THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, March 8, 1996 TAG: 9603080550
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 71 lines
Helped by the IRS's speedier payment of tax refunds this year, Jackson Hewitt Inc. has bounced back from the crippling conditions of early 1995, its chief executive officer told shareholders Thursday.
Since early January, Jackson Hewitt offices have prepared 515,000 returns, a 14 percent increase from a year earlier, chairman and president John T. Hewitt said during the hour-long meeting.
In addition, Jackson Hewitt's gross income has increased 32 percent from the comparable period of 1995, he said.
``Thus far, we're very pleased with the 1996 tax season,'' Hewitt told about 65 shareholders, employees and franchise owners.
Virginia Beach-based Jackson Hewitt, the nation's second-largest chain of tax-preparation offices after H&R Block. Jackson Hewitt has 1,331 offices that include 1,240 owned by 500 franchisees.
In a drive to crack down on fraudulent filings, the IRS looked more closely last year at personal tax returns, especially ones that filed for the earned income credit. That delay slowed down customer demand for electronic filing of tax returns and refund-anticipation loans.
That, in turn, created cash-flow problems for Jackson Hewitt and some of its franchisees. In addition to preparing tax returns, Jackson Hewitt offices often arrange bank loans to customers based on the size of the refunds they are due.
The pace of traffic during the tax season is crucial to Jackson Hewitt and other tax-return preparers because they generate the bulk of their revenues and earnings between January and mid-April.
For the fiscal year that ended last April 30, Jackson Hewitt reported net income of $840,000, or 11 cents a share.
However, the company suffered an operating loss of $2.37 million, which it offset with a $3.07 million gain on the sale of certain offices and customer lists.
Hewitt told shareholders Thursday that Jackson Hewitt expects to repay a $4 million loan from NationsBank by the end of April and is negotiating with NationsBank to buy back warrants that the bank holds.
Jackson Hewitt tried unsuccessfully last year to raise $7 million of additional capital, which threatened the availability of a working capital line of credit and a term loan from NationsBank.
The bank eventually agreed to provide $4 million of fresh working capital and $3.5 million of additional financing. But as part of its loan agreement, the bank received warrants to buy 999,372 of Jackson Hewitt's common shares at one cent per share.
If the bank exercised the warrants, it would own an 18 percent stake in the company and would become the largest shareholder.
Responding to questions about Jackson Hewitt's expansion plans, Hewitt said the company wants to provide tax-preparation services to small businesses. However, the company has no plans to offer bookkeeping services to businesses, he said.
Other tax-preparation chains have already tried it and eventually gave up, Hewitt said.
Hewitt, who was re-elected to the Jackson Hewitt board during teh meeting, did not speak about his future role in management. The company disclosed last December that he would step down as chairman, president and CEO on May 1 but remain working.
Martha A. O'Gorman, a spokeswoman, said the board's search for a successor is continuing. ILLUSTRATION: Color photo
JOHN T. HEWITT, CHAIRMAN AND PRESIDENT
KEYWORDS: INCOME-TAX PREPARERS by CNB