Jackson Hewitt Prepares for 2009 Tax Season
Despite popular thinking on the certainty of taxes, recent filings with the SEC suggest even Jackson Hewitt Tax Service (JHI) -- and its business partners -- is taking a cautious approach to the coming year. The No. 2 U.S. tax return preparer, which competes with H&R Block, has reworked agreements with its bank and credit card affiliates, consolidated its senior management team and struck an agreement for a "winning" marketing program.On December 2, the company amended its agreement with Republic Bank & Trust Company, which provides financial products such as refund anticipation loans to JHI customers during the tax season. One amendment relates to the number of Jackson Hewitt locations where Republic products will be offered and the fees to be paid by Republic to JHI for the 2009 tax season.
Tellingly, JHI had to give Republic a concession for the 2009 tax year, allowing Republic to withhold some fees due JHI in the event the financial product sales do not meet Republic's goals. Republic is apparently expecting to achieve benchmark profitability levels and wants some protection if JHI fails to comply with Republic's policies and procedures. In other words, there will be no tolerance of predatory sales pitches for high fee IRAs or high interest cost refund anticipation loans.
JHI also disclosed in a November Form 8-K filing that it has amended its agreement with MetaBank (doing business as Meta Payment Systems) relating to a prepaid debit card program. The company receives fees from MetaBank for the sale of pre-paid debit cards. JHI had to provide new guarantees up to $13.0 million to MetaBank if loan losses are greater than projected.
JHI is not taking any changes with a "build it and they will come" marketing strategy. Instead the Company recently signed a marketing agreement with Magic Johnson Enterprises to secure the help of a seemingly certain winner, Ervin "Magic" Johnson. The world-renowned NBA basketball player and successful entrepreneur will serve as spokesperson for JHI, helping in particular to recruit new franchise owners. During tax season from January through April, JHI provides tax return services at more than 6,800 franchised and company-owned offices throughout the United States.
Chief Executive Officer Michael Yerington said in the second-quarter 2009 press release today that JHI has "completed an intensive off-season of preparation for the 2009 tax season," and the company has accomplished, or is on track to accomplish, all of the initiatives -- including those mentioned in this article -- necessary to selectively broaden distribution and improve same store sales. Comforting words in a discomforting economic climate. But, as Benjamin Franklin once remarked: "In this world nothing to be said to be certain, except death and taxes."
Reporting by contributor Debra Fiakas, who does not hold a financial interest in any stocks mentioned in this article. The 10-Q Detective has a Full Disclosure Policy.