MLM Blog – Network Marketing Blog

 Pre-Paid Legal has just released their financials for 2010 and the 4th quarter results are truly abysmal. Here's a screenshot of the numbers...

PPL 2010 Results

During the 4th quarter of 2010, new sales associates enrolled decreased 54.3% to 28,160 from the 61,623 enrolled in the 4th quarter of 2009 and new memberships produced decreased 20.8% to 117,472 during the 2010 quarter compared to 148,248 for the 2009 quarter.

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An offer to buy out Ada based Prepaid Legal Services, Inc. has been withdrawn, according to The Oklahoman.

Late last month the firm announced an estimated $600 million offer by an undisclosed private equity firm to acquire its outstanding shares of stock. Pre-Paid officials said at the time the private equity firm insisted on anonymity or the offer would be withdrawn.

It was anyway five days later.

Thomas W. Smith, of Prescott Investors, owner of approximately 25 percent of Pre-Paid Legal stock, is reported by The Oklahoman to have written in a letter to the Securities and Exchange Commission that a merger may still be in the offing.

“...although the offer has since been withdrawn, we understand that the private equity firm remains inter

Source: Ada Evening News

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Net income at Pre-Paid Legal up 46%!  Earnings per share up 63%! You would think that Pre-Paid Legal distributors would be dancing in the streets, but wait until you see how Pre-Paid Legal magically found the income and earnings.

"Net income for the third quarter of 2010 increased 46% to $15.9 million from $10.8 million for the prior year's third quarter primarily due to a $7.6 million decrease in commissions..."

Distributors taking a cut in commissions turn out to be the main reason why Pre-Paid Legal posted gains in net income. Pre-Paid Legal admits that revenues are not growing:

"Third quarter 2010 membership fees decreased $1.5 million to $105.3 million from $106.7 million for the second quarter of 2010. Associate services revenues decreased during the 2010 third quarter by $393,000 to $6.1 million from $6.5 million for the 2010 second quarter..."

While the percentage paid back to distributors is shrinking:

Commissions to associates totaled $29.1 million in the 2010 third quarter compared to $29.2 million for the 2010 second quarter and represented 27.6% and 27.4% of membership fees for the respective periods.

According to reports, Pre-Paid Legal has received an offer to sell to a "well-known" equity firm.  You might ask Arbonne how that type of transaction worked for them. Many suggest that this type of transaction lead to Arbonne's well publicized bankruptcy last year. Just another reason why a publicly traded company is a red flag for many successful Network Marketers.