SOURCE: JTH Holding, Inc.

JTH Holding, Inc.

December 09, 2013 16:01 ET

Liberty Tax Service Reports Fiscal 2014 Second Quarter Results

VIRGINIA BEACH, VA--(Marketwired - Dec 9, 2013) - JTH Holding, Inc. (NASDAQ: TAX) (the "Company"), the parent company of Liberty Tax Service, today reported a net loss for the second fiscal quarter ended October 31, 2013, of $8.5 million, or $0.66 per share, compared to a net loss of $6.1 million, or $0.47 per share, in the prior year period. 

"Our preparation for the coming tax season is almost complete and even though the IRS will be delaying efiling again this year, we don't believe it will have the same impact as last year," said John Hewitt, CEO. "We don't believe the delay will result in a decrease in filers and, in fact, we think the industry environment this year will generate an increase of one and a half to two million more filers than last year. In addition, we believe that some of the tax season 2013 tax filers simply delayed filing beyond April as a result of all the confusion, because we have seen a 12% increase in U.S. systemwide revenue during the first half of our fiscal year." 

Revenues
Revenues for the three months ended October 31, 2013 decreased 21.6% to $7.3 million compared to $9.3 million in the prior year period. The decrease in revenue was primarily due to a decrease in franchise fees because, as previously announced, the Company was unable to sell franchises for a portion of the quarter. 

Revenues for the six months ended October 31, 2013 decreased 7.2% to $15.4 million compared to $16.6 million in the prior year period. The decrease in revenue was primarily due to a decrease in franchise fees because of the franchise sale issue. 

Operating Expenses
Operating expenses for the three months ended October 31, 2013 increased 11.1% to $20.9 million compared to $18.8 million in the prior year period. During the three months ended October 31, 2013, the Company incurred approximately $693,000 in pre-tax costs related to the restatement. The Company also incurred approximately $614,000, pre-tax, in one-time severance costs. These items accounted for the bulk of the increase in operating expenses. 

Operating expenses for the six months ended October 31, 2013 increased 6.0% to $38.3 million compared to $36.2 million in the prior year period. The increase was primarily due to costs related to the restatement of approximately $792,000, pre-tax, and the severance costs noted above, as well as an increase in supply, software, rent and utility expense. This was partially offset by a one-time pre-tax decrease in stock compensation of $872,000 that was previously announced during the first quarter of fiscal 2014. 

Balance Sheet
The Company had a cash balance of $2.6 million at October 31, 2013. The Company has drawn $38.5 million on its revolving credit facility as of October 31, 2013 compared to $39.7 million as of October 31, 2012, to provide cash used for operations and operating loans to franchisees. 

Operational Results
During the first half of fiscal 2014, the Company added 106 new franchisees, 48 of which purchased 53 new territories. The Company sold a total of 65 new territories during the first half of fiscal 2014. This does not include any "rent to own" or "try before you buy" agreements which many existing franchisees utilize to expand. 

Second Quarter Conference Call
At 4:30 p.m. ET on Monday, December 9, 2013, the Company will host a conference call to discuss its results from the second quarter of fiscal 2014. To listen to the call, dial 855-611-0856 (domestic) or 518-444-5569 (international), conference ID code 16508204, 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 www.libertytax.com

A telephonic replay of the call will be available beginning shortly after the call on Monday, December 9, 2013 and continuing until Monday, December 16, 2013, by dialing 855-859-2056 (domestic) or 404-537-3406 (international). The conference ID code is 16508204. 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 www.libertytax.com.

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 Company 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
         
    October 31,   April 30,
    2013   2013
Current assets:            
  Cash and cash equivalents   $ 2,607   $ 19,013
  Receivables, net     71,055     71,306
  Available-for-sale securities     4,606     3,619
  Other current assets     17,560     9,195
    Total current assets     95,828     103,133
             
  Property, equipment, and software, net     36,470     33,037
  Notes receivable, excluding current portion, net     16,793     14,352
  Goodwill     7,194     5,685
  Other intangible assets, net     16,316     10,921
  Other assets, net     2,160     2,402
    Total assets   $ 174,761   $ 169,530
             
Current liabilities:            
  Current installments of long-term debt   $ 6,485   $ 3,400
  Accounts payable and accrued expenses     7,851     11,954
  Due to area developers     8,315     18,248
  Income taxes payable     -     5,897
  Deferred revenue - short-term portion     6,693     7,555
    Total current liabilities     29,344     47,054
             
  Long-term debt, excluding current installments     22,987     24,283
  Revolving credit facility     38,459     -
  Deferred revenue - long-term portion     8,092     10,381
  Other non-current liabilities     2,106     5,976
    Total liabilities     100,988     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     7,818     1,920
  Accumulated other comprehensive income, net of taxes     1,639     1,194
  Retained earnings     64,186     78,592
    Total stockholders' equity     73,773     81,836
    Total liabilities and stockholders' equity   $ 174,761   $ 169,530
             
   
JTH Holding, Inc.  
Condensed Consolidated Statement of Operations  
Unaudited, amounts in thousands, except per share and share data  
                         
    Three months ended
 October 31,
    Six months ended
October 31,
 
    2013     2012     2013     2012  
Revenues:                                
  Franchise fees   $ 886     $ 2,138     $ 1,925     $ 2,805  
  Area developer fees     1,880       2,079       3,683       4,001  
  Royalties and advertising fees     1,180       1,049       2,629       2,373  
  Financial products     169       169       618       471  
  Interest income     2,200       2,651       4,434       5,199  
  Tax preparation fees, net of discounts     242       225       628       441  
  Other revenue     760       1,027       1,465       1,292  
    Total revenues     7,317       9,338       15,382       16,582  
                                 
Operating expenses:                                
  Employee compensation and benefits     8,196       7,615       14,285       14,281  
  General and administrative expenses     7,744       6,110       14,010       11,926  
  Area developer expense     705       1,115       1,533       1,832  
  Advertising expense     2,507       2,539       5,191       5,099  
  Depreciation, amortization, and impairment charges     1,745       1,432       3,323       3,023  
    Total operating expenses     20,897       18,811       38,342       36,161  
    Loss from operations     (13,580 )     (9,473 )     (22,960 )     (19,579 )
                                 
Other income (expense):                                
  Foreign currency transaction gains (losses)     (5 )     2       (12 )     4  
  Gain on sale of available-for-sale securities     188       -       188       -  
  Interest expense     (357 )     (512 )     (602 )     (804 )
    Loss before income taxes     (13,754 )     (9,983 )     (23,386 )     (20,379 )
  Income tax benefit     (5,276 )     (3,872 )     (8,981 )     (7,905 )
    Net loss   $ (8,478 )   $ (6,111 )   $ (14,405 )   $ (12,474 )
                                 
Net loss per share of Class A and Class B common stock                                
  Basic and diluted   $ (0.66 )   $ (0.47 )   $ (1.12 )   $ (0.99 )
                                 
Weighted-average shares outstanding                                
  Basic and diluted     12,926,060       13,027,179       12,910,673       12,601,417  
                                 
   
JTH Holding, Inc.  
Condensed Consolidated Statements of Cash Flows  
Unaudited, amounts in thousands  
    Six months ended October 31,  
    2013     2012  
Cash flows from operating activities:                
  Net loss   $ (14,405 )   $ (12,474 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Provision for doubtful accounts     3,430       3,264  
    Depreciation, amortization and impairment charges     3,323       3,023  
    Amortization of deferred financing costs     167       139  
    Stock-based compensation expense related to equity classified awards     741       892  
    Stock-based compensation expense related to liability classified awards     (872 )     -  
    Gain on bargain purchases and sales of company-owned offices     (518 )     (226 )
    Equity in loss of affiliate     101       69  
    Deferred tax expense     2,598       3,770  
    Gain on sale of available-for-sale securities     (188 )     -  
    Changes in assets and liabilities decreasing cash flows from operating activities     (22,258 )     (26,098 )
      Net cash used in operating activities     (27,881 )     (27,641 )
                 
Cash flows from investing activities:                
  Issuance of operating loans to franchisees     (17,420 )     (20,855 )
  Payments received on operating loans from franchisees     1,230       1,227  
  Purchases of area developer rights and company-owned offices     (4,436 )     (2,352 )
  Proceeds from sale of company-owned offices and area developer rights     205       1,386  
  Purchase of marketable equity securities     -       (2,980 )
  Proceeds from sale of available-for-sale securities     456       -  
  Purchase of property and equipment     (5,463 )     (5,673 )
      Net cash used in investing activities     (25,428 )     (29,247 )
                 
Cash flows from financing activities:                
  Proceeds from the exercise of stock options     2,998       1,592  
  Repurchase of common stock     (2,495 )     (1,413 )
  Repayment of long-term debt     (2,418 )     (1,894 )
  Borrowings under revolving credit facility     43,104       40,147  
  Repayments under revolving credit facility     (4,645 )     (475 )
  Payment for debt issue costs     -       (8 )
  Tax benefit of stock option exercises     416       269  
      Net cash provided by financing activities     36,960       38,218  
                 
Effect of exchange rate changes on cash, net     (57 )     (20 )
      Net decrease in cash and cash equivalents     (16,406 )     (18,690 )
Cash and cash equivalents at beginning of period     19,013       19,848  
Cash and cash equivalents at end of period   $ 2,607     $ 1,158  
                 
Supplementary cash flow data:                
  Cash paid for interest, net of capitalized interest   $ 455     $ 605  
  Cash paid for taxes, net of refunds     6,143       6,837  
                 

Contact Information

  • CONTACTS:
    Investors:
    Darby Schoenfeld
    JTH Holding, Inc.
    Director of Investor Relations
    (757) 453-6047
    Email Contact

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