Jackson Hewitt Reports Fiscal 2009 First Quarter Results

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 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.