ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended April 30, 2013
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Delaware
(State or other jurisdiction of
incorporation or organization)
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27-3561876
(I.R.S. Employer
Identification No.)
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1716 Corporate Landing Parkway,
Virginia Beach, Virginia
(Address of principal executive offices)
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23454
(Zip Code)
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Class A Common Stock,
$0.01 par value per share
(Title of Class)
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The NASDAQ Stock Market LLC
(Name of Exchange on which
registered)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a
smaller reporting company)
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Smaller reporting company
ý
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•
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We determined that our area developer, or “AD”, agreements do not constitute a franchise relationship for accounting purposes. Therefore, instead of recording revenue at the inception of the AD relationship under franchise accounting, we now record these fees over the life of the AD agreement, which is typically ten years. Additionally, our consolidated financial statements now show the portion of franchise fees and royalties that the AD is entitled to receive from us in our revenue captions, with an equal amount of expense shown in a new operating expense caption as "area developer expense." These amounts were previously presented on a net basis.
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We changed our revenue recognition policy for franchise fees to record revenue as amounts are received from the franchisee. Previously, we generally recorded these revenues at the time of sale, net of expected note cancellations related to the amount financed. Therefore, under the new revenue recognition policy any portion of franchise fees that is financed is only reflected as revenue when the note payments are made.
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We also revised our methodology for the allocation of the purchase price associated with the acquisitions of businesses from franchisees. Historically, we allocated the entire purchase price to an identifiable intangible asset denominated as customer list. The new methodology allocates the purchase price to all identifiable intangible assets, which consist of reacquired rights and customer list. Any unallocated purchase price is recorded as goodwill.
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2009
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2010
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2011
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2012
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2013
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(dollars in thousands)
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As Reported
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$
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20,816
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$
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17,884
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$
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26,636
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$
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27,805
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$
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29,792
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Adjustments related to the following areas:
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Area developer agreements
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2,249
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5,917
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762
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(1,935
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)
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(951
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)
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Franchise fees
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(541
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)
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(894
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)
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(2,330
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)
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(668
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)
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(26
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)
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Business combinations
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60
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139
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(256
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)
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928
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(18
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)
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As Restated
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$
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22,584
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$
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23,046
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$
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24,812
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$
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26,130
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$
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28,797
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•
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The Restatement does not impact actual cash received or the reported cash balances for any of the Restated Periods.
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The Restatement does not impact the receipt of the total reported revenue, but instead changes the time periods over which the revenue was recognized.
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our possible inability to sustain growth at our historical pace;
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the seasonality of our business;
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our inability to secure reliable sources of the tax settlement products we make available to our customers;
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the continued service of our senior management team;
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government regulation and oversight, including the regulation of tax settlement products such as electronic refund checks ("ERCs") and loan settlement products;
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government initiatives that simplify tax return preparation, improve the timing and efficiency of processing tax returns, limit payments to tax preparers or decrease the number of tax returns filed or the size of the refunds;
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government initiatives to pre-populate income tax returns;
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increased regulation of the products and services that we offer;
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the possible characterization of ERCs as a form of loan or extension of credit;
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changes in the tax settlement products offered to our customers that make our services less attractive to customers or more costly to us;
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our ability to maintain relationships with our tax settlement product service providers;
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our ability and the ability of our franchisees to comply with regulatory requirements;
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changes in our franchise sale model that may reduce our revenue;
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the ability of our franchisees to open new territories and operate them successfully;
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the ability of our franchisees to generate sufficient revenue to repay their indebtedness to us;
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our exposure to litigation;
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our ability and our franchisees' ability to protect customers' personal information, including from a cyber-security incident;
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our ability to access the credit markets and satisfy our covenants to lenders;
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challenges in deploying accurate tax software in a timely way each tax season;
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competition in the tax preparation market;
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our reliance on technology systems, including the deployment of our NextGen project, and electronic communications;
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our ability to deploy our NextGen software in time for the 2014 tax season;
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potential shareholder litigation as a result of the restatement of our previously issued consolidated financial statements;
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risks relating to our management's determination that there was a material weakness in our internal control over financial reporting, and as a result that our disclosure controls and procedures were not effective, as of April 30, 2013; and
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other factors, including the risk factors discussed in this annual report.
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2009
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2010
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2011
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2012
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2013
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Offices - Total
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3,091
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3,531
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3,845
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4,183
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4,520
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Tax returns prepared in our offices
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1,632,000
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1,795,000
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1,946,000
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2,075,000
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2,116,000
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For new franchisees purchasing their first territory, payment of a franchisee fee of $40,000, a portion of which might be financed (subject to credit approval) by us.
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For existing franchisees acquiring additional territories, payment of a franchise fee of $40,000, of which 20% must be paid as a down payment and the balance (subject to credit approval) may be financed by us.
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For existing franchisees willing to expand, use of our "try before you buy" or "rent to own" options, which require the same 20% down payment, but allow the franchisees to defer the payment of the down payment until they have operated the territory for most of one tax season and elect to keep the territory.
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Alternatively, new and existing franchisees can opt for our new "zero franchise fee" alternative, which allows a new territory to be acquired without the payment of the franchise fee, upon delivery of a minimal security deposit, subject to a franchise agreement that will impose higher royalties, as described below.
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A base royalty equal to 14% of the franchisee's tax preparation revenue, subject to certain specified minimums.
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An advertising fee of 5% of the franchisee's tax preparation revenue that we utilize to fund our collective advertising efforts.
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The unpaid portion of franchise and AD fees, which does not represent a cash advance by us to the franchisee or AD, but a loan of the franchise or AD fee, generally payable over four (territory franchise fees) to eight years (AD fees). At April 30, 2013 the unrecognized revenue related to these loans was $37.1 million.
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Amounts due to us in connection with the purchase price of customer lists for franchisees acquiring previously opened territories. The notes for these amounts are generally payable over five years following the acquisition. At April 30, 2013 the unrecognized revenue related to these loans was $2.6 million.
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Annual working capital loans made available to qualified franchisees between May 1 and January 31 each year, which are repayable to us generally by the end of February of the following year.
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Amounts payable in connection with promissory notes payable to us for royalty and advertising fee amounts due to us for prior periods, but not paid by a franchisee on a timely basis.
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a direct deposit of the customer's tax refund into a newly established temporary bank account in the customer's name that we establish with one of our banking partners or other banks that have contracted with JTH Financial, LLC ("JTH Financial"), one of our subsidiaries; or
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delivery to the customer of a paper check or a prepaid card containing the balance of the customer's refund after the payment of tax preparation and other fees.
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Our ability to continue to grow our franchise base, in order to broaden our national reach and brand recognition.
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Our ability to offer best of class customer and franchisee service and support.
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Consolidation in our industry and our ability to capitalize on such consolidation.
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Our ability to continue to offer a competitive range of tax settlement financial products.
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Our successful deployment of our NextGen software, which will enable us to continue to improve our office interface, customer targeting and the ability to move customers between our online and retail tax offerings.
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require all tax return preparers to use a Preparer Tax Identification Number ("PTIN") as their identifying number on federal tax returns filed after December 31, 2010;
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require all tax return preparers to be authorized to practice before the IRS as a prerequisite to obtaining or renewing a PTIN;
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caused all previously issued PTINs to expire annually on December 31;
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allow the IRS to conduct tax compliance checks on tax return preparers;
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define the individuals who are considered "tax return preparers" for the PTIN requirement; and
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set the amount of the PTIN user registration fee at $64.25 per year for new registrants and $63.00 for renewals.
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adding new customers and retaining existing customers;
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innovating new products and services to meet the needs of our customers;
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finding new opportunities in our existing and new markets;
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remaining competitive in the tax return preparation industry;
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our ability to offer directly and to facilitate through others the sale of tax settlement products;
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attracting and retaining capable franchisees and ADs;
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our success in replacing independent preparers with franchisees;
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hiring, training and retaining skilled managers and seasonal employees; and
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expanding and improving the efficiency of our operations and systems.
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cash and resource management during the first eight months of our fiscal year, when we generally operate at a loss and incur fixed costs and costs of preparing for the upcoming tax season;
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compliance with financial covenants under our credit facility, particularly if the timing of our revenue generation deviates from our typical revenue patterns, as happened during the third quarter of fiscal 2013;
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the availability of seasonal employees willing to work for our franchisees for little more than the minimum wage, with minimal benefits, for periods of less than a year;
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the success of our franchisees in hiring, training, and supervising these employees and dealing with turnover rates;
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accurate forecasting of revenues and expenses, because we may have little or no time to respond to changes in competitive conditions, markets, pricing, and new product offerings by competitors, which could affect our position during the tax season;
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disruptions in one tax season, including any customer dissatisfaction issues, may not be discovered until the following tax season; and
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ensuring optimal uninterrupted operations during peak season.
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We must satisfy a "leverage ratio" test that is based on our outstanding indebtedness at the end of each fiscal quarter.
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We must satisfy a "fixed charge coverage ratio" test at the end of each fiscal quarter.
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We must reduce the outstanding balance under our revolving loan to zero for a period of at least 45 consecutive days each fiscal year.
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civil monetary damages and penalties;
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criminal penalties; and
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injunctions or other restrictions on the manner in which we conduct our business.
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actual or anticipated variations in our operating results from quarter to quarter;
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actual or anticipated variations in our operating results from the expectations of securities analysts and investors;
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actual or anticipated variations in our operating results from our competitors;
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fluctuations in the valuation of companies perceived by investors to be comparable to us;
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sales of Class A common stock or other securities by us or our stockholders in the future;
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changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
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departures of key executives or directors;
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announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, financing efforts or capital commitments;
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delays or other changes in our expansion plans;
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involvement in litigation or governmental investigations;
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stock price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
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general market conditions in our industry and the industries of our customers;
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general economic and stock market conditions;
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regulatory or political developments; and
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terrorist attacks or natural disasters.
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prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and NASDAQ rules;
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create or expand the roles and duties of our Board of Directors and committees of the Board of Directors;
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institute more comprehensive financial reporting and disclosure compliance functions;
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supplement our internal accounting and auditing function;
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enhance and formalize closing procedures at the end of our accounting periods;
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enhance our investor relations function;
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establish new or enhanced internal policies, including those relating to disclosure controls and procedures; and
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involve and retain to a greater degree outside counsel and accountants in the activities listed above.
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authorize our Board of Directors to issue, without further action by the stockholders, up to approximately 3 million shares of undesignated preferred stock;
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specify that special meetings of our stockholders can be called only by our Board of Directors, the Chair of our Board of Directors, or holders of at least 20% of the shares that will be entitled to vote on the matters presented at such special meeting;
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establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board of Directors; and
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do not provide for cumulative voting in the election of directors.
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2013 Fiscal Quarter
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High
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Low
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First Quarter(1)
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$
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14.99
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$
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10.00
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Second Quarter
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15.50
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8.85
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Third Quarter
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16.35
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12.99
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Fourth Quarter
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17.50
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14.48
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Period
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Total Number
of Shares
Purchased(1)
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Average
Price Paid
per Share
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Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Plan
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Maximum
Value
of Shares
that may
be Purchased
Under
the Plan(2)
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February 1 through February 28, 2013
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—
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$
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—
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—
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$
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4,208,979
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March 1 through March 31, 2013
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3,116
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15.74
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3,116
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4,159,919
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April 1 through April 30, 2013
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299,539
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15.94
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299,539
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1,181,478
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Total
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302,655
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302,655
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|
|
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Fiscal Years Ended and as of April 30,
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2009(1)
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2010(1)
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2011(2)
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2012(2)
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2013
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||||||||||
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As Restated
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As Restated
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As Restated
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As Restated
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(dollars in thousands, except per share, per office amounts and fees per tax return)
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Consolidated Statements of Income Data:
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Revenue:
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Franchise fees
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$
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10,056
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|
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$
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13,366
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$
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8,780
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|
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$
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7,996
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|
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$
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8,721
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Area developer fees
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6,881
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|
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6,476
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|
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6,335
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|
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6,702
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|
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7,699
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Royalties and advertising fees
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47,874
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|
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58,361
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|
|
66,182
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|
|
70,016
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|
|
73,129
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Financial products
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18,560
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|
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14,175
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|
|
16,507
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|
|
22,903
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|
|
30,345
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|
|||||
Tax preparation fees, net of discounts
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|
5,075
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|
|
5,982
|
|
|
4,789
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|
|
7,026
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|
|
10,148
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|
|||||
Other revenue
|
|
12,377
|
|
|
14,225
|
|
|
15,343
|
|
|
16,582
|
|
|
17,571
|
|
|||||
Total revenue
|
|
100,823
|
|
|
112,585
|
|
|
117,936
|
|
|
131,225
|
|
|
147,613
|
|
|||||
Total operating expenses
|
|
(76,781
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)
|
|
(91,060
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)
|
|
(91,245
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)
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|
(103,245
|
)
|
|
(116,777
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)
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Income from operations
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|
24,042
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|
|
21,525
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|
|
26,691
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|
|
27,980
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|
|
30,836
|
|
|||||
Interest expense
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|
(1,769
|
)
|
|
(1,947
|
)
|
|
(1,954
|
)
|
|
(1,854
|
)
|
|
(2,039
|
)
|
|||||
Other income
|
|
311
|
|
|
3,468
|
|
|
75
|
|
|
4
|
|
|
—
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|
|||||
Income before income taxes
|
|
22,584
|
|
|
23,046
|
|
|
24,812
|
|
|
26,130
|
|
|
28,797
|
|
|||||
Income tax expense
|
|
(9,427
|
)
|
|
(8,657
|
)
|
|
(10,142
|
)
|
|
(9,747
|
)
|
|
(11,170
|
)
|
|||||
Net income
|
|
$
|
13,157
|
|
|
$
|
14,389
|
|
|
$
|
14,670
|
|
|
$
|
16,383
|
|
|
$
|
17,627
|
|
Earnings per share of Class A common stock and Class B common stock
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
$
|
0.89
|
|
|
$
|
0.99
|
|
|
$
|
0.85
|
|
|
$
|
1.17
|
|
|
$
|
1.26
|
|
Diluted
|
|
$
|
0.85
|
|
|
$
|
0.95
|
|
|
$
|
0.83
|
|
|
$
|
1.16
|
|
|
$
|
1.25
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amounts due from franchisees and area developers, net of allowances
|
|
$
|
48,904
|
|
|
$
|
57,591
|
|
|
$
|
68,196
|
|
|
$
|
76,493
|
|
|
$
|
85,658
|
|
Property, equipment and software, net
|
|
17,426
|
|
|
13,127
|
|
|
18,228
|
|
|
23,948
|
|
|
33,037
|
|
|||||
Total assets
|
|
109,357
|
|
|
102,081
|
|
|
116,093
|
|
|
152,196
|
|
|
169,530
|
|
|||||
Revolving credit facility
|
|
10,002
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Long-term debt, including current installments
|
|
5,205
|
|
|
4,734
|
|
|
4,458
|
|
|
28,985
|
|
|
27,683
|
|
|||||
Total stockholders' equity
|
|
35,089
|
|
|
44,179
|
|
|
52,018
|
|
|
67,065
|
|
|
81,836
|
|
Other Financial and Operational Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted EBITDA(3)
|
|
$
|
31,460
|
|
|
$
|
34,928
|
|
|
$
|
33,568
|
|
|
$
|
36,517
|
|
|
$
|
42,107
|
|
Franchisees
|
|
1,801
|
|
|
1,901
|
|
|
1,941
|
|
|
2,098
|
|
|
2,211
|
|
|||||
Offices(4)
|
|
3,091
|
|
|
3,531
|
|
|
3,845
|
|
|
4,183
|
|
|
4,520
|
|
|||||
Offices per franchisee
|
|
1.72
|
|
|
1.86
|
|
|
1.98
|
|
|
1.99
|
|
|
2.04
|
|
|||||
Tax returns processed
|
|
1,766,000
|
|
|
1,912,000
|
|
|
2,044,000
|
|
|
2,188,000
|
|
|
2,275,000
|
|
|||||
Net average fee per tax return prepared(5)
|
|
$
|
149
|
|
|
$
|
170
|
|
|
$
|
174
|
|
|
$
|
173
|
|
|
$
|
180
|
|
Systemwide revenue(6)
|
|
$
|
243,600
|
|
|
$
|
304,300
|
|
|
$
|
338,600
|
|
|
$
|
359,100
|
|
|
$
|
381,200
|
|
Systemwide revenue per office(5)(6)
|
|
$
|
78,809
|
|
|
$
|
86,180
|
|
|
$
|
88,062
|
|
|
$
|
85,847
|
|
|
$
|
84,336
|
|
|
|
|
||||||||||||||||||||||
|
|
2009
|
|
2010
|
||||||||||||||||||||
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||||||||
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
|
|
(dollars in thousands, except per share, per office amounts and fees per tax return)
|
||||||||||||||||||||||
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Franchise fees
|
|
$
|
11,476
|
|
|
$
|
(1,420
|
)
|
|
$
|
10,056
|
|
|
$
|
11,288
|
|
|
$
|
2,078
|
|
|
$
|
13,366
|
|
Provision for refunds
|
|
(1,193
|
)
|
|
1,193
|
|
|
—
|
|
|
(1,656
|
)
|
|
1,656
|
|
|
—
|
|
||||||
Area developer fees
|
|
—
|
|
|
6,881
|
|
|
6,881
|
|
|
—
|
|
|
6,476
|
|
|
6,476
|
|
||||||
Royalties and advertising fees
|
|
33,093
|
|
|
14,781
|
|
|
47,874
|
|
|
41,413
|
|
|
16,948
|
|
|
58,361
|
|
||||||
Interest income
|
|
8,783
|
|
|
249
|
|
|
9,032
|
|
|
8,876
|
|
|
1,087
|
|
|
9,963
|
|
||||||
Net gain on sale of customer lists and other assets and other revenue
|
|
3,484
|
|
|
(139
|
)
|
|
3,345
|
|
|
4,549
|
|
|
(287
|
)
|
|
4,262
|
|
||||||
Total revenue
|
|
79,278
|
|
|
21,545
|
|
|
100,823
|
|
|
84,627
|
|
|
27,958
|
|
|
112,585
|
|
||||||
General and administrative expenses
|
|
16,551
|
|
|
1,200
|
|
|
17,751
|
|
|
17,871
|
|
|
1,280
|
|
|
19,151
|
|
||||||
Area developer expense
|
|
—
|
|
|
19,084
|
|
|
19,084
|
|
|
—
|
|
|
22,031
|
|
|
22,031
|
|
||||||
Depreciation, amortization, and impairment charges
|
|
5,313
|
|
|
(507
|
)
|
|
4,806
|
|
|
7,305
|
|
|
(515
|
)
|
|
6,790
|
|
||||||
Total operating expenses
|
|
57,004
|
|
|
19,777
|
|
|
76,781
|
|
|
68,264
|
|
|
22,796
|
|
|
91,060
|
|
||||||
Income from operations
|
|
22,274
|
|
|
1,768
|
|
|
24,042
|
|
|
16,363
|
|
|
5,162
|
|
|
21,525
|
|
||||||
Income before income taxes
|
|
20,816
|
|
|
1,768
|
|
|
22,584
|
|
|
17,884
|
|
|
5,162
|
|
|
23,046
|
|
||||||
Income tax expense
|
|
8,737
|
|
|
690
|
|
|
9,427
|
|
|
6,882
|
|
|
1,775
|
|
|
8,657
|
|
||||||
Net income
|
|
12,079
|
|
|
1,078
|
|
|
13,157
|
|
|
11,002
|
|
|
3,387
|
|
|
14,389
|
|
||||||
Earnings per share of Class A common stock and Class B common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
$
|
0.82
|
|
|
$
|
0.07
|
|
|
$
|
0.89
|
|
|
$
|
0.75
|
|
|
$
|
0.24
|
|
|
$
|
0.99
|
|
Diluted
|
|
$
|
0.78
|
|
|
$
|
0.07
|
|
|
$
|
0.85
|
|
|
$
|
0.73
|
|
|
$
|
0.22
|
|
|
$
|
0.95
|
|
•
|
Adjustments to franchise fees includes the reclassification of area developer fees to a separate caption, the net impact of changing our franchise fee recognition policy to receipt of funds and the change to gross presentation for the area developer portion
|
•
|
Adjustments to provision for refunds is due to the change in our franchise fee recognition policy
|
•
|
Adjustments to area developer fees is the net effect of reclassifying AD fees out of franchisee fees and the impact of recognizing revenue over the life of the agreement
|
•
|
Adjustments to royalties and advertising reflects the change to gross presentation for the area developer portion of royalties
|
•
|
Adjustments to interest income reflect the change to gross presentation for the area developer portion of interest and the conversion to cash basis from accrual basis for interest on notes related to unrecognized revenue
|
•
|
Adjustments to general and administrative expense reflects the increase in the provision for bad debts due to the elimination of the provision for refunds
|
•
|
Adjustments to area developer expense reflects the change to a gross presentation for franchise fees, royalties and interest owed to area developer
|
•
|
Adjustments to amortization and impairment charges are the net effect of the change in purchase price allocation for company-owned offices acquired from franchisees and the impact of a smaller balance of area developer rights due to the netting of deferred revenue upon reacquisition
|
•
|
Adjustments to the provision for income taxes reflects the impact of the restatement adjustments
|
|
|
2009
|
|
2010
|
||||||||||||||||||||
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||||||||
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
|
|
(dollars in thousands)
|
||||||||||||||||||||||
Amounts due from franchisees and area developers, net of allowances
|
|
$
|
81,233
|
|
|
$
|
(32,329
|
)
|
|
$
|
48,904
|
|
|
$
|
86,838
|
|
|
$
|
(29,247
|
)
|
|
$
|
57,591
|
|
Property, equipment and software, net
|
|
17,426
|
|
|
—
|
|
|
17,426
|
|
|
13,127
|
|
|
—
|
|
|
13,127
|
|
||||||
Total assets
|
|
132,726
|
|
|
(23,369
|
)
|
|
109,357
|
|
|
126,886
|
|
|
(24,805
|
)
|
|
102,081
|
|
||||||
Revolving credit facility
|
|
10,002
|
|
|
—
|
|
|
10,002
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Long-term debt, including current installments
|
|
5,205
|
|
|
—
|
|
|
5,205
|
|
|
4,734
|
|
|
—
|
|
|
4,734
|
|
||||||
Total stockholders' equity
|
|
69,493
|
|
|
(34,404
|
)
|
|
35,089
|
|
|
75,196
|
|
|
(31,017
|
)
|
|
44,179
|
|
|
|
2011
|
|
|
|
||||||||||
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
|
|
||||||
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
||||||
|
|
(dollars in thousands)
|
|
|
|
||||||||||
Amounts due from franchisees and area developers, net of allowances
|
|
$
|
101,958
|
|
|
$
|
(33,762
|
)
|
|
$
|
68,196
|
|
|
|
|
Property, equipment and software, net
|
|
18,228
|
|
|
—
|
|
|
18,228
|
|
|
|
|
|||
Total assets
|
|
147,793
|
|
|
(31,700
|
)
|
|
116,093
|
|
|
|
|
|||
Revolving credit facility
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|||
Long-term debt, including current installments
|
|
4,458
|
|
|
—
|
|
|
4,458
|
|
|
|
|
|||
Total stockholders' equity
|
|
84,127
|
|
|
(32,109
|
)
|
|
52,018
|
|
|
|
|
•
|
Adjustments to amounts due from franchisees and area developers, net of allowances, to present notes receivable net of unrecognized revenue and changes to the allowance for doubtful accounts due to changes in our franchise fee revenue recognition policy.
|
•
|
Adjustments to total assets include those noted above in addition to changes in deferred income taxes to reflect the impact of the restatement adjustments and to goodwill and other intangibles, related to the revised purchase price allocation methodology for assets acquired from franchisees.
|
•
|
Adjustments to stockholders' equity reflect the cumulative impact of all of the restatement adjustments.
|
|
|
Fiscal Years Ended April 30,
|
||||||||||||||||||
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
||||||||||
|
|
As Restated(1)
|
|
As Restated(1)
|
|
As Restated(1)
|
|
As Restated(1)
|
|
|
||||||||||
|
|
(dollars in thousands)
|
||||||||||||||||||
Reconciliation of Adjusted EBITDA to Net Income
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
|
|
$
|
13,157
|
|
|
$
|
14,389
|
|
|
$
|
14,670
|
|
|
$
|
16,383
|
|
|
$
|
17,627
|
|
Interest expense
|
|
1,769
|
|
|
1,947
|
|
|
1,954
|
|
|
1,854
|
|
|
2,039
|
|
|||||
Income tax expense
|
|
9,427
|
|
|
8,657
|
|
|
10,142
|
|
|
9,747
|
|
|
11,170
|
|
|||||
Depreciation, amortization and impairment charges
|
|
4,806
|
|
|
6,790
|
|
|
5,439
|
|
|
5,999
|
|
|
6,538
|
|
|||||
Loss on discontinued use of software
|
|
—
|
|
|
5,570
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Foreign currency transaction (gain) loss
|
|
451
|
|
|
(1,014
|
)
|
|
(75
|
)
|
|
(4
|
)
|
|
—
|
|
|||||
Net gain on short-term investments
|
|
(762
|
)
|
|
(2,454
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Costs associated with postponed IPO
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,348
|
|
|
—
|
|
|||||
Restructuring charge
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
425
|
|
|||||
Litigation settlement
|
|
1,557
|
|
|
43
|
|
|
(56
|
)
|
|
(239
|
)
|
|
187
|
|
|||||
Stock-based compensation expense related to conversion from equity to liability instrument
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,625
|
|
|||||
Stock-based compensation expense
|
|
1,055
|
|
|
1,000
|
|
|
1,494
|
|
|
1,429
|
|
|
1,496
|
|
|||||
Adjusted EBITDA
|
|
$
|
31,460
|
|
|
$
|
34,928
|
|
|
$
|
33,568
|
|
|
$
|
36,517
|
|
|
$
|
42,107
|
|
•
|
our consolidated balance sheet as of April 30, 2012 and the consolidated statements of income, stockholders' equity, comprehensive income and cash flows for the fiscal years ended April 30, 2012 and 2011; and
|
•
|
our unaudited quarterly financial information for the first three quarters of fiscal 2013 and each quarter in our fiscal year ended April 30, 2012.
|
•
|
We determined that our AD agreements do not constitute a franchise relationship for accounting purposes. Therefore, instead of recording revenue at the inception of the AD relationship under franchise accounting, we now record these fees over the life of the AD agreement, which is typically ten years. Additionally, our consolidated financial statements now show the portion of franchise fees and royalties that the AD is entitled to receive from us in our revenue captions, with an equal amount of expense shown in a new operating expense caption as area developer expense. These amounts were previously presented on a net basis.
|
•
|
We changed our revenue recognition policy for franchise fees to record revenue as amounts are received from the franchisee. Previously, we generally recorded these revenues at the time of sale, net of expected note cancellations related to the amount financed. Therefore, under the new revenue recognition policy any portion of franchise fees that is financed is only reflected as revenue when the note payments are made.
|
•
|
We also revised our methodology for the allocation of the purchase price associated with the acquisitions of businesses from franchisees. Historically, we allocated the entire purchase price to an identifiable intangible asset denominated as customer list. The new methodology allocates the purchase price to all identifiable intangible assets, which consist of reacquired rights and customer list. Any unallocated purchase price is recorded as goodwill.
|
•
|
The Restatement does impact actual cash received or the reported cash balances for any of the Restated Periods.
|
•
|
The Restatement does not impact the receipt of the total reported revenue, but instead changes the time periods over which the revenue was recognized.
|
•
|
Royalties: We earn royalty revenue from our franchisees. Our franchise agreement requires franchisees to pay us a base royalty equal to 14% of the franchisee's tax preparation revenue, subject to certain specified minimums. Franchisees acquiring territories under our "zero franchise fee" alternative are required to pay us franchise royalties of 25% through their first five tax seasons, and thereafter 14% of their tax preparation revenue. Over time, as our offices continue to "season," we expect that our growth in revenue from royalties will continue to outpace our growth in revenue from franchise fees. We also expect to see steadier growth from our royalty revenue, but our franchise fee revenue may decrease if franchisees choose our "zero franchise fee" alternative.
|
•
|
Franchise Fees: Our standard franchise fee per territory is $40,000 and we offer our franchisees flexible structures and financing options for franchise fees. Franchise fee revenue is recognized when our obligations to prepare the franchisee for operation are substantially complete and as cash is received. However, in 2011 we introduced a franchise fee option that forgoes the initial franchise fee payment in favor of a higher royalty rate. See "Item 1—Business—Liberty's Franchise Model." The franchise fee revenue we report includes the portion of franchise fees received by us from
|
•
|
Area Developer Fees: Our fees for AD areas vary based on our assessment of the revenue potential of each AD area, and also depend on the performance of any existing franchisees within the AD area being sold. Our ADs generally receive 50% of both the franchise fees and royalties derived from territories located in their area. Area development fees received are recognized as revenue on a straight-line basis over the initial contract term of each Area Developer agreement with the cumulative amount of revenue recognized not to exceed the amount of cash received. See "Item 1—Business—Liberty's Franchise Model."
|
•
|
Advertising Fees: We earn advertising fee revenue from our franchisees. Our franchise agreement requires all franchisees to pay us an advertising fee of 5% of the franchisee's tax preparation revenue, which we use primarily to fund collective advertising efforts.
|
•
|
Financial Products: We offer two types of tax settlement financial products: "refund transfer" products, such as ERCs, which involve providing a means by which a customer may receive his or her refund more quickly and conveniently, and other tax settlement products, such as ICA refund-based loans. We earn fees from the use of these financial products. During the 2013 tax season ICAs were available in our offices in 27 states, but because of regulatory considerations, the third-party lender that offers the ICAs may not be able to expand the ICA program much further. See "Item 1—Business—Tax Preparation in the Liberty System." However, we believe the negative effect of fewer refund-based loans will be offset by two factors. First, we believe that most customers who previously would have obtained loans have elected to purchase a refund transfer product, and that the continued availability of these products will enable us to experience similar tax settlement product "attachment rates" as in prior years. Second, as we continue to offer more of our financial products through our JTH Financial subsidiary, we expect to be able to realize more of the fee income associated with tax settlement products (although we will also incur greater expenses in connection with offering the products).
|
•
|
Interest Income: We earn interest income from our franchisees and ADs related to both indebtedness for the unpaid portions of their franchise fees and AD territory fees, and for other loans we extend to our franchisees related to the operation of their territories. For franchise fees and AD loans upon which the underlying revenue has not been recognized, we recognize the interest income only to the extent of actual payment.
|
•
|
Tax Preparation Fees: We also earn tax preparation revenue directly from both the operation of company-owned offices and the provision of tax preparation services through our eSmartTax online product.
|
|
|
Fiscal Years Ended and as of April 30,
|
||||||||||
|
|
2011
|
|
2012
|
|
2013
|
||||||
|
|
As Restated
|
|
As Restated
|
|
|
||||||
|
|
(dollars in thousands, except net average fee per tax return prepared, systemwide revenue per office and fees per tax return)
|
||||||||||
Results of Operations:
|
|
|
|
|
|
|
||||||
Total revenue
|
|
$
|
117,936
|
|
|
$
|
131,225
|
|
|
$
|
147,613
|
|
Operating income
|
|
$
|
26,691
|
|
|
$
|
27,980
|
|
|
$
|
30,836
|
|
Net income
|
|
$
|
14,670
|
|
|
$
|
16,383
|
|
|
$
|
17,627
|
|
Other Financial and Operational Data:
|
|
|
|
|
|
|
||||||
Franchisees
|
|
1,941
|
|
|
2,098
|
|
|
2,211
|
|
|||
Number of franchised offices
|
|
3,790
|
|
|
4,089
|
|
|
4,259
|
|
|||
Number of company-owned offices
|
|
55
|
|
|
94
|
|
|
261
|
|
|||
Tax returns processed
|
|
2,044,000
|
|
|
2,188,000
|
|
|
2,275,000
|
|
|||
Net average fee per tax return prepared in our offices
|
|
$
|
174
|
|
|
$
|
173
|
|
|
$
|
180
|
|
Systemwide revenue
|
|
$
|
338,600
|
|
|
$
|
359,100
|
|
|
$
|
381,200
|
|
Systemwide revenue per office
|
|
$
|
88,062
|
|
|
$
|
85,847
|
|
|
$
|
84,336
|
|
Customers obtaining financial products
|
|
902,000
|
|
|
922,000
|
|
|
973,000
|
|
•
|
Net growth in office locations.
Our growth in office locations from year to year is a function of the opening of new offices, offset by locations that our franchisees or we close from year to year. Changes in the number of our offices are a function of both the sale of new territories and the opening of offices in previously sold territories. In fiscal
2013
, our franchisees acquired
405
new territories in the U.S. in which new offices were open for the
2013
tax season (compared to
428
such offices in fiscal
2012
), and opened an additional
346
offices in U.S. territories that had been sold in prior years. We also operated 167 more company-owned offices in fiscal 2013 than in fiscal 2012, which was largely a consequence of our decision relatively late in the franchise sales season to commit to open tax kiosks in Walmart stores. We operated 155 such kiosks in Walmart stores during the 2013 tax season as company-owned offices. Our net increase in US offices of
342
reflects the fact that because of franchise terminations and other reasons,
409
offices that operated in the
2012
tax season were closed before the
2013
season. However, for the 2014 tax season, we expect to add fewer new franchisees than in prior seasons because the need to restate our financial statements prevented us from engaging in franchise sales activity for more than a month during our peak franchise sales season.
|
•
|
Growth in the number of returns prepared.
We strive to provide our franchisees with the resources and training needed to grow their own revenue, and one of the principal factors in that growth is growth in the number of returns prepared. We and our franchisees prepared a total of approximately
1.8 million
returns in our U.S. offices in the
2013
tax season, which was an increase of
1%
from the
2012
tax season. Our new retail offices typically experience their most rapid growth during their first five years as they develop customer loyalty, operational experience and a referral base within their community. The seasoning of our U.S. offices shown in the following table highlights the relative young age and majority of our offices, with 2,471 offices of 4,262 operated during tax season 2013 having been operated for five or fewer years, including the 2013 tax season.
|
|
Tax Season 2013 Office Age in Years
|
|||||||||||||||||||
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
|
6+
|
|
Total
|
|||||||
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Franchised storefronts
|
402
|
|
|
481
|
|
|
351
|
|
|
427
|
|
|
350
|
|
|
1,706
|
|
|
3,717
|
|
Franchised kiosks
|
206
|
|
|
34
|
|
|
22
|
|
|
13
|
|
|
10
|
|
|
26
|
|
|
311
|
|
Total franchised offices
|
608
|
|
|
515
|
|
|
373
|
|
|
440
|
|
|
360
|
|
|
1,732
|
|
|
4,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Company-owned storefronts
|
—
|
|
|
3
|
|
|
2
|
|
|
12
|
|
|
3
|
|
|
57
|
|
|
77
|
|
Company-owned kiosks
|
155
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
157
|
|
Total company-owned offices
|
155
|
|
|
3
|
|
|
2
|
|
|
12
|
|
|
3
|
|
|
59
|
|
|
234
|
|
Total U.S. offices
|
763
|
|
|
518
|
|
|
375
|
|
|
452
|
|
|
363
|
|
|
1,791
|
|
|
4,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Canada
|
31
|
|
|
15
|
|
|
9
|
|
|
6
|
|
|
2
|
|
|
195
|
|
|
258
|
|
Total Offices
|
794
|
|
|
533
|
|
|
384
|
|
|
458
|
|
|
365
|
|
|
1,986
|
|
|
4,520
|
|
•
|
Growth in systemwide revenue.
We earn most of our revenue from franchise fees, AD fees, royalties and advertising fees. Therefore, the growth in systemwide revenue, which represents total revenue of our franchised and company-owned offices is not a direct measure of our performance. However, because our royalty revenue is derived from systemwide revenue, and because our cost structure is based on maintaining resources to support a franchise system, we believe that this information is important in obtaining an understanding of our financial performance. We believe systemwide revenue information aids in understanding how we derive royalty revenue, assists readers in evaluating our performance relative to competitors, indicates the strength of our franchised brand and demonstrates increases in recurring royalty revenue.
|
•
|
Growth in the number of tax settlement products obtained by customers in Liberty Tax offices.
As we describe elsewhere in this annual report, we and our competitors face a challenging legal and regulatory environment with respect to the types and characteristics of the financial products we can enable our franchised and company-owned offices to make available to their customers. The availability of products in our offices drives customer loyalty and word of mouth referrals, and it is important that we give customers who view our services as an alternative to the lengthy process of receiving a tax refund by mail a full range of appropriate and competitive choices.
|
|
|
Fiscal Years Ended April 30,
|
|||||||||||||
|
|
|
|
|
|
Change
|
|||||||||
|
|
2012
|
|
2013
|
|
$
|
|
%
|
|||||||
|
|
As Restated
|
|
|
|
|
|
|
|||||||
|
|
(dollars in thousands)
|
|||||||||||||
Employee compensation and benefits
|
|
$
|
29,802
|
|
|
$
|
35,373
|
|
|
$
|
5,571
|
|
|
19
|
%
|
Stock-based compensation expense due to conversion from equity to liability instrument
|
|
—
|
|
|
2,625
|
|
|
2,625
|
|
|
NM
|
|
|||
Advertising
|
|
15,346
|
|
|
15,293
|
|
|
(53
|
)
|
|
—
|
%
|
|||
General and administrative
|
|
26,878
|
|
|
31,212
|
|
|
4,334
|
|
|
16
|
%
|
|||
Area developer expense
|
|
23,872
|
|
|
25,736
|
|
|
1,864
|
|
|
8
|
%
|
|||
Costs associated with postponed IPO
|
|
1,348
|
|
|
—
|
|
|
(1,348
|
)
|
|
NM
|
|
|||
Depreciation, amortization and impairment charges
|
|
5,999
|
|
|
6,538
|
|
|
539
|
|
|
9
|
%
|
|||
Total operating expenses
|
|
$
|
103,245
|
|
|
$
|
116,777
|
|
|
$
|
13,532
|
|
|
13
|
%
|
•
|
A
19%
increase in employee compensation and benefits primarily attributable to the addition of corporate personnel to support the anticipated growth in the number of offices and our becoming a public company, as well as the additional personnel hired to run
167
additional company-owned offices.
|
•
|
A
$2.6 million
one-time charge to stock-based compensation expense because
t
he settlement of certain stock option transactions triggered a change in the classification of the related outstanding stock options from an equity instrument to a liability instrument.
|
•
|
A
16%
increase in general and administrative expenses, caused primarily by the following:
|
◦
|
A $1.7 million increase in rent and utility costs to support the increase in company-owned offices;
|
◦
|
A $1.4 million increase in computer supply and software expense largely due to the increase in our online tax return volume, causing our licensing fee for our online software to be $0.6 million higher. Additionally, our expenses for subscriptions to software as a service related to the use of electronic signatures for customer documents increased because we implemented an electronic signature initiative;
|
◦
|
A $1.3 million increase in bad debt expense based on our assessment of the appropriate level of the allowance for doubtful accounts;
|
◦
|
A $0.6 million increase in travel expense for costs primarily related to attracting new franchisees, training existing and new franchisees, and travel to support the increased number of company-owned offices; and
|
◦
|
An increase in the cost of our ERC programs of $1.3 million which is a result of the increase in the number of tax settlement products originated through JTH Financial in 2013 as compared to 2012.
|
•
|
An
8%
increase in area developer expense primarily related to increases in franchise fee and royalty revenues generated in territories in AD areas.
|
•
|
The non-recurrence in fiscal 2013 of the $1.3 million in one-time costs associated with the postponed IPO that occurred in fiscal 2012 offset some of the increase in operating expenses.
|
|
|
Fiscal Years Ended April 30,
|
|||||||||||||
|
|
|
|
|
|
Change
|
|||||||||
|
|
2012
|
|
2013
|
|
$
|
|
%
|
|||||||
|
|
As Restated
|
|
|
|
|
|
|
|||||||
|
|
(dollars in thousands)
|
|||||||||||||
Income before income taxes
|
|
$
|
26,130
|
|
|
$
|
28,797
|
|
|
$
|
2,667
|
|
|
10
|
%
|
Income tax expense
|
|
9,747
|
|
|
11,170
|
|
|
1,423
|
|
|
15
|
%
|
|||
Effective tax rate
|
|
37.3
|
%
|
|
38.8
|
%
|
|
|
|
|
|
|
|
Fiscal Years Ended April 30,
|
|||||||||||||
|
|
|
|
|
|
Change
|
|||||||||
|
|
2011
|
|
2012
|
|
$
|
|
%
|
|||||||
|
|
As Restated
|
|
As Restated
|
|
|
|
|
|||||||
|
|
(dollars in thousands)
|
|||||||||||||
Franchise fees
|
|
$
|
8,780
|
|
|
$
|
7,996
|
|
|
$
|
(784
|
)
|
|
(9
|
)%
|
Area developer fees
|
|
6,335
|
|
|
6,702
|
|
|
367
|
|
|
6
|
%
|
|||
Royalties
|
|
50,559
|
|
|
53,922
|
|
|
3,363
|
|
|
7
|
%
|
|||
Advertising fees
|
|
15,623
|
|
|
16,094
|
|
|
471
|
|
|
3
|
%
|
|||
Financial products
|
|
16,507
|
|
|
22,903
|
|
|
6,396
|
|
|
39
|
%
|
|||
Interest income
|
|
11,322
|
|
|
12,406
|
|
|
1,084
|
|
|
10
|
%
|
|||
Tax preparation fees, net of discounts
|
|
4,789
|
|
|
7,026
|
|
|
2,237
|
|
|
47
|
%
|
|||
Other
|
|
4,021
|
|
|
4,176
|
|
|
155
|
|
|
4
|
%
|
|||
Total revenues
|
|
$
|
117,936
|
|
|
$
|
131,225
|
|
|
$
|
13,289
|
|
|
11
|
%
|
|
|
Fiscal Years Ended April 30,
|
|||||||||||||
|
|
|
|
|
|
Change
|
|||||||||
|
|
2011
|
|
2012
|
|
$
|
|
%
|
|||||||
|
|
As Restated
|
|
As Restated
|
|
|
|
|
|||||||
|
|
(dollars in thousands)
|
|||||||||||||
Employee compensation and benefits
|
|
$
|
25,162
|
|
|
$
|
29,802
|
|
|
$
|
4,640
|
|
|
18
|
%
|
Advertising
|
|
15,078
|
|
|
15,346
|
|
|
268
|
|
|
2
|
%
|
|||
General and administrative
|
|
22,472
|
|
|
26,878
|
|
|
4,406
|
|
|
20
|
%
|
|||
Area developer expense
|
|
23,094
|
|
|
23,872
|
|
|
778
|
|
|
3
|
%
|
|||
Costs associated with postponed IPO
|
|
—
|
|
|
1,348
|
|
|
1,348
|
|
|
NM
|
|
|||
Depreciation, amortization and impairment charges
|
|
5,439
|
|
|
5,999
|
|
|
560
|
|
|
10
|
%
|
|||
Total operating expenses
|
|
$
|
91,245
|
|
|
$
|
103,245
|
|
|
$
|
12,000
|
|
|
13
|
%
|
•
|
An
18%
increase in employee compensation and benefits attributable to the addition of personnel due to an increase in company-owned offices from the prior year, additional staffing of JTH Financial, and the additional expenses associated with anticipating our becoming a public company.
|
•
|
A
20%
increase in general and administrative expenses, caused primarily by the following:
|
◦
|
A $1.4 million increase in professional fees related to legal and technology projects;
|
◦
|
A $2.3 million increase in costs associated with the expansion of JTH Financial; and
|
◦
|
A $0.8 million increase in rent and related costs to support an increase in company-owned offices.
|
•
|
We also incurred charges of
$1.3 million
related to the expensing of legal, accounting and other professional costs associated with our planned IPO, which we determined to postpone in April 2012.
|
•
|
We must satisfy a "leverage ratio" test that is based on our outstanding indebtedness at the end of each fiscal quarter.
|
•
|
We must satisfy a "fixed charge coverage ratio" test at the end of each fiscal quarter.
|
•
|
We must reduce the outstanding balance under our revolving loan to zero for a period of at least 45 consecutive days each fiscal year.
|
•
|
Higher financial product fee receipts of $9.9 million in 2013 compared to 2012 primarily because we originated more tax settlement products through JTH Financial in fiscal 2013 than in fiscal 2012;
|
•
|
Higher tax preparation fees of $3.1 million due to operating more company-owned offices in 2013 than in 2012 and the large increase in the number of online returns;
|
•
|
The non-recurrence, in fiscal 2013, of the $1.3 million in payments related to the postponed IPO in fiscal 2012.
|
•
|
Higher payroll related payments of $6.0 million primarily attributable to the addition of corporate personnel to support the anticipated growth in the number of offices and our becoming a public company, costs related to staffing the additional company-owned offices and increased staffing to support the additional products sold through JTH Financial.
|
•
|
Higher general and administrative payments of $4.0 million as we incurred more costs to support the increase in offices and franchisees, and company-owned offices, as compared to the prior year.
|
•
|
Higher general and administrative payments of $7.5 million because we incurred more costs to support the increase in offices and franchises as compared to the prior year;
|
•
|
Higher payroll-related payments of $4.6 million attributable to the addition of personnel due to an increase in company-owned and franchise offices from the prior year, additional staffing of JTH Financial, and the additional expenses associated with anticipating our becoming a public company.
|
•
|
Higher financial product rebate payments of $2.1 million because we paid 2011 rebates in 2012, but substantially all of the fiscal 2010 financial product rebates had been paid prior to the end of 2010. This change in timing related to our determination that we should delay payment until we could assess our RAL guarantee obligation to Republic Bank for the 2011 tax season, which was the first season the debt indicator had become unavailable.
|
•
|
Payments made of $1.3 million for costs related to the postponement of our initial public offering.
|
•
|
Higher advertising payments of $0.9 million as we increased spending to the match the increase in advertising royalties.
|
•
|
Higher financial product fees of $4.7 million in 2012 compared to 2011 primarily because we offered more ERCs through JTH Financial, and ICAs were available in more offices, in fiscal 2012 than in fiscal 2011.
|
•
|
Higher area developer fees of $2.4 million
.
|
•
|
Higher tax preparation fees of $2.2 million associated with operating more company-owned offices in 2012 than in 2011.
|
•
|
Higher interest income of $1.3 million associated with an increase in amounts loaned to our franchisees for working capital needs and to purchase company-owned offices.
|
•
|
Lower tax payments of $0.8 million.
|
•
|
An increase of $3.0 million for the purchase of equity securities in a strategic business partner.
|
•
|
An increase in purchases of property and equipment of $1.6 million, primarily attributable to an increase in software development costs related to our NextGen project and the purchase of a new corporate building.
|
•
|
An increase of $1.2 million in the acquisition of assets from franchisees and area developers.
|
•
|
An increase of $3.2 million in purchases of property and equipment, primarily attributable to an increase in software development costs primarily related to our NextGen project.
|
•
|
An increase of $1.7 million in the acquisition of assets from franchisees and area developers.
|
•
|
A $1.6 million net increase in the issuance of operating loans to our franchisees (including ADs), net of payments received on operating loans.
|
•
|
An equity interest acquired in a tax software development company for $1.0 million.
|
•
|
The extent to which we extend additional financing to our franchisees and ADs, beyond the levels of prior periods.
|
•
|
The extent to which we finance any tax settlement products offered by JTH Financial in the future.
|
•
|
The extent and timing of our expenditures related to our NextGen project. Our NextGen project is an integral part of our determination to deliver an improved level of service to our franchisees. In addition to integrating our online and retail-based tax preparation software, we expect the NextGen project, when fully deployed, to improve the ability of our franchisees to comply with financial information protection requirements by moving most tax preparation information to a secure centralized platform, and to provide web-based support services in a way that will be both more accessible to our franchisees and their employees and less expensive for us to provide.
|
•
|
The cash flow effect of selling franchises under our new program allowing franchisees to purchase additional territories without making any cash down payment.
|
•
|
The offsetting impact of the higher royalty rates we receive from franchisees who elect to purchase territories under the no down payment plan.
|
•
|
The extent to which we engage in stock repurchases.
|
•
|
Our ability to generate fee and other income related to tax settlement products in light of regulatory pressures on us and our business partners.
|
•
|
The extent to which we repurchase AD areas, which will involve the use of cash but the countervailing receipt in future periods of what would have been the AD's share of royalties and franchise fees.
|
•
|
The extent, if any, to which our Board of Directors elects to declare dividends on our common stock.
|
|
|
Contractual Obligations
|
||||||||||||||||||
|
|
Total
|
|
Less than 1 Year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
|
More than 5 Years
|
||||||||||
|
|
(dollars in thousands)
|
||||||||||||||||||
Long-term debt obligations(1)
|
|
$
|
29,570
|
|
|
$
|
3,954
|
|
|
$
|
6,147
|
|
|
$
|
19,469
|
|
|
$
|
—
|
|
Capital lease obligations
|
|
125
|
|
|
42
|
|
|
77
|
|
|
6
|
|
|
—
|
|
|||||
Operating lease obligations(2)
|
|
8,455
|
|
|
4,338
|
|
|
2,780
|
|
|
951
|
|
|
386
|
|
|||||
Purchase obligations(3)
|
|
7,877
|
|
|
6,414
|
|
|
1,463
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
|
$
|
46,027
|
|
|
$
|
14,748
|
|
|
$
|
10,467
|
|
|
$
|
20,426
|
|
|
$
|
386
|
|
Date and Year of Grant
|
|
Number of Options Granted
|
|
Average Exercise Price
|
|
Fair Value of Underlying Common Stock
|
|
Per Share Stock Compensation Expense
|
|
Aggregate Stock Compensation Expense
|
|||||||||
June 2012
|
|
332,035
|
|
|
$
|
15.00
|
|
|
$
|
15.00
|
|
|
$
|
1.80
|
|
|
$
|
595,998
|
|
Date and Year of Grant
|
|
Number of Restricted Stock Units Granted
|
|
Fair Value of Underlying Common Stock
|
|
Per Share Stock Compensation Expense
|
|
Aggregate Stock Compensation Expense
|
|||||||
June 2012
|
|
9,305
|
|
|
$
|
15.00
|
|
|
$
|
15.00
|
|
|
$
|
139,575
|
|
August 2012
|
|
3,166
|
|
|
11.80
|
|
|
11.80
|
|
|
37,359
|
|
|||
August 2012
|
|
3,500
|
|
|
11.07
|
|
|
11.07
|
|
|
38,745
|
|
Description
|
|
Judgments and Uncertainties
|
|
Effect if Actual Results Differ From Assumptions
|
Allowance for doubtful accounts
|
|
|
|
|
We establish our allowance for doubtful accounts for our trade accounts receivable and notes receivable based on a comparison of the amount due to the estimated fair value of the underlying franchise. In establishing the fair value of the underlying franchise, management considers net fees of open offices and the number of unopened offices.
|
|
Our calculation of the allowance requires management to make assumptions regarding the fair value of the franchise to which the account relates.
|
|
A 10% decrease in our valuation of franchise territories at April 30, 2013 would have increased our allowance for doubtful accounts by approximately $1.1 million at that date.
|
Long-lived assets
|
|
|
|
|
Long-lived assets other than goodwill and indefinite-lived intangible assets, which are separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
|
|
Our calculation of the allowance requires management to make assumptions regarding the fair value of the franchise to which the account relates.
|
|
We have not made any material changes in the accounting methodology we use to assess impairment loss during the past three fiscal years.
|
Description
|
|
Judgments and Uncertainties
|
|
Effect if Actual Results Differ From Assumptions
|
When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset's estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset.
|
|
|
|
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.
|
Stock-based compensation
|
|
|
|
|
Prior to becoming a public reporting company in June 2012, we based the valuation of the common stock underlying stock options granted to directors and employees on transactions in which the Company had repurchased stock, or in which we had evidence of arms-length transactions between third parties. We have used that valuation to determine the cost of our employee stock-based compensation, rather than obtaining a third party appraisal or using more traditional methods, because we concluded that the number and nature of these transactions in recent periods provided a reasonable basis for the valuation. See "--Critical Accounting Policies--Stock Compensation Expense."
|
|
Our calculation of the cost of employee stock-based compensation depends on the assumption that the exercise price provided for stock options constitutes the fair value of the awards at the grant date.
|
|
For each of fiscal 2011, fiscal 2012, and fiscal 2013 we established the fair value of our common stock at the grant date of various stock options. A $1.00 increase in the per share valuation of the stock with respect to options granted during fiscal 2013 would have increased our stock compensation expense by $40,000 and a $1.00 decrease in that valuation would have reduced our stock compensation expense by $37,000.
|
•
|
Ineffective controls over revenue recognition, business combinations accounting and accounting for stock-based compensation awards
|
•
|
Staffing
: We will streamline the Chief Financial Officer's responsibilities by moving responsibility for our financial products business unit to a newly created executive level position. We have also reorganized the day-to-day accounting function under the leadership of a newly created controller position, reporting directly to the chief accounting officer. The controller will have responsibility for overseeing newly dedicated personnel responsible for ensuring our compliance with our revenue recognition policies.
|
•
|
Policies and procedures
:
We consulted with external accounting experts to assist with enhancing our policies and procedures related to revenue recognition. We are currently expanding our policies surrounding revenue recognition and stock-based compensation awards and the related procedures with more detailed explanations and examples
|
•
|
Training
: We are expanding our accounting policy and procedures training program to include our sales and corporate support teams as well as our accounting team.
|
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
John T. Hewitt
|
|
64
|
|
Chairman, Chief Executive Officer and President
|
Mark F. Baumgartner
|
|
51
|
|
Chief Financial Officer
|
T. Rufe Vanderpool
|
|
52
|
|
Chief Operating Officer
|
James J. Wheaton
|
|
53
|
|
General Counsel, Vice President of Legal and Governmental Affairs
|
Gordon D'Angelo
|
|
60
|
|
Director
|
John R. Garel
|
|
55
|
|
Director
|
Gary P. Golding
|
|
56
|
|
Director
|
Steven Ibbotson
|
|
51
|
|
Director
|
Ross N. Longfield
|
|
73
|
|
Director
|
Ellen M. McDowell
|
|
53
|
|
Director
|
George T. Robson
|
|
66
|
|
Director
|
Name of Director
|
|
Audit
|
|
Compensation
|
|
Nominating and Corporate Governance
|
|
Gordon D'Angelo
|
|
|
|
X
|
|
X
|
|
John R. Garel
|
|
X
|
|
|
|
X
|
(1)
|
Gary P. Golding
|
|
|
|
X
|
|
X
|
|
John T. Hewitt
|
|
|
|
|
|
|
|
Steven Ibbotson
|
|
|
|
X
|
(1)
|
X
|
|
Ross N. Longfield
|
|
X
|
|
|
|
X
|
|
Ellen M. McDowell
|
|
|
|
|
|
|
|
George T. Robson
|
|
X
|
(1)
|
|
|
X
|
|
Name
|
|
Fees Earned or
Paid in Cash
|
|
Stock
Awards
(1)(2)
|
|
Option
Awards
(3)(4)
|
|
Total
|
|||||||||||
Gordon D'Angelo
|
|
$
|
—
|
|
|
$
|
55,659
|
|
|
$
|
—
|
|
|
$
|
55,659
|
|
|||
John R. Garel
|
|
—
|
|
|
59,340
|
|
|
14,407
|
|
|
73,747
|
|
|||||||
Gary P. Golding
|
|
47,500
|
|
|
20,595
|
|
(5
|
)
|
14,407
|
|
(5
|
)
|
82,502
|
|
|||||
Steven Ibbotson
|
|
50,000
|
|
|
20,595
|
|
|
14,407
|
|
|
85,002
|
|
|||||||
Ross N. Longfield
|
|
50,000
|
|
|
20,595
|
|
|
14,407
|
|
|
85,002
|
|
|||||||
Ellen M. McDowell
|
|
35,000
|
|
|
18,300
|
|
|
—
|
|
|
53,300
|
|
|||||||
George T. Robson
|
|
60,000
|
|
|
20,595
|
|
|
14,407
|
|
|
95,002
|
|
Name
|
|
Revenue
|
|
Net Income
|
|
Total Target Bonus as
Percentage of Base
Salary
|
|||
John T. Hewitt
|
|
50
|
%
|
|
50
|
%
|
|
100
|
%
|
Mark F. Baumgartner
|
|
37.5
|
%
|
|
37.5
|
%
|
|
75
|
%
|
T. Rufe Vanderpool
|
|
30
|
%
|
|
30
|
%
|
|
60
|
%
|
James J. Wheaton
|
|
15
|
%
|
|
15
|
%
|
|
30
|
%
|
|
|
Bonus Eligibility
as a
Percentage of
Base Salary
|
|
Actual Bonus
Amount as a
Percentage
of Base
Salary
|
|
Actual
Bonus
Amount
|
|||||||||||
Name
|
|
Revenue
|
|
Net Income
|
|
Total
|
|
||||||||||
John T. Hewitt
|
|
37.5
|
%
|
|
37.5
|
%
|
|
75
|
%
|
|
40
|
%
|
|
$
|
187,600
|
|
|
Mark F. Baumgartner
|
|
28.1
|
%
|
|
28.1
|
%
|
|
56.2
|
%
|
|
30
|
%
|
|
95,846
|
|
||
T. Rufe Vanderpool
|
|
22.5
|
%
|
|
22.5
|
%
|
|
45
|
%
|
|
24
|
%
|
|
61,680
|
|
||
James J. Wheaton
|
|
11.25
|
%
|
|
11.25
|
%
|
|
22.5
|
%
|
|
12
|
%
|
|
39,698
|
|
•
|
Each revenue and net income target utilized for the purpose of the fiscal 2013 bonuses and for bonuses awarded in prior fiscal years was established by the Compensation Committee based on the Company's then-current revenue recognition practices. For this reason, it would be inappropriate for the Compensation Committee to recalculate fiscal 2013 bonus amounts or bonus amounts awarded in prior fiscal years, because of changes in the results in any of those fiscal years attributable to accounting changes, without also adjusting the revenue and net income targets utilized in each of those fiscal years to reflect the accounting changes.
|
•
|
The fact that the primary adjustments contained in the fiscal 2013 financial statements and prior financial statements relate to timing differences in the recognition of revenue, rather than a fundamental change in franchise and area developer sales themselves. For this reason, the changes in revenue and net income in any particular prior fiscal year do not reflect adversely on the relative success of the Company in achieving its growth goals during those years, but merely a shift in timing of revenue recognition.
|
•
|
The Compensation Committee took into account the expected changes to revenue and net income in establishing revised criteria for fiscal 2014 bonuses, in order to adjust for revenue changes that are solely attributable to the changes in accounting practices.
|
•
|
The revenue targets used in fiscal 2013 and prior years did not include the gross-up of revenues to include the area developer's share of franchisee fees and royalties, so using the pre-existing revenue targets would actually increase the bonus payment in all years in which the maximum revenue target had not been achieved.
|
•
|
Taking into account the changes in accounting practices and their effect on the audited fiscal 2013 financial statements, as compared to the unaudited draft financial statements utilized in May for the purposes of determining fiscal 2013 bonuses, the Compensation Committee determined that because of the reduction in the bonus payout to 40% described above, each of the executive officers would have been eligible for a bonus of at least the amount actually awarded even taking into account the difference in the Company's results reflected in the final audited financial statements.
|
•
|
The restatement of financial results was based on an interpretation of accounting requirements related to revenue recognition and did not involve any misconduct. Therefore, the clawback provision contained in section 304 of the Sarbanes-Oxley Act is not applicable to either of Messrs. Hewitt or Baumgartner as the Chief Executive Officer and Chief Financial Officer of the Company.
|
Name
|
|
Revenue
|
|
Net Income
|
|
Systemwide Revenue
|
|
Total Target Bonus as
Percentage of Base
Salary
|
||||||||
John T. Hewitt
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
40
|
%
|
|
|
100
|
%
|
Mark F. Baumgartner
|
|
|
22.5
|
%
|
|
|
22.5
|
%
|
|
|
30
|
%
|
|
|
75
|
%
|
T. Rufe Vanderpool
|
|
|
18
|
%
|
|
|
18
|
%
|
|
|
24
|
%
|
|
|
60
|
%
|
James J. Wheaton
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
20
|
%
|
|
|
50
|
%
|
•
|
All stock options, stock appreciation rights and other purchase rights must have an exercise price that is not less than the fair market value of the underlying stock on the grant date.
|
•
|
The maximum number of shares of our Class A Common Stock available under the 2011 Plan is 1,826,994 (as of September 26, 2013, including shares that had been previously available under the 1998 Plan). The maximum number of shares of our Class A Common Stock that may be issued under the 2011 Plan may be issued under any type of award, including incentive stock options.
|
•
|
The 2011 Plan does not include any reload or "evergreen" share replenishment features.
|
•
|
Without stockholder approval, we may not reprice awards or repurchase awards that are subject to forfeiture or have not yet vested.
|
•
|
Any material amendments to the 2011 Plan require stockholder approval.
|
•
|
The 2011 Plan is administered by our Compensation Committee.
|
•
|
No dividends or Dividend Equivalents may be granted in connection with options, SARs or other Stock-Based Awards in the nature of purchase rights (as defined below). No dividends or Dividend Equivalents may be paid in connection with a performance-based award unless and until the underlying performance conditions are achieved, and any such dividends or dividend equivalents will accumulate (without interest) and become payable only at the time and to the extent the applicable award becomes payable or nonforfeitable.
|
Name and Principal Position
|
|
Fiscal
Year
Ended
April 30,
|
|
Salary
|
|
Bonus
|
|
Option
Awards(1)
|
|
Non-Equity
Incentive Plan
Compensation
(2)
|
|
All Other
Compensation
(3)
|
|
Total
|
||||||||||||||||||
John T. Hewitt, Chairman, President and Chief Executive Officer
|
|
|
2013
|
|
$
|
447,025
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
187,600
|
|
|
$
|
5,835
|
|
|
$
|
640,460
|
|
||
|
|
2012
|
|
299,619
|
|
|
|
—
|
|
|
|
—
|
|
|
|
316,045
|
|
|
4,127
|
|
|
619,791
|
|
|||||||||
|
|
2011
|
|
287,790
|
|
|
|
—
|
|
|
|
712,500
|
|
|
|
303,849
|
|
|
7,636
|
|
|
1,311,775
|
|
|||||||||
Mark F. Baumgartner, Chief Financial Officer
|
|
|
2013
|
|
308,826
|
|
|
|
—
|
|
|
|
—
|
|
|
|
95,846
|
|
|
4,848
|
|
|
409,520
|
|
||||||||
|
|
2012
|
|
237,738
|
|
|
|
—
|
|
|
|
—
|
|
|
|
135,675
|
|
|
5,184
|
|
|
378,597
|
|
|||||||||
|
|
2011
|
|
204,277
|
|
|
|
—
|
|
|
|
—
|
|
|
|
118,800
|
|
|
8,961
|
|
|
332,038
|
|
|||||||||
T. Rufe Vanderpool, Chief Operating Officer
|
|
|
2013
|
|
250,854
|
|
|
|
—
|
|
|
|
—
|
|
|
|
61,680
|
|
|
7,251
|
|
|
319,785
|
|
||||||||
|
|
2012
|
|
204,185
|
|
|
|
—
|
|
|
|
260,100
|
|
|
|
94,500
|
|
|
5,750
|
|
|
564,535
|
|
|||||||||
|
|
2011
|
|
161,856
|
|
|
|
—
|
|
|
|
99,900
|
|
|
|
61,845
|
|
|
—
|
|
|
323,601
|
|
|||||||||
James J. Wheaton, General Counsel, Vice President of Legal and Governmental Affairs
|
|
|
2013
|
|
323,075
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,698
|
|
|
7,041
|
|
|
369,814
|
|
||||||||
|
|
2012
|
|
269,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,840
|
|
|
7,476
|
|
|
337,516
|
|
|||||||||
|
|
2011
|
|
50,000
|
|
(4
|
)
|
|
90,000
|
|
(5)
|
|
606,000
|
|
|
|
—
|
|
|
—
|
|
|
746,000
|
|
|
|
|
|
|
Estimated Future Payouts under
Non-Equity Incentive Plan Awards
|
All Other Option Awards: Number of Securities Underlying Options
|
|
Exercise
Price of
Option
Awards
($/Share)
|
|
Grant Date Fair Value of Option Awards
|
|||||||||||||||||
Name
|
|
Grant
Date
|
|
||||||||||||||||||||||||
|
Threshold(1)
|
|
Target
|
|
Maximum(2)
|
|
|||||||||||||||||||||
John T. Hewitt
|
|
|
|
$
|
—
|
|
$
|
469,000
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|||
Mark F. Baumgartner
|
|
|
|
—
|
|
239,250
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
T. Rufe Vanderpool
|
|
|
|
—
|
|
154,200
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
James J. Wheaton
|
|
|
|
—
|
|
99,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Grant
Date
|
|
Number of Securities Underlying Unexercised Options (#)
|
|
Option Exercise Price
|
|
Option
Expiration
Date
|
|
|||||||||
Name
|
|
|
Exercisable
|
|
Unexercisable
|
|
|
|
||||||||||
John T. Hewitt
|
|
|
6/16/2008
|
|
|
6,060
|
|
—
|
|
|
$
|
16.50
|
|
|
6/16/2013
|
|
||
|
|
|
6/16/2008
|
|
|
43,940
|
|
—
|
|
|
15.00
|
|
|
6/16/2013
|
|
|||
|
|
|
5/29/2009
|
|
|
6,060
|
|
—
|
|
|
16.50
|
|
|
5/29/2014
|
|
|||
|
|
|
5/29/2009
|
|
|
68,940
|
|
—
|
|
|
15.00
|
|
|
5/29/2014
|
|
|||
|
|
|
6/4/2010
|
|
|
24,240
|
|
—
|
|
|
16.50
|
|
|
|
(1)
|
|||
|
|
|
6/4/2010
|
|
|
275,760
|
|
—
|
|
|
15.00
|
|
|
|
(1)
|
|||
Mark F. Baumgartner
|
|
|
6/16/2008
|
|
|
200,000
|
|
—
|
|
|
15.00
|
|
|
|
(2)
|
|||
T. Rufe Vanderpool
|
|
|
6/16/2008
|
|
|
8,000
|
|
—
|
|
|
15.00
|
|
|
6/16/2013
|
|
|||
|
|
|
5/29/2009
|
|
|
10,000
|
|
—
|
|
|
15.00
|
|
|
5/29/2014
|
|
|||
|
|
|
6/4/2010
|
|
|
40,000
|
|
—
|
|
|
15.00
|
|
|
|
(1)
|
|||
|
|
|
6/3/2011
|
|
|
60,000
|
|
30,000
|
|
15.00
|
|
|
|
(3)
|
||||
James J. Wheaton
|
|
|
2/7/2011
|
|
|
120,000
|
|
80,000
|
|
15.00
|
|
|
|
(4)
|
|
|
Option Awards
|
|||||||
Name
|
|
Number of
Shares
Acquired
on Exercise
(1)
|
|
Value Realized
on Exercise
(2)
|
|||||
John T. Hewitt
|
|
|
50,000
|
|
|
|
$
|
215,909
|
|
Mark F. Baumgartner
|
|
|
40,000
|
|
|
|
411,600
|
|
|
T. Rufe Vanderpool
|
|
|
3,781
|
|
|
|
17,015
|
|
|
James J. Wheaton
|
|
|
—
|
|
|
|
—
|
|
|
|
Executive
Contributions in
Fiscal 2013
(1)
|
|
Aggregate
Earnings in
Fiscal 2013
(2)
|
|
Aggregate
Withdrawals/
Distributions
|
|
Aggregate
Balance at
April 30, 2013
(3)
|
|||||||
Name
|
|
|
|||||||||||||
James J. Wheaton
|
|
$
|
8,821
|
|
|
$
|
490
|
|
|
$
|
—
|
|
|
$
|
9,311
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Severance
Compensation
|
|
Benefits and Perquisites
|
|
|
|||||||||||||||
Executive
|
Severance
|
Bonus
|
|
Unvested
Stock Options (1)
|
Welfare
Benefits
|
Total
|
||||||||||||||
John T. Hewitt
|
|
|
|
|
|
|
|
|
|
|||||||||||
Voluntary termination without Good Reason
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Voluntary termination for Good Reason
|
703,500
|
|
|
187,600
|
|
|
—
|
|
|
18,096
|
|
|
909,196
|
|
||||||
Termination by Company for Cause
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Termination by Company without Cause
|
703,500
|
|
|
187,600
|
|
|
—
|
|
|
18,096
|
|
|
909,196
|
|
||||||
Employment-Related Death or Disability
|
703,500
|
|
|
187,600
|
|
|
—
|
|
|
18,096
|
|
|
909,196
|
|
||||||
Other death
|
—
|
|
|
187,600
|
|
|
—
|
|
|
—
|
|
|
187,600
|
|
||||||
Other disability
|
—
|
|
|
187,600
|
|
|
—
|
|
|
—
|
|
|
187,600
|
|
||||||
Mark F. Baumgartner
|
|
|
|
|
|
|
|
|
|
|||||||||||
Voluntary termination without Good Reason
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Voluntary termination for Good Reason
|
478,500
|
|
|
95,846
|
|
|
—
|
|
|
22,017
|
|
|
596,363
|
|
||||||
Termination by Company for Cause
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Termination by Company without Cause
|
478,500
|
|
|
95,846
|
|
|
—
|
|
|
22,017
|
|
|
596,363
|
|
||||||
Employment-Related Death or Disability
|
478,500
|
|
|
95,846
|
|
|
—
|
|
|
22,017
|
|
|
596,363
|
|
||||||
Other death
|
—
|
|
|
95,846
|
|
|
—
|
|
|
—
|
|
|
95,846
|
|
||||||
Other disability
|
—
|
|
|
95,846
|
|
|
—
|
|
|
—
|
|
|
95,846
|
|
||||||
T. Rufe Vanderpool
|
|
|
|
|
|
|
|
|
|
|||||||||||
Voluntary termination without Good Reason
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Voluntary termination for Good Reason
|
385,500
|
|
|
61,680
|
|
|
67,500
|
|
|
27,923
|
|
|
542,603
|
|
||||||
Termination by Company for Cause
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Termination by Company without Cause
|
385,500
|
|
|
61,680
|
|
|
67,500
|
|
|
27,923
|
|
|
542,603
|
|
||||||
Employment-Related Death or Disability
|
385,500
|
|
|
61,680
|
|
|
—
|
|
|
27,923
|
|
|
475,103
|
|
||||||
Other death
|
—
|
|
|
61,680
|
|
|
—
|
|
|
—
|
|
|
61,680
|
|
||||||
Other disability
|
—
|
|
|
61,680
|
|
|
—
|
|
|
—
|
|
|
61,680
|
|
||||||
James J. Wheaton
|
|
|
|
|
|
|
|
|
|
|||||||||||
Voluntary termination without Good Reason
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Voluntary termination for Good Reason
|
662,000
|
|
|
39,698
|
|
|
180,000
|
|
|
37,231
|
|
|
918,929
|
|
||||||
Termination by Company for Cause
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Termination by Company without Cause
|
662,000
|
|
|
39,698
|
|
|
180,000
|
|
|
37,231
|
|
|
918,929
|
|
||||||
Employment-Related Death or Disability
|
662,000
|
|
|
39,698
|
|
|
—
|
|
|
37,231
|
|
|
738,929
|
|
||||||
Other death
|
—
|
|
|
39,698
|
|
|
—
|
|
|
—
|
|
|
39,698
|
|
||||||
Other disability
|
—
|
|
|
39,698
|
|
|
—
|
|
|
—
|
|
|
39,698
|
|
Plan category
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
|
||||
|
|
(a)
|
|
(b)
|
|
(c)
|
||||
Equity compensation plans approved by security holders
|
|
|
|
|
|
|
||||
1998 Stock Option Plan
|
|
2,270,125
|
|
|
$
|
14.79
|
|
|
—
|
|
2011 Equity and Cash Incentive Plan
|
|
264,558
|
|
|
15.00
|
|
|
2,027,439
|
|
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
2,534,683
|
|
|
$
|
14.81
|
|
|
2,027,439
|
|
•
|
each person, or group of affiliated persons, known by us to beneficially own more than 5% of our Class A common stock or Class B common stock;
|
|
|
Shares of Common
Stock Beneficially
Owned
|
|||||
|
|
Number
|
|
Percent
|
|||
5% Stockholders:
|
|
|
|
|
|
||
Datatax Business Services Limited(1)
|
|
|
4,680,000
|
|
|
33.6
|
%
|
Edison Venture Fund IV, L.P.(2)
|
|
|
1,204,200
|
|
|
8.6
|
%
|
Envest Funds(3)
|
|
|
881,097
|
|
|
6.3
|
%
|
Named Executive Officers and Directors:
|
|
|
|
|
|
||
Mark F. Baumgartner(4)
|
|
|
285,984
|
|
|
2
|
%
|
Gordon D'Angelo(5)
|
|
|
24,000
|
|
|
*
|
|
John R. Garel(3)
|
|
|
889,724
|
|
|
6.4
|
%
|
Gary P. Golding(2)
|
|
|
1,204,200
|
|
|
8.6
|
%
|
John T. Hewitt(6)
|
|
|
2,403,422
|
|
|
16.6
|
%
|
Steven Ibbotson(1)(7)
|
|
|
4,856,908
|
|
|
34.8
|
%
|
Ross N. Longfield(8)
|
|
|
42,530
|
|
|
*
|
|
Ellen M. McDowell(9)
|
|
|
91,387
|
|
|
*
|
|
George T. Robson(10)
|
|
|
144,931
|
|
|
1
|
%
|
T. Rufe Vanderpool(11)
|
|
|
113,781
|
|
|
*
|
|
James J. Wheaton(12)
|
|
|
124,000
|
|
|
*
|
|
All executive officers and directors as a group (11 persons)(13)
|
|
|
10,180,867
|
|
|
67.4
|
%
|
•
|
the amounts involved exceeded or will exceed $120,000; and
|
•
|
any of our directors, executive officers or holders of more than 5% of our common stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest.
|
Fiscal Year
|
|
2013
|
|
2012
|
||||
Audit fees
|
|
$
|
662,135
|
|
|
$
|
587,580
|
|
Tax fees
|
|
48,274
|
|
|
162,654
|
|
||
All other fees
|
|
1,650
|
|
|
1,650
|
|
||
Total fees
|
|
$
|
712,059
|
|
|
$
|
751,884
|
|
(a)
|
Financial Statements.
|
|
Page
|
|
Report of Independent Registered Public Accounting Firm
|
|
F-1
|
Consolidated Balance Sheets as of April 30, 2013 and 2012
|
|
F-2
|
Consolidated Statements of Income for the Years Ended April 30, 2013, 2012 and 2011
|
|
F-3
|
Consolidated Statements of Comprehensive Income for the Years Ended April 30, 2013, 2012 and 2011
|
|
F-4
|
Consolidated Statement of Stockholders' Equity for the Year Ended April 30, 2013
|
|
F-5
|
Consolidated Statement of Stockholders' Equity for the Year Ended April 30, 2012
|
|
F-6
|
Consolidated Statement of Stockholders' Equity for the Year Ended April 30, 2011
|
|
F-7
|
Consolidated Statements of Cash Flows for the Years Ended April 30, 2013, 2012 and 2011
|
|
F-8
|
Notes to Consolidated Financial Statements
|
|
F-11
|
(b)
|
Exhibits.
|
Exhibit
Number
|
|
Exhibit Description
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation of JTH Holding, Inc. (incorporated by reference to Exhibit 3.1 to Form S-1, File No. 333-176655 filed on September 2, 2011).
|
3.2
|
|
|
Amended and Restated Bylaws of JTH Holding, Inc. (incorporated by reference to Exhibit 3.2 to Form S-1, File No. 333-176655 filed on September 2, 2011).
|
4.3
|
|
|
Share Exchange Agreement among DataTax Business Services Limited, Liberty Tax Holding Corporation, Liberty Tax Service Inc. and JTH Tax, Inc. dated as of October 16, 2001 (incorporated by reference to Exhibit 4.3 to Form S-1, File No. 333-176655 filed on September 2, 2011).
|
4.4
|
|
|
Support Agreement between JTH Tax, Inc. and Liberty Tax Holding Corporation dated as of October 16, 2001(incorporated by reference to Exhibit 4.4 to Form S-1, File No. 333-176655 filed on September 2, 2011).
|
4.5
|
|
|
Specimen Common Stock Certificate of JTH Holding, Inc. (Incorporated by reference to Exhibit 4.5 to Amendment No. 2 to Form 10, File No. 000-54660 dated June 1, 2012).
|
10.1
|
|
|
JTH Holding, Inc. 2011 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to Amendment No. 3 to Form S-1, File No. 333-176655 filed on February 3, 2012).
|
10.2
|
|
|
JTH Tax, Inc. Stock Option Plan dated as of May 1, 1998 (incorporated by reference to Exhibit 10.2 to Form S-1, File No. 333-176655 filed on September 2, 2011).
|
10.3
|
|
|
Form of Stock Option Agreement under Stock Option Plan (incorporated by reference to Exhibit 10.3 to Form S-1, File No. 333-176655 filed on September 2, 2011).
|
10.4
|
|
|
Form of Incentive Stock Option Agreement for Employees via JTH Holding, Inc. 2011 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.7 to Amendment No. 5 to Form S-1, File No. 333-176655 filed on October 15, 2012).
|
10.5
|
|
|
Form of Restricted Stock Unit Agreement for Employees via JTH Holding, Inc. 2011 Equity and Cash Incentive Plan (filed herewith).
|
10.6
|
|
|
Employment Agreement for John T. Hewitt dated June 1, 2012 (incorporated by reference to Exhibit 10.1, of Form 8-K, File No. 000-54660 filed on June 14, 2012).
|
10.7
|
|
|
Employment Agreement for Mark F. Baumgartner dated June 1, 2012 (incorporated by reference to Exhibit 10.2 of Form 8-K, File No. 000-54660 filed on June 14, 2012).
|
10.8
|
|
|
Employment Agreement for T. Rufe Vanderpool dated June 1, 2012 (incorporated by reference to Exhibit 10.3 of Form 8-K, File No. 000-54660 filed on June 14, 2012).
|
10.9
|
|
|
Amended and Restated Employment Agreement for James J. Wheaton dated June 1, 2012 (incorporated by reference to Exhibit 10.4 of Form 8-K, File No. 000-54660 filed on June 14, 2012).
|
10.10
|
|
|
Revolving Credit and Term Loan Agreement dated as of April 30, 2012 among JTH Holding, Inc. and SunTrust Bank (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to Form 10, File No. 000-54660 filed on May 18, 2012).
|
10.11
|
|
|
Security Agreement among JTH Holding, Inc. and certain of its subsidiaries and SunTrust Bank dated as of April 30, 2012 (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to Form 10, File No. 000-54660 filed on May 18, 2012).
|
Exhibit
Number
|
|
Exhibit Description
|
|
10.12
|
|
|
Pledge Agreement among JTH Holding, Inc. and certain of its subsidiaries and SunTrust Bank dated as of April 30, 2012 (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to Form 10, File No. 000-54660 filed on May 18, 2012).
|
10.13
|
|
|
Subsidiary Guaranty Agreement among certain subsidiaries of JTH Holding, Inc. and SunTrust Bank dated April 30, 2012 (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to Form 10, File No. 000-54660 filed on May 18, 2012).
|
10.14
|
|
|
Waiver and Amendment to Revolving Credit and Term Loan Agreement dated as of December 19, 2012 among JTH Holding, Inc. and SunTrust Bank (incorporated by reference to Exhibit 10.1 to Form 8-K, File No. 000-1104659 filed on December 26, 2012).
|
10.15
|
|
|
Supplement and Joinder Agreement dated as of December 28, 2012 among JTH Holding, Inc. and SunTrust Bank (incorporated by reference to Exhibit 10.1 to Form 8-K, File No. 000-1104659 filed on December 18, 2012).
|
10.16
|
|
|
Waiver to Revolving Credit and Term Loan Agreement with SunTrust Bank as Administrative Agent (incorporated by reference to Exhibit 10.1 to Form 8-K, File No. 000-1104659 filed on March 12, 2013).
|
10.17
|
|
|
Standstill Agreement between JTH Holding, Inc., SunTrust Bank and certain of JTH Holding, Inc.'s subsidiaries dated as of August 5, 2013 (incorporated by reference to Exhibit 10.1 to Form 8-K, File No. 001-35588 filed on August 6, 2013).
|
10.18
|
|
|
Waiver to Revolving Credit and Term Loan Agreement with SunTrust Bank as Administrative Agent dated as of August 29, 2013 (incorporated by reference to Exhibit 10.1 to Form 8-K, File No. 001-35588 filed on August 29, 2013).
|
10.19
|
|
†
|
Amended and Restated Distributor Agreement between NetSpend Corporation and JTH Tax, Inc. dated as of June 1, 2010 (incorporated by reference to Exhibit 10.17 to Amendment No. 2 to Form S-1, File No. 333-176655 filed on November 7, 2011).
|
10.20
|
|
|
Form of Franchise Agreement for United States Franchisees (filed herewith).
|
10.21
|
|
|
Form of Area Developer Agreement for United States Area Developers (filed herewith).
|
21.1
|
|
|
Subsidiaries of JTH Holding, Inc. (incorporated by reference to Exhibit 21.1 to Form 10, File No. 000-54660 dated April 18, 2012).
|
23.1
|
|
|
Consent of KPMG LLP (filed herewith).
|
31.1
|
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
|
31.2
|
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
|
32.1
|
|
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith).
|
32.2
|
|
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith).
|
|
|
JTH HOLDING, INC..
(Registrant)
|
||
Dated: October 1, 2013
|
|
By:
|
|
/s/ JOHN T. HEWITT
|
|
|
|
John T. Hewitt
Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ MARK F. BAUMGARTNER
|
|
|
|
Mark F. Baumgartner
Chief Financial Officer (Principal Financial Officer) |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ THOMAS S. DANIELS
|
|
|
|
Thomas S. Daniels
Chief Accounting Officer (Principal Accounting Officer) |
Dated: October 1, 2013
|
|
By:
|
|
/s/ JOHN T. HEWITT
|
|
|
|
|
John T. Hewitt
Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
Dated: October 1, 2013
|
|
By:
|
|
/s/ MARK F. BAUMGARTNER
|
|
|
|
Mark F. Baumgartner
Chief Financial Officer, (Principal Financial Officer) |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ THOMAS S. DANIELS
|
|
|
|
Thomas S. Daniels
Chief Accounting Officer (Principal Accounting Officer) |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ GORDON D'ANGELO
|
|
|
|
Gordon D'Angelo
Director |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ JOHN R. GAREL
|
|
|
|
John R. Garel
Director |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ GARY P. GOLDING
|
|
|
|
Gary P. Golding
Director |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ STEVEN IBBOTSON
|
|
|
|
Steven Ibbotson
Director |
Dated: October 1, 2013
|
|
By:
|
|
/s/ ROSS LONGFIELD
|
|
|
|
Ross Longfield
Director |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ ELLEN MCDOWELL
|
|
|
|
Ellen McDowell
Director |
|
Dated: October 1, 2013
|
|
By:
|
|
/s/ GEORGE T. ROBSON
|
|
|
|
George T. Robson
Director |
|
|
2013
|
|
2012
|
||||
|
|
|
|
As Restated
(1)
|
||||
Assets
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
19,013
|
|
|
$
|
19,848
|
|
Receivables (note 2):
|
|
|
|
|
||||
Trade accounts
|
|
41,856
|
|
|
38,321
|
|
||
Notes
|
|
34,156
|
|
|
30,283
|
|
||
Interest, net
|
|
877
|
|
|
674
|
|
||
Allowance for doubtful accounts
|
|
(5,583
|
)
|
|
(4,496
|
)
|
||
Total receivables, net
|
|
71,306
|
|
|
64,782
|
|
||
Available-for-sale securities (note 4)
|
|
3,619
|
|
|
—
|
|
||
Deferred income taxes (note 10)
|
|
4,232
|
|
|
3,901
|
|
||
Other current assets
|
|
4,963
|
|
|
5,614
|
|
||
Total current assets
|
|
103,133
|
|
|
94,145
|
|
||
Property, equipment, and software, net (notes 3 and 8)
|
|
33,037
|
|
|
23,948
|
|
||
Notes receivable, excluding current portion, net of allowance for uncollectible amounts of $1,101 and $794 for 2013 and 2012, respectively (note 2)
|
|
14,352
|
|
|
11,711
|
|
||
Goodwill (note 5)
|
|
5,685
|
|
|
5,400
|
|
||
Other intangible assets, net (note 5)
|
|
10,921
|
|
|
10,314
|
|
||
Deferred income taxes (note 10)
|
|
—
|
|
|
4,093
|
|
||
Other assets, net
|
|
2,402
|
|
|
2,585
|
|
||
Total assets (note 6)
|
|
$
|
169,530
|
|
|
$
|
152,196
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Current installments of long-term debt (note 8)
|
|
$
|
3,400
|
|
|
$
|
2,736
|
|
Accounts payable and accrued expenses (notes 9 and 16)
|
|
11,954
|
|
|
14,170
|
|
||
Due to area developers (note 2)
|
|
18,248
|
|
|
15,956
|
|
||
Income taxes payable (note 10)
|
|
5,897
|
|
|
6,689
|
|
||
Deferred revenue - short-term portion
|
|
7,555
|
|
|
6,920
|
|
||
Total current liabilities
|
|
47,054
|
|
|
46,471
|
|
||
Long-term debt, excluding current installments (note 8)
|
|
24,283
|
|
|
26,249
|
|
||
Revolving credit facility (note 7)
|
|
—
|
|
|
—
|
|
||
Deferred revenue - long-term portion
|
|
10,381
|
|
|
12,411
|
|
||
Liability classified stock-based compensation awards (note 12)
|
|
5,111
|
|
|
—
|
|
||
Deferred income taxes (note 10)
|
|
865
|
|
|
—
|
|
||
Total liabilities
|
|
87,694
|
|
|
85,131
|
|
||
Stockholders' equity (notes 4, 9, 11, 12, and 14):
|
|
|
|
|
||||
Class A preferred stock, $0.01 par value per share, 190,000 shares authorized, 0 and 170,320 shares issued and outstanding at April 30, 2013 and 2012, respectively
|
|
—
|
|
|
2,129
|
|
||
Special voting preferred stock, $0.01 par value per share, 10 shares authorized, issued and outstanding
|
|
—
|
|
|
—
|
|
||
Class A common stock, $0.01 par value per share, 21,200,000 shares authorized, 11,975,128 and 10,343,957 shares issued and outstanding at April 30, 2013 and 2012, respectively
|
|
120
|
|
|
103
|
|
||
Class B common stock, $0.01 par value per share, 1,000,000 shares authorized, 900,000 shares issued and outstanding
|
|
9
|
|
|
9
|
|
||
Exchangeable shares, $0.01 par value, 100,000 shares issued and outstanding
|
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
|
1,920
|
|
|
3,182
|
|
||
Accumulated other comprehensive income, net of taxes
|
|
1,194
|
|
|
676
|
|
||
Retained earnings
|
|
78,592
|
|
|
60,965
|
|
||
Total stockholders' equity
|
|
81,836
|
|
|
67,065
|
|
||
Commitments, contingencies, and subsequent events (notes 6, 7, 16, and 17)
|
|
|
|
|
||||
Total liabilities and stockholders' equity
|
|
$
|
169,530
|
|
|
$
|
152,196
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
(1)
|
|
As Restated
(1)
|
||||||
Revenues:
|
|
|
|
|
|
|
||||||
Franchise fees
|
|
$
|
8,721
|
|
|
$
|
7,996
|
|
|
$
|
8,780
|
|
Area developer fees
|
|
7,699
|
|
|
6,702
|
|
|
6,335
|
|
|||
Royalties and advertising fees
|
|
73,129
|
|
|
70,016
|
|
|
66,182
|
|
|||
Financial products
|
|
30,345
|
|
|
22,903
|
|
|
16,507
|
|
|||
Interest income (note 2)
|
|
13,848
|
|
|
12,406
|
|
|
11,322
|
|
|||
Tax preparation fees, net of discounts
|
|
10,148
|
|
|
7,026
|
|
|
4,789
|
|
|||
Net gain on sale of company-owned offices and other revenue
|
|
3,723
|
|
|
4,176
|
|
|
4,021
|
|
|||
Total revenues
|
|
147,613
|
|
|
131,225
|
|
|
117,936
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Employee compensation and benefits
|
|
37,998
|
|
|
29,802
|
|
|
25,162
|
|
|||
General and administrative expenses
|
|
31,212
|
|
|
26,878
|
|
|
22,472
|
|
|||
Area developer expense
|
|
25,736
|
|
|
23,872
|
|
|
23,094
|
|
|||
Advertising expense
|
|
15,293
|
|
|
15,346
|
|
|
15,078
|
|
|||
Depreciation, amortization, and impairment charges (notes 3 and 5)
|
|
6,538
|
|
|
5,999
|
|
|
5,439
|
|
|||
Costs associated with postponed IPO
|
|
—
|
|
|
1,348
|
|
|
—
|
|
|||
Total operating expenses
|
|
116,777
|
|
|
103,245
|
|
|
91,245
|
|
|||
Income from operations
|
|
30,836
|
|
|
27,980
|
|
|
26,691
|
|
|||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|||
Foreign currency transaction gains
|
|
—
|
|
|
4
|
|
|
75
|
|
|||
Interest expense (notes 7, 8, and 9)
|
|
(2,039
|
)
|
|
(1,854
|
)
|
|
(1,954
|
)
|
|||
Income before income taxes
|
|
28,797
|
|
|
26,130
|
|
|
24,812
|
|
|||
Income tax expense (note 10)
|
|
11,170
|
|
|
9,747
|
|
|
10,142
|
|
|||
Net income
|
|
$
|
17,627
|
|
|
$
|
16,383
|
|
|
$
|
14,670
|
|
Net income per share of Class A and Class B common stock:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
1.26
|
|
|
$
|
1.17
|
|
|
$
|
0.85
|
|
Diluted
|
|
1.25
|
|
|
1.16
|
|
|
0.83
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
As Restated
(1)
|
|
As Restated
(1)
|
||||||
Net income
|
$
|
17,627
|
|
|
$
|
16,383
|
|
|
$
|
14,670
|
|
Interest rate swap agreements, net of taxes (note 9)
|
438
|
|
|
196
|
|
|
(164
|
)
|
|||
Unrealized gain on equity securities available-for-sale, net of taxes (note 4)
|
387
|
|
|
—
|
|
|
—
|
|
|||
Foreign currency translation adjustment
|
(307
|
)
|
|
99
|
|
|
424
|
|
|||
Comprehensive income
|
$
|
18,145
|
|
|
$
|
16,678
|
|
|
$
|
14,930
|
|
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Special voting preferred stock
|
||||||||||||||||||||
|
|
Common stock
|
|
Common stock
|
|
Preferred stock
|
|
|||||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||
Balance at May 1, 2012 (As Restated)
1
|
|
10,344
|
|
|
$
|
103
|
|
|
900
|
|
|
$
|
9
|
|
|
170
|
|
|
$
|
2,129
|
|
|
—
|
|
|
$
|
—
|
|
Exercise of stock options (note 11)
|
|
350
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchase of common stock
|
|
(422
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Conversion of preferred stock to common stock
|
|
1,703
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
(170
|
)
|
|
(2,129
|
)
|
|
—
|
|
|
—
|
|
||||
Balance at April 30, 2013
|
|
11,975
|
|
|
$
|
120
|
|
|
900
|
|
|
$
|
9
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
|
Exchangeable shares
|
|
Additional paid-in capital
|
|
Accumulated other comprehensive
income
|
|
Retained earnings
|
|
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
Total
|
|||||||||||||||||
Balance at May 1, 2012 (As Restated)
1
|
|
100
|
|
|
$
|
1
|
|
|
$
|
3,182
|
|
|
$
|
676
|
|
|
$
|
60,965
|
|
|
$
|
67,065
|
|
Exercise of stock options (note 11)
|
|
—
|
|
|
—
|
|
|
3,797
|
|
|
—
|
|
|
—
|
|
|
3,801
|
|
|||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
(6,452
|
)
|
|
—
|
|
|
—
|
|
|
(6,456
|
)
|
|||||
Conversion of preferred stock to common stock
|
|
—
|
|
|
—
|
|
|
2,112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation expense (note 11)
|
|
—
|
|
|
—
|
|
|
1,704
|
|
|
—
|
|
|
—
|
|
|
1,704
|
|
|||||
Conversion of stock-based compensation awards from equity to liability classification (notes 11 and 12)
|
|
—
|
|
|
—
|
|
|
(2,694
|
)
|
|
—
|
|
|
—
|
|
|
(2,694
|
)
|
|||||
Tax benefit of stock option exercises (note 9)
|
|
—
|
|
|
—
|
|
|
271
|
|
|
—
|
|
|
—
|
|
|
271
|
|
|||||
Net income (As Restated)
1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,627
|
|
|
17,627
|
|
|||||
Interest rate swap agreements, net of taxes (note 8)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
438
|
|
|
—
|
|
|
438
|
|
|||||
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(307
|
)
|
|
—
|
|
|
(307
|
)
|
|||||
Unrealized gain on equity securities available-for-sale, net of taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
387
|
|
|
—
|
|
|
387
|
|
|||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,145
|
|
|||||
Balance at April 30, 2013
|
|
100
|
|
|
$
|
1
|
|
|
$
|
1,920
|
|
|
$
|
1,194
|
|
|
$
|
78,592
|
|
|
$
|
81,836
|
|
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Special voting preferred stock
|
||||||||||||||||||||
|
|
Common stock
|
|
Common stock
|
|
Preferred stock
|
|
|||||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||
Balance at May 1, 2011 (As Restated)
1
|
|
10,519
|
|
|
$
|
105
|
|
|
900
|
|
|
$
|
9
|
|
|
170
|
|
|
$
|
2,129
|
|
|
—
|
|
|
$
|
—
|
|
Exercise of stock options (note 11)
|
|
110
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchase of common stock
|
|
(285
|
)
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance at April 30, 2012 (As Restated)
1
|
|
10,344
|
|
|
$
|
103
|
|
|
900
|
|
|
$
|
9
|
|
|
170
|
|
|
$
|
2,129
|
|
|
—
|
|
|
$
|
—
|
|
|
|
Exchangeable shares
|
|
Additional paid-in capital
|
|
Accumulated other comprehensive income
|
|
Retained earnings
|
|
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
Total
|
||||||||||||||||
Balance at May 1, 2011 (As Restated)
1
|
|
100
|
|
|
$
|
1
|
|
|
$
|
4,811
|
|
|
$
|
381
|
|
|
$
|
44,582
|
|
|
$
|
52,018
|
|
Exercise of stock options (note 11)
|
|
—
|
|
|
—
|
|
|
741
|
|
|
—
|
|
|
—
|
|
|
742
|
|
|||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
(4,257
|
)
|
|
—
|
|
|
—
|
|
|
(4,260
|
)
|
|||||
Stock-based compensation expense (note 11)
|
|
—
|
|
|
—
|
|
|
1,429
|
|
|
—
|
|
|
—
|
|
|
1,429
|
|
|||||
Tax benefit of stock option exercises (note 9)
|
|
—
|
|
|
—
|
|
|
458
|
|
|
—
|
|
|
—
|
|
|
458
|
|
|||||
Net income (As Restated)
1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,383
|
|
|
16,383
|
|
|||||
Interest rate swap agreements, net of taxes (note 8)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
196
|
|
|||||
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
99
|
|
|
—
|
|
|
99
|
|
|||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,678
|
|
|||||
Balance at April 30, 2012 (As Restated)
1
|
|
100
|
|
|
$
|
1
|
|
|
$
|
3,182
|
|
|
$
|
676
|
|
|
$
|
60,965
|
|
|
$
|
67,065
|
|
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Special voting preferred stock
|
||||||||||||||||||||
|
|
Common stock
|
|
Common stock
|
|
Preferred stock
|
|
|||||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||
Balance at May 1, 2010 (As Reported)
|
|
10,730
|
|
|
$
|
107
|
|
|
900
|
|
|
$
|
9
|
|
|
190
|
|
|
$
|
2,375
|
|
|
—
|
|
|
$
|
—
|
|
Restatement adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balance at May 1, 2010 (As Restated)
1
|
|
10,730
|
|
|
107
|
|
|
900
|
|
|
9
|
|
|
190
|
|
|
2,375
|
|
|
—
|
|
|
—
|
|
||||
Exercise of stock options (note 11)
|
|
460
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchase of common stock
|
|
(686
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchase of preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(227
|
)
|
|
—
|
|
|
—
|
|
||||
Conversion of preferred stock to common stock
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
||||
Balance at April 30, 2011 (As Restated)
1
|
|
10,519
|
|
|
$
|
105
|
|
|
900
|
|
|
$
|
9
|
|
|
170
|
|
|
$
|
2,129
|
|
|
—
|
|
|
$
|
—
|
|
|
|
Exchangeable shares
|
|
Additional paid-in capital
|
|
Accumulated other comprehensive income
|
|
Retained earnings
|
|
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
Total
|
||||||||||||||||
Balance at May 1, 2010 (As Reported)
|
|
100
|
|
|
$
|
1
|
|
|
$
|
9,159
|
|
|
$
|
121
|
|
|
$
|
63,424
|
|
|
$
|
75,196
|
|
Restatement adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,017
|
)
|
|
(31,017
|
)
|
|||||
Balance at May 1, 2010 (As Restated)
1
|
|
100
|
|
|
1
|
|
|
9,159
|
|
|
121
|
|
|
32,407
|
|
|
44,179
|
|
|||||
Exercise of stock options (note 11)
|
|
—
|
|
|
—
|
|
|
3,800
|
|
|
—
|
|
|
—
|
|
|
3,805
|
|
|||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
(10,069
|
)
|
|
—
|
|
|
—
|
|
|
(10,076
|
)
|
|||||
Repurchase of preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,495
|
)
|
|
(2,722
|
)
|
|||||
Conversion of preferred stock to common stock
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation expense (note 11)
|
|
—
|
|
|
—
|
|
|
1,494
|
|
|
—
|
|
|
—
|
|
|
1,494
|
|
|||||
Tax benefit of stock option exercises (note 9)
|
|
—
|
|
|
—
|
|
|
408
|
|
|
—
|
|
|
—
|
|
|
408
|
|
|||||
Net income (As Restated)
1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,670
|
|
|
14,670
|
|
|||||
Interest rate swap agreements, net of taxes (note 8)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(164
|
)
|
|
—
|
|
|
(164
|
)
|
|||||
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424
|
|
|
—
|
|
|
424
|
|
|||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,930
|
|
|||||
Balance at April 30, 2011 (As Restated)
1
|
|
100
|
|
|
$
|
1
|
|
|
$
|
4,811
|
|
|
$
|
381
|
|
|
$
|
44,582
|
|
|
$
|
52,018
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
(1)
|
|
As Restated
(1)
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
17,627
|
|
|
$
|
16,383
|
|
|
$
|
14,670
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Provision for doubtful accounts
|
|
7,098
|
|
|
5,788
|
|
|
5,497
|
|
|||
Depreciation and amortization
|
|
5,750
|
|
|
5,511
|
|
|
5,001
|
|
|||
Amortization of deferred financing costs
|
|
301
|
|
|
418
|
|
|
254
|
|
|||
Impairment of goodwill and other intangible assets
|
|
788
|
|
|
488
|
|
|
438
|
|
|||
Stock-based compensation expense related to equity classified awards
|
|
1,496
|
|
|
1,429
|
|
|
1,494
|
|
|||
Stock-based compensation expense related to liability classified awards
|
|
2,625
|
|
|
—
|
|
|
—
|
|
|||
Gain on sale of company-owned offices
|
|
(777
|
)
|
|
(973
|
)
|
|
(1,109
|
)
|
|||
Equity in loss of affiliate
|
|
193
|
|
|
138
|
|
|
—
|
|
|||
Deferred tax expense
|
|
4,119
|
|
|
2,304
|
|
|
1,671
|
|
|||
Changes in assets and liabilities increasing (decreasing) cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Trade receivable
|
|
(27,722
|
)
|
|
(25,230
|
)
|
|
(20,803
|
)
|
|||
Notes and interest receivable
|
|
16,505
|
|
|
16,401
|
|
|
13,466
|
|
|||
Prepaid expenses and other assets
|
|
210
|
|
|
(95
|
)
|
|
149
|
|
|||
Accounts payable and accrued expenses
|
|
(1,837
|
)
|
|
(3,559
|
)
|
|
4,041
|
|
|||
Due to area developers
|
|
5,213
|
|
|
3,989
|
|
|
4,417
|
|
|||
Income taxes
|
|
(508
|
)
|
|
221
|
|
|
61
|
|
|||
Deferred revenue
|
|
(2,640
|
)
|
|
(2,770
|
)
|
|
(4,472
|
)
|
|||
Net cash provided by operating activities
|
|
28,441
|
|
|
20,443
|
|
|
24,775
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
||||||
Issuance of operating loans to franchisees
|
|
(75,605
|
)
|
|
(67,969
|
)
|
|
(56,400
|
)
|
|||
Payments received on operating loans from franchisees
|
|
68,782
|
|
|
60,918
|
|
|
50,921
|
|
|||
Purchases of area developer rights and company-owned offices
|
|
(5,980
|
)
|
|
(4,741
|
)
|
|
(3,091
|
)
|
|||
Proceeds from sale of company-owned offices and area developer rights
|
|
4,072
|
|
|
2,146
|
|
|
1,711
|
|
|||
Purchase of marketable equity securities
|
|
(2,980
|
)
|
|
—
|
|
|
—
|
|
|||
Purchase of equity method investment
|
|
—
|
|
|
(1,009
|
)
|
|
—
|
|
|||
Purchases of property and equipment
|
|
(11,928
|
)
|
|
(10,288
|
)
|
|
(7,051
|
)
|
|||
Net cash used in investing activities
|
|
(23,639
|
)
|
|
(20,943
|
)
|
|
(13,910
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from the exercise of stock options
|
|
3,801
|
|
|
742
|
|
|
3,805
|
|
|||
Repurchase of common stock
|
|
(6,456
|
)
|
|
(4,260
|
)
|
|
(10,076
|
)
|
|||
Repurchase of preferred stock
|
|
—
|
|
|
—
|
|
|
(2,722
|
)
|
|||
Term debt borrowings
|
|
—
|
|
|
25,000
|
|
|
—
|
|
|||
Repayment of long-term debt
|
|
(2,953
|
)
|
|
(2,118
|
)
|
|
(2,284
|
)
|
|||
Borrowings under revolving credit facility
|
|
121,216
|
|
|
124,270
|
|
|
135,484
|
|
|||
Repayments under revolving credit facility
|
|
(121,216
|
)
|
|
(124,270
|
)
|
|
(135,484
|
)
|
|||
Payment for debt issue costs
|
|
(289
|
)
|
|
(1,123
|
)
|
|
(333
|
)
|
|||
Tax benefit of stock option exercises
|
|
271
|
|
|
458
|
|
|
408
|
|
|||
Net cash provided by (used in) financing activities
|
|
(5,626
|
)
|
|
18,699
|
|
|
(11,202
|
)
|
|||
Effect of exchange rate changes on cash, net
|
|
(11
|
)
|
|
(13
|
)
|
|
(113
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
(835
|
)
|
|
18,186
|
|
|
(450
|
)
|
|||
Cash and cash equivalents at beginning of year
|
|
19,848
|
|
|
1,662
|
|
|
2,112
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
19,013
|
|
|
$
|
19,848
|
|
|
$
|
1,662
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
(1)
|
|
As Restated
(1)
|
||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
||||||
Cash paid for interest, net of capitalized interest
|
|
$
|
1,872
|
|
|
$
|
1,640
|
|
|
$
|
1,671
|
|
Cash paid for taxes, net of refunds
|
|
7,328
|
|
|
7,222
|
|
|
8,032
|
|
|||
Supplemental disclosures of noncash investing and financing activities:
|
|
|
|
|
|
|
||||||
During the years ended April 30, 2013, 2012, and 2011, the Company acquired certain assets from franchisees and area developers as follows:
|
|
|
|
|
|
|
||||||
Fair value of assets purchased
|
|
$
|
10,714
|
|
|
$
|
12,050
|
|
|
$
|
6,826
|
|
Receivables applied
|
|
(6,804
|
)
|
|
(10,120
|
)
|
|
(5,233
|
)
|
|||
Accounts payable canceled
|
|
2,922
|
|
|
2,961
|
|
|
2,405
|
|
|||
Notes payable issued
|
|
(1,655
|
)
|
|
(1,540
|
)
|
|
(1,936
|
)
|
|||
Elimination of related deferred revenue
|
|
803
|
|
|
1,390
|
|
|
1,029
|
|
|||
Cash paid to franchisees
|
|
$
|
5,980
|
|
|
$
|
4,741
|
|
|
$
|
3,091
|
|
During the years ended April 30, 2013, 2012, and 2011, the Company sold certain assets to franchisees and area developers as follows:
|
|
|
|
|
|
|
||||||
Book value of assets sold
|
|
$
|
6,517
|
|
|
$
|
5,929
|
|
|
$
|
4,913
|
|
Gain on sale
|
|
(417
|
)
|
|
(191
|
)
|
|
1
|
|
|||
Deferred revenue
|
|
2,846
|
|
|
1,370
|
|
|
1,267
|
|
|||
Applied from acquisitions of franchise territories
|
|
—
|
|
|
—
|
|
|
(120
|
)
|
|||
Notes received
|
|
(4,874
|
)
|
|
(4,962
|
)
|
|
(4,350
|
)
|
|||
Cash received from franchisees
|
|
$
|
4,072
|
|
|
$
|
2,146
|
|
|
$
|
1,711
|
|
Accrued capitalized software costs included in accounts payable
|
|
$
|
733
|
|
|
$
|
345
|
|
|
$
|
1,368
|
|
|
|
Tax Season
|
|||||||
|
|
2013
|
|
2012
|
|
2011
|
|||
|
|
|
|
|
|
|
|||
Franchised U.S. offices, beginning of period
|
|
3,845
|
|
|
3,549
|
|
|
3,233
|
|
U.S. offices opened
|
|
596
|
|
676
|
|
622
|
|||
U.S. offices purchased from the Company
|
|
60
|
|
|
37
|
|
|
47
|
|
U.S. offices acquired by the Company
|
|
(64
|
)
|
|
(76
|
)
|
|
(37
|
)
|
U.S. offices closed
|
|
(409
|
)
|
|
(341
|
)
|
|
(316
|
)
|
Franchised U.S. offices, end of period
|
|
4,028
|
|
|
3,845
|
|
|
3,549
|
|
|
|
|
|
|
|
|
|||
Franchised Canadian offices, end of period
|
|
231
|
|
|
244
|
|
|
241
|
|
|
|
|
|
|
|
|
|||
Total franchised offices
|
|
4,259
|
|
|
4,089
|
|
|
3,790
|
|
|
|
|
|
|
|
|
|||
Company-owned offices, end of period
|
|
|
|
|
|
|
|||
U.S.
|
|
234
|
|
|
75
|
|
|
41
|
|
Canadian
|
|
27
|
|
|
19
|
|
|
14
|
|
Total
|
|
261
|
|
|
94
|
|
|
55
|
|
|
|
|
|
|
|
|
|||
Total offices
|
|
4,520
|
|
|
4,183
|
|
|
3,845
|
|
|
|
2013
|
|
2012
|
||||
|
|
|
|
As Restated
|
||||
|
|
(In thousands)
|
||||||
Balance at beginning of year
|
|
$
|
79,838
|
|
|
$
|
70,564
|
|
Notes received for:
|
|
|
|
|
||||
Sales of franchises and clusters of territories
|
|
6,770
|
|
|
8,131
|
|
||
Sales of certain assets to franchisees and ADs
|
|
15,130
|
|
|
12,554
|
|
||
Franchisee to franchisee note assumptions
|
|
11,259
|
|
|
7,439
|
|
||
Working capital and equipment loans to franchisees
|
|
75,642
|
|
|
67,969
|
|
||
Refinancing of accounts receivable
|
|
18,527
|
|
|
16,787
|
|
||
|
|
127,328
|
|
|
112,880
|
|
||
Repayment of notes
|
|
(95,664
|
)
|
|
(82,258
|
)
|
||
Notes canceled
|
|
(21,981
|
)
|
|
(21,188
|
)
|
||
Foreign currency adjustment
|
|
(181
|
)
|
|
(160
|
)
|
||
Balance at end of year
|
|
89,340
|
|
|
79,838
|
|
||
Unrecognized revenue portion of notes receivable
|
|
(39,731
|
)
|
|
(37,050
|
)
|
||
Notes receivable less unrecognized revenue
|
|
$
|
49,609
|
|
|
$
|
42,788
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
|
|
As Restated
|
||||||
|
|
(In thousands)
|
||||||||||
Beginning balance
|
|
$
|
5,290
|
|
|
$
|
4,827
|
|
|
$
|
3,455
|
|
Additions charged to expense
|
|
7,098
|
|
|
5,788
|
|
|
5,497
|
|
|||
Write-offs
|
|
(5,655
|
)
|
|
(5,595
|
)
|
|
(4,224
|
)
|
|||
Foreign currency adjustment
|
|
(49
|
)
|
|
270
|
|
|
99
|
|
|||
Ending balance
|
|
$
|
6,684
|
|
|
$
|
5,290
|
|
|
$
|
4,827
|
|
|
|
2013
|
|
2012
|
||||
|
|
|
|
As Restated
|
||||
|
|
(In thousands)
|
||||||
Impaired:
|
|
|
|
|
||||
Notes receivable including interest less unrecognized revenue
|
|
$
|
9,399
|
|
|
$
|
6,728
|
|
Accounts receivable
|
|
5,907
|
|
|
4,375
|
|
||
Less allowance for uncollected interest, amounts due ADs, related deferred revenue and amounts due franchisees
|
|
(2,336
|
)
|
|
(1,704
|
)
|
||
Net amount due
|
|
$
|
12,970
|
|
|
$
|
9,399
|
|
Allowance for doubtful accounts for impaired notes and accounts receivable
|
|
$
|
6,120
|
|
|
$
|
4,488
|
|
Nonimpaired:
|
|
|
|
|
||||
Notes receivable including interest less unrecognized revenue
|
|
$
|
42,459
|
|
|
$
|
37,936
|
|
Accounts receivable
|
|
37,650
|
|
|
35,259
|
|
||
Less allowance for uncollected interest, amounts due ADs, related deferred revenue and amounts due franchisees
|
|
(19,992
|
)
|
|
(17,432
|
)
|
||
Net amount due
|
|
$
|
60,117
|
|
|
$
|
55,763
|
|
Allowance for doubtful accounts for nonimpaired notes and accounts receivable
|
|
$
|
564
|
|
|
$
|
802
|
|
Total allowance for doubtful accounts
|
|
$
|
6,684
|
|
|
$
|
5,290
|
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Thereafter
|
|
Total
|
||||||||||||||
Franchise fees and company-owned offices
|
$
|
8,082
|
|
|
$
|
5,066
|
|
|
$
|
2,934
|
|
|
$
|
2,458
|
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
18,602
|
|
Area developer fees
|
3,982
|
|
|
3,670
|
|
|
3,758
|
|
|
3,652
|
|
|
3,086
|
|
|
2,981
|
|
|
21,129
|
|
|||||||
Total
|
$
|
12,064
|
|
|
$
|
8,736
|
|
|
$
|
6,692
|
|
|
$
|
6,110
|
|
|
$
|
3,148
|
|
|
$
|
2,981
|
|
|
$
|
39,731
|
|
|
|
2013
|
|
2012
|
||||
|
|
(In thousands)
|
||||||
Land & land improvements
|
|
$
|
1,328
|
|
|
$
|
997
|
|
Buildings and building improvements
|
|
7,602
|
|
|
6,826
|
|
||
Leasehold improvements
|
|
225
|
|
|
292
|
|
||
Furniture, fixtures, and equipment
|
|
6,388
|
|
|
5,053
|
|
||
Software
|
|
36,500
|
|
|
27,462
|
|
||
|
|
52,043
|
|
|
40,630
|
|
||
Less accumulated depreciation and amortization
|
|
19,006
|
|
|
16,682
|
|
||
Property, equipment, and software, net
|
|
$
|
33,037
|
|
|
$
|
23,948
|
|
|
|
Goodwill
|
|
Accumulated impairment loss
|
|
Net
|
||||||
|
|
(In thousands)
|
||||||||||
Balance at April 30, 2011 (As Restated)
|
|
$
|
3,457
|
|
|
$
|
(345
|
)
|
|
$
|
3,112
|
|
Acquisitions of assets from franchisees
|
|
4,859
|
|
|
—
|
|
|
4,859
|
|
|||
Disposals and foreign currency changes, net
|
|
(2,159
|
)
|
|
76
|
|
|
(2,083
|
)
|
|||
Impairments
|
|
—
|
|
|
(488
|
)
|
|
(488
|
)
|
|||
Balance at April 30, 2012 (As Restated)
|
|
6,157
|
|
|
(757
|
)
|
|
5,400
|
|
|||
Acquisitions of assets from franchisees
|
|
3,449
|
|
|
—
|
|
|
3,449
|
|
|||
Disposals and foreign currency changes, net
|
|
(3,149
|
)
|
|
610
|
|
|
(2,539
|
)
|
|||
Impairments
|
|
—
|
|
|
(625
|
)
|
|
(625
|
)
|
|||
Balance at April 30, 2013
|
|
$
|
6,457
|
|
|
$
|
(772
|
)
|
|
$
|
5,685
|
|
|
|
April 30, 2013
|
||||||||||||
|
|
Weighted average amortization period
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
||||||
|
|
(In thousands)
|
||||||||||||
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
||||||
Acquired customer lists
|
|
7 years
|
|
$
|
1,603
|
|
|
$
|
(171
|
)
|
|
$
|
1,432
|
|
Assets acquired from franchisees:
|
|
|
|
|
|
|
|
|
||||||
Customer lists
|
|
4 years
|
|
1,834
|
|
|
(582
|
)
|
|
1,252
|
|
|||
Reacquired rights
|
|
2 years
|
|
1,640
|
|
|
(905
|
)
|
|
735
|
|
|||
Area developer rights
|
|
10 years
|
|
9,842
|
|
|
(2,340
|
)
|
|
7,502
|
|
|||
Total
|
|
|
|
$
|
14,919
|
|
|
$
|
(3,998
|
)
|
|
$
|
10,921
|
|
|
|
April 30, 2012
|
||||||||||||
|
|
As Restated
|
||||||||||||
|
|
Weighted average amortization period
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
||||||
|
|
(In thousands)
|
||||||||||||
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
||||||
Assets acquired from franchisees:
|
|
|
|
|
|
|
|
|
||||||
Customer lists
|
|
4 years
|
|
$
|
1,795
|
|
|
$
|
(490
|
)
|
|
$
|
1,305
|
|
Reacquired rights
|
|
2 years
|
|
1,575
|
|
|
(705
|
)
|
|
870
|
|
|||
Area developer rights
|
|
10 years
|
|
10,429
|
|
|
(2,290
|
)
|
|
8,139
|
|
|||
Total
|
|
|
|
$
|
13,799
|
|
|
$
|
(3,485
|
)
|
|
$
|
10,314
|
|
|
|
2013
|
|
2012
|
||||
|
|
|
|
As Restated
|
||||
|
|
(In thousands)
|
||||||
Customer lists
|
|
$
|
3,234
|
|
|
$
|
1,913
|
|
Reacquired rights
|
|
1,216
|
|
|
1,674
|
|
||
Goodwill
|
|
3,449
|
|
|
4,859
|
|
||
Total
|
|
$
|
7,899
|
|
|
$
|
8,446
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
|
|
As Restated
|
||||||
|
|
(In thousands)
|
||||||||||
Amortization expense, excluding impairment charges
|
|
$
|
2,681
|
|
|
$
|
1,949
|
|
|
$
|
1,563
|
|
Impairment charges and write-downs
|
|
$
|
788
|
|
|
$
|
488
|
|
|
$
|
438
|
|
|
|
Lease payments
|
|
Sublease receipts
|
||||
|
|
(In thousands)
|
||||||
Year ending April 30:
|
|
|
|
|
||||
2014
|
|
$
|
4,338
|
|
|
$
|
2,393
|
|
2015
|
|
1,915
|
|
|
1,094
|
|
||
2016
|
|
865
|
|
|
490
|
|
||
2017
|
|
633
|
|
|
389
|
|
||
2018
|
|
318
|
|
|
136
|
|
||
Thereafter
|
|
386
|
|
|
110
|
|
||
Total minimum lease payments
|
|
$
|
8,455
|
|
|
$
|
4,612
|
|
|
|
2013
|
|
2012
|
||||
|
|
(In thousands)
|
||||||
Term loan payable in quarterly principal installments commencing July 31, 2012 of 1.25%,1.875%, 2.5%, 2.5% and 3.125% of the original amount borrowed for the years ending April 30, 2013, 2014, 2015, 2016 and 2017, respectively
|
|
$
|
23,750
|
|
|
$
|
25,000
|
|
Mortgage note payable to a bank in monthly installments of $16 including interest at 6.06% through September 2016; at which time a balloon payment of $2,213 is payable; collateralized by land and building
|
|
2,370
|
|
|
2,411
|
|
||
Notes payable for acquired assets from franchisees, interest rates ranging from 0% to 12%; due May 2013 through June 2013
|
|
1,439
|
|
|
1,401
|
|
||
Other debt
|
|
124
|
|
|
173
|
|
||
Total long-term debt
|
|
27,683
|
|
|
28,985
|
|
||
Less current installments
|
|
3,400
|
|
|
2,736
|
|
||
Total long-term debt, less current installments
|
|
$
|
24,283
|
|
|
$
|
26,249
|
|
|
|
||
Year ending April 30:
|
|
||
2014
|
$
|
3,400
|
|
2015
|
2,590
|
|
|
2016
|
2,582
|
|
|
2017
|
19,111
|
|
|
Total long-term debt
|
$
|
27,683
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
|
|
As Restated
|
||||||
|
|
(In thousands)
|
||||||||||
Income taxes from continuing operations
|
|
$
|
11,170
|
|
|
$
|
9,747
|
|
|
$
|
10,142
|
|
Tax benefit of stock option exercises
|
|
(271
|
)
|
|
(458
|
)
|
|
(408
|
)
|
|||
Interest rate swap agreements
|
|
257
|
|
|
152
|
|
|
(104
|
)
|
|||
Unrealized appreciation on available-for-sale securities
|
|
252
|
|
|
—
|
|
|
—
|
|
|||
Foreign currency translation adjustment
|
|
—
|
|
|
(550
|
)
|
|
167
|
|
|||
Total income taxes
|
|
$
|
11,408
|
|
|
$
|
8,891
|
|
|
$
|
9,797
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
|
|
As Restated
|
||||||
|
|
(In thousands)
|
||||||||||
Current:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
5,368
|
|
|
$
|
5,961
|
|
|
$
|
6,324
|
|
State
|
|
1,254
|
|
|
1,160
|
|
|
1,292
|
|
|||
Foreign
|
|
429
|
|
|
322
|
|
|
855
|
|
|||
Current tax expense
|
|
7,051
|
|
|
7,443
|
|
|
8,471
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
Federal
|
|
3,365
|
|
|
1,963
|
|
|
1,331
|
|
|||
State
|
|
787
|
|
|
382
|
|
|
272
|
|
|||
Foreign
|
|
(33
|
)
|
|
(41
|
)
|
|
68
|
|
|||
Deferred tax expense
|
|
4,119
|
|
|
2,304
|
|
|
1,671
|
|
|||
Total income tax expense
|
|
$
|
11,170
|
|
|
$
|
9,747
|
|
|
$
|
10,142
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
|
|
As Restated
|
||||||
|
|
(In thousands)
|
||||||||||
U.S. operations
|
|
$
|
27,434
|
|
|
$
|
24,859
|
|
|
$
|
22,148
|
|
Foreign operations
|
|
1,363
|
|
|
1,271
|
|
|
2,664
|
|
|||
|
|
$
|
28,797
|
|
|
$
|
26,130
|
|
|
$
|
24,812
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
As Restated
|
|
As Restated
|
||||||
|
|
(In thousands)
|
||||||||||
Computed "expected" income tax expense
|
|
$
|
10,079
|
|
|
$
|
9,145
|
|
|
$
|
8,684
|
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
||||||
State income taxes, net of federal benefit
|
|
1,455
|
|
|
1,033
|
|
|
1,048
|
|
|||
Nondeductible items, net
|
|
421
|
|
|
297
|
|
|
356
|
|
|||
Tax credits
|
|
(545
|
)
|
|
(445
|
)
|
|
—
|
|
|||
Other
|
|
(240
|
)
|
|
(283
|
)
|
|
54
|
|
|||
Total income tax expense
|
|
$
|
11,170
|
|
|
$
|
9,747
|
|
|
$
|
10,142
|
|
|
|
2013
|
|
2012
|
||||
|
|
|
|
As Restated
|
||||
|
|
(In thousands)
|
||||||
Deferred tax assets:
|
|
|
|
|
||||
Unexercised nonqualified stock options
|
|
$
|
2,425
|
|
|
$
|
1,192
|
|
Allowance for doubtful accounts
|
|
3,501
|
|
|
2,593
|
|
||
Interest rate swap agreements
|
|
—
|
|
|
257
|
|
||
Deferred revenue
|
|
4,948
|
|
|
7,398
|
|
||
Other
|
|
441
|
|
|
208
|
|
||
Total deferred tax assets
|
|
11,315
|
|
|
11,648
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Property, equipment, software, and other intangible assets
|
|
7,258
|
|
|
3,480
|
|
||
Prepaid expenses
|
|
438
|
|
|
174
|
|
||
Unrealized appreciation on available-for-sale securities
|
|
252
|
|
|
—
|
|
||
Total deferred tax liabilities
|
|
7,948
|
|
|
3,654
|
|
||
Net deferred tax asset
|
|
$
|
3,367
|
|
|
$
|
7,994
|
|
(a)
|
Preferred Stock and Exchangeable Shares
|
(b)
|
Common Stock
|
(c)
|
Accumulated Other Comprehensive Income
|
|
|
2013
|
|
2012
|
||||
|
|
(In thousands)
|
||||||
Foreign currency adjustment
|
|
$
|
807
|
|
|
$
|
1,113
|
|
Unrealized gain on equity securities available for sale, net of taxes
|
|
387
|
|
|
—
|
|
||
Interest rate swap agreements, net of tax
|
|
—
|
|
|
(437
|
)
|
||
|
|
$
|
1,194
|
|
|
$
|
676
|
|
(d)
|
Earnings per Share
|
|
|
2013
|
||||||
|
|
Class A common stock
|
|
Class B common stock
|
||||
|
|
(In thousands, except for share and per share amounts)
|
||||||
Basic net income per share:
|
|
|
|
|
||||
Numerator:
|
|
|
|
|
||||
Allocation of undistributed earnings
|
|
$
|
16,386
|
|
|
$
|
1,241
|
|
Amounts allocated to participating securities:
|
|
|
|
|
||||
Class A preferred stock
|
|
(247
|
)
|
|
(18
|
)
|
||
Exchangeable shares
|
|
(1,171
|
)
|
|
(89
|
)
|
||
Net income attributable to common stockholders
|
|
$
|
14,968
|
|
|
$
|
1,134
|
|
Denominator:
|
|
|
|
|
||||
Weighted-average common shares outstanding
|
|
11,883,214
|
|
|
900,000
|
|
||
Basic net income per share
|
|
$
|
1.26
|
|
|
$
|
1.26
|
|
Diluted net income per share:
|
|
|
|
|
||||
Numerator:
|
|
|
|
|
||||
Allocation of undistributed earnings for basic computation
|
|
$
|
14,968
|
|
|
$
|
1,134
|
|
Reallocation of undistributed earnings as a result of assumed conversion of:
|
|
|
|
|
||||
Class B common stock to Class A common stock
|
|
1,134
|
|
|
—
|
|
||
Class A preferred stock to Class A common stock
|
|
265
|
|
|
—
|
|
||
Exchangeable shares to Class A common stock
|
|
1,260
|
|
|
—
|
|
||
|
|
$
|
17,627
|
|
|
$
|
1,134
|
|
Denominator:
|
|
|
|
|
||||
Number of shares used in basic computation
|
|
11,883,214
|
|
|
900,000
|
|
||
Weighted-average effect of dilutive securities and the conversion or exercise of:
|
|
|
|
|
||||
Class B common stock to Class A common stock
|
|
900,000
|
|
|
—
|
|
||
Class A preferred stock to Class A common stock
|
|
210,560
|
|
|
—
|
|
||
Exchangeable shares to Class A common stock
|
|
1,000,000
|
|
|
—
|
|
||
Employee stock options
|
|
78,584
|
|
|
5,054
|
|
||
|
|
14,072,358
|
|
|
905,054
|
|
||
Diluted net income per share
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
|
|
2012
|
||||||
|
|
As Restated
|
||||||
|
|
Class A common stock
|
|
Class B common stock
|
||||
|
|
(In thousands, except for share and per share amounts)
|
||||||
Basic net income per share:
|
|
|
|
|
||||
Numerator:
|
|
|
|
|
||||
Allocation of undistributed earnings
|
|
$
|
15,076
|
|
|
$
|
1,307
|
|
Amounts allocated to participating securities:
|
|
|
|
|
||||
Class A preferred stock
|
|
(1,836
|
)
|
|
(159
|
)
|
||
Exchangeable shares
|
|
(1,078
|
)
|
|
(94
|
)
|
||
Net income attributable to common stockholders
|
|
$
|
12,162
|
|
|
$
|
1,054
|
|
Denominator:
|
|
|
|
|
||||
Weighted-average common shares outstanding
|
|
10,383,780
|
|
|
900,000
|
|
||
Basic net income per share
|
|
$
|
1.17
|
|
|
$
|
1.17
|
|
Diluted net income per share:
|
|
|
|
|
||||
Numerator:
|
|
|
|
|
||||
Allocation of undistributed earnings for basic computation
|
|
$
|
12,162
|
|
|
$
|
1,054
|
|
Reallocation of undistributed earnings as a result of assumed conversion of:
|
|
|
|
|
||||
Class B common stock to Class A common stock
|
|
1,054
|
|
|
—
|
|
||
Class A preferred stock to Class A common stock
|
|
1,995
|
|
|
—
|
|
||
Exchangeable shares to Class A common stock
|
|
1,172
|
|
|
—
|
|
||
|
|
$
|
16,383
|
|
|
$
|
1,054
|
|
Denominator:
|
|
|
|
|
||||
Number of shares used in basic computation
|
|
10,383,780
|
|
|
900,000
|
|
||
Weighted-average effect of dilutive securities add the conversion or exercise of:
|
|
|
|
|
||||
Class B common stock to Class A common stock
|
|
900,000
|
|
|
—
|
|
||
Class A preferred stock to Class A common stock
|
|
1,703,200
|
|
|
—
|
|
||
Exchangeable shares to Class A common stock
|
|
1,000,000
|
|
|
—
|
|
||
Employee stock options
|
|
180,956
|
|
|
11,644
|
|
||
|
|
14,167,936
|
|
|
911,644
|
|
||
Diluted net income per share
|
|
$
|
1.16
|
|
|
$
|
1.16
|
|
|
|
2011
|
||||||
|
|
As Restated
|
||||||
|
|
Class A common stock
|
|
Class B common stock
|
||||
|
|
(In thousands, except for share and per share amounts)
|
||||||
Basic net income per share:
|
|
|
|
|
||||
Numerator:
|
|
|
|
|
||||
Allocation of undistributed earnings, based on net income
|
|
$
|
13,521
|
|
|
$
|
1,149
|
|
Preferred stock redeemed, treated as dividend (Note 19)
|
|
(2,300
|
)
|
|
(195
|
)
|
||
Allocation of undistributed earnings, as adjusted
|
|
11,221
|
|
|
954
|
|
||
Amounts allocated to participating securities:
|
|
|
|
|
||||
Class A preferred stock
|
|
(1,448
|
)
|
|
(123
|
)
|
||
Exchangeable shares
|
|
(783
|
)
|
|
(67
|
)
|
||
Net income attributable to common stockholders
|
|
$
|
8,990
|
|
|
$
|
764
|
|
Denominator:
|
|
|
|
|
||||
Weighted-average common shares outstanding
|
|
10,588,954
|
|
|
900,000
|
|
||
Basic net income per share
|
|
$
|
0.85
|
|
|
$
|
0.85
|
|
Diluted net income per share:
|
|
|
|
|
||||
Numerator:
|
|
|
|
|
||||
Allocation of undistributed earnings for basic computation
|
|
$
|
8,990
|
|
|
$
|
764
|
|
Reallocation of undistributed earnings as a result conversion of:
|
|
|
|
|
||||
Class B common stock to Class A common stock
|
|
764
|
|
|
—
|
|
||
Class A preferred stock to Class A common stock
|
|
1,572
|
|
|
—
|
|
||
Exchangeable shares to Class A common stock
|
|
849
|
|
|
—
|
|
||
|
|
$
|
12,175
|
|
|
$
|
764
|
|
Denominator:
|
|
|
|
|
||||
Number of shares used in basic computation
|
|
10,588,954
|
|
|
900,000
|
|
||
Weighted-average effect of dilutive securities add the conversion or exercise of:
|
|
|
|
|
||||
Class B common stock to Class A common stock
|
|
900,000
|
|
|
—
|
|
||
Class A preferred stock to Class A common stock
|
|
1,850,800
|
|
|
—
|
|
||
Exchangeable shares to Class A common stock
|
|
1,000,000
|
|
|
—
|
|
||
Employee stock options
|
|
322,494
|
|
|
20,241
|
|
||
|
|
14,662,248
|
|
|
920,241
|
|
||
Diluted net income per share
|
|
$
|
0.83
|
|
|
$
|
0.83
|
|
|
|
2013
|
|
2012
|
|
2011
|
Weighted average fair value of options granted
|
|
$1.80
|
|
$2.30
|
|
$2.54
|
Dividend yield
|
|
—%
|
|
—%
|
|
—%
|
Expected volatility
|
|
13.0% -14.9%
|
|
14.9% - 15.0%
|
|
14.6% - 15.7%
|
Expected terms
|
|
4-6 years
|
|
4 - 6 years
|
|
4 - 6 years
|
Risk-free interest rates
|
|
0.6%-1.0%
|
|
0.8% - 1.9%
|
|
1.2% - 2.3%
|
|
|
Number of options
|
|
Weighted average exercise price
|
|||
Outstanding at April 30, 2010
|
|
1,970,720
|
|
|
$
|
11.61
|
|
Granted
|
|
1,048,800
|
|
|
15.03
|
|
|
Exercised
|
|
(460,162
|
)
|
|
8.27
|
|
|
Canceled
|
|
(98,020
|
)
|
|
10.08
|
|
|
Outstanding at April 30, 2011
|
|
2,461,338
|
|
|
13.77
|
|
|
Granted
|
|
433,670
|
|
|
15.00
|
|
|
Exercised
|
|
(110,125
|
)
|
|
6.74
|
|
|
Canceled
|
|
(55,870
|
)
|
|
14.88
|
|
|
Outstanding at April 30, 2012
|
|
2,729,013
|
|
|
14.21
|
|
|
Granted
|
|
332,035
|
|
|
15.00
|
|
|
Exercised
|
|
(349,500
|
)
|
|
10.88
|
|
|
Canceled
|
|
(176,865
|
)
|
|
13.65
|
|
|
Outstanding at April 30, 2013
|
|
2,534,683
|
|
|
14.81
|
|
|
|
Nonvested options
|
|
Weighted average exercise price
|
|||
Outstanding at April 30, 2010
|
|
177,500
|
|
|
$
|
14.65
|
|
Granted
|
|
702,500
|
|
|
15.00
|
|
|
Vested
|
|
(275,000
|
)
|
|
14.78
|
|
|
Canceled
|
|
—
|
|
|
—
|
|
|
Outstanding at April 30, 2011
|
|
605,000
|
|
|
15.00
|
|
|
Granted
|
|
433,670
|
|
|
15.00
|
|
|
Vested
|
|
(577,450
|
)
|
|
15.00
|
|
|
Canceled
|
|
(8,720
|
)
|
|
15.00
|
|
|
Outstanding at April 30, 2012
|
|
452,500
|
|
|
15.00
|
|
|
Granted
|
|
332,035
|
|
|
15.00
|
|
|
Vested
|
|
(596,935
|
)
|
|
15.00
|
|
|
Canceled
|
|
(55,100
|
)
|
|
15.00
|
|
|
Outstanding at April 30, 2013
|
|
132,500
|
|
|
15.00
|
|
Number of shares outstanding at April 30, 2013
|
|
Range of exercise prices
|
|
Weighted average exercise price
|
|
Weighted average remaining contractual life (years)
|
|
Number of shares exercisable at April 30, 2013
|
|
Weighted average exercise price
|
||||||||
117,500
|
|
|
$
|
10.50
|
|
|
$
|
10.50
|
|
|
1.9
|
|
117,500
|
|
|
$
|
10.50
|
|
2,152,625
|
|
|
14.00 - 16.50
|
|
|
15.02
|
|
|
2.9
|
|
2,020,125
|
|
|
15.02
|
|
|||
264,558
|
|
|
15.00
|
|
|
15.00
|
|
|
3.8
|
|
264,558
|
|
|
15.00
|
|
|||
|
|
|
|
|
|
|
|
|
|
2,402,183
|
|
|
|
|
|
|
April 30, 2013
|
Weighted average fair value of options granted
|
|
$5.12
|
Dividend yield
|
|
—%
|
Expected volatility
|
|
36.2%
|
Expected terms
|
|
2.90
|
Risk-free interest rates
|
|
0.36%
|
•
|
Level 1—Quoted prices for identical assets and liabilities in active markets.
|
•
|
Level 2—Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.
|
•
|
Level 3—Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
|
|
|
|
|
April 30, 2013 Fair value measurements using
|
||||||||||||
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
(In thousands)
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Recurring:
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
|
$
|
16,798
|
|
|
$
|
16,798
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities, available for sale
|
|
3,619
|
|
|
3,619
|
|
|
—
|
|
|
—
|
|
||||
|
|
$
|
20,417
|
|
|
$
|
20,417
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
||||||||
Impaired accounts and notes receivable
|
|
$
|
7,973
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,973
|
|
Impaired goodwill
|
|
1,254
|
|
|
—
|
|
|
—
|
|
|
1,254
|
|
||||
Impaired reacquired rights
|
|
286
|
|
|
—
|
|
|
—
|
|
|
286
|
|
||||
Impaired customer lists
|
|
453
|
|
|
—
|
|
|
—
|
|
|
453
|
|
||||
|
|
$
|
9,966
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,966
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Recurring:
|
|
|
|
|
|
|
|
|
||||||||
Liability classified stock-based compensation awards
|
|
$
|
5,111
|
|
|
$
|
—
|
|
|
$
|
5,111
|
|
|
$
|
—
|
|
|
|
|
|
April 30, 2012 As Restated Fair value measurements using
|
||||||||||||
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
(In thousands)
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Recurring:
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
|
$
|
18,848
|
|
|
$
|
18,848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Nonrecurring:
|
|
|
|
|
|
|
|
|
||||||||
Impaired accounts and notes receivable
|
|
$
|
5,746
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,746
|
|
Impaired goodwill
|
|
1,477
|
|
|
—
|
|
|
—
|
|
|
1,477
|
|
||||
Impaired reacquired rights
|
|
412
|
|
|
—
|
|
|
—
|
|
|
412
|
|
||||
Impaired customer lists
|
|
564
|
|
|
—
|
|
|
—
|
|
|
564
|
|
||||
|
|
$
|
8,199
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,199
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Recurring:
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swap agreements
|
|
$
|
694
|
|
|
$
|
—
|
|
|
$
|
694
|
|
|
$
|
—
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Common stock:
|
|
|
|
|
|
|
||||||
Shares repurchased
|
|
191,000
|
|
|
52,000
|
|
|
98,000
|
|
|||
Amount
|
|
$
|
3,010,000
|
|
|
$
|
787,000
|
|
|
$
|
1,471,000
|
|
Preferred stock:
|
|
|
|
|
|
|
||||||
Shares repurchased
|
|
—
|
|
|
—
|
|
|
18,000
|
|
|||
Amount
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,722,000
|
|
|
|
2013
|
|
2012
|
||||
Note receivable
|
|
$
|
22,000
|
|
|
$
|
21,000
|
|
Repayments received during the year
|
|
2,000
|
|
|
971,000
|
|
|
|
Three Months Ended
|
||||||||||||||
|
|
July 31, 2012
|
|
October 31, 2012
|
|
January 31, 2013
|
|
April 30, 2013
|
||||||||
|
|
As Restated
|
|
As Restated
|
|
As Restated
|
|
|
||||||||
|
|
(In thousands, except per share amounts)
|
||||||||||||||
Revenue
|
|
$
|
7,244
|
|
|
$
|
9,482
|
|
|
$
|
37,921
|
|
|
$
|
92,966
|
|
Net income (loss)
|
|
$
|
(6,363
|
)
|
|
$
|
(6,111
|
)
|
|
$
|
1,673
|
|
|
$
|
28,428
|
|
Net income (loss) per share of Class A and Class B common stock:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
(0.52
|
)
|
|
$
|
(0.47
|
)
|
|
$
|
0.12
|
|
|
$
|
2.04
|
|
Diluted
|
|
$
|
(0.52
|
)
|
|
$
|
(0.47
|
)
|
|
$
|
0.12
|
|
|
$
|
2.01
|
|
|
|
Three Months Ended
|
||||||||||||||
|
|
July 31, 2011
|
|
October 31, 2011
|
|
January 31, 2012
|
|
April 30, 2012
|
||||||||
|
|
As Restated
|
|
As Restated
|
|
As Restated
|
|
As Restated
|
||||||||
|
|
(In thousands, except per share amounts)
|
||||||||||||||
Revenue
|
|
$
|
6,332
|
|
|
$
|
8,248
|
|
|
$
|
44,226
|
|
|
$
|
72,419
|
|
Net income (loss)
|
|
$
|
(4,551
|
)
|
|
$
|
(5,366
|
)
|
|
$
|
5,266
|
|
|
$
|
21,034
|
|
Net income (loss) per share of Class A and Class B common stock:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
(0.40
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.38
|
|
|
$
|
1.51
|
|
Diluted
|
|
$
|
(0.40
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
0.37
|
|
|
$
|
1.49
|
|
|
|
Three Months Ended January 31, 2013
|
||||||||||
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||
|
|
(In thousands, except per share amounts)
|
||||||||||
Revenue
|
|
$
|
30,538
|
|
|
$
|
7,383
|
|
|
$
|
37,921
|
|
Net income
|
|
$
|
1,112
|
|
|
$
|
561
|
|
|
$
|
1,673
|
|
Net income per share of Class A and Class B common stock:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.08
|
|
|
$
|
0.04
|
|
|
$
|
0.12
|
|
Diluted
|
|
$
|
0.08
|
|
|
$
|
0.04
|
|
|
$
|
0.12
|
|
|
|
Three Months Ended October 31, 2012
|
|
Three Months Ended July 31, 2012
|
||||||||||||||||||||
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||||||||
|
|
(In thousands, except per share amounts)
|
||||||||||||||||||||||
Revenue
|
|
$
|
7,289
|
|
|
$
|
2,193
|
|
|
$
|
9,482
|
|
|
$
|
6,786
|
|
|
$
|
458
|
|
|
$
|
7,244
|
|
Net income (loss)
|
|
$
|
(6,698
|
)
|
|
$
|
587
|
|
|
$
|
(6,111
|
)
|
|
$
|
(6,152
|
)
|
|
$
|
(211
|
)
|
|
$
|
(6,363
|
)
|
Net income (loss) per share of Class A and Class B common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
$
|
(0.51
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.47
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.52
|
)
|
Diluted
|
|
$
|
(0.51
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.47
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.52
|
)
|
|
|
Three Months Ended April 30, 2012
|
|
Three Months Ended January 31, 2012
|
||||||||||||||||||||
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||||||||
|
|
(In thousands, except per share amounts)
|
||||||||||||||||||||||
Revenue
|
|
$
|
59,789
|
|
|
$
|
12,630
|
|
|
$
|
72,419
|
|
|
$
|
35,650
|
|
|
$
|
8,576
|
|
|
$
|
44,226
|
|
Net income (loss)
|
|
$
|
22,039
|
|
|
$
|
(1,005
|
)
|
|
$
|
21,034
|
|
|
$
|
4,677
|
|
|
$
|
589
|
|
|
$
|
5,266
|
|
Net income (loss) per share of Class A and Class B common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
$
|
1.58
|
|
|
$
|
(0.07
|
)
|
|
$
|
1.51
|
|
|
$
|
0.33
|
|
|
$
|
0.05
|
|
|
$
|
0.38
|
|
Diluted
|
|
$
|
1.56
|
|
|
$
|
(0.07
|
)
|
|
$
|
1.49
|
|
|
$
|
0.33
|
|
|
$
|
0.04
|
|
|
$
|
0.37
|
|
|
|
Three Months Ended October 31, 2011
|
|
Three Months Ended July 31, 2011
|
||||||||||||||||||||
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||||||||
|
|
(In thousands, except per share amounts)
|
||||||||||||||||||||||
Revenue
|
|
$
|
8,793
|
|
|
$
|
(545
|
)
|
|
$
|
8,248
|
|
|
$
|
4,868
|
|
|
$
|
1,464
|
|
|
$
|
6,332
|
|
Net income (loss)
|
|
$
|
(4,326
|
)
|
|
$
|
(1,040
|
)
|
|
$
|
(5,366
|
)
|
|
$
|
(4,979
|
)
|
|
$
|
428
|
|
|
$
|
(4,551
|
)
|
Net income (loss) per share of Class A and Class B common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
$
|
(0.38
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.40
|
)
|
Diluted
|
|
$
|
(0.38
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.40
|
)
|
•
|
Adjustments to revenue to include the change to gross presentation for the AD portion of franchise fees and royalties, the net impact of charging our franchise fee recognition policy to receipt of funds and the net impact of recognizing area developer fees over the life of the agreement instead of upfront.
|
•
|
Adjustments to net income include the revenue adjustments mentioned above, expense adjustments for the gross presentation of amounts due ADs, changes to the provision for bad debt due to the elimination of the provision for refunds, adjustments to amortization due to the purchase price allocation for company-owned offices and adjustments to the provision for income taxes due to the restatement adjustments.
|
•
|
We determined that our area developer agreements do not constitute a franchise relationship for accounting purposes. Therefore, instead of recording revenue at the inception of the area developer relationship under franchise accounting, we now record these fees over the life of the area developer contract, which is typically
10
years. Additionally, our financial statements now show the portion of franchise fees, interest and royalties that the AD is entitled to receive from us in our revenue captions, with an equal amount of expense shown in a new operating expense caption, area developer expense. These amounts were previously presented on a net basis.
|
•
|
We changed our revenue recognition policy for franchise fees to record revenue as amounts are received from the franchisee. Previously, we generally recorded such revenues at the time of sale, net of expected note cancellations related to the amount financed. Therefore, under the new revenue recognition policy any portion of franchise fees that is financed is only reflected as revenue as the note payments are made.
|
•
|
We also revised our methodology for the allocation of the purchase price associated with the acquisitions of businesses from franchisees. Historically, we allocated the entire purchase price to an identifiable intangible asset, customer list. The new methodology allocates the purchase price to all identifiable intangible assets, which consist of reacquired rights and customer list. Any unallocated purchase price is recorded as goodwill.
|
|
April 30, 2012
|
||||||||||
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||
|
(in thousands)
|
||||||||||
Receivables:
|
|
|
|
|
|
||||||
Notes
|
$
|
41,889
|
|
|
$
|
(11,606
|
)
|
|
$
|
30,283
|
|
Interest
|
1,610
|
|
|
(936
|
)
|
|
674
|
|
|||
Allowance for doubtful accounts
|
(5,044
|
)
|
|
548
|
|
|
(4,496
|
)
|
|||
Total receivables, net
|
76,776
|
|
|
(11,994
|
)
|
|
64,782
|
|
|||
Deferred income taxes
|
41
|
|
|
3,860
|
|
|
3,901
|
|
|||
Total current assets
|
102,279
|
|
|
(8,134
|
)
|
|
94,145
|
|
|||
Notes receivable, excluding current portion
|
37,949
|
|
|
(25,444
|
)
|
|
12,505
|
|
|||
Allowance for uncollectible amounts for long-term notes receivable
|
(2,086
|
)
|
|
1,292
|
|
|
(794
|
)
|
|||
Goodwill
|
1,913
|
|
|
3,487
|
|
|
5,400
|
|
|||
Other intangibles, net
|
22,158
|
|
|
(11,844
|
)
|
|
10,314
|
|
|||
Deferred income taxes
|
—
|
|
|
4,093
|
|
|
4,093
|
|
|||
Other assets, net
|
2,580
|
|
|
5
|
|
|
2,585
|
|
|||
Total assets
|
188,741
|
|
|
(36,545
|
)
|
|
152,196
|
|
|||
Due to area developers
|
21,893
|
|
|
(5,937
|
)
|
|
15,956
|
|
|||
Deferred income taxes
|
1,222
|
|
|
(1,222
|
)
|
|
—
|
|
|||
Deferred revenue - short-term portion
|
3,270
|
|
|
3,650
|
|
|
6,920
|
|
|||
Total current liabilities
|
49,980
|
|
|
(3,509
|
)
|
|
46,471
|
|
|||
Deferred revenue - long-term portion
|
—
|
|
|
12,411
|
|
|
12,411
|
|
|||
Deferred income taxes
|
12,310
|
|
|
(12,310
|
)
|
|
—
|
|
|||
Total liabilities
|
88,539
|
|
|
(3,408
|
)
|
|
85,131
|
|
|||
Retained earnings
|
94,102
|
|
|
(33,137
|
)
|
|
60,965
|
|
|||
Total stockholders' equity
|
100,202
|
|
|
(33,137
|
)
|
|
67,065
|
|
|||
Total liabilities and stockholders' equity
|
188,741
|
|
|
(36,545
|
)
|
|
152,196
|
|
•
|
Adjustments to notes receivable to present balance net of the unrecognized revenue portion of notes
|
•
|
Adjustments to interest receivable to convert from accrual basis to cash basis for notes related to unrecognized revenue
|
•
|
Adjustments to allowance for doubtful accounts includes the impact of the change in our franchise fee revenue recognition policy
|
•
|
Adjustments to deferred income taxes, long-term portion shown in other assets, net and income taxes payable reflect the impact of the restatement adjustments
|
•
|
Adjustments to goodwill and a portion of the other intangibles, net relate to the revised purchase price allocation methodology for businesses acquired from franchisees
|
•
|
Adjustments to other intangibles includes the net impact of the elimination of the deferred revenue balance of repurchased area developer areas
|
•
|
Adjustments to due to area developer to conform to net presentation for notes related to unrecognized revenue
|
•
|
Adjustments to deferred revenue to reflect the recognition of area developer fees over the life of their agreement
|
•
|
Adjustments to stockholders' equity reflects the cumulative impact of all of the restatement adjustments
|
|
April 30, 2012
|
||||||||||
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||
Franchise fees
|
$
|
15,073
|
|
|
$
|
(7,077
|
)
|
|
$
|
7,996
|
|
Provision for refunds
|
928
|
|
|
(928
|
)
|
|
—
|
|
|||
Area developer fees
|
—
|
|
|
6,702
|
|
|
6,702
|
|
|||
Royalties and advertising fees
|
49,964
|
|
|
20,052
|
|
|
70,016
|
|
|||
Interest income
|
11,437
|
|
|
969
|
|
|
12,406
|
|
|||
Net gain on sale of company-owned offices and other assets and other revenue
|
3,625
|
|
|
551
|
|
|
4,176
|
|
|||
Total revenues
|
109,100
|
|
|
22,125
|
|
|
131,225
|
|
|||
General and administrative expenses
|
25,780
|
|
|
1,098
|
|
|
26,878
|
|
|||
Area developer expense
|
—
|
|
|
23,872
|
|
|
23,872
|
|
|||
Depreciation, amortization, and impairment charges
|
7,169
|
|
|
(1,170
|
)
|
|
5,999
|
|
|||
Total operating expenses
|
79,445
|
|
|
23,800
|
|
|
103,245
|
|
|||
Income from operations
|
29,655
|
|
|
(1,675
|
)
|
|
27,980
|
|
|||
Income before income taxes
|
27,805
|
|
|
(1,675
|
)
|
|
26,130
|
|
|||
Income tax expense
|
10,394
|
|
|
(647
|
)
|
|
9,747
|
|
|||
Net income
|
17,411
|
|
|
(1,028
|
)
|
|
16,383
|
|
|||
Net income per share of Class A and Class B common stock:
|
|
|
|
|
|
||||||
Basic
|
$
|
1.24
|
|
|
$
|
(0.07
|
)
|
|
$
|
1.17
|
|
Diluted
|
$
|
1.23
|
|
|
$
|
(0.07
|
)
|
|
$
|
1.16
|
|
|
April 30, 2011
|
||||||||||
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||
Franchise fees
|
$
|
14,354
|
|
|
$
|
(5,574
|
)
|
|
$
|
8,780
|
|
Provision for refunds
|
1,206
|
|
|
(1,206
|
)
|
|
—
|
|
|||
Area developer fees
|
—
|
|
|
6,335
|
|
|
6,335
|
|
|||
Royalties and advertising fees
|
46,879
|
|
|
19,303
|
|
|
66,182
|
|
|||
Interest income
|
10,110
|
|
|
1,212
|
|
|
11,322
|
|
|||
Net gain on sale of company-owned offices and other assets and other revenue
|
4,091
|
|
|
(70
|
)
|
|
4,021
|
|
|||
Total revenues
|
95,524
|
|
|
22,412
|
|
|
117,936
|
|
|||
General and administrative expenses
|
20,707
|
|
|
1,765
|
|
|
22,472
|
|
|||
Area developer expense
|
—
|
|
|
23,094
|
|
|
23,094
|
|
|||
Depreciation, amortization, and impairment charges
|
6,062
|
|
|
(623
|
)
|
|
5,439
|
|
|||
Total operating expenses
|
67,009
|
|
|
24,236
|
|
|
91,245
|
|
|||
Income from operations
|
28,515
|
|
|
(1,824
|
)
|
|
26,691
|
|
|||
Income before income taxes
|
26,636
|
|
|
(1,824
|
)
|
|
24,812
|
|
|||
Income tax expense
|
10,874
|
|
|
(732
|
)
|
|
10,142
|
|
|||
Net income
|
15,762
|
|
|
(1,092
|
)
|
|
14,670
|
|
|||
Net income per share of Class A and Class B common stock:
|
|
|
|
|
|
||||||
Basic
|
$
|
1.10
|
|
|
$
|
(0.25
|
)
|
|
$
|
0.85
|
|
Diluted
|
$
|
1.08
|
|
|
$
|
(0.25
|
)
|
|
$
|
0.83
|
|
•
|
Adjustments to franchise fees includes the reclassification of area developer fees to a separate caption, the net impact of changing our franchise fee recognition policy to receipt of funds and the change to gross presentation for the area developer portion
|
•
|
Adjustments to provision for refunds is due to the change in our franchise fee recognition policy
|
•
|
Adjustments to area developer fees is the net effect of reclassifying AD fees out of franchisee fees and the impact of recognizing revenue over the life of the agreement
|
•
|
Adjustments to royalties and advertising reflects the change to gross presentation for the area developer portion of royalties
|
•
|
Adjustments to interest income reflect the change to gross presentation for the area developer portion of interest and the conversion to cash basis from accrual basis for interest on notes related to unrecognized revenue
|
•
|
Adjustments to general and administrative expense reflects the increase in the provision for bad debts due to the elimination of the provision for refunds
|
•
|
Adjustments to area developer expense reflects the change to a gross presentation for franchise fees, royalties and interest owed to area developer
|
•
|
Adjustments to amortization and impairment charges are the net effect of the change in purchase price allocation for company-owned offices acquired from franchisees and the impact of a smaller balance of area developer rights due to the netting of deferred revenue upon reacquisition
|
•
|
Adjustments to the provision for income taxes reflects the impact of the restatement adjustments
|
•
|
Adjustment for the year ended April 30, 2011 to the basic and diluted net income per share of Class A and Class B common stock reflects the repurchase of preferred stock as a reduction of net income attributable to common stockholders
|
|
April 30, 2012
|
||||||||||
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||
Net income
|
$
|
17,411
|
|
|
$
|
(1,028
|
)
|
|
$
|
16,383
|
|
Comprehensive income
|
$
|
17,706
|
|
|
$
|
(1,028
|
)
|
|
$
|
16,678
|
|
|
|
|
|
|
|
||||||
|
April 30, 2011
|
||||||||||
|
As Reported
|
|
Adjustments
|
|
As Restated
|
||||||
Net income
|
$
|
15,762
|
|
|
$
|
(1,092
|
)
|
|
$
|
14,670
|
|
Comprehensive income
|
$
|
16,022
|
|
|
$
|
(1,092
|
)
|
|
$
|
14,930
|
|
1.
|
Grant of RSUs
. The Company hereby grants the Employee ______ RSUs, each RSU corresponding to one share of the Class A Common Stock of the Company, par value of $0.01 per share. Subject to the terms and conditions of the Plan and this Agreement, each RSU represents an unsecured promise of the Company to deliver, and the right of the Employee to receive, one share of the Common Stock of the Company, par value of $0.01 per share, at the time and on the terms and conditions set forth herein. As a holder of RSUs, the Employee has only the rights of a general unsecured creditor of the Company.
|
2.
|
Vesting
. These RSUs are subject to vesting. These RSUs will become vested and payable in full on _________________________________, provided the Employee serves continuously on the Board of Employees of the Company from the Date of Grant until such time. No RSUs shall vest or become payable after termination of the Employee’s service on the Board of Employees of the Company.
|
3.
|
Settlement of Award
. Subject to the terms of this Section 3 and 4 below, the Company shall issue to the Employee one share of Class A Common Stock for each RSU that has become vested and payable under Section 2 above and shall deliver to the Employee such shares as soon as practicable (and within thirty (30) days) after the vesting date. The RSUs shall be forfeited if they are not vested and payable prior to the termination of the Employee’s service on the Board of Employees of the Company.
|
4.
|
Shareholder Rights
.
Except as set forth in Section 6 below,
the Employee shall not have any rights as a shareholder with respect to shares of Common Stock subject to any RSUs until issuance of the shares of Common Stock. The Company may include on any certificates or notations representing shares of Common Stock issued pursuant to this Agreement such legends referring to any representations, restrictions or any other applicable statements as the Company, in its discretion, shall deem appropriate.
|
5.
|
Effect of Termination of Service
.
|
i)
|
Year One.
For the period ending April 30 following the Effective Date of this Agreement, if you operated or were required to have operated an office in the Territory for any part of Tax Season ending in that April, the minimum royalty is $5,000 per Territory.
|
(i)
|
You violate any term or condition of this Agreement, the Operations Manual, or any other agreement with Liberty;
|
(ii)
|
Any amount owing to Liberty, whether related to the Territory or not, is more than thirty (30) days past due;
|
(iii)
|
You fail to comply with IRS standards applicable to e-file providers as stated in IRS Publication 1345 or another or successor IRS publication applicable to e-file providers; or
|
(iv)
|
You are more than sixty (60) days in default of any loan, lease or sublease agreement with a third party, affecting the Franchised Business.
|
a.
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Sell to Liberty (if Liberty elects pursuant to Section 11) any or all equipment, signs, trade fixtures, and furnishings used in the Franchised Business, or if Liberty does not so elect, remove all Marks or other distinguishing indicia from all of your offices and other premises; and
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b.
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Stop identifying yourself as a Liberty Tax franchisee, never hold out as a former Liberty Tax franchisee and forever cease the use of any of the Marks or any other marks that may be confused with the Marks; and
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c.
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Stop using all literature and forms received from Liberty and other items bearing the Marks; and
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d.
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Pay to Liberty all amounts owing to Liberty, whether related to the Territory or not; and
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e.
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Transfer to Liberty all telephone numbers, listings and advertisements used in relation to the Franchised Business and deliver to Liberty copies of such documents of transfer; and
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f.
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Assign to Liberty (if Liberty elects), and upon lessor’s consent, any interest that you have in any lease, sublease or any other agreement related to the Franchised Business; and
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g.
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Deliver to Liberty any original and all copies, including electronic copies and media, of lists and other sources of information containing the names, addresses, e-mail addresses, or phone numbers of customers of the Franchised Business; and
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h.
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Deliver to Liberty any original and all copies, including electronic copies and media, containing customer tax returns, files, and records; and
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i.
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Deliver to Liberty the copy of the Manual and any updates which Liberty loaned to you; and
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j.
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Cancel all fictitious name listings which you have filed that utilize any of the Marks; and
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k.
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Adhere to all applicable provisions contained herein including, but not limited to, the post-term covenants not to compete and not to solicit.
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i)
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Franchisee or his/her legal representative fails for a period of one hundred eighty (180) days after such death or incapacity to commence action to assign this Agreement according to controlling state law regarding the affairs of a deceased or incapacitated person and the terms of this Agreement; or
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ii)
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Such assignment is not completed within one (1) year after death or incapacity.
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i)
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The proposed transferee(s) must complete Liberty’s franchise application and pass Liberty’s application screening in place at the time of transfer;
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ii)
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The proposed transferee(s) must sign the Liberty amendment forms and/or franchise agreement in place at the time of transfer, and must personally assume and be bound by all of the terms, covenants and conditions therein;
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iii)
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The proposed transferee(s) must attend and successfully complete EOT and HOT;
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iv)
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You shall sign the transfer and release forms required by Liberty at the time of transfer and pay the transfer fee described in Section 4.i. of this Agreement; and
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v)
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Except as to approved transfers within the Liberty system as described in this Section, you may not give, transfer or sell all or substantially all of the assets of your Franchised Business during the term of this Agreement, or for a two (2) year period after its expiration or termination, to a person or entity who might be reasonably expected to use any such assets to offer income tax preparation in the Territory or within ten (10) miles of the boundaries of the Territory.
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*Note:
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When a Territory description includes a road, avenue, street, parkway, highway, route or similar roadway, the Territory includes the U.S. Postal addresses assigned to either side of the roadway. When a Territory description excludes a road, avenue, street, parkway, highway, route or similar roadway, the Territory excludes the U.S. Postal addresses assigned to either side of such roadway. If a map of the Territory is attached, the map approximates the Territory, but the above legal description controls as to the Territory's precise boundaries.
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1.
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You agree to operate the territory (“Rental Territory”) described below for the tax season January 2, 2014 - April 15, 2014 (“2014 Calendar Year Tax Season”). This Rental Territory shall be deemed part of your existing Franchise Agreement and not a new franchise. If you own multiple territories, Liberty will deem and select which franchise agreement this Special Stipulation will relate to unless it is clearly specified otherwise. Except as modified by this Special Stipulation, the rights, duties and obligations in your existing Franchise Agreement shall control as to this Rental Territory. You specifically agree that section 10 of your Franchise Agreement will apply to the Rental Territory, regardless of whether you purchase the Rental Territory.
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2.
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You shall be obligated to pay all royalties and other amounts due and payable to Liberty with respect to the Rental Territory and the 2014 Calendar Year Tax Season as provided below:
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1.
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You agree to operate the territory (“Rental Territory”) described below for the tax season January 2, 2014 - April 15, 2014 (“2014 Calendar Year Tax Season”). This Rental Territory shall be deemed part of your existing franchise agreement and not a new franchise. If you own multiple territories, Liberty will deem and select which franchise agreement this Special Stipulation will relate to unless it is clearly specified otherwise. Except as modified by this Special Stipulation, the rights, duties and obligations in your existing franchise agreement relates shall control as to the Rental Territory. You specifically agree that section 10 of your Franchise Agreement will apply to the Rental Territory, regardless of whether you purchase the Rental Territory.
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2.
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You shall be obligated to pay all royalties and other amounts due and payable to Liberty with respect to the Rental Territory and the 2014 Calendar Year Tax Season as provided below:
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c.
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You must pay the royalty owed by the 5th of each month based on Gross Receipts for the preceding month, and any balance owed to achieve Minimum Royalty on May 5 for each fiscal year ending April 30. You must pay advertising fees by the 5
th
of each month based on Gross Receipts for the preceding month.
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(ii)
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For a Developed Territory, meaning one containing an existing company, franchisee or other Liberty tax preparation office, you must pay royalties as set forth above depending upon how long any office has been operated in the Territory. For example, if an office has been operated in the Territory through one Tax Season, then that Territory would be subject to Year Two royalties for the year that contains the Tax Season in which you first operate the Territory. The term “
Tax Season
” means the time period January 2 – April 30. An office includes locations such as kiosks or temporary locations.
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(iii)
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If you are or become in an area covered by an Area Developer, Liberty may pay to the Area Developer a portion of the royalties that you pay to Liberty.
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(iv)
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At the conclusion of the five (5) year term of this Agreement, your royalty structure will revert to the royalty structure specified in Section 4 of the Franchise Agreement.”
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10.
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CONFIDENTIAL INFORMATION 16
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12.
COUNTERPARTS
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18
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(i)
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Area Developer commits a violation of any law, ordinance, rule or regulation of a government or governmental agency or department and such conduct constitutes a material violation of any franchise law, antitrust law or securities law, fraud or a similar wrong, unfair or deceptive practices, or a comparable violation of applicable law, or the Area Developer is convicted of a felony; or
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(ii)
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Area Developer violates any of Sections 5.1, 5.2, 5.3 or 5.4 of this Agreement; or
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i)
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The proposed transferee(s) must complete Liberty’s Area Developer application and pass Liberty’s application screening in place at the time of transfer.
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ii)
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The proposed transferee(s) must sign the Liberty amendment forms and/or Area Developer Agreement in place at the time of transfer and must personally assume and be bound by all of the terms, covenants and conditions therein.
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iii)
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The proposed transferee(s) must attend and successfully complete Area Developer Training.
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iv)
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Area Developer shall sign Liberty’s transfer and release forms required by Liberty at the time of transfer and pay to Liberty a transfer fee of $10,000.00.
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Development
Period Ending |
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Cumulative Number of Liberty Tax Service
Effective Franchise Agreements
in Operation with an Active Liberty Office
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Date: October 1, 2013
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By:
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/s/ John T. Hewitt
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John T. Hewitt
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Chief Executive Officer and Chairman of the Board
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(Principal Executive Officer)
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Date: October 1, 2013
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By:
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/s/ Mark F. Baumgartner
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Mark F. Baumgartner
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Chief Financial Officer
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(Principal Financial Officer)
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Date: October 1, 2013
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By:
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/s/ John T. Hewitt
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John T. Hewitt
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Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
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Date: October 1, 2013
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By:
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/s/ Mark F. Baumgartner
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Mark F. Baumgartner
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Chief Financial Officer
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(Principal Financial Officer)
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