"Our goal is to find buyers for those stores before the start of the next season," CFO Kathleen Donovan said during the webcast. The company has recognized an impairment charge of $1.4 million after having reclassified the company stores as assets held for sale. There were 180 of those locations at the end of fiscal 2014, down from 234 a year ago.
The number of Liberty franchised locations also dropped, falling to 3,999 on April 30 from 4,028 a year earlier. That was because JTH's need to restate financial results related to accounting for area franchise developer fees led to a freeze on the franchisee sales during much of the year. Founder and CEO John Hewitt said store growth should resume with the restatement behind it.
JTH reported net income of just under $22 million for the most recently ended year, an increase of 25 percent from $17.6 million for fiscal 2013. Revenue for 2014 was $159.7 million, an 8-percent increase from $147.6 million the prior year. Revenue was helped by a 6-percent increase in net fees, which was made possible because its competitor, H&R Block, abandoned its free 1040EZ filing for the 2014 tax season.
The change of JTH's name to Liberty should be accomplished by August 1. The company anticipated mailing shareholders a notice of its filing of a Restated Certificate of Incorporation and with the approval of a majority of those holding shares already in hand, the change can be made within 20 business days of the mailing.
JTH also withdrew an S-1 filing that was made two years. However, the company has not had an initial public offering—it went public without one. Hewitt said the organization should be eligible to use an S-3 form this fall. While Liberty would like an offering to provide better float for investors, no specifics were given.
In discussing developments, Hewitt reported the company anticipates that the impact of the Affordable Care Act will product an estimate 5-percent increase in fees. "We are going to be announcing some significant changes in our operating processes" to deal with the impact of the ACA, Hewitt said. He also predicts that the move of taxpayers to do-it-yourself filling will be replaced with a trend toward increase use of assisted filing because of the need to deal with the complexities of ACA.
One major operational change is already under way. After several years of development, Liberty began using its next-generation tax software for D-I-Y filers during the recent tax season. Hewitt said the application will be brought to the stores next year. Liberty speed up the process early in 2013 by acquiring CompleteTax from CCH.
Liberty saw a 12-percent increase in the number of funded Refund Transfers, which reached 973,000. Hewitt said because the company was able to get a more favorable revenue split it shifted business to third-party financing, rather than relying as heavily on its in-house JTH financial. For 2014, 52-percent of funding was through third parties, compared to 49 percent in 2013. The company is continuing to evaluate the best mix.
