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, 1997
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 East Main Street
Ada, Oklahoma 74821-0145
(Address of principal executive offices) (Zip Code)
(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 24, 1997:
Common Stock $.01 par value 22,375,758
<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 30, December 31,
1997 1996
------------ -----------
(Unaudited)
Current assets:
Cash ............................................... $20,959 $14,831
Held-to-maturity short-term investments ............ 500 500
Accrued membership income .......................... 2,108 1,710
Commission advances - current portion .............. 14,042 9,108
------- -------
Total current assets ............................ 37,609 26,149
Held-to-maturity investments ....................... 3,493 1,757
Investments pledged ................................ 2,772 2,772
Commission advances, net ........................... 33,543 21,744
Property and equipment, net ........................ 3,181 2,955
Other .............................................. 2,146 2,155
------- -------
Total assets .................................... $82,744 $57,532
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Membership benefits................................. $ 2,557 $ 1,862
Accounts payable and accrued expenses............... 1,793 912
------- -------
Total current liabilities.......................... 4,350 2,774
Deferred income taxes................................. 16,456 9,284
------- -------
Total liabilities................................. 20,806 12,058
======= =======
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 $77 at September 30, 1997
and $84 at December 31, 1996, respectively....... 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, 31
and 32 shares authorized, issued and outstanding
at September 30, 1997 and December 31, 1996,
respectively; liquidation value of $413 at
September 30, 1997 and $430 at December 31, 1996. 31 32
Common stock, $.01 par value; 100,000 shares
authorized; 23,017 and 22,459 issued at September 30,
1997 and December 31, 1996, respectively........... 230 225
Capital in excess of par value...................... 44,190 41,039
Retained earnings................................... 19,659 6,350
Less: Treasury stock, at cost; 747 shares........... (2,177) (2,177)
-------- --------
Total stockholders' equity......................... 61,938 45,474
-------- --------
Total liabilities and stockholders' equity........ $ 82,744 $ 57,532
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in 000's, except per share amounts)
(Unaudited)
Nine Months Ended
September 30,
----------------------
1997 1996
--------- --------
Revenues:
Membership premiums................................ $ 54,758 $ 35,941
Associate services................................. 8,777 4,246
Interest income.................................... 1,152 960
Other.............................................. 1,436 1,291
-------- --------
66,123 42,438
-------- --------
Costs and expenses:
Membership benefits................................ 18,110 11,987
Commissions........................................ 11,988 8,104
General and administrative......................... 6,215 4,501
Associate services and direct marketing expenses... 8,141 3,354
Depreciation....................................... 508 394
Premium taxes...................................... 670 276
-------- --------
45,632 28,616
-------- --------
Income before income taxes........................... 20,491 13,822
Provision for income taxes........................... 7,172 4,838
-------- --------
Net income........................................... 13,319 8,984
Less dividends on preferred shares................... 10 11
-------- --------
Net income applicable to common shares............... $ 13,309 $ 8,973
======== ========
Earnings per common and common equivalent share...... $ .59 $ .40
======== ========
Earnings per common share - assuming full dilution... $ .59 $ .40
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in 000's, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
--------------------
1997 1996
------- --------
Revenues:
Membership premiums................................ $ 20,149 $ 13,376
Associate services................................. 3,142 1,392
Interest income.................................... 407 363
Other.............................................. 501 416
-------- --------
24,199 15,547
-------- --------
Costs and expenses:
Membership benefits................................ 6,476 4,408
Commissions........................................ 4,418 3,063
General and administrative......................... 2,232 1,703
Associate services and direct marketing expenses... 3,041 1,132
Depreciation....................................... 183 128
Premium taxes...................................... 182 107
-------- --------
16,532 10,541
-------- --------
Income before income taxes........................... 7,667 5,006
Provision for income taxes........................... 2,684 1,752
-------- --------
Net income........................................... 4,983 3,254
Less dividends on preferred shares................... 3 3
-------- --------
Net income applicable to common shares............... $ 4,980 $ 3,251
======== ========
Earnings per common and common equivalent share...... $ .22 $ .15
======== =========
Earnings per common share - assuming full dilution... $ .22 $ .15
======== =========
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,
---------------------
1997 1996
-------- --------
Cash flows from operating activities:
Net income........................................... $ 13,319 $ 8,984
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 508 394
Provision for deferred income taxes............... 7,172 4,838
Provision for associate stock options............. 100 318
Increase in accrued membership income............. (398) (248)
Increase in commission advances................... (16,733) (14,004)
Decrease (increase) in other assets............... 9 (354)
Increase in membership benefits payable........... 695 285
Increase (decrease) in accounts payable and
accrued expenses................................ 781 (165)
-------- --------
Net cash provided by operating activities........ 5,453 48
-------- --------
Cash flows from investing activities:
Additions to property and equipment................ (734) (450)
Purchases of investments........................... (1,851) (1,082)
Maturities of investments.......................... 115 400
-------- --------
Net cash used in investing activities............ (2,470) (1,132)
-------- --------
Cash flows from financing activities:
Proceeds from sale of common and preferred stock... 3,155 1,735
Dividends paid on preferred stock.................. (10) (11)
-------- --------
Net cash provided by financing activities........ 3,145 1,724
-------- --------
Net increase in cash................................. 6,128 640
Cash at beginning of period.......................... 14,831 14,489
-------- --------
Cash at end of period................................ $ 20,959 $ 15,129
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest............................. $ 6 $ 1
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRE-PAID LEGAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in 000's, except per share amounts)
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The consolidated balance sheet as of September 30, 1997, the related
statements of income for the three-month and nine-month periods ended September
30, 1997 and 1996 and the statements of cash flows for the nine-month periods
ended September 30, 1997 and 1996 are unaudited; in the opinion of management,
all adjustments necessary for a fair presentation of such financial statements
have been included.
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 1996 Annual Report on Form 10-K. 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.
Statement of Financial Accounting Standards 128, Earnings Per Share,
("SFAS 128") was issued in February, 1997. This statement provides new
accounting and reporting standards for earnings per share and will replace the
currently used primary and fully diluted earnings per share with basic and
diluted earnings per share. Basic earnings per share excludes dilution and is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share represents the potential dilution that could occur if all stock options
and other stock-based awards, as well as convertible securities, were exercised
and converted into common stock. SFAS 128, effective for year-end 1997 financial
statements, requires that prior period earnings per share be restated. The
Company does not expect adoption of this statement to have a material impact on
earnings per common share amounts.
Statement of Financial Accounting Standards 130, Reporting
Comprehensive Income, ("SFAS 130") was issued in June, 1997. This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS 130, effective for fiscal years beginning after December 15,
1997, requires reclassification of financial statements for earlier periods
provided for comparative purposes. The Company does not expect adoption of this
statement to have a material impact on earnings per common share amounts.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST NINE MONTHS OF 1997 COMPARED TO FIRST NINE MONTHS OF 1996
The Company reported net income applicable to common shares of $13.3
million, or $.59 per share, assuming full dilution, for the nine months ended
September 30, 1997 compared to $9.0 million, or $.40 per share, for the
comparable period of 1996. As a percentage of total revenues, net income
applicable to common shares was 20% in the nine months ended September 30, 1997,
down slightly from 21% in the comparable period of 1996. The decline in this
margin is primarily attributable to increased expenses associated with the
implementation of a new program which became available in January, 1997. The new
combination classroom and field training program, titled Fast Start to Success
("Fast Start"), is aimed at increasing the level of new membership sales per
associate. The positive impact of the program is reflected in the increase in
new memberships written and new sales associates recruited per Fast Start
associate.
<PAGE>
Revenues rose 56% to $66.1 million from $42.4 million for the prior
year's comparable period. Income before income taxes for the first nine months
of 1997 increased 48% to $20.5 million, or 31% of revenues, from $13.8 million,
or 33% of revenues for the comparable period of 1996.
Membership premiums totaled $54.8 million during the first nine months
of 1997 compared to $35.9 million for the same period of 1996, an increase of
52%. The increase in membership premiums was primarily the result of increased
new membership sales resulting in a higher number of active memberships in
force. New membership sales during the first nine months of 1997 were 208,087
compared to 142,429 during the 1996 period, an increase of 46%. At September 30,
1997, there were 392,791 active memberships in force compared to 273,211 at
September 30, 1996, an increase of 44%. Membership premiums and their impact on
total revenues in any period are determined directly by the number of active
memberships in force during any such period. The active membership in force are
determined by both the number of new memberships sold in any period together
with the persistency, or renewal rate, of existing memberships. The Company's
overall membership persistency rate varies based on, among other factors, the
relative age of total memberships in force. From 1981 through the year ended
December 31, 1996, the Company's annual memberships persistency rates have
averaged approximately 76%.
Associate services revenue increased from $4.2 million for the first
nine months of 1996 to $8.8 million during the same period of 1997 primarily as
a result of Fast Start which resulted in the Company receiving training fees of
approximately $4.0 million during the first nine months of 1997. Fast Start
requires a training fee of $184 per new associate and upon successful completion
of the program provides for the payment of certain training bonuses. In order to
be deemed successful for Fast Start purposes, the new associate must write three
new memberships and recruit one new sales associate within 15 days of the
associate's Fast Start training. The $4.0 million in training fees was comprised
of $184 from each of approximately 19,850 new sales associates who elected to
participate in Fast Start and training fees of $25 from each of approximately
14,500 existing associates who participated in the program. New associates
enrolled during the first nine months of 1997 were 43,861 compared to 54,228 for
the same period of 1996, a decrease of 19%. Future revenues from associate
services will depend primarily on the number of new associates enrolled and the
number who choose to participate in the Company's training program, but the
Company expects that such revenues will continue to be largely offset by the
direct and indirect cost to the Company of training bonuses paid, providing
associate services and other direct marketing expenses.
Interest income increased 20% to $1.2 million during the nine months
ended September 30, 1997 from $1.0 million for the comparable period of 1996 as
a result of increases in the average investments outstanding and higher interest
rates on investments. At September 30, 1997 the Company reported $27.7 million
in cash and investments compared to $19.6 million at September 30, 1996.
Membership benefits totaled $18.1 million for the first nine months of
1997 compared to $12.0 million for the same period of 1996, an increase of 51%.
However, the loss ratio (membership benefits as a percentage of membership
premiums) for the 1997 period remained level with the loss ratio for the
comparable period of 1996 at 33%. The loss ratio is expected to remain near 35%
as the portion of active memberships which provide for a capitated benefit
continues to increase.
Commissions were $12.0 million for the first nine months of 1997
compared to $8.1 million for the same period of 1996, but decreased, as a
percentage of membership premiums, from 23% to 22%. Commission expense, as a
percentage of membership premiums, is expected to gradually increase to near 25%
of membership premiums in future years as a result of changes in the commission
structure for memberships sold after March 1, 1995.
General and administrative expenses during the 1997 and 1996 nine month
periods were $6.2 million and $4.5 million, respectively, and represented 11%
and 13% of membership premiums for such periods. These expenses are expected to
remain at or near these levels and gradually decrease when expressed as a
percentage of membership premiums as a result of certain economies of scale
pertaining to the Company's operations.
<PAGE>
Associate services and direct marketing expenses increased to $8.1
million for the first nine months of 1997 from $3.4 million for the same period
of 1996 primarily as a result of approximately $3.0 million in Fast Start
training bonuses paid, additional costs of supplies due to increased purchases
by associates and higher staffing requirements. These expenses also include the
costs of providing associate services and marketing costs other than commissions
which are directly associated with new membership sales.
Due to property and equipment additions, depreciation increased from
$394,000 during the first nine months of 1996 to $508,000 for the first nine
months of 1997. Premium taxes increased to $670,000 during the first nine months
of 1997 from $276,000 for the comparable period of 1996, largely as a result of
a $200,000 accrual related to a prior year tax assessment.
The Company's expense ratio, which represents commissions, general and
administrative expenses and premium taxes as a percentage of membership
premiums, was 34% for the first nine months of 1997 compared to 36% for the
comparable period of 1996 resulting in a combined loss and expense ratio of 67%
for the first nine months of 1997 compared to 69% for the same period of 1996.
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 $7.2 million
(35% of pretax income) for the first nine months of 1997 compared to $4.8
million (35% of pretax income) for the same period of 1996. The 1997 and 1996
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 membership sales.
Dividends paid on outstanding preferred stock during the first nine
months of 1997 were $10,000 compared to $11,000 during the same period of 1996.
This decrease is attributable to the conversion of shares of $3.00 Cumulative
Convertible Preferred Stock into common stock.
THIRD QUARTER OF 1997 COMPARED TO THE THIRD QUARTER OF 1996
The results of operations in the third quarter of 1997, compared to the
third quarter of 1996, reflect increases in revenues and expenses primarily as a
result of the same factors discussed in the comparison of the first nine months
of 1997 compared to the first nine months of 1996.
Total revenues increased 56% or approximately $8.7 million to $24.2
million in the third quarter of 1997 compared to $15.5 million in the third
quarter of 1996, primarily as a result of increase in membership premiums The
membership premium increase of approximately 51% primarily resulted from an
increase in the number of average active memberships during the third quarter of
1997 compared to the similar period in 1996.
Membership benefits totaled $6.5 million in the 1997 third quarter
compared to $4.4 million in the 1996 third quarter and resulted in a loss ratio
of 32% and 33%, respectively. The Company's expense ratio for the third quarter
of 1997 was 34% compared to 36% for the 1996 third quarter resulting in a
combined loss and expense ratio of 66% for the third quarter of 1997 compared to
69% for the same period of 1996. The combined ratio does not measure total
profitability because it does not take into account all revenues and expenses.
The above factors resulted in a 1997 third quarter net income
applicable to common shares of $5.0 million, or $.22 per share assuming full
dilution, compared to $3.3 million, or $.15 per share, for the third quarter of
1996.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated net cash provided by operating activities was $5.5 million
for the first nine months of 1997 compared to $48,000 for the 1996 period. The
increase of $5.4 million in cash provided by operations during the first nine
months of 1997 compared to the same period of 1996 resulted primarily from
increases in net income of $4.3 million, increases in deferred income taxes of
$2.3 million, increases in accounts payable and accrued expenses of $946,000 and
only partially reduced by an increase in commission advances of $2.7 million
related to the increase in new membership enrollments.
<PAGE>
The Company had consolidated working capital of $33.3 million at
September 30, 1997, an increase of $9.9 million compared to consolidated working
capital of $23.4 million at December 31, 1996 and an increase of $10.7 million
compared to September 30, 1996 working capital of $22.6 million.
The Company advances significant commissions at the time a membership
is sold. During the nine months ended September 30, 1997, the Company advanced
commissions of $27.6 million on new membership sales compared to $19.7 million
for the same period of 1996. Since approximately 92% of membership premiums are
collected on a monthly basis, a significant cash flow deficit is created at the
time a membership is sold. This deficit is reduced as monthly premiums are
remitted and no additional commissions are paid on the membership until all
previous commission advances have been fully recovered. Commission advances were
subsequently reduced by commission earnings of $10.6 million and $5.2 million
for the nine month periods ended September 30, 1997 and 1996, respectively. The
Company has recorded an allowance of $3.7 million to provide for estimated
uncollectible balances which includes an increase in the allowance of $300,000
during the nine months ended September 30, 1997.
Although the Company is the operating entity in many jurisdictions, the
Company's subsidiaries serve as operating companies in various states which
regulate memberships 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 2. CHANGES IN SECURITIES.
(c) Recent Sales of Unregistered Securities:
On July 10, 1997, the Company issued to a current non-employee director a
total of 3,500 shares of Common Stock upon exercise of outstanding warrants
at a weighted average exercise price of $1.90 per share. Such warrants were
issued by the Company during 1994 at the then current market value in
connection with the non-employee director's attendance at meetings of the
Board of Directors.
On August 12, 1997, the Company issued to assignees of Roger T. Staubach a
total of 3,000 shares of Common Stock upon exercise of outstanding warrants
to purchase Common Stock at an exercise price of $.50 per share. Such
warrants were issued by the Company during 1993 in connection with a
marketing services agreement entered into between the Company and Mr.
Staubach.
On October 6, 1997, the Company issued to the spouse and son of a former
non-employee director a total of 100,000 shares (50,000 shares each) of
Common Stock upon exercise of outstanding warrants at a weighted average
exercise price of $.50 per share. Such warrants were issued by the Company
during 1989 in connection with the non-employee director's services to the
Company.
All such options and shares of Common Stock were issued without
registration under the Securities Act of 1933 in reliance on the exemption
under Section 4(2) thereof.
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
---- ------------
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, 1997.
<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 30, 1997 /s/ HARLAND C. STONECIPHER
--------------------------
Harland C. Stonecipher
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: October 30, 1997 /s/ RANDY HARP
--------------------------
Randy Harp
Chief Financial Officer and
Chief Operating Officer
(Principal Financial Officer)
Date: October 30, 1997 /s/ KATHY PINSON
----------------
Kathy Pinson
Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
No. Description
--- -----------
11.1 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
<PAGE>
EXHIBIT 11.1
<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,
-------------------
1997 1996
-------- -------
PRIMARY EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a)............... $ 13,309 $ 8,973
======== ========
Shares:
Weighted average shares outstanding, (net of 747
shares of treasury stock) disregarding exercise of 22,043 21,230
options or conversion of preferred stock...........
Assumed dilutive conversion of preferred stock....... 112 149
Assumed exercise of options and warrants based on the
treasury stock
method using average market price.................. 355 966
-------- --------
Weighted average number of shares, as adjusted....... 22,510 22,345
======== ========
Earnings per share (a)............................... $ .59 $ .40
======== ========
FULLY DILUTED EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a)............... $ 13,309 $ 8,973
======== ========
Shares:
Weighted average shares outstanding, (net of 747
shares of treasury stock) disregarding exercise of 22,043 21,230
options or conversion of preferred stock ..........
Assumed dilutive conversion of preferred stock....... 112 149
Assumed exercise of options and warrants based on the
treasury stock
method using closing market price if higher than
average market price............................... 453 966
-------- --------
Weighted average number of shares, as adjusted....... 22,608 22,345
======== ========
Earnings per share (a)............................... $ .59 $ .40
======== ========
(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,
------------------
1997 1996
------ ------
PRIMARY EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a)............... $ 4,980 $ 3,251
======== ========
Shares:
Weighted average shares outstanding, (net of 747
shares of treasury stock) disregarding exercise of 22,256 21,505
options or conversion of preferred stock...........
Assumed dilutive conversion of preferred stock....... 108 139
Assumed exercise of options and warrants based on the
treasury stock
method using average market price.................. 306 711
-------- --------
Weighted average number of shares, as adjusted....... 22,670 22,355
======== ========
Earnings per share (a)............................... $ .22 $ .15
======== ========
FULLY DILUTED EARNINGS PER SHARE:
Computation for Statement of Income
Earnings:
Income applicable to common shares (a)............... $ 4,980 $ 3,251
======== ========
Shares:
Weighted average shares outstanding, (net of 747
shares of treasury stock) disregarding exercise of
options or conversion of preferred stock .......... 22,256 21,505
Assumed dilutive conversion of preferred stock....... 108 139
Assumed exercise of options and warrants based on the
treasury stock
method using closing market price if higher than
average market price............................... 348 711
-------- --------
Weighted average number of shares, as adjusted....... 22,712 22,355
======== ========
Earnings per share (a)............................... $ .22 $ .15
======== ========
(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, 1997 financial statements contained in Form 10-Q
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000311657
<NAME> Pre-Paid Legal Services, Inc.
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 20,959
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0
36
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