Pre-Paid Legal Services Issues Dividend and Letter to Stockholders
The following letter was issued by PPL, with all of the appropriate legal statements re "forward looking statements", etc. I have not reproduced all of that here. See the Pre-Paid website for stockholders for all of those details.
PRE-PAID LEGAL ISSUES LETTER TO SHAREHOLDERS
ADA, OK, December 6, 2004 -
Pre-Paid Legal Services, Inc. (NYSE:PPD) ("Pre-Paid") -
The attached "Letter to Shareholders" from Pre-Paid Chairman and CEO Harland C. Stonecipher was posted on Pre-Paid's web site for shareholders and/or electronically distributed to them today.
Letter to Shareholders - No. 7
From Harland C. Stonecipher
Date: December 6, 2004
Today we announced a year-end dividend of 50 cents ($0.50) per share. We will consider a quarterly dividend next year. I thought I should explain this decision. Over the past five and a half years our stock has been so undervalued, our cash generation so great the decision to repurchase shares was obvious. And we did with conviction. We repurchased $210 million of our own stock, reducing the number of shares outstanding from 23.6 million to 15.5 million.
During the same period we doubled our membership revenues. However, because we reduced the number of shares outstanding, our per share membership revenues tripled. As to the future, without putting up one cent, each outstanding share today has 52% more of the future; i.e., 52% more of earnings as well as dividends forever. Had we not reduced the number of shares outstanding, the $7.8 million we will pay out as a $0.50 per share dividend would have been reduced to $.32 per share.
Prior to the recent reduction in the confiscatory taxes on dividends, paying a dividend rarely made sense, especially for a growing company. The new tax treatment changes that. Paying a dividend is now a rational option. But there is one caveat to our intention to pay a quarterly dividend. If conditions are such that we can use internally generated cash and/or borrowed funds to produce greater long-term per share results by repurchasing shares versus paying a dividend, as your long-term partner we want the flexibility to do so.
This does not mean repurchasing shares and paying a dividend are mutually exclusive. We will do what we think best given the conditions. Our focus is to maximize the value of each share outstanding. Until now we have opted to reduce the number of shares outstanding through share repurchases. Incidentally, in that same vein we no longer grant options.
Business models are not just financial concepts. Something has to be produced. Something has to be sold. The primary driver of our business is the value of our product. Our product is both unique and has extraordinary value. We urge you to become a member. Tell your friends about it. Use the product. By using the product you will see why we believe our product is both valuable and unique.
Last year we received 3.2 million calls from our members. Our 50 provider law firms, with their 990 dedicated attorneys, handled 2.3 million requests for professional assistance. The value of our product comes from our ability not only to satisfy each member's request for legal assistance but to do so promptly. This is crucial. It is something we do not take for granted. We are somewhat comforted by the hundreds of letters we receive each month from our members thanking us for helping them with a problem they could not otherwise solve. It is not uncommon for members to tell us how impressed they were with how quickly their call was returned, their problems solved. We will soon have these letters available on our website so you can see why we are enthusiastic about our product and about our future.
The importance of our ability to deliver a high-quality product and yet produce free cash cannot be overstated. That after purchasing $210 million of our own stock, building a new corporate headquarters, having more than $40 million cash and investments and but $45 million in debt and now declaring a dividend speaks clearly to the soundness of our financial model. We have a business model that allows us to grow and produce excess cash. We will continue, as we have these past five and a half years, to utilize excess cash to leverage operational results so as to produce maximum long-term per share results for our shareholder/partners through share repurchases and now paying a dividend. All of us at Pre-Paid appreciate your continued confidence. We do not take it for granted.
Posted by George Schmidt
PRE-PAID LEGAL ISSUES LETTER TO SHAREHOLDERS
ADA, OK, December 6, 2004 -
Pre-Paid Legal Services, Inc. (NYSE:PPD) ("Pre-Paid") -
The attached "Letter to Shareholders" from Pre-Paid Chairman and CEO Harland C. Stonecipher was posted on Pre-Paid's web site for shareholders and/or electronically distributed to them today.
Letter to Shareholders - No. 7
From Harland C. Stonecipher
Date: December 6, 2004
Today we announced a year-end dividend of 50 cents ($0.50) per share. We will consider a quarterly dividend next year. I thought I should explain this decision. Over the past five and a half years our stock has been so undervalued, our cash generation so great the decision to repurchase shares was obvious. And we did with conviction. We repurchased $210 million of our own stock, reducing the number of shares outstanding from 23.6 million to 15.5 million.
During the same period we doubled our membership revenues. However, because we reduced the number of shares outstanding, our per share membership revenues tripled. As to the future, without putting up one cent, each outstanding share today has 52% more of the future; i.e., 52% more of earnings as well as dividends forever. Had we not reduced the number of shares outstanding, the $7.8 million we will pay out as a $0.50 per share dividend would have been reduced to $.32 per share.
Prior to the recent reduction in the confiscatory taxes on dividends, paying a dividend rarely made sense, especially for a growing company. The new tax treatment changes that. Paying a dividend is now a rational option. But there is one caveat to our intention to pay a quarterly dividend. If conditions are such that we can use internally generated cash and/or borrowed funds to produce greater long-term per share results by repurchasing shares versus paying a dividend, as your long-term partner we want the flexibility to do so.
This does not mean repurchasing shares and paying a dividend are mutually exclusive. We will do what we think best given the conditions. Our focus is to maximize the value of each share outstanding. Until now we have opted to reduce the number of shares outstanding through share repurchases. Incidentally, in that same vein we no longer grant options.
Business models are not just financial concepts. Something has to be produced. Something has to be sold. The primary driver of our business is the value of our product. Our product is both unique and has extraordinary value. We urge you to become a member. Tell your friends about it. Use the product. By using the product you will see why we believe our product is both valuable and unique.
Last year we received 3.2 million calls from our members. Our 50 provider law firms, with their 990 dedicated attorneys, handled 2.3 million requests for professional assistance. The value of our product comes from our ability not only to satisfy each member's request for legal assistance but to do so promptly. This is crucial. It is something we do not take for granted. We are somewhat comforted by the hundreds of letters we receive each month from our members thanking us for helping them with a problem they could not otherwise solve. It is not uncommon for members to tell us how impressed they were with how quickly their call was returned, their problems solved. We will soon have these letters available on our website so you can see why we are enthusiastic about our product and about our future.
The importance of our ability to deliver a high-quality product and yet produce free cash cannot be overstated. That after purchasing $210 million of our own stock, building a new corporate headquarters, having more than $40 million cash and investments and but $45 million in debt and now declaring a dividend speaks clearly to the soundness of our financial model. We have a business model that allows us to grow and produce excess cash. We will continue, as we have these past five and a half years, to utilize excess cash to leverage operational results so as to produce maximum long-term per share results for our shareholder/partners through share repurchases and now paying a dividend. All of us at Pre-Paid appreciate your continued confidence. We do not take it for granted.
Posted by George Schmidt
posted by Unknown | 4:17 PM
1 Comments:
I really got some very nice information about growing our Prepaid Legal business.Thanks a lot!
prepaid legal
Post a Comment
<< Home