Parsippany, N.J. (March 16, 2004) -- Cendant Corp. subsidiary Jackson Hewitt Tax Service Inc. plans to go public in an offering estimated at $100 million, according to the company's registration, filed with the Securities and Exchange Commission on Monday.
The initial public offering is expected to take place in the second quarter of 2004. The company, which intends to list on the New York Stock Exchange under the symbol JTX, didn't specify the price or amount of shares to be offered. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are serving as joint book-running managers of the offering.
Jackson Hewitt, with 4,295 franchised offices and 642 company-owned offices, is the second largest tax return preparer in the United States, behind Kansas City, Mo.-based H&R Block. The 2.8 million tax returns Jackson Hewitt's network prepared in 2003 represented less than 4 percent of the total paid tax return preparer industry in the United States. In comparison, Block has about 21 percent of the paid preparer market, which is comprised of about 77 million tax returns, or 59 percent of the 131 million individual tax returns filed with the IRS in 2003.
Jackson Hewitt reported net revenue of $171.5 million in 2003, 37 percent of which came from royalty and advertising fees paid by its franchisees -- its fastest growing source of revenue. Tax returns filed by the company's franchised offices represented 87 percent of the total number of tax returns filed by the Jackson Hewitt network in 2003.
In its filing, the company said it has "significant opportunities" to expand into territories where it doesn't currently operate. Of 4,500 territories it identified nationwide, each consisting of approximately 50,000 people, Jackson Hewitt said its network has offices operating in approximately 2,700 territories, leaving the remaining 40 percent of territories available to expand its network.
While JH said its primary strategy for growth will be increasing the number of offices in its network, it also plans to expand into new territories by selling new franchises, converting established third-party tax preparation businesses to its franchise system, and acquiring established tax return preparation businesses to be company-owned offices. The company also plans to leverage its relationships with large retailers. At the start of this year, JH had some 1,500 offices in retailer locations nationwide, including approximately 1,100 in Wal-Mart stores. Long term, the company said it plans to expand into new markets with income tax systems similar to the United States', such as Canada and Puerto Rico.
-- WebCPA staff
