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UPDATE 2-Jackson Hewitt says may seek RAL funding plan extension
September 8, 2010 / 11:29 AM / 7 years ago

UPDATE 2-Jackson Hewitt says may seek RAL funding plan extension

* Q1 adj loss/shr $0.65 vs est loss/shr $0.75

* Total expenses fall 17.5 pct

* Stock falls 7 pct (Recasts; adds conference call details, background, updates share price)

Sept 8 (Reuters) - Jackson Hewitt Tax Service Inc JTX.N said it may seek an extension with its lenders to submit a plan on funding its refund anticipation loans (RALs), sending its shares down as much as 7 percent.

The No. 2 U.S. tax-preparer, which has been struggling to get full funding for RALs after its lender pulled the plug in December, is expected to provide a date by Sept. 15 to submit a detailed plan.

“Our amended credit agreement contains a series of RAL milestone dates that if we fail to meet, could lead to an event of default. The first such milestone date is coming up on Sept. 15,” CFO Dan O‘Brien said in a post-earnings call. RALs, also known as tax-refund loans, typically last seven to 14 days until taxpayers receive their refunds from the U.S. Internal Revenue Service (IRS).

RALs are generally popular among lower income group taxpayers and carry high interest. Tax prepares use these loans as a tool to attract more clients.

Jackson Hewitt’s stock has crashed about 80 percent year-to-date and has not been able to move beyond the penny-stock status since Aug. 5, when IRS announced its decision to eliminate “debt indicator” from 2011. [ID:nSGE6740M3]

A debt indicator is a tool to determine how much a lender can provide in loans, at what rate and whether a borrower can repay the loan.

The removal of debt indicator will lead to fewer approvals, lower loan amounts and higher costs, Jackson Hewitt said in a statement.

Q1 LOSS NARROWS

Net loss for the first quarter was $19.2 million, or 67 cents a share, compared with a loss $21.8 million, or 76 cents a share, a year ago, as a drop in total expenses offset revenue decline.

Total revenue fell to $4.4 million from $5 million.

Analysts were expecting the company to report revenue of $5 million, according to Thomson Reuters I/B/E/S.

Total expenses decreased to about $31 million from $37.6 million.

Last week, bigger rival H&R Block Inc (HRB.N) also used cost cuts to reduce its losses in the wake of stiff competition from TurboTax maker Intuit Inc (INTU.O). [ID:nSGE68116F]

Parsippany, New Jersey-based Jackson Hewitt’s shares were down 5 percent at 86 cents in late-morning trade Wednesday on the New York Stock Exchange. The stock touched a low of 85 cents earlier in the day. (Reporting by Abhinav Sharma in Bangalore; Editing by Maju Samuel)

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