UPDATE 2-Jackson Hewitt says may breach covenant; Q3 lags view

* Says may breach financial covenants on April 30

* Q3 adj EPS $0.46 vs est $0.48

* Sees 2010 income breakeven or slightly positive

* Shares down as much as 15 pct (Adds details, background, share movement)

March 11 (Reuters) - Jackson Hewitt Tax Service Inc JTX.N posted lower-than-expected quarterly profit and said it is in danger of breaching financial covenants in April, sending its shares down 15 percent.

The tax preparer said it intends to start discussions with the lead agent under its credit facility to seek relief on the financial covenants.

Jackson Hewitt, which generates majority of its revenue by offering refund anticipation loans (RALs) and refund transfers, started to face problems in December when the bank that originated those loans terminated its contract with the company.

Tax preparers like Jackson Hewitt extend refund anticipation loans at high interest rates to taxpayers who expect to receive refunds from the government.

The company now expects total tax returns prepared for 2010 to be down between 17 percent and 19 percent from last year.

For 2010, Jackson Hewitt sees growth of revenue per tax return to be about 1 to 2 percent and expects its net income to breakeven or be modestly positive, excluding items.

However, Jackson Hewitt said it is now eyeing late-season clients, which are in the range of 60 million to 70 million, and are yet to file tax returns.

The company said its earnings were significantly hurt by the loss of its refund anticipation loan product, which cut its origination by half. [ID:nSGE5BN09B]

These developments would have hurt 75 percent of the company's RAL program but an agreement with Republic Bank to expand its coverage from 25 percent to about 50 percent helped to cover some of the shortfall.

The company, however, said it was unable to secure alternative RAL funding for the rest of its program for the 2010 tax season.

Tax preparers like Jackson Hewitt extend refund anticipation loans at high interest rates to taxpayers who expect to receive refunds from the government.

For the third quarter ended Jan. 31, the company posted a loss of $279 million, or $9.75 a share, compared with an income of $20.9 million, or 73 cents a share, a year ago.

Excluding items, Jackson Hewitt posted a net income of $13.1 million, or 46 cents a share.

Analysts on average were looking for a profit of 48 cents a share, on revenue of $83.41 million, according to Thomson Reuters I/B/E/S.

The third quarter expenses included a non-cash goodwill impairment charge of $223.7 million, the company said.

Shares of the Parsippany, New Jersey-based company were down 8 percent at $2.27 in midday trade on the New York Stock Exchange. They touched a low of $2.11 earlier in the session. (Reporting by Archana Shankar in Bangalore; Editing by Unnikrishnan Nair, Ratul Ray Chaudhuri)