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| | |
| CONTACTS: | | |
Investors: Darby Schoenfeld | | Media: Martha O'Gorman |
| JTH Holding, Inc. | | JTH Holding, Inc. |
| Director of Investor Relations | | Chief Marketing Officer |
| (757) 453-6047 | | (757) 301-8022 |
| darby.schoenfeld@libtax.com | | martha@libtax.com |
Liberty Tax Service Reports Fiscal 2014 First Quarter Results
Virginia Beach, Va. (October 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
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.
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October 16, 2013
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.
Walmart
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 www.libertytax.com.
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 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 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
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October 16, 2013
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.
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October 16, 2013
|
| | | | | | | |
| 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 |
|
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October 16, 2013
|
| | | | | | | |
| 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 |
|
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October 16, 2013
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| | | | | | | |
| 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 |
|
