a President and a Secretary and such other senior or
subordinate officers as may from time to time be elected by the Board of
Directors. The Board of Directors may also elect from its number a Chairman and
Vice Chairman of the Board of the corporation. Officers shall be elected by the
Board of Directors, which shall consider that subject at its first meeting after
every annual meeting of shareholders. Each officer shall hold his office until
his successor is elected and qualified or until his earlier resignation or
removal. Any number of offices may be held by the same person. (Amended June
27, 1996)
Section 4.02. Chairman of the Board
The Chairman of the Board, if any, shall, if present, preside
at all meetings of the Board of Directors and exercise and perform such other
powers and duties as may be from time to time assigned to him by the Board of
Directors. He shall be the senior officer of the corporation and shall be
responsible for overall planning and policy. (Amended June 27, 1996)
Section 4.03. Vice Chairman of the Board
The Vice Chairman of the Board shall perform such duties as
the Board of Directors shall prescribe. In the absence or disability of the
Chairman of the Board, the Vice Chairman shall perform the duties and exercise
the powers of the Chairman of the Board.
(Amended June 27, 1996)
Section 4.04. Chief Executive Officer
The Chief Executive Officer shall, subject to the provisions
of these bylaws and to the direction of the Board of Directors, have the
responsibility for the general management and control of the affairs and
business of the corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief executive or which are
delegated to him by the Board of Directors. He shall have power to sign all
stock certificates, contracts and other instruments of the corporation which are
authorized. He shall have general supervision and direction of all of the other
officers and agents of the corporation. (Amended June 27, 1996)
Section 4.05. President
The President shall have such duties as are assigned to him by
the Board of Directors or the Chief Executive Officer. In the absence or
disability of the Chief Executive Officer, the President shall perform the
duties and exercise the powers of the Chief Executive Officer. (Amended June
27, 1996)
Section 4.06. Vice Presidents
Each Vice President shall perform such duties as the Board of
Directors or Chief Executive Officer shall prescribe. In the absence or
disability of the President, the Vice President who has served in such capacity
for the longest time shall perform the duties and exercise the powers of the
President. (Amended June 27, 1996)
Section 4.07. Secretary
The Secretary shall issue all authorized notices for, and
shall keep minutes of, all meetings of the shareholders and the Board of
Directors. He shall have charge of the corporate records. (Amended June 27,
1996)
Section 4.08. Treasurer
The Treasurer, if any, shall have the custody of all monies
and securities of the corporation and shall keep regular books of account. He
shall make such disbursements of the funds of the corporation as are proper and
shall render from time to time an account of all such transactions and of the
financial condition of the corporation. (Amended June 27, 1996)
Section 4.09. Delegation of Authority
The Board of Directors may from time to time delegate the
powers or duties of any officer to any other officers or agents, notwithstanding
any provision hereof.
(Amended June 27, 1996)
Section 4.10. Removal
Any officer of the corporation may be removed at any time,
with or without cause, by the Board of Directors. (Amended June 27, 1996)
Section 4.11. Action with Respect to Securities of Other Corporation
Unless otherwise directed by the Board of Directors, the Chief
Executive Officer or the President shall have power to vote and otherwise act on
behalf of the corporation, in person or by proxy, at any meeting of shareholders
of or with respect to any action of shareholders of any other corporation in
which this corporation may hold securities and otherwise to exercise any and all
rights and powers which this corporation may possess by reason of its ownership
of securities in such other corporation. (Amended June 27, 1996)
ARTICLE V - STOCK
Section 5.01. Certificates of Stock
Each shareholder shall be entitled to a certificate signed by,
or in the name of, the corporation by the Chairman or the Vice Chairman of the
Board, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying and
representing the number of shares owned by him. Any of or all the signatures on
the certificate may be facsimile.
Section 5.02. Transfers of Stock
Transfers of stock shall be made only upon the transfer books
of the corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 5.04 of these bylaws, an
outstanding certificate for the number of shares involved shall be surrendered
for cancellation before a new certificate is issued therefor.
Section 5.03. Record Date
The Board of Directors may fix a record date, which shall not
be more than sixty nor less than ten days before the date of any meeting of
shareholders, nor more than sixty days prior to the time for the other action
hereinafter described, as of which there shall be determined the shareholders
who are entitled: to notice of or to vote at any meeting of shareholders or any
adjournment thereof; to express consent to corporate action in writing without a
meeting; to receive payment of any dividend or other distribution or allotment
of any rights; or to exercise any rights with respect to any change, conversion
or exchange of stock or with respect to any other lawful action.
Section 5.04. Lost, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any
certificate of stock, another may be issued in its place pursuant to such
regulations as the Board of Directors may establish concerning proof of such
loss, theft or destruction and concerning the giving of a satisfactory bond or
bonds of indemnity.
Section 5.05. Regulations
The issue, transfer, conversion and registration of
certificates of stock shall be governed by such other regulations as the Board
of Directors may establish.
ARTICLE VI - NOTICES
Section 6.01. Notices
Whenever notice is required to be given to any shareholder,
director, officer, or agent, such requirement shall not be construed to mean
personal notice. Such notice may in every instance be effectively given by
depositing a writing in a post office or letter box, in a postpaid, sealed
wrapper, or by dispatching a prepaid telegram, addressed to such shareholder,
director, officer, or agent at his or her address as the same appears on the
books of the corporation. The time when such notice is dispatched shall be the
time of the giving of the notice.
Section 6.02. Waivers
A written waiver of any notice, signed by a shareholder,
director, officer, or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such shareholder, director, officer, or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 7.01. Facsimile Signatures
In addition to the provisions for the use of facsimile
signatures elsewhere specifically authorized in these bylaws, facsimile
signatures of any officer or officers of the corporation may be used whenever
and as authorized by the Board of Directors or a committee thereof.
Section 7.02. Corporate Seal
The Board of Directors may provide a suitable seal, containing
the name of the corporation and the word "Oklahoma", which seal shall be placed
in the custody of the Secretary. If and when so directed by the Board of
Directors or a committee thereof, duplicates of the seal may be kept and used by
the Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 7.03. Reliance upon Books, Reports and Records
Each director and each member of any committee designated by
the Board of Directors shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the corporation, including reports made to the corporation by any of its
officers, by an independent certified public accountant, by an appraiser
selected with reasonable care, by the Board of Directors, or by any such
committee.
Section 7.04. Fiscal Year
The fiscal year of the corporation shall be as fixed by the
Board of Directors.
Section 7.05. Time Periods
In applying any provision of these bylaws which require than
an act be done or not done a specified number of days prior to an event or that
an act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
ARTICLE VIII - INDEMNIFICATION
Each person who is or was a director or officer of this
corporation, and each person who serves or served at the request of this
corporation as a director or officer (or equivalent) of another enterprise,
shall be indemnified and held harmless by this corporation to the fullest extent
authorized by the Oklahoma General Corporation Act as it may be in effect from
time to time, except as to any action, suit or proceeding brought by or on
behalf of such director or officer without prior approval of the Board of
Directors. The right to indemnification conferred in this Article VIII shall be
a contract right and shall not be exclusive of any other right which any person
may have or hereafter acquire under this corporation's Certificate of
Incorporation, these Bylaws, or any statute, bylaw, agreement, vote of
stockholders or directors or otherwise.
ARTICLE IX - AMENDMENTS
These bylaws may be amended or repealed by the Board of
Directors at any meeting or by the shareholders at any meeting.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Secretary of Pre-Paid
Legal Services, Inc., an Oklahoma corporation;
2. That the foregoing bylaws comprising fifteen (15) pages
constitute the bylaws of said corporation as duly adopted by the Instrument of
Organization of the incorporators effective November 5, 1987 and as amended on
June 27, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of said corporation this 27th day of June, 1996.
/s/ KATHRYN WALDEN
--------------------------------
Kathryn Walden, Secretary
[SEAL]
EXHIBIT 11.1
PRE-PAID LEGAL SERVICES, INC.
Statement re Computation of Per Share Earnings
<PAGE>
EXHIBIT 11.1
PRE-PAID LEGAL SERVICES, INC.
Statement re Computation of Per Share Earnings
(In 000's except per share amounts)
Nine Months Ended
September 30,
--------------------
1996 1995
-------- --------
PRIMARY EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a).................. $ 8,973 $ 5,032
======= =======
Shares:
Weighted average shares outstanding, (net of 747 shares
of treasury stock) disregarding exercise of options or 21,230 18,340
conversion of preferred stock.........................
Assumed dilutive conversion of preferred stock.......... 149 188
Assumed exercise of options and warrants based on the
modified treasury stock method using average market
price................................................. 966 1,721
-------- -------
Weighted average number of shares, as adjusted.......... 22,345 20,249
======== =======
Earnings per share (a).................................. $ .40 $ .25
======== =======
FULLY DILUTED EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a).................. $ 8,973 $ 5,032
Add: Dividends on assumed conversion of preferred stock. - 121
------- -------
Net income, as adjusted................................. $ 8,973 $ 5,153
======= =======
Shares:
Weighted average shares outstanding, (net of 747 shares
of treasury stock) disregarding exercise of options or 21,230 18,340
conversion of preferred stock ........................
Assumed dilutive conversion of preferred stock.......... 149 1,052
Assumed exercise of options and warrants based on the
modified treasury stock method using closing market
price if higher than average market price............. 966 2,107
------- -------
Weighted average number of shares, as adjusted.......... 22,345 21,499
======= =======
Earnings per share (a).................................. $ .40 $ .24
======= =======
(a) These amounts agree with the related amounts in the statements of income.
<PAGE>
EXHIBIT 11.1
(continued)
PRE-PAID LEGAL SERVICES, INC.
Statement re Computation of Per Share Earnings
(In 000's except per share amounts)
Three Months Ended
September 30,
--------------------
1996 1995
-------- --------
PRIMARY EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a).................. $ 3,251 $ 1,940
======= =======
Shares:
Weighted average shares outstanding, (net of 747 shares
of treasury stock) disregarding exercise of options or
conversion of preferred stock......................... 21,505 20,653
Assumed dilutive conversion of preferred stock.......... 139 169
Assumed exercise of options and warrants based on the
modified treasury stock method using average market
price................................................. 711 1,061
------- -------
Weighted average number of shares, as adjusted.......... 22,355 21,883
======= =======
Earnings per share (a).................................. $ .15 $ .09
======= =======
FULLY DILUTED EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a).................. $ 3,251 $ 1,940
Add: Dividends on assumed conversion of preferred stock. - 3
------- -------
Net income, as adjusted.............................. $ 3,251 $ 1,943
======= =======
Shares:
Weighted average shares outstanding, (net of 747 shares
of treasury stock) disregarding exercise of options or
conversion of preferred stock ........................ 21,505 20,653
Assumed dilutive conversion of preferred stock.......... 139 169
Assumed exercise of options and warrants based on the
modified treasury stock method using closing market
price if higher than average market price............. 711 1,094
Weighted average number of shares, as adjusted.......... 22,355 21,916
======= =======
Earnings per share (a).................................. $ .15 $ .09
======= =======
(a) These amounts agree with the related amounts in the statements of income.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the September 30, 1996 financial statements contained in Form 10-Q
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 15,629
<SECURITIES> 0
<RECEIVABLES> 1,286
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,072
<PP&E> 2,258
<DEPRECIATION> 0
<TOTAL-ASSETS> 51,613
<CURRENT-LIABILITIES> 2,443
<BONDS> 0
0
43
<COMMON> 223
<OTHER-SE> 40,500
<TOTAL-LIABILITY-AND-EQUITY> 51,613
<SALES> 35,941
<TOTAL-REVENUES> 42,910
<CGS> 0
<TOTAL-COSTS> 29,088
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,822
<INCOME-TAX> 4,838
<INCOME-CONTINUING> 8,984
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,973
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
