Jackson Hewitt bankruptcy leads to industry questions
Is the market for tax preparation eroding? That’s the key question facing Jackson Hewitt, the nation’s second largest tax preparation chain, which has declared bankruptcy due to falling earnings.
The bankruptcy was not a surprise. The New Jersey-based company had acknowledged a prepackaged filing was possible, even likely, after months of negotiations with its creditors. In early May, the company’s stock was delisted from the New York Stock Exchange because of extended trading below $1. According to court documents, the company owes $357 million in secured loans, but is worth between $200 million and $250 million—meaning lenders would take a bath if the company were to be sold. Under their agreement, the lenders agreed to exchange their debt for a share of $100 million in new-term loan and all of the equity in a new, reorganized company.
Jackson Hewitt has seen its revenues drop 27 percent in just three years, while EBITDA, or earnings before interest, taxes, depreciation and amortization, fell from $75 million in 2009 to $46.8 million in 2010. The main problem: a big drop in the number of tax returns amid mounting competition from online tax preparers and software programs.
Bad news just keeps piling on for Quiznos
The Denver-based sub chain, which has seen 40 percent of its U.S. restaurants close over the past two years, has hired a restructuring adviser following a reported fall in same-store sales in May by more than 12 percent. The sales decline put the company in danger of defaulting on its debt. The company confirmed the move in a statement to Franchise Times, saying that, "Quiznos has hired a financial advisor to assist in working constructively with its lenders to develop a proper financial structure for the company."
The chain has $850 million in debt, and is reportedly working on a plan to convert $225 million of that into equity stakes for the debt-holders.
