Jackson Hewitt Reports Fiscal 2009 First Quarter Results
Adjusted Net Loss of $0.69 Per Basic and Diluted Share Progress Achieved on All Initiatives in Preparation for 2009 Tax Season
PARSIPPANY, N.J., Sept. 4 // PRNewswire-FirstCall // -- Jackson Hewitt Tax Service Inc. ("Jackson Hewitt") (NYSE: JTX) today reported financial results for the first quarter of fiscal 2009. Jackson Hewitt reported a net loss of $20.5 million, or $0.72 per basic and diluted share, versus a net loss of $19.6 million in the first quarter of fiscal 2008, or $0.65 per basic and diluted share. On an adjusted basis, Jackson Hewitt's net loss in the 2009 first quarter was $19.7 million, or $0.69 per basic and diluted share, versus an adjusted net loss of $17.1 million, or $0.57 per basic and diluted share, in the year ago quarter. A schedule entitled Condensed Adjusted Results of Operations, which reconciles the reported and adjusted results, accompanies this earnings release.
Jackson Hewitt has historically generated roughly 2% of its total annual revenues in each of the first two fiscal quarters due to the seasonal nature of the tax return preparation business. Additionally, Jackson Hewitt incurs a net loss during the first and second fiscal quarters. These losses have typically increased annually due to an increased number of company-owned stores, which was higher at the outset of fiscal 2009 due primarily to acquisitions in fiscal 2008, the addition of resources to support the franchise business and an increase in interest expense resulting from past common share repurchases.
Reported consolidated total revenues in the 2009 first quarter were $4.3 million, versus $5.9 million in the 2008 first quarter. The decline in revenues was primarily due to lower territory sales versus the comparable period a year ago.
"We continue to be focused on delivering outstanding operating and financial performance in the 2009 tax season," said Michael C. Yerington, Jackson Hewitt's president and chief executive officer. "We have made, and continue to make, progress on all of the initiatives we detailed on our June 5, 2008, conference call, including new product development, new marketing programs, a more efficient cost structure, and other initiatives to selectively broaden our distribution and improve same store sales. I am confident that we are on track with our plans for a successful 2009."
Workforce Realignment
As part of an initiative to achieve a lower cost structure in advance of the 2009 tax season, Jackson Hewitt's overall consolidated workforce was reduced by approximately 10% during the 2009 first quarter. In connection with this action and certain employee terminations, a $1.4 million pre-tax severance charge was recorded in the quarter.
Franchise Operations
Reported revenues in the 2009 first quarter were $3.9 million, versus $5.4 million in the 2008 first quarter. The lower revenues versus last year's first quarter were primarily attributable to lower territory sales coupled with a slight decrease in financial product fees. Territory sales are reported in the "Other" revenue line item. Financial product fees earned in the first and second quarters of each year primarily relate to sales of the Gold Guarantee(R) product from prior tax seasons.
Reported total expenses in the franchise segment were $16.0 million in the 2009 first quarter, versus $16.6 million in the 2008 first quarter.
Company-Owned Offices Operations
As expected, the reported 2009 first quarter expenses in Jackson Hewitt's company-owned offices operations were substantially higher than the 2008 first quarter due primarily to occupancy costs and related expenses associated with maintaining a significantly increased base of storefront locations resulting primarily from acquisitions during the 2008 fiscal year. During the 2009 first quarter, as part of an overall effort to optimize company-owned store locations and improve profitability, 191 under-performing store locations were closed. In connection with this action, a pre-tax charge of $1.6 million was recorded related to lease terminations and related expenses associated with 51 of these store location closures. In total, the loss before income taxes in company-owned offices operations in the 2009 first quarter increased to $11.9 million, versus $6.9 million in the year ago quarter.
Corporate and Other
On a reported basis, the corporate and other loss before income taxes was $10.5 million in the 2009 first quarter, versus a reported loss before income taxes of $14.5 million in the 2008 first quarter. The 2009 first quarter reported loss included a $1.5 million favorable credit from an insurance recovery in connection with the settlement of certain prior period litigation. The 2008 first quarter included $3.4 million of expenses in connection with Jackson Hewitt's internal review related to last year's Department of Justice matter involving a former franchisee.
Analyst Conference Call
Michael Yerington, president and chief executive officer, and Dan O'Brien, executive vice president, chief financial officer and treasurer, will host an analyst conference call this morning, Thursday, September 4, 2008, at 8:30 a.m. (EDT), to discuss the fiscal 2009 first quarter results and discuss progress on initiatives for next tax season. Please visit the investor relations tab of the Company's website, http://www.jacksonhewitt.com, at least 10 minutes prior to the beginning of the call in order to access the webcast. If you are unable to listen to the live webcast, a replay will be available on this website.
About Jackson Hewitt Tax Service Inc.
Jackson Hewitt Tax Service Inc. (NYSE: JTX), with approximately 6,800 franchised and company-owned offices throughout the United States during the 2008 tax season, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey. More information may be obtained at http://www.jacksonhewitt.com. To locate the Jackson Hewitt Tax Service(R) office nearest to you, call 1-800-234-1040.
Forward-Looking Statements
This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward looking statements involve risks and uncertainties, actual results may differ materially from those expressed or implied in the forward-looking statements due to a number of factors, including but not limited to: Jackson Hewitt's ability to timely or effectively respond to customer trends and attract new customers, develop and make new products available through Jackson Hewitt's offices, improve Jackson Hewitt's distribution system or reduce Jackson Hewitt's cost structure; Jackson Hewitt's ability to successfully attract and retain key personnel; government initiatives that simplify tax return preparation or reduce the need for a third party tax return preparer, improve the timing and efficiency of processing tax returns or decrease the number of tax returns filed; delays in the passage of tax laws and their implementation; the trend of tax payers filing their tax returns later in the tax season; the success of Jackson Hewitt's franchised offices; Jackson Hewitt's responsibility to third parties, regulators or courts for the acts of, or failures to act by, Jackson Hewitt's franchisees or their employees; government legislation and regulation of the tax return preparation industry and related financial products, including refund anticipation loans, and the failure by Jackson Hewitt, or the financial institutions which provide financial products to Jackson Hewitt's customers, to comply with such legal and regulatory requirements; the effectiveness of Jackson Hewitt's tax return preparation compliance program; increased regulation of tax return preparers; Jackson Hewitt's exposure to litigation; the failure of Jackson Hewitt's insurance to cover all the risks associated with Jackson Hewitt's business; Jackson Hewitt's ability to protect Jackson Hewitt's customers' personal and financial information; the effectiveness of Jackson Hewitt's marketing and advertising programs and franchisee support of these programs; disruptions in Jackson Hewitt's relationships with Jackson Hewitt's franchisees; changes in Jackson Hewitt's relationships with financial product providers that could reduce the revenues Jackson Hewitt derives from Jackson Hewitt's agreements with these financial institutions as well as affect Jackson Hewitt's customers' ability to obtain financial products through Jackson Hewitt's tax return preparation offices; changes in Jackson Hewitt's relationships with retailers and shopping malls that could affect Jackson Hewitt's growth and profitability; the seasonality of Jackson Hewitt's business and its effect on Jackson Hewitt's stock price; competition from tax return preparation service providers, volunteer organizations and the government; Jackson Hewitt's reliance on technology systems and electronic communications to perform the core functions of Jackson Hewitt's business; Jackson Hewitt's ability to protect Jackson Hewitt's intellectual property rights or defend against any third party allegations of infringement by Jackson Hewitt; Jackson Hewitt's reliance on cash flow from subsidiaries; Jackson Hewitt's compliance with credit facility covenants; Jackson Hewitt's exposure to increases in prevailing market interest rates; Jackson Hewitt's quarterly results not being indicative of Jackson Hewitt's performance as a result of tax season being relatively short and straddling two quarters; Jackson Hewitt's ability to pay dividends in the future; certain provisions that may hinder, delay or prevent third party takeovers; changes in accounting policies or practices and Jackson Hewitt's ability to maintain an effective system of internal controls; impairment charges related to goodwill; and the effect of market conditions, general conditions in the tax return preparation industry or general economic conditions.
Additional information concerning these and other risks that could impact Jackson Hewitt's business can be found in Jackson Hewitt's Annual Report on Form 10- K for the fiscal year ended April 30, 2008, and other public filings with the Securities and Exchange Commission ("SEC"). Copies are available from the SEC or Jackson Hewitt's website. Jackson Hewitt assumes no obligation, and Jackson Hewitt expressly disclaims any obligation, to update or alter any forward-looking statements.
JACKSON HEWITT TAX SERVICE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
July 31,
2008 2007
Revenues
Franchise operations revenues:
Royalty $627 $658
Marketing and advertising 277 275
Financial product fees 2,622 2,746
Other 349 1,733
Service revenues from company-owned
office operations 412 508
Total revenues 4,287 5,920
Expenses
Cost of franchise operations 8,612 9,386
Marketing and advertising 4,169 4,140
Cost of company-owned office operations 9,307 5,617
Selling, general and administrative 10,448 13,319
Depreciation and amortization 3,207 3,284
Total expenses 35,743 35,746
Loss from operations (31,456) (29,826)
Other income/(expense):
Interest and other income 400 440
Interest expense (3,006) (2,860)
Loss before income taxes (34,062) (32,246)
Benefit from income taxes 13,518 12,641
Net loss $(20,544) $(19,605)
Loss per share:
Basic and Diluted $(0.72) $(0.65)
Weighted average shares outstanding:
Basic and Diluted 28,468 30,268
Dividends declared per share $0.18 $0.36 (a)
(a) On May 30, 2007, the Company's Board of Directors declared the
fiscal first quarter cash dividend of $0.18 per share of common stock
that was paid on July 13, 2007. On July 30, 2007, the Company's Board
of Directors declared the fiscal second quarter cash dividend of
$0.18 per share of common stock that was paid on October 15, 2007.
JACKSON HEWITT TAX SERVICE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
As of As of
July 31, 2008 April 30, 2008
Assets
Current assets:
Cash and cash equivalents $230 $4,594
Accounts receivable, net of
allowance for doubtful accounts
of $1,066 and $694, respectively 6,487 17,850
Notes receivable, net 7,113 6,033
Prepaid expenses and other 11,968 13,241
Deferred income taxes 1,335 200
Total current assets 27,133 41,918
Property and equipment, net 29,951 32,099
Goodwill 415,784 414,887
Other intangible assets, net 86,830 86,458
Notes receivable, net 5,056 6,035
Other non-current assets, net 18,068 18,668
Total assets $582,822 $600,065
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $12,443 $34,851
Income taxes payable 30,186 48,531
Deferred revenues 7,426 8,264
Total current liabilities 50,055 91,646
Long-term debt 281,000 231,000
Deferred income taxes 27,505 27,298
Other non-current liabilities 11,361 13,604
Total liabilities 369,921 363,548
Stockholders' equity:
Common stock, par value $0.01;
Authorized: 200,000,000 shares;
Issued: 39,290,418 and
38,867,231 shares, respectively 389 389
Additional paid-in capital 384,479 383,084
Retained earnings 132,298 158,011
Accumulated other comprehensive loss (1,604) (2,306)
Less: Treasury stock, at cost:
10,440,491 shares at each
respective period-end (302,661) (302,661)
Total stockholders' equity 212,901 236,517
Total liabilities and
stockholders' equity $582,822 $600,065
JACKSON HEWITT TAX SERVICE INC.
CONDENSED FRANCHISE RESULTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
July 31,
2008 2007
Revenues
Royalty $627 $658
Marketing and advertising 277 275
Financial product fees 2,622 2,746
Other 349 1,733
Total revenues 3,875 5,412
Expenses
Cost of operations 8,612 9,386
Marketing and advertising 4,108 3,925
Selling, general and administrative 1,067 728
Depreciation and amortization 2,193 2,588
Total expenses 15,980 16,627
Loss from operations (12,105) (11,215)
Other income/(expense):
Interest and other income 376 365
Loss before income taxes $(11,729) $(10,850)
JACKSON HEWITT TAX SERVICE INC.
CONDENSED COMPANY-OWNED OFFICE RESULTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
July 31,
2008 2007
Revenues
Service revenues from operations $412 $508
Expenses
Cost of operations (a) 9,307 5,617
Marketing and advertising 61 215
Selling, general and administrative (b) 1,894 888
Depreciation and amortization 1,014 696
Total expenses 12,276 7,416
Loss from operations (11,864) (6,908)
Loss before income taxes $(11,864) $(6,908)
(a) The three months ended July 31, 2008 includes $1.6 million of lease
termination and related expenses in connection with the closure of
underperforming locations.
(b) The three months ended July 31, 2008 includes $0.7 million of
severance expense.
JACKSON HEWITT TAX SERVICE INC.
CONDENSED CORPORATE AND OTHER
(Unaudited)
(In thousands)
Three Months Ended
July 31,
2008 2007
Expenses (a)
General and administrative $7,569 $7,031
Share-based compensation 1,418 1,258
Insurance settlement (b) (1,500) -
Internal review - 3,414
Total expenses 7,487 11,703
Loss from operations (7,487) (11,703)
Other income/(expense):
Interest and other income 24 75
Interest expense (3,006) (2,860)
Loss before income taxes $(10,469) $(14,488)
(a) Included in selling, general and administrative in the Condensed
Consolidated Statements of Operations.
(b) Represents an insurance recovery in connection with the settlement of
certain litigation related expenses incurred in prior fiscal years.
JACKSON HEWITT TAX SERVICE INC.
CONDENSED ADJUSTED RESULTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended
July 31,
2008 2007
Net loss, as reported $(20,544) $(19,605)
Severance 1,370 661
Lease termination and related expenses 1,604 -
Insurance settlement (1,500) -
Internal review - 3,414
Adjustment to income taxes (585) (1,597)
Net loss, as adjusted $(19,655) $(17,127)
Loss per share, as reported
Basic and Diluted $(0.72) $(0.65)
Loss per share, as adjusted
Basic and Diluted $(0.69) $(0.57)
A "non-GAAP financial measure" is defined as a numerical measure of a
company's performance that excludes or includes amounts so as to be
different than the most directly comparable measure calculated and
presented in accordance with generally accepted accounting principles
("GAAP") in the United States of America. In the schedule presented above,
the Company has included a comparison of such non-GAAP financial measures
to the most directly comparable GAAP financial measures. Management
believes the above presentation of net loss and loss per share on an "as
adjusted" basis, which are non-GAAP financial measures, is necessary to
reflect the impact of the items listed above in order to help investors
compare, on an equivalent basis, the Company's financial results for the
current period presented to its financial results for the same period
presented last year.
SOURCE Jackson Hewitt Tax Service Inc.
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