Liberty Tax Service Reports Fiscal 2014 First Quarter Results

VIRGINIA BEACH, VA - (Marketwired - Oct 16, 2013) - JTH Holding, Inc. (NASDAQ: TAX) (the "Company"), the parent company of Liberty Tax Service, today reported a net loss for the fiscal first quarter ended July 31, 2013, of $5.9 million, or $0.46 per share, compared to a net loss of $6.4 million, or $0.52 per share, in the prior year period. All amounts included in this press release reflect the impact of the Company's previously announced restatement.

"With the anticipated filing of our first quarter Form 10-Q later this week, the majority of the restatement work is behind us, and we are now able to commit our focus to the 2014 tax season and the future," said John Hewitt, CEO. "We continue to take steps as a Company to prepare for the next stage of our growth, such as expanding our relationship with Walmart and expanding our executive team to guide and manage our growth."


Revenues for the three months ended July 31, 2013 increased 11.3% to $8.1 million, versus $7.2 million in the prior year period. The increase in revenue was primarily due to an increase in franchise fees because the Company experienced an increase in payments made by franchisees on their outstanding franchise fee note balances.

Operating Expenses

Operating expenses for the three months ended July 31, 2013 increased slightly to $17.4 million. Operating expenses in the first quarter of fiscal 2014 were impacted by the reclassification of stock options back to an equity instrument, which resulted in a one-time decrease in pre-tax stock compensation expense during the first quarter of approximately $872,000.

During the three months ended July 31, 2013, the Company incurred approximately $100,000 related to the restatement. The Company expects total costs related to the restatement to be in the range of $700,000 - $850,000.

Balance Sheet

The Company had a cash balance of $8.6 million at July 31, 2013. The Company has drawn $16.5 million on its revolving credit facility as of July 31, 2013, which is typical of the first quarter, to provide for cash used for operations and operating loans to franchisees.

Operational Results

During the first quarter of fiscal 2014, the Company was pleased to add 30 new franchisees, 16 of which purchased 20 new territories and the remaining 14 of which purchased at least one existing territory. With the issuance of the Company's annual financial statements last month, the Company was able to complete its franchise disclosure document for all but three states by October 7, 2013, with the franchise disclosure document becoming effective for the vast majority of states during September.

The Company will be expanding its relationship with Walmart and plans to provide tax preparation services in approximately 500 Walmart locations in the coming tax season. In fiscal 2013, the Company and its franchisees operated approximately 300 tax preparation kiosks in Walmart stores.

First Quarter Conference Call

At 8:30 a.m. ET on Wednesday, October 16, 2013, the Company will host a conference call to discuss its results from fiscal 2013, results from the first quarter of fiscal 2014, the effects of the restatement and the Company's recent management changes. To listen to the call, dial 855-611-0856 (domestic) or 518-444-5569 (international), conference ID code 76308499, approximately 10 minutes prior to the start time of the call. The call will also be webcast in a listen-only format. The link to the webcast may be accessed on the Company's investor relations website at

A telephonic replay of the call will be available beginning shortly after the call on Wednesday, October 16, 2013 and continuing until Wednesday, October 23, 2013, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 76308499. A replay of the webcast will also be available at the site listed above beginning shortly after its conclusion.

About JTH Holding, Inc.

Founded in 1997 by CEO John T. Hewitt, JTH Holding, Inc. is the parent company of Liberty Tax Service. As the fastest-growing tax preparation franchise, Liberty Tax Service has prepared almost 16 million individual income tax returns. Liberty Tax Service also offers an online tax service, eSmart Tax, which enables customers to do their own taxes wherever there's a computer. eSmart Tax is backed by the tax professionals at Liberty Tax Service and its nationwide network of over 30,000 tax preparers, ready to offer their assistance at any time. For a more in-depth look at Liberty Tax Service, visit

Forward Looking Statements

In addition to historical information, this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including implied and express statements regarding the restatement of the Company's historical financial statements, the costs associated with the restatement, the filing of the Company's periodic reports with the SEC, the Company's anticipated growth and expansion of its business, and the completion of the Company's franchise disclosure documents and related filings. These forward-looking statements, as well as the Company's guidance, are based upon the Company's current expectations and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties and speak only as of the date on which they are made, the Company's actual results could differ materially from these statements. These risks and uncertainties relate to, among other things, the impact of changes in our accounting practices on historical and future financial results; the consequences of any restatements of our financial statements; the timing for and results of the pending restatements, including our filings with the SEC; uncertainties regarding the Company's ability to attract and retain clients; meet its prepared returns targets; competitive factors; the Company's effective income tax rate; litigation defense expenses and costs of judgments or settlements; and changes in market, economic, political or regulatory conditions. Information concerning these risks and uncertainties is contained in the Company's annual report on Form 10-K and in other filings by the Company with the Securities and Exchange Commission. The Company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

JTH Holding, Inc.
Condensed Consolidated Balance Sheets
Unaudited, amounts in thousands
    July 31,   April 30,
    2013   2013
Current assets:            
  Cash and cash equivalents   $ 8,573   $ 19,013
  Receivables, net     53,811     71,306
  Available for sale securities     4,001     3,619
  Other current assets     9,861     9,195
    Total current assets     76,246     103,133
  Property, equipment, and software, net     34,805     33,037
  Notes receivable, excluding current portion, net     25,106     14,352
  Goodwill     6,992     5,685
  Other intangible assets, net     13,277     10,921
  Other assets, net     2,228     2,402
    Total assets   $ 158,654   $ 169,530
Current liabilities:            
  Current installments of long-term debt   $ 3,918   $ 3,400
  Accounts payable and accrued expenses     6,866     11,954
  Due to area developers     9,900     18,248
  Income taxes payable     -     5,897
  Deferred revenue - short-term portion     6,822     7,555
    Total current liabilities     27,506     47,054
  Long-term debt, excluding current installments     23,635     24,283
  Revolving credit facility     16,505     -
  Deferred revenue - long-term portion     9,108     10,381
  Other non-current liabilities     600     5,976
    Total liabilities     77,354     87,694
Stockholders' Equity:            
  Special voting preferred stock, $0.01 par value per share     -     -
  Class A common stock, $0.01 par value per share     120     120
  Class B common stock, $0.01 par value per share     9     9
  Exchangeable shares, $0.01 par value     1     1
  Additional paid-in capital     7,220     1,920
  Accumulated other comprehensive income, net of taxes     1,285     1,194
  Retained earnings     72,665     78,592
    Total stockholders' equity     81,300     81,836
    Total liabilities and stockholders' equity   $ 158,654   $ 169,530
JTH Holding, Inc.  
Condensed Consolidated Income Statement  
Unaudited, amounts in thousands, except per share and share data  
    Three months ended
 July 31,
    2013     2012  
Revenues:         (Restated)  
  Franchise fees   $ 1,039     $ 666  
  Area developer fees     1,803       1,923  
  Royalties and advertising fees     1,449       1,324  
  Financial products     449       302  
  Interest income     2,234       2,548  
  Tax preparation fees, net of discounts     386       216  
  Other revenue     705       265  
    Total revenues     8,065       7,244  
Operating expenses:                
  Employee compensation and benefits     6,089       6,666  
  General and administrative expenses     6,266       5,816  
  Area developer expense     828       717  
  Advertising expense     2,684       2,560  
  Depreciation, amortization, and impairment charges     1,578       1,591  
    Total operating expenses     17,445       17,350  
    Loss from operations     (9,380 )     (10,106 )
Other income (expense):                
  Foreign currency transaction gains (losses)     (7 )     2  
  Interest expense     (245 )     (292 )
    Loss before income taxes     (9,632 )     (10,396 )
  Income tax benefit     (3,705 )     (4,033 )
    Net loss   $ (5,927 )   $ (6,363 )
Net loss per share of Class A and Class B common stock                
  Basic and diluted   $ (0.46 )   $ (0.52 )
Weighted-average shares outstanding                
  Basic and diluted     12,895,286       12,170,977  
JTH Holding, Inc.  
Condensed Consolidated Statements of Cash Flows  
Unaudited, amounts in thousands  

Three months ended
July 31,

    2013     2012  
Cash flows from operating activities:         (Restated)  
  Net loss   $ (5,927 )   $ (6,363 )
  Adjustments to reconcile net income to net cash used in operating activities:                
    Provision for doubtful accounts     1,562       1,528  
    Depreciation and amortization     1,578       1,591  
    Amortization of deferred financing costs     84       69  
    Stock-based compensation expense related to equity classified awards     175       398  
    Stock-based compensation expense related to liability classified awards     (872 )     -  
    Gain on sale of company-owned offices     (351 )     (60 )
    Equity in loss of affiliate     68       69  
    Deferred tax expense     592       1,941  
    Changes in assets and liabilities decreasing cash flows from operating activities     (11,454 )     (15,390 )
      Net cash used in operating activities     (14,545 )     (16,217 )
Cash flows from investing activities:                
  Issuance of operating loans to franchisees     (7,296 )     (9,956 )
  Payments received on operating loans from franchisees     999       999  
  Purchases of area developer rights and company-owned offices     (2,145 )     (1,329 )
  Proceeds from sale of company-owned offices and area developer rights     3       350  
  Purchase of property and equipment     (2,904 )     (1,976 )
      Net cash used in investing activities     (11,343 )     (11,912 )
Cash flows from financing activities:                
  Proceeds from the exercise of stock options     1,492       1,592  
  Repurchase of common stock     (863 )     (843 )
  Repayment of long-term debt     (1,929 )     (1,561 )
  Borrowings under revolving credit facility     17,210       11,078  
  Repayments under revolving credit facility     (705 )     -  
  Payment for debt issue costs     -       (8 )
  Tax benefit of stock option exercises     258       269  
      Net cash provided by financing activities     15,463       10,527  
Effect of exchange rate changes on cash, net     (15 )     (18 )
      Net decrease in cash and cash equivalents     (10,440 )     (17,620 )
Cash and cash equivalents at beginning of period     19,013       19,848  
Cash and cash equivalents at end of period   $ 8,573     $ 2,228  
Supplementary cash flow data:                
  Cash paid for interest, net of capitalized interest   $ 172     $ 199  
  Cash paid for taxes, net of refunds     5,492       6,364  



Darby Schoenfeld
JTH Holding, Inc.
Director of Investor Relations
(757) 453-6047


Martha O'Gorman
JTH Holding, Inc.
Chief Marketing Officer
(757) 301-8022


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