"We expect we will have the required letter in effect," he said. The company anticipates that Republic Bank will provide 50 percent of refund loan funding for the 2011 tax season as it did this year. During the 2010 tax season, funding was available only for 50 percent of stores after the chain had to find a new backer following the forced exit of Santa Barbara Bank & Trust from the RAL business. Lack of RALs caused customers to turn to other tax preparers and drove down tax season revenue.
The company declined to provide details of the franchise agreement until those have been presented to store operators. However, CEO Harry W. Buckley said the new agreement provides incentives to help store operators improve performance.
That came as the chain reported lost $19.2 million in the first quarter ended July 31, down from a loss of $21.8 million a year earlier. Revenue was also down, falling to $4.4 million 12 percent from $5 million in last year's corresponding period. The company typically loses money in this quarter and it said that less than 3 percent of operating revenue comes from the first and second quarters.
Although Jackson Hewitt trimmed expenses during the July quarter, the results were helped substantially due to the absence of two charges that were reported a year earlier. In the first quarter of fiscal 2010, there was a $4.3 million charge in connection with the departure of former CEO Michael C. Yarrington in June 2009. There was also a $1.6 million drop in external legal fees from last year.