March 4, 2009 / 10:10 PM / 10 years ago

UPDATE 2-Jackson Hewitt sees weak '09; seeks relief from lenders

* Sees 2009 adj EPS $1.00-$1.10

* Sees 2009 revenue $250 mln-$255 mln

* Seeks relief from banks regarding debt covenant

* Q3 adj profit tops estimates by a cent

* Q3 revenue lags Street view

(Adds details, conference call comments)

March 4 (Reuters) - Jackson Hewitt Tax Service Inc JTX.N forecast 2009 results well below market estimates and said it was seeking relief from lenders regarding its leverage ratio covenant, sending its shares down 5 percent.

The No. 2 U.S. tax preparer said in a conference call that its third-quarter leverage ratio was 3.1, versus the maximum allowable ratio under its credit agreement covenant of 3.5. It expects the ratio to go up in the fourth quarter.

However, due to an amendment of its credit agreement, the leverage ratio covenant for the period ending April 30 will be lowered to 3.15 from 3.5, the company said.

Jackson Hewitt said it is seeking relief from all member banks in its credit facility syndicate in connection with the leverage ratio covenant.

For the 2009 tax season, the company expects total tax returns prepared to fall 12 percent to 13 percent and revenue to drop 8 percent to 10 percent.

The company said higher pricing and more competition from independent rivals has hurt its tax return count for the 2009 tax season.

“There has clearly been a heightened awareness of price and value among first season customers and this has hurt us, given our pricing levels, versus competitive discounting during this period,” CEO Michael Yerington said on the conference call.


The company forecast 2009 adjusted earnings of $1.00 to $1.10 a share on revenue of $250 million to $255 million.

Analysts on average were expecting 2009 earnings of $1.53 a share, before special items, on revenue of $296.7 million, according to Reuters Estimates.

The company posted third-quarter net income of $20.9 million, or 73 cents a share, compared with $18.2 million, or 61 cents a share, a year earlier.

On an adjusted basis, the company earned 74 cents a share.

Revenue rose marginally to $97.8 million.

Analysts were looking for a profit of 73 cents a share, excluding items, on revenue of $103.6 million.

Jackson Hewitt and its franchisees, which compete with H&R Block Inc (HRB.N), the largest U.S. tax preparer, operated 6,599 offices, down 3 percent compared with the prior tax season.

Shares of the Parsippany, New Jersey-based company were down 34 cents in trading after the bell on the New York Stock Exchange. The stock closed at $6.29 Wednesday. (Reporting by Supantha Mukherjee in Bangalore; Editing by Anne Pallivathuckal)

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