##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark one)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended July 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
                     to

Commission file number 1-32215





Jackson Hewitt Tax Service
Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0779692                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

3 Sylvan Way

Parsippany, New Jersey 07054

(Address of principal executive offices including zip code)

(973) 630-1040

(Registrants telephone number, including area code)





Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceeding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act)    Yes   ̈    No  x

The number of shares outstanding of the registrants common stock was 28,783,120 (net of 10,725,422 shares held in treasury) as of August 31, 2009.









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##### Table of Contents

JACKSON HEWITT TAX SERVICE INC.

TABLE OF CONTENTS



|                               |  |                                                                                                       |  |     
|------------------------------ |  | ----------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                       |  | Page
|PART 1 - FINANCIAL INFORMATION
|                               |  |                                                                                                      
|Item 1.                        |  | Financial Statements (Unaudited):                                                                     |  |     
|                               |  |                                                                                                      
|                               |  | Condensed Consolidated Balance Sheets                                                                 |  | 1   
|                               |  |                                                                                                      
|                               |  | Condensed Consolidated Statements of Operations                                                       |  | 2   
|                               |  |                                                                                                      
|                               |  | Condensed Consolidated Statements of Cash Flows                                                       |  | 3   
|                               |  |                                                                                                      
|                               |  | Notes to Condensed Consolidated Financial Statements                                                  |  | 4   
|                               |  |                                                                                                      
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | 17  
|                               |  |                                                                                                      
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                            |  | 27  
|                               |  |                                                                                                      
|Item 4.                        |  | Controls and Procedures                                                                               |  | 28  
|                              
|PART II - OTHER INFORMATION   
|                               |  |                                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                                     |  | 28  
|                               |  |                                                                                                      
|Item 1A.                       |  | Risk Factors                                                                                          |  | 28  
|                               |  |                                                                                                      
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity
Securities |  | 28  
|                               |  |                                                                                                      
|Item 3.                        |  | Defaults Upon Senior Securities                                                                       |  | 29  
|                               |  |                                                                                                      
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                   |  | 29  
|                               |  |                                                                                                      
|Item 5.                        |  | Other Information                                                                                     |  | 29  
|                               |  |                                                                                                      
|Item 6.                        |  | Exhibits                                                                                              |  | 29  
|                               |  |                                                                                                      
|                               |  | Signatures                                                                                            |  | 30  



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##### Table of Contents

PART 1  FINANCIAL INFORMATION



|Item 1. | Financial Statements (Unaudited)
|------- | --------------------------------

JACKSON HEWITT TAX SERVICE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share amounts)



|                                                                                                                      |  |              |          |   |               |   |          |  
|--------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ------------- | - | -------- | -
|                                                                                                                      |  | As of        |         
|                                                                                                                      |  | July 31,2009 |          |   | April 30,2009 |  
|Assets                                                                                                                |  |              |          |   |               |   |          |  
|Current assets:                                                                                                       |  |              |          |   |               |   |          |  
|Cash and cash equivalents                                                                                             |  | $            | 50       |   |               | $ | 306      |  
|Accounts receivable, net of allowance for doubtful accounts of $2,185 and $1,869, respectively                        |  |              | 14,614   |   |               |   | 24,272   |  
|Notes receivable, net                                                                                                 |  |              | 7,546    |   |               |   | 6,569    |  
|Prepaid expenses and other                                                                                            |  |              | 10,773   |   |               |   | 14,195   |  
|Deferred income taxes                                                                                                 |  |              | 6,381    |   |               |   | 5,601    |  
|                                                                                                                      |  |              |          |   |               |   |          |  
|Total current assets                                                                                                  |  |              | 39,364   |   |               |   | 50,943   |  
|                                                                                                                      |  |             
|Property and equipment, net                                                                                           |  |              | 28,915   |   |               |   | 27,685   |  
|Goodwill                                                                                                              |  |              | 418,674  |   |               |   | 418,674  |  
|Other intangible assets, net                                                                                          |  |              | 86,967   |   |               |   | 87,324   |  
|Notes receivable, net                                                                                                 |  |              | 3,532    |   |               |   | 4,146    |  
|Other non-current assets, net                                                                                         |  |              | 18,147   |   |               |   | 19,436   |  
|                                                                                                                      |  |              |          |   |               |   |          |  
|Total assets                                                                                                          |  | $            | 595,599  |   |               | $ | 608,208  |  
|                                                                                                                      |  |              |          |   |               |   |          |  
|Liabilities and Stockholders Equity                                                                                  |  |              |          |   |               |   |          |  
|Current liabilities:                                                                                                  |  |              |          |   |               |   |          |  
|Accounts payable and accrued liabilities                                                                              |  | $            | 20,196   |   |               | $ | 33,693   |  
|Income taxes payable                                                                                                  |  |              | 29,194   |   |               |   | 48,305   |  
|Deferred revenues                                                                                                     |  |              | 9,393    |   |               |   | 10,370   |  
|                                                                                                                      |  |              |          |   |               |   |          |  
|Total current liabilities                                                                                             |  |              | 58,783   |   |               |   | 92,368   |  
|                                                                                                                      |  |             
|Long-term debt                                                                                                        |  |              | 274,000  |   |               |   | 232,000  |  
|Deferred income taxes                                                                                                 |  |              | 24,584   |   |               |   | 23,589   |  
|Other non-current liabilities                                                                                         |  |              | 14,799   |   |               |   | 16,587   |  
|                                                                                                                      |  |              |          |   |               |   |          |  
|Total liabilities                                                                                                     |  |              | 372,166  |   |               |   | 364,544  |  
|                                                                                                                      |  |              |          |   |               |   |          |  
|Commitments and Contingencies (Note 8)                                                                                |  |              |          |   |               |   |          |  
|Stockholders equity:                                                                                                 |  |              |          |   |               |   |          |  
|Common stock, par value $0.01; Authorized: 200,000,000 shares; Issued: 39,508,562 and 39,290,418 shares, respectively |  |              | 395      |   |               |   | 393      |  
|Additional paid-in capital                                                                                            |  |              | 389,675  |   |               |   | 388,136  |  
|Retained earnings                                                                                                     |  |              | 140,144  |   |               |   | 161,988  |  
|Accumulated other comprehensive loss                                                                                  |  |              | (3,923   | ) |               |   | (4,178   | )
|Less: Treasury stock, at cost: 10,707,583 and 10,527,879 shares, respectively                                         |  |              | (302,858 | ) |               |   | (302,675 | )
|                                                                                                                      |  |              |          |   |               |   |          |  
|Total stockholders equity                                                                                            |  |              | 223,433  |   |               |   | 243,664  |  
|                                                                                                                      |  |              |          |   |               |   |          |  
|Total liabilities and stockholders equity                                                                            |  | $            | 595,599  |   |               | $ | 608,208  |  
|                                                                                                                      |  |              |          |   |               |   |          |  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.



1



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JACKSON HEWITT TAX SERVICE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)



|                                                      |  |                            |         |   |      |   |         |  
|----------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                      |  | Three Months EndedJuly 31, |        
|                                                      |  | 2009                       |         |   | 2008 |  
|Revenues                                              |  |                            |         |   |      |   |         |  
|Franchise operations revenues:                        |  |                            |         |   |      |   |         |  
|Royalty                                               |  | $                          | 556     |   |      | $ | 627     |  
|Marketing and advertising                             |  |                            | 245     |   |      |   | 277     |  
|Financial product fees                                |  |                            | 3,320   |   |      |   | 2,622   |  
|Other                                                 |  |                            | 336     |   |      |   | 349     |  
|Service revenues from company-owned office operations |  |                            | 588     |   |      |   | 412     |  
|                                                      |  |                            |         |   |      |   |         |  
|Total revenues                                        |  |                            | 5,045   |   |      |   | 4,287   |  
|                                                      |  |                            |         |   |      |   |         |  
|Expenses                                              |  |                            |         |   |      |   |         |  
|Cost of franchise operations                          |  |                            | 7,488   |   |      |   | 8,612   |  
|Marketing and advertising                             |  |                            | 3,015   |   |      |   | 4,169   |  
|Cost of company-owned office operations               |  |                            | 6,996   |   |      |   | 9,307   |  
|Selling, general and administrative                   |  |                            | 16,726  |   |      |   | 10,448  |  
|Depreciation and amortization                         |  |                            | 3,325   |   |      |   | 3,207   |  
|                                                      |  |                            |         |   |      |   |         |  
|Total expenses                                        |  |                            | 37,550  |   |      |   | 35,743  |  
|                                                      |  |                            |         |   |      |   |         |  
|Loss from operations                                  |  |                            | (32,505 | ) |      |   | (31,456 | )
|Other income/(expense):                               |  |                            |         |   |      |   |         |  
|Interest and other income                             |  |                            | 598     |   |      |   | 400     |  
|Interest expense                                      |  |                            | (5,029  | ) |      |   | (3,006  | )
|                                                      |  |                            |         |   |      |   |         |  
|Loss before income taxes                              |  |                            | (36,936 | ) |      |   | (34,062 | )
|Benefit from income taxes                             |  |                            | 15,096  |   |      |   | 13,518  |  
|                                                      |  |                            |         |   |      |   |         |  
|Net loss                                              |  | $                          | (21,840 | ) |      | $ | (20,544 | )
|                                                      |  |                            |         |   |      |   |         |  
|Loss per share:                                       |  |                            |         |   |      |   |         |  
|Basic and Diluted                                     |  | $                          | (0.76   | ) |      | $ | (0.72   | )
|                                                      |  |                            |         |   |      |   |         |  
|Weighted average shares outstanding:                  |  |                            |         |   |      |   |         |  
|Basic and Diluted                                     |  |                            | 28,558  |   |      |   | 28,468  |  
|                                                      |  |                            |         |   |      |   |         |  
|Cash dividends declared per share:                    |  | $                          |        |   |      | $ | 0.18    |  
|                                                      |  |                            |         |   |      |   |         |  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.



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JACKSON HEWITT TAX SERVICE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                                            |  |                            |         |   |      |   |         |  
|--------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                            |  | Three Months EndedJuly 31, |        
|                                                                            |  | 2009                       |         |   | 2008 |  
|Operating activities:                                                       |  |                            |         |   |      |   |         |  
|Net loss                                                                    |  | $                          | (21,840 | ) |      | $ | (20,544 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                            |         |   |      |   |         |  
|Depreciation and amortization                                               |  |                            | 3,325   |   |      |   | 3,207   |  
|Share-based compensation                                                    |  |                            | 2,228   |   |      |   | 1,418   |  
|Amortization of deferred financing costs                                    |  |                            | 475     |   |      |   | 98      |  
|Amortization of development advances                                        |  |                            | 432     |   |      |   | 436     |  
|Provision for uncollectible receivables, net                                |  |                            | 253     |   |      |   |        |  
|Deferred income taxes                                                       |  |                            | (652    | ) |      |   | (1,463  | )
|Other                                                                       |  |                            |        |   |      |   | (8      | )
|Changes in assets and liabilities, excluding the impact of acquisitions:    |  |                            |         |   |      |   |         |  
|Accounts receivable                                                         |  |                            | 8,343   |   |      |   | 10,894  |  
|Notes receivable                                                            |  |                            |        |   |      |   | (240    | )
|Prepaid expenses and other                                                  |  |                            | 4,634   |   |      |   | 2,678   |  
|Accounts payable, accruals, and other liabilities                           |  |                            | (13,810 | ) |      |   | (12,864 | )
|Income taxes payable                                                        |  |                            | (19,101 | ) |      |   | (18,322 | )
|Deferred revenues                                                           |  |                            | (2,225  | ) |      |   | (1,713  | )
|                                                                            |  |                            |         |   |      |   |         |  
|Net cash used in operating activities                                       |  |                            | (37,938 | ) |      |   | (36,423 | )
|                                                                            |  |                            |         |   |      |   |         |  
|Investing activities:                                                       |  |                            |         |   |      |   |         |  
|Capital expenditures                                                        |  |                            | (4,198  | ) |      |   | (618    | )
|Funding provided to franchisees                                             |  |                            | (359    | ) |      |   | (497    | )
|Proceeds from repayment of certain franchisee notes                         |  |                            | 203     |   |      |   | 187     |  
|Cash paid for acquisitions                                                  |  |                            | (710    | ) |      |   | (11,123 | )
|                                                                            |  |                            |         |   |      |   |         |  
|Net cash used in investing activities                                       |  |                            | (5,064  | ) |      |   | (12,051 | )
|                                                                            |  |                            |         |   |      |   |         |  
|Financing activities:                                                       |  |                            |         |   |      |   |         |  
|Common stock repurchases                                                    |  |                            | (183    | ) |      |   |        |  
|Borrowings under revolving credit facility                                  |  |                            | 45,000  |   |      |   | 65,000  |  
|Repayments of borrowings under revolving credit facility                    |  |                            | (3,000  | ) |      |   | (15,000 | )
|Dividends paid to stockholders                                              |  |                            | (28     | ) |      |   | (5,112  | )
|Debt issuance costs                                                         |  |                            | (211    | ) |      |   | (881    | )
|Change in cash overdrafts                                                   |  |                            | 1,168   |   |      |   | 138     |  
|Other                                                                       |  |                            |        |   |      |   | (35     | )
|                                                                            |  |                            |         |   |      |   |         |  
|Net cash provided by financing activities                                   |  |                            | 42,746  |   |      |   | 44,110  |  
|                                                                            |  |                            |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                   |  |                            | (256    | ) |      |   | (4,364  | )
|Cash and cash equivalents, beginning of period                              |  |                            | 306     |   |      |   | 4,594   |  
|                                                                            |  |                            |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                    |  | $                          | 50      |   |      | $ | 230     |  
|                                                                            |  |                            |         |   |      |   |         |  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.



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JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BACKGROUND AND BASIS OF PRESENTATION

Description of Business

Jackson Hewitt Tax Service Inc. provides computerized preparation of federal, state and local individual income tax returns in the United States through a nationwide network of franchised and company-owned offices operating under the
brand name Jackson Hewitt Tax Service®. The Company provides its customers with convenient, fast and quality tax return
preparation services and electronic filing. In connection with their tax return preparation experience, the Companys customers may select various financial products to suit their needs, including refund anticipation loans (RALs).
Jackson Hewitt and the Company are used interchangeably in these notes to the Condensed Consolidated Financial Statements to refer to Jackson Hewitt Tax Service Inc. and its subsidiaries, appropriate to the context.

Jackson Hewitt Tax Service Inc. was incorporated in Delaware in February 2004 as the parent corporation in connection with the
Companys June 2004 initial public offering (IPO) pursuant to which Cendant Corporation, now known as Avis Budget Group, Inc. (Cendant), divested 100% of its ownership interest in Jackson Hewitt Tax Service Inc. Jackson
Hewitt Inc. (JHI) is a wholly-owned subsidiary of Jackson Hewitt Tax Service Inc. Jackson Hewitt Technology Services LLC is a wholly-owned subsidiary of JHI that supports the technology needs of the Company. Company-owned
office operations are conducted by Tax Services of America, Inc. (TSA), which is a wholly-owned subsidiary of JHI. The Condensed Consolidated Financial Statements include the accounts and transactions of Jackson Hewitt and its
subsidiaries.

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC) for interim financial statements. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and
other financial information included in the Companys Annual Report on Form 10-K which was filed with the SEC on July 2, 2009.

In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information.
Accordingly, actual results could differ from those estimates. In the opinion of management, the accompanying interim Condensed Consolidated Financial Statements contain all normal and recurring adjustments necessary for a fair presentation of the
Companys financial position, results of operations and cash flows. The results of operations for the interim periods reported are not necessarily indicative of the results of operations that may be expected for any future interim periods or
for the full fiscal year.

Management has evaluated all activity of the Company through September 3, 2009 (the issuance date of the
Condensed Consolidated Financial Statements) and concluded that no subsequent events have occurred since July 31, 2009 that would require recognition in the Condensed Consolidated Financial Statements or disclosure in the notes related to the
Condensed Consolidated Financial Statements.



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Comprehensive Loss

The Companys comprehensive income loss is comprised of net loss from the Companys results of operations and changes in the fair value of derivatives. The components of comprehensive loss, net of tax, were
as follows:



|                                     |  |                            |         |   |      |   |         |  
|------------------------------------ |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                     |  | Three Months EndedJuly 31, |        
|                                     |  | (in thousands)             |        
|                                     |  | 2009                       |         |   | 2008 |  
|Net loss                             |  | $                          | (21,840 | ) |      | $ | (20,544 | )
|Changes in fair value of derivatives |  |                            | 255     |   |      |   | 702     |  
|                                     |  |                            |         |   |      |   |         |  
|Total comprehensive loss             |  | $                          | (21,585 | ) |      | $ | (19,842 | )
|                                     |  |                            |         |   |      |   |         |  

Computation of loss per share

Basic and diluted loss per share are calculated as net loss divided by the weighted average number of common shares and vested shares of restricted stock
outstanding during the period. In net loss periods, basic and diluted loss per share are identical since the effect of potential common shares assuming conversion of potentially dilutive securities arising from stock options outstanding and shares
of unvested restricted stock is anti-dilutive and therefore excluded.

In each reporting period, both basic and dilutive loss per share
computations exclude all performance vesting awards since the performance conditions had not been met for those periods. See Note 5Share-Based Payments for additional information on the Companys performance vesting
awards.

The following table summarizes the anti-dilutive securities that were excluded from the computation of the effect of dilutive
securities on loss per share that consisted of (i) stock options with exercise prices less than the average market prices for the Companys common stock; (ii) stock options with exercise prices greater than the average market prices
for the Companys common stock; (iii) shares of restricted stock considered anti-dilutive due to both periods presented being net loss periods; and (iv) shares of restricted stock considered anti-dilutive due to the impact of the
unrecognized compensation cost on the calculation of assumed proceeds in the application of the treasury stock method.



|                               |  |                            |  |     
|------------------------------ |  | -------------------------- |  | ----
|                               |  | Three Months EndedJuly 31,
|(in thousands)                 |  | 2009                       |  | 2008
|Stock options                  |  | 2,231                      |  | 561 
|Shares of restricted stock     |  | 160                        |  | 362 
|                               |  |                            |  |     
|Total anti-dilutive securities |  | 2,391                      |  | 923 
|                               |  |                            |  |     

2. ACCOUNTING STANDARD ISSUED BUT NOT YET ADOPTED

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (FAS 168). This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles, and establishes only two levels of U.S. generally accepted accounting principles (GAAP)authoritative and non-authoritative. The FASB Accounting Standards Codification (the Codification) will become the
source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the
Codification will become



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non-authoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The
Company will use the new guidelines and numbering system prescribed by the Codification when referring to GAAP beginning in the Companys Quarterly Report on Form 10-Q for the period ended October 31, 2009. As the Codification was not
intended to change or alter existing GAAP, the adoption of FAS 168 will have no impact on the Companys Consolidated Financial Statements.

3. FAIR
VALUE MEASUREMENTS

Financial assets and liabilities subject to fair value measurements on a recurring basis are classified according to
a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Level 1 represents observable inputs such as quoted prices in active markets. Level 2 is defined as inputs other than quoted prices in active markets that
are either directly or indirectly observable. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. There were no changes to the Companys valuation
techniques used to measure asset and liabilities fair values on a recurring basis during the three months ended July 31, 2009.

The
Companys investments that are held in trust for payment of non-qualified deferred compensation to certain employees consist primarily of investments that are either publicly traded or for which market prices are readily available. These funds
are held in registered investment funds and common/collateral trusts.

The Companys derivative contracts represent interest rate swap
and collar agreements to convert a notional amount of floating-rate borrowings into fixed rate debt. The fair value of the Companys derivative contracts was derived from third party service providers utilizing proprietary models based on
current market indices and estimates about relevant future market conditions.

The accompanying condensed consolidated balance sheet
includes financial instruments that are recorded at fair value as noted below:



|                                       |  |                               |                                                                |                                    |                                           |    |                             |   |       |  |   |  
|-------------------------------------- |  | ----------------------------- | -------------------------------------------------------------- | ---------------------------------- | ----------------------------------------- | -- | --------------------------- | - | ----- |  | - | -
|                                       |  | Fair ValueAs of July 31, 2009 |                                                                | Fair Value at Reporting Date Using
|                                       |  |                               | Quoted Prices inActive Marketsfor IdenticalSecurities(Level 1) |                                    | SignificantOtherObservableInputs(Level 2) |    | UnobservableInputs(Level 3)
|Assets                                 |  |                               |                                                                |                                    |                                           |    |                             |   |       |  |   |  
|Investments held in trust, current     |  | $                             | 157                                                            |                                    | $                                         | 6  |                             | $ | 151   |  | $ | 
|Investments held in trust, non-current |  |                               | 74                                                             |                                    |                                           | 4  |                             |   | 70    |  |   | 
|                                       |  |                               |                                                                |                                    |                                           |    |                             |   |       |  |   |  
|Total                                  |  | $                             | 231                                                            |                                    | $                                         | 10 |                             | $ | 221   |  | $ | 
|                                       |  |                               |                                                                |                                    |                                           |    |                             |   |       |  |   |  
|Liabilities                            |  |                               |                                                                |                                    |                                           |    |                             |   |       |  |   |  
|Derivative contracts                   |  | $                             | 6,539                                                          |                                    | $                                         |   |                             | $ | 6,539 |  | $ | 
|                                       |  |                               |                                                                |                                    |                                           |    |                             |   |       |  |   |  
|Total                                  |  | $                             | 6,539                                                          |                                    | $                                         |   |                             | $ | 6,539 |  | $ | 
|                                       |  |                               |                                                                |                                    |                                           |    |                             |   |       |  |   |  



6



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4. GOODWILL AND OTHER INTANGIBLE ASSETS

The were no changes to the goodwill balance in either the Franchise operations segment or company-owned operations segment for the three months ended
July 31, 2009.

Other intangible assets consisted of:



|                                            |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|------------------------------------------- |  | ------------------- | ------ | ----------------------- | -- | ------- | ----------------- |  | ------------------- | ------ | ----------------------- | - | ------ | ----------------- | - | ------- | - |  | - | ------
|                                            |  | As of July 31, 2009 |        | As of April 30, 2009   
|                                            |  | GrossCarryingAmount |        | AccumulatedAmortization |    |         | NetCarryingAmount |  | GrossCarryingAmount |        | AccumulatedAmortization |   |        | NetCarryingAmount
|                                            |  | (In thousands)     
|Amortizable other intangible assets:        |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Franchise agreements(a)                     |  | $                   | 16,052 |                         | $  | (15,632 | )                 |  | $                   | 420    |                         | $ | 16,052 |                   | $ | (15,605 | ) |  | $ | 447   
|Customer relationships(b)                   |  |                     | 12,449 |                         |    | (9,570  | )                 |  |                     | 2,879  |                         |   | 12,449 |                   |   | (9,246  | ) |  |   | 3,203 
|Acquired tradename                          |  |                     | 53     |                         |    | (10     | )                 |  |                     | 43     |                         |   | 53     |                   |   | (4      | ) |  |   | 49    
|                                            |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Total amortizable other intangible assets   |  | $                   | 28,554 |                         | ($ | 25,212  | )                 |  |                     | 3,342  |                         | $ | 28,554 |                   | $ | (24,855 | ) |  |   | 3,699 
|                                            |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Unamortizable other intangible assets:      |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Jackson Hewitt trademark                    |  |                     |        |                         |    |         |                   |  |                     | 81,000 |                         |   |        |                   |   |         |   |  |   | 81,000
|Reacquired franchise rights                 |  |                     |        |                         |    |         |                   |  |                     | 2,625  |                         |   |        |                   |   |         |   |  |   | 2,625 
|                                            |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Total unamortizable other intangible assets |  |                     |        |                         |    |         |                   |  |                     | 83,625 |                         |   |        |                   |   |         |   |  |   | 83,625
|                                            |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       
|Total other intangible assets, net          |  |                     |        |                         |    |         |                   |  | $                   | 86,967 |                         |   |        |                   |   |         |   |  | $ | 87,324
|                                            |  |                     |        |                         |    |         |                   |  |                     |        |                         |   |        |                   |   |         |   |  |   |       



|(a) | Amortized using the straight-line method over a period of ten years.
|--- | --------------------------------------------------------------------

|(b) | Consists of customer lists and non-compete agreements. Customer lists are amortized using the double declining method over a period of five years and non-compete agreements are
amortized using the straight-line method over a period of two to six years.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The changes in the carrying amount of other
intangibles assets, net, by segment were as follows:



|                             |  |                     |        |   |                               |   |       |       |  |   |        |  
|---------------------------- |  | ------------------- | ------ | - | ----------------------------- | - | ----- | ----- |  | - | ------ | -
|                             |  | FranchiseOperations |        |   | Company-OwnedOfficeOperations |   |       | Total | 
|                             |  | (In thousands)      |       
|Balance as of April 30, 2009 |  |                     | 84,072 |   |                               |   | 3,252 |       |  |   | 87,324 |  
|Amortization                 |  |                     | (27    | ) |                               |   | (330  | )     |  |   | (357   | )
|                             |  |                     |        |   |                               |   |       |       |  |   |        |  
|Balance as of July 31, 2009  |  | $                   | 84,045 |   |                               | $ | 2,922 |       |  | $ | 86,967 |  
|                             |  |                     |        |   |                               |   |       |       |  |   |        |  

Amortization expense relating to other intangible assets was as follows:



|                       |  |                            |     |      |   |    
|---------------------- |  | -------------------------- | --- | ---- | - | ---
|                       |  | Three Months EndedJuly 31,
|                       |  | 2009                       |     | 2008
|Franchise agreements   |  | $                          | 27  |      | $ | 26 
|Customer relationships |  |                            | 324 |      |   | 289
|Acquired tradename     |  |                            | 6   |      |   |   
|                       |  |                            |     |      |   |    
|Total                  |  | $                          | 357 |      | $ | 315
|                       |  |                            |     |      |   |    



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Estimated amortization expense related to other intangible assets for each of the fiscal years ended
April 30 is as follows:



|                                     |  |                |      
|------------------------------------ |  | -------------- | -----
|                                     |  | Amount        
|                                     |  | (In thousands)
|Remaining nine months of fiscal 2010 |  |                | 1,023
|2011                                 |  |                | 1,061
|2012                                 |  |                | 693  
|2013                                 |  |                | 430  
|2014 and thereafter                  |  |                | 135  
|                                     |  |                |      
|Total                                |  | $              | 3,342
|                                     |  |                |      

5. SHARE-BASED PAYMENTS

The Companys amended and restated 2004 Equity and Incentive Plan (the Amended and Restated Plan) makes available for grant 6.5 million shares of common stock in the form of incentive stock
options, nonqualified stock options, stock appreciation rights, shares of restricted stock, restricted stock units (RSUs), and/or other stock or cash-based awards to non-employee directors, officers, employees, advisors, and consultants
who are selected by the Companys Compensation Committee for participation in the plan. As of July 31, 2009, 2.2 million shares remained available for grant. The Amended and Restated Plan provides for accelerated vesting of
outstanding awards if there is a change in control. The Amended and Restated Plan includes nondiscretionary antidilution provisions in case of an equity restructuring.

Share-based payments under the Amended and Restated Plan include the following:



| | (i) | Time-Based Vesting Stock Options (TVOs);
| | --- | ------------------------------------------



| | (ii) | Performance-Based Vesting Stock Options (PVOs);
| | ---- | -------------------------------------------------



| | (iii) | Time-Based Vesting Shares of Restricted Stock (TVRSs);
| | ----- | --------------------------------------------------------



| | (iv) | Performance-Based Vesting Shares of Restricted Stock (PVRSs); and
| | ---- | -------------------------------------------------------------------



| | (v) | Restricted Stock Units (RSUs).
| | --- | --------------------------------

(i) Time-Based Vesting
Stock Options

TVOs are granted, with the exception of certain TVOs granted at the time of the Companys IPO, with an exercise
price equal to the New York Stock Exchange (NYSE) closing price of a share of common stock on the date of grant and have a contractual term of ten years. TVOs granted through April 30, 2007 become exercisable with respect to 25% of
the shares on each of the first four anniversaries of the date of grant. TVOs granted in fiscal 2008 become exercisable with respect to 20% of the shares on each of the first five anniversaries of the date of grant. TVOs granted since fiscal 2009,
with the exception of the Companys June 2009 two-year grant to its new Chief Executive Officer, become exercisable with respect to one-third of the shares on each of the first three anniversaries of the date of grant. All TVOs granted are
subject to continued employment on the vesting date.

The Company incurred share-based compensation expense of $1.35 million and $1.0
million in the three months ended July 31, 2009 and 2008, respectively, in connection with the vesting of TVOs. The share-based compensation in the three months ended July 31, 2009 included expense of $0.85 million related to the
accelerated vesting of 160,642 TVOs attributed to the departure of the Companys former Chief Executive Officer in June 2009.

The weighted average grant date fair value for TVOs granted in the three months ended July 31, 2009 and 2008 was $3.45 and $2.98, respectively. The fair value of each TVO award was estimated on the date of grant



8



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using the Black-Scholes option-pricing model. The Company uses the method permitted under SEC Staff Accounting Bulletin (SAB) No. 110
(SAB 110), which amends SAB No. 107, Share-Based Payment, to determine the expected holding period and will continue to do so until the Company is able to accumulate a sufficient number of years of employee exercise
behavior to make a more refined estimate of expected term. Expected volatility was based on the Companys historical publicly traded stock price. The risk-free interest rate assumption was determined using the Federal Reserve nominal rates for
U.S. Treasury zero-coupon bonds with maturities similar to those of the expected holding period of the award being valued.

The following
table sets forth the weighted average assumptions used to determine compensation cost for TVOs granted during the following periods:



|                                   |  |                            |   |  |      |  
|---------------------------------- |  | -------------------------- | - |  | ---- | -
|                                   |  | Three Months EndedJuly 31, |  
|                                   |  | 2009                       |   |  | 2008 |  
|Expected holding period (in years) |  | 5.94                       |   |  | 6.00 |  
|Expected volatility                |  | 67.4                       | % |  | 39.5 | %
|Dividend yield                     |  |                           | % |  | 5.7  | %
|Risk-free interest rate            |  | 2.7                        | % |  | 3.3  | %

The following table summarizes information about TVO activity for the three months ended
July 31, 2009:



|                                |  |              |   |  |                              |      
|------------------------------- |  | ------------ | - |  | ---------------------------- | -----
|                                |  | NumberofTVOs |   |  | WeightedAverageExercisePrice
|Balance as of April 30, 2009    |  | 2,238,689    |   |  | $                            | 21.04
|Granted                         |  | 195,602      |   |  | $                            | 5.54 
|Forfeited                       |  | (4,629       | ) |  | $                            | 23.77
|Expired                         |  | (116,680     | ) |  | $                            | 20.79
|                                |  |              |   |  |                              |      
|Balance as of July 31, 2009     |  | 2,312,982    |   |  | $                            | 19.74
|                                |  |              |   |  |                              |      
|Exercisable as of July 31, 2009 |  | 1,531,577    |   |  | $                            | 21.92
|                                |  |              |   |  |                              |      

As of July 31, 2009, outstanding in-the-money TVOs had an aggregate intrinsic value of $0.2
million. The aggregate intrinsic value discussed in this paragraph represents the total pre-tax intrinsic value based on the Companys closing stock price on July 31, 2009, which would have been received by the option holders had all
in-the-money TVO holders exercised their TVOs on that date.

As of July 31, 2009, outstanding TVOs had an average remaining
contractual life of 7.0 years. As of July 31, 2009, there were no exercisable in-the-money TVOs. As of July 31, 2009, exercisable TVOs had an average remaining contractual life of 6.1 years.

The following table summarizes information about unvested TVO activity for the first quarter of fiscal 2010:



|                              |  |               |   |  |                                               |     
|----------------------------- |  | ------------- | - |  | --------------------------------------------- | ----
|                              |  | Numberof TVOs |   |  | Weighted AverageGrant DateFair ValuePer Share
|Unvested as of April 30, 2009 |  | 979,159       |   |  | $                                             | 5.99
|Granted                       |  | 195,602       |   |  | $                                             | 3.45
|Vested                        |  | (388,727      | ) |  | $                                             | 6.92
|Forfeited                     |  | (4,629        | ) |  | $                                             | 6.87
|                              |  |               |   |  |                                               |     
|Unvested as of July 31, 2009  |  | 781,405       |   |  | $                                             | 4.88
|                              |  |               |   |  |                                               |     



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As of July 31, 2009, there was $3.5 million of total unrecognized compensation cost related to
unvested TVOs, which is expected to be recognized over a weighted average period of 1.7 years. The total fair value of stock options vested in the three months ended July 31, 2009 and 2008 was $2.7 million and $3.1 million, respectively.

(ii) Performance-Based Vesting Stock Options

In July 2009, the Company granted 148,579 PVOs to certain executives with a $5.95 per share exercise price representing the NYSE closing price of a share of common stock on the date of grant. PVOs had a grant date
fair value of $3.87 per share with a contractual term of ten years. These PVOs will vest after three years provided that the Company achieves a pre-determined Earnings Before Income Tax, Depreciation and Amortization (EBITDA) target for
fiscal 2012. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial target in fiscal 2012, except in the case of the Companys Chief Executive Officer, who needs only to
have been employed through the term of his employment agreement, which ends on June 4, 2011.

No compensation expense related to the
July 2009 PVO grant was recorded in the three months ended July 31, 2009. If, and when, the Company determines it is probable that the performance condition will be achieved, compensation expense will be recognized cumulatively in such period
from the date of grant through the date of the change in estimate for the awards under which the requisite service period has been rendered. The remaining unrecognized compensation expense for those awards would be recognized prospectively over the
remaining requisite service period.

The weighted average grant date fair value for PVOs granted in the three months ended July 31,
2009 and 2008 was $3.87 and $3.70, respectively. The fair value of each PVO award was estimated on the date of grant using the Black-Scholes option-pricing model. For both the July 2009 and July 2008 grants, the expected holding period, expected
volatility and risk-free interest rate assumptions were determined using the same methodology as the TVO grants discussed earlier.

The
following table sets forth the weighted average assumptions used to determine compensation cost for PVOs granted during the following periods:



|                                   |  |                            |   |  |      |  
|---------------------------------- |  | -------------------------- | - |  | ---- | -
|                                   |  | Three Months EndedJuly 31, |  
|                                   |  | 2009                       |   |  | 2008 |  
|Expected holding period (in years) |  | 6.50                       |   |  | 6.00 |  
|Expected volatility                |  | 68.4                       | % |  | 39.5 | %
|Dividend yield                     |  |                           | % |  | 5.7  | %
|Risk-free interest rate            |  | 2.8                        | % |  | 3.3  | %

The following table sets forth the weighted average assumptions used to determine compensation
cost for PVOs granted during the three months ended July 31, 2009:



|                                 |  |               |   |  |                                |      
|-------------------------------- |  | ------------- | - |  | ------------------------------ | -----
|                                 |  | Number ofPVOs |   |  | Weighted AverageExercise Price
|Outstanding as of April 30, 2009 |  | 186,870       |   |  | $                              | 14.50
|Granted                          |  | 148,579       |   |  | $                              | 5.95 
|Forfeited                        |  | (186,870      | ) |  | $                              | 14.50
|                                 |  |               |   |  |                                |      
|Outstanding as of July 31, 2009  |  | 148,579       |   |  | $                              | 5.95 
|                                 |  |               |   |  |                                |      

On June 30, 2009, the Compensation Committee of the Board of Directors determined that the
performance criteria required for vesting of the July 2008 award had not been achieved and, as a result, all such outstanding TVRs were forfeited.



10



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Outstanding in-the-money PVOs as of July 31, 2009 had an aggregate intrinsic value that was
negligible. Outstanding PVOs as of July 31, 2009 had an average remaining contractual life of 9.96 years.

The following table
summarizes information about unvested PVO activity for the first quarter of fiscal 2010:



|                              |  |               |   |  |                                               |     
|----------------------------- |  | ------------- | - |  | --------------------------------------------- | ----
|                              |  | Number ofPVOs |   |  | Weighted AverageGrant DateFair ValuePer Share
|Unvested as of April 30, 2009 |  | 186,870       |   |  | $                                             | 3.70
|Granted                       |  | 148,579       |   |  | $                                             | 3.87
|Forfeited                     |  | (186,870      | ) |  | $                                             | 3.70
|                              |  |               |   |  |                                               |     
|Unvested as of July 31, 2009  |  | 148,579       |   |  | $                                             | 3.87
|                              |  |               |   |  |                                               |     

(iii) Time-Based Vesting Shares of Restricted Stock

The fair value of each TVRS grant is measured by the NYSE closing price of the Companys common stock on the date of grant. Compensation expense
related to the fair value of TVRSs is recognized on a straight-line basis over the requisite service period based on those restricted stock grants that are expected to ultimately vest. One third of the shares of restricted stock vest on each of the
first three anniversaries of the date of grant, subject to continued employment on the vesting date, except in the case of the Companys Chief Executive Officer, whereby one half of the shares of restricted stock vest on each of the first two
anniversaries of the date of grant, subject to continued employment on the vesting date.

The Company incurred share-based compensation
expense of $0.8 million and $0.2 million in the three months ended July 31, 2009 and 2008, respectively, in connection with the vesting of TVRSs. The share-based compensation in the three months ended July 31, 2009 included expense of
$0.55 million related to the accelerated vesting of 54,616 TVRSs attributed to the departure of the Companys former Chief Executive Officer in June 2009.

The following table summarizes information about TVRS activity during the three months ended July 31, 2009:



|                                 |  |               |   |  |                                      |      
|-------------------------------- |  | ------------- | - |  | ------------------------------------ | -----
|                                 |  | NumberofTVRSs |   |  | Weighted AverageGrant DateFair Value
|Outstanding as of April 30, 2009 |  | 208,068       |   |  | $                                    | 13.41
|Granted                          |  | 121,504       |   |  | $                                    | 5.56 
|Vested                           |  | (105,740      | ) |  | $                                    | 14.08
|Forfeited                        |  | (1,113        | ) |  | $                                    | 12.72
|                                 |  |               |   |  |                                      |      
|Outstanding as of July 31, 2009  |  | 222,719       |   |  | $                                    | 8.81 
|                                 |  |               |   |  |                                      |      

As of July 31, 2009, outstanding TVRSs had an aggregate intrinsic value of $1.3 million.

As of July 31, 2009, there was $1.9 million of total unrecognized compensation cost related to unvested TVRSs, which is expected to
be recognized over a weighted average period of 1.6 years.

(iv) Performance-Based Vesting Shares of Restricted Stock

In July 2009, the Company granted 96,640 PVRSs to certain executives with a grant date fair value of $5.95 per share. These PVRSs will vest after three
years provided that the Company achieves a pre-determined EBITDA target for fiscal 2012. Additionally, vesting is subject to the executive being employed by the Company



11



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at the time the Company achieves such financial target in fiscal 2012, except in the case of the Companys Chief Executive Officer, who needs only to
have been employed through the term of his employment agreement, which ends on June 4, 2011.

No compensation expense related to the
July 2009 PVRS grant was recorded in the three months ended July 31, 2009. If, and when, the Company determines it is probable that the performance condition will be achieved, compensation expense will be recognized cumulatively in such period
from the date of grant through the date of the change in estimate for the awards under which the requisite service period has been rendered. The remaining unrecognized compensation expense for those awards would be recognized prospectively over the
remaining requisite service period.

The following table summarizes information about PVRS activity during the three months ended
July 31, 2009:



|                                 |  |               |   |  |                                      |      
|-------------------------------- |  | ------------- | - |  | ------------------------------------ | -----
|                                 |  | NumberofPVRSs |   |  | Weighted AverageGrant DateFair Value
|Outstanding as of April 30, 2009 |  | 143,053       |   |  | $                                    | 14.50
|Granted                          |  | 96,640        |   |  | $                                    | 5.95 
|Forfeited                        |  | (143,053      | ) |  | $                                    | 14.50
|                                 |  |               |   |  |                                      |      
|Outstanding as of July 31, 2009  |  | 96,640        |   |  | $                                    | 5.95 
|                                 |  |               |   |  |                                      |      

On June 30, 2009, the Compensation Committee of the Board of Directors determined that the
performance criteria required for vesting of the July 2008 award had not been achieved and, as a result, all such outstanding PVRSs were forfeited.

As of July 31, 2009, outstanding PVRSs had an aggregate intrinsic value of $0.6 million.

(v) Restricted Stock Units

The Company incurred share-based compensation expense of $0.1 million in each of the three months ended July 31, 2009 and
2008, respectively, in connection with the issuance of fully vested and non-forfeitable RSUs to certain non-employee directors that are payable in shares of the Companys common stock as a one-time distribution upon termination of services. In
the three months ended July 31, 2009, the Company granted 14,272 RSUs at a grant price of $6.05 resulting in 116,487 RSUs outstanding as of July 31, 2009 with a weighted average grant price of $16.38.

6. LEASE TERMINATION ACCRUAL

As part of an overall
effort to optimize company-owned store locations and improve profitability, in fiscal 2009, approximately 303 under-performing store locations were either closed, or the Company decided to exit them in connection with its April 2009 restructuring
action.

The following table summarizes the aggregate activity in the first quarter of fiscal 2010 in connection with the Companys
lease termination accrual:



|                                                          |  |                |        |  
|--------------------------------------------------------- |  | -------------- | ------ | -
|                                                          |  | (In Thousands) |       
|Accrued lease termination balance as of April 30, 2009(a) |  | $              | 4,476  |  
|Additional accruals                                       |  |                | 23     |  
|Adjustments(b)                                            |  |                | (203   | )
|Cash payments(c)                                          |  |                | (1,394 | )
|                                                          |  |                |        |  
|Accrued lease termination balance as of July 31, 2009(d)  |  | $              | 2,902  |  
|                                                          |  |                |        |  



12



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|(a) | The balance as of April 30, 2009 consisted of $3.2 million in accounts payable and accrued liabilities and $1.3 million in other non-current liabilities in the accompanying
Condensed Consolidated Balance Sheet
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | The decrease in the accrual was primarily the result of favorable negotiations with certain landlords to buy out of leases early.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(c) | Cash payments during the period consisted of $0.8 million in cash payments associated with early lease buyouts and $0.6 million associated with monthly contractual rental payments.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | The balance as of July 31, 2009 consisted of $1.6 million in accounts payable and accrued liabilities and $1.3 million in other non-current liabilities in the accompanying
Condensed Consolidated Balance Sheet
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company expects to continue to adjust the fair value of this lease termination
liability due to the passage of time as an increase in the liability and as an operating expense (accretion) over the remaining terms of the leases.

7.
SEGMENT INFORMATION

The Company manages and evaluates the operating results of the business in two segments:



| |  |  | Franchise operationsThis segment consists of the operations of the Companys franchise business, including royalty and marketing and advertising
revenues, financial product fees and other revenues; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Company-owned office operationsThis segment consists of the operations of the company-owned offices for which the Company recognizes service revenues
primarily for the preparation of tax returns.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management evaluates the operating results of each of its reportable
segments based upon revenues and income before income taxes. Intersegment transactions approximate fair market value and are not significant.



|                                 |  |                     |         |   |                               |   |         |                        |  |   |         |   |  |   |         |  
|-------------------------------- |  | ------------------- | ------- | - | ----------------------------- | - | ------- | ---------------------- |  | - | ------- | - |  | - | ------- | -
|                                 |  | FranchiseOperations |         |   | Company-OwnedOfficeOperations |   |         | Corporateand Other (a) |  |   | Total   |  
|                                 |  | (In thousands)      |        
|Three months ended July 31, 2009 |  |                     |         |   |                               |   |         |                        |  |   |         |   |  |   |         |  
|Revenues                         |  | $                   | 4,457   |   |                               | $ | 588     |                        |  | $ |        |   |  | $ | 5,045   |  
|                                 |  |                     |         |   |                               |   |         |                        |  |   |         |   |  |   |         |  
|Loss before income taxes         |  | $                   | (8,496  | ) |                               | $ | (8,431  | )                      |  | $ | (20,009 | ) |  | $ | (36,936 | )
|                                 |  |                     |         |   |                               |   |         |                        |  |   |         |   |  |   |         |  
|Three months ended July 31, 2008 |  |                     |         |   |                               |   |         |                        |  |   |         |   |  |   |         |  
|Revenues                         |  | $                   | 3,875   |   |                               | $ | 412     |                        |  | $ |        |   |  | $ | 4,287   |  
|                                 |  |                     |         |   |                               |   |         |                        |  |   |         |   |  |   |         |  
|Loss before income taxes         |  | $                   | (11,729 | ) |                               | $ | (11,864 | )                      |  | $ | (10,469 | ) |  | $ | (34,062 | )
|                                 |  |                     |         |   |                               |   |         |                        |  |   |         |   |  |   |         |  



|(a) | Corporate and other expenses include unallocated corporate overhead supporting both segments including legal, finance, human resources, real estate facilities and strategic
development activities, as well as share-based compensation and financing costs.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8. COMMITMENTS AND CONTINGENCIES

The Company is required to provide various types of surety bonds, such as tax return preparer bonds and performance bonds, which are irrevocable
undertakings by the Company to make payment in the event the Company fails to perform certain of its obligations to third parties. These bonds vary in duration although most are issued and outstanding from one to two years. If the Company fails to
perform under its obligations, the maximum potential payment under these surety bonds is $2.5 million as of July 31, 2009. Historically, no surety bonds have been drawn upon and there is no future expectation that these surety bonds will be
drawn upon.



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The Company, through TSA, provides customers of company-owned offices with a
guarantee in connection with the preparation of tax returns that may require in certain circumstances the Company to pay penalties and interest assessed by a taxing authority. The Company had a liability of $0.1 million as of July 31, 2009 for
the fair value of the obligation undertaken in issuing the guarantee. Such liabilities were included in accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets. In addition, the Company may be required to pay additional
tax (or refund shortfall) assessed by a taxing authority for all customers that purchase the Companys Gold Guarantee®
product. The Company may incur a liability to the extent that the total customer Gold Guarantee claims exceed maximum thresholds pursuant to the contract between the Company and the third party program provider. There have been no amounts paid by
the Company under this arrangement in the past relating to such potential liability and the Company does not expect to be required to make payment in the future.

The transitional agreement with Cendant provides that the Company continues to indemnify Cendant and its affiliates against potential losses based on, arising out of or resulting from, among other things, claims by
third parties relating to the ownership or the operation of the Companys assets or properties and the operation or conduct of the Companys business, whether in the past or future, including any currently pending litigation against
Cendant and any claims arising out of or relating to the Companys IPO. Additionally, the transitional agreement provides that the Company is responsible for the respective tax liabilities imposed on or attributable to the Company and any of
the Companys subsidiaries relating to all taxable periods. Accordingly, the Company is required to indemnify Cendant and its subsidiaries against any such tax liabilities imposed on or attributable to the Company and any of the Companys
subsidiaries. While there have not been any indemnification claims against the Company under these arrangements since the Companys IPO, the Company could be obligated to make payments in the future.

The Company routinely enters into contracts that include indemnification provisions that serve to protect the contracting parties from losses such
parties suffer as a result of acts or omissions of the Company and/or its affiliates, including in particular indemnity obligations relating to (a) tax, legal and other risks related to the sale of businesses or the provision of services;
(b) indemnification of the Companys directors and officers; (c) indemnities of various lessors in connection with facility leases for certain claims arising from such facility or lease; and (d) third-party claims, including
those from franchisees, relating to various arrangements in the normal course of business. There is no stated maximum payment related to these indemnities, and the term of indemnities may vary and in many cases is limited only by the applicable
statute of limitations. The likelihood of any claims being asserted against the Company and the ultimate liability related to any such claims, if any, is difficult to predict. In addition, from time to time, the Company enters into other indemnity
agreements in connection with the operations of the business.

Legal Proceedings

On September 26, 2006, Willie Brown brought a purported class action complaint against the Company in the Ohio Court of Common Pleas, Cuyahoga
County, on behalf of Ohio customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Ohios Credit Services Organization Act, and for alleged unfair and deceptive acts in violation of Ohios Consumer
Sales Practices Act, and seeking damages and injunctive relief. On November 10, 2008, the Company filed a motion to dismiss, or alternatively, to stay proceedings and to compel arbitration. On May 5, 2009, the Court granted the
Companys motion to stay proceedings and to compel individual arbitration of Plaintiffs claims, and denied the Companys motion to dismiss. Plaintiff subsequently filed a notice of appeal of the Courts decision to stay
proceedings and to compel arbitration. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On
October 30, 2006, Linda Hunter (now substituted by Christian Harper and Elizabeth Harper as proposed class representatives) brought a purported class action complaint against the Company in the United States District Court, Southern District of
West Virginia, on behalf of West Virginia customers who obtained RALs facilitated by the Company, seeking damages for an alleged breach of fiduciary duty, for alleged breach of West Virginias Credit Service Organization Act, for alleged breach
of contract, and for alleged unfair or deceptive



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acts or practices in connection with the Companys RAL facilitation activities. On March 13, 2008, the Court granted the Companys partial
motion for summary judgment on Plaintiffs breach of contract claim. On July 15, 2008, the Company answered the first amended complaint. On February 10, 2009, Plaintiffs filed a motion to certify a class. The Company opposed that
motion. On February 11, 2009, Plaintiffs filed a motion for partial summary judgment. On February 11, 2009, the Company filed a motion for summary judgment. On March 6, 2009, the Company opposed Plaintiffs motion for partial
summary judgment. On April 7, 2009, Plaintiffs filed a motion seeking the certifications of four legal questions to the West Virginia Supreme Court of Appeals. Decisions by the Court on those motions are currently pending. The case is in its
pretrial stage. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On April 20, 2007, Brent
Wooley brought a purported class action complaint against the Company and certain unknown franchisees in the United States District Court, Northern District of Illinois. The complaint, which was subsequently amended, was brought on behalf of
customers who obtained tax return preparation services that allegedly included false deductions without support by the customer that resulted in penalties being assessed by the IRS against the taxpayer for violations of the Illinois Consumer Fraud
and Deceptive Practices Act, and the Racketeering and Corrupt Organizations Act, and alleging unjust enrichment and breach of contract, seeking compensatory and punitive damages, restitution, and attorneys fees. The alleged violations of the
Illinois Consumer Fraud and Deceptive Practices Act relate to representations regarding tax return preparation, Basic Guarantee and Gold Guarantee coverage and denial of Gold Guarantee claims. Following dispositive motions, on December 24,
2008, the Company answered Plaintiffs fourth amended complaint with respect to the remaining breach of contract claim. The case is in its discovery and pretrial stage. On August 18, 2009, Plaintiff filed a motion seeking leave to file a
Fifth Amended Complaint. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On January 17,
2008, an attorney with the New York State Division of Human Rights (the Division) filed with the Division a Division-initiated administrative complaint against the Company for allegedly marketing loan products to individuals in New York
based on their race and military status in violation of New York States Human Rights Law, and seeking injunctive and other relief. On February 19, 2008, the Company filed a response to the complaint with the Division. On June 30,
2008, the Division issued a determination of probable cause on the matter and determined that it had jurisdiction. The matter will be set for an administrative hearing. The Company believes that no jurisdiction exists, that it has meritorious
defenses and is contesting this matter vigorously. On October 15, 2008, the Company filed a Complaint in the United States District Court, Southern District of New York against the Commissioner of the Division for injunctive and declaratory
relief. On October 20, 2008, the Company filed a motion for a preliminary injunction against the Commissioner of the Division to prevent the Division from proceeding with its administrative complaint. At the request of the Division, the parties
had entered into a number of stipulations to extend the Divisions response date to the Complaint until August 10, 2009 while maintaining thestatus quo in the administrative complaint process to permit the parties to engage in
further discussions regarding these matters. Due to these ongoing discussions, on June 25, 2009, at the request of the Court, the Company agreed to withdraw its motion for a preliminary injunction without prejudice and with the
understanding that the Company could refile its motion at a future date. On August 11, 2009, the Division filed a motion to dismiss the Complaint. The parties have submitted a stipulation to the Court that provides for maintaining the status
quo with respect to the administrative proceeding. The Company intends to litigate this matter vigorously.

On February 8, 2008,
H&R Block Tax Services, Inc. brought a patent infringement action against the Company in the U.S. District Court for the Eastern District of Texas alleging infringement of two patents relating to issuing spending vehicles to an individual in
exchange for the assignment of at least a portion of a payment that the individual is entitled to receive from a governmental agency, and seeking damages and injunctive relief. On April 3, 2008, the Company filed an answer denying infringement
and asserting counterclaims of non-infringement and invalidity. On November 14, 2008, Plaintiff moved for leave to amend the action alleging infringement of a third patent relating to providing a loan to a taxpayer prior to the end of the
current year, the loan amount being based on the taxpayers estimated tax refund amount for such year. On December 23, 2008,



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the Court granted Plaintiffs motion for leave to amend. On January 12, 2009, the Company answered the amended complaint denying infringement
and asserting counterclaims of non-infringement and invalidity. On March 13, 2009, the Company filed a motion for summary judgment of invalidity of all asserted patent claims. A decision on that motion is currently pending. On
August 28, 2009, the Company filed a motion for summary judgment of indefiniteness of certain of the asserted patent claims. The Court has set a trial date of May 10, 2010. The case is in its discovery and pretrial phase. The
Company believes it has meritorious defenses and is contesting this matter vigorously.

On February 16, 2009, Alicia Gomez brought a
purported class action complaint against the Company in the Circuit Court of Maryland, Montgomery County, on behalf of Maryland customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Marylands Credit
Services Businesses Act, and for an alleged violation of Marylands Consumer Protection Act, and seeking damages and injunctive relief. On March 18, 2009, the Company filed a motion to dismiss. On June 18, 2009, the Court granted the
Companys motion to dismiss in all respects, dismissing the Plaintiffs complaint. On July 17, 2009, Plaintiff filed a notice of appeal. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On April 14, 2009, Quiana Norris brought a purported class action complaint against the Company in the Superior Court of Indiana,
Marion County, on behalf of Indiana customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Indianas Credit Services Organization Act, and seeking damages and injunctive relief. On May 1, 2009, the
Company filed a notice removing the complaint to the United States District Court for the Southern District of Indiana. On June 8, 2009 the Company filed a motion to dismiss. A decision by the Court is currently pending. The Company believes it
has meritorious defenses and is contesting this matter vigorously.

On April 29, 2009, Sherita Fugate brought a purported class action
complaint against the Company in the Circuit Court of Missouri, Jackson County, on behalf of Missouri customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Missouris Credit Services Organization Act, for
an alleged violation of Missouris Merchandising Practices Act, and seeking damages and injunctive relief. On May 29, 2009, the Company filed a motion to dismiss. A decision by the Court is currently pending. The Company believes it has
meritorious defenses and is contesting this matter vigorously.

The Company is from time to time subject to other legal proceedings and
claims in the ordinary course of business, including vicarious liability matters more properly alleged against other parties (generally, the Companys franchisees), none of which the Company believes is likely to have a material adverse effect
on its financial position, results of operations or cash flows.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion should be read in conjunction with the consolidated financial statements, notes to the consolidated financial statements and
Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on July 2, 2009.

FORWARD-LOOKING STATEMENTS

Certain statements in
this report, including, but not limited to, those contained in Part I. Item 1Financial Statements and notes thereto, Part I. Item 2Managements Discussion and Analysis of Financial Condition and
Results of Operations and Part II. Item 1Legal Proceedings included in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect
to the financial condition, results of operations, cash flows, plans, objectives, future performance and business of Jackson Hewitt Tax Service Inc. All statements in this report, other than statements that are purely historical, are
forward-looking statements. Forward-looking statements include statements preceded by, followed by or that otherwise include the words believes, expects, anticipates, intends, projects,
estimates, plans, may increase, may fluctuate and similar expressions or future or conditional verbs such as will, should, would, may, and
could. These forward-looking statements involve risks and uncertainties.

Actual results may differ materially from those
contemplated (expressed or implied) by such forward-looking statements, because of, among other things, the following potential risks and uncertainties: our ability to execute on our strategic plan and reverse our declining profitability, improve
our distribution system or reduce our cost structure; our ability to successfully attract and retain key personnel; government initiatives that simplify tax return preparation or reduce the need for a third party tax return preparer, improve the
timing and efficiency of processing tax returns or decrease the number of tax returns filed; delays in the passage of tax laws and their implementation; the success of our franchised offices; our responsibility to third parties, regulators or courts
for the acts of, or failures to act by, our franchisees or their employees; government legislation and regulation of the tax return preparation industry and related financial products, including refund anticipation loans, and the failure by us, or
the financial institutions which provide financial products to our customers, to comply with such legal and regulatory requirements; the effectiveness of our tax return preparation compliance program; increased regulation of tax return preparers;
our exposure to litigation; the failure of our insurance to cover all the risks associated with our business; our ability to protect our customers personal and financial information; the effectiveness of our marketing and advertising programs
and franchisee support of these programs; disruptions in our relationships with our franchisees; changes in our relationships with financial product providers that could reduce the revenues we derive from our agreements with these
financial institutions as well as affect our customers ability to obtain financial products through our tax return preparation offices; changes in our relationship with Wal-Mart or other large retailers and shopping malls that could affect our
growth and profitability; the seasonality of our business and its effect on our stock price; competition from tax return preparation service providers, volunteer organizations and the government; our reliance on technology systems and electronic
communications to perform the core functions of our business; our ability to protect our intellectual property rights or defend against any third party allegations of infringement by us; our reliance on cash flow from subsidiaries; our compliance
with credit facility covenants; our exposure to increases in prevailing market interest rates; our quarterly results not being indicative of our performance as a result of tax season being relatively short and straddling two quarters; certain
provisions that may hinder, delay or prevent third party takeovers; changes in accounting policies or practices and our ability to maintain an effective system of internal controls; impairment charges related to goodwill; and the effect of market
conditions, general conditions in the tax return preparation industry or general economic conditions.

Other factors and assumptions not
identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also



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cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our
control. As a result of these factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events
or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any
forward-looking statements, whether as a result of new information, future events or otherwise.

OVERVIEW

We manage and evaluate the operating results of our business in two segments:



| |  |  | Franchise operations: This segment consists of the operations of our franchise business, including royalty and marketing and advertising revenues, financial product
fees and other revenues; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Company-owned office operations: This segment consists of the operations of our company-owned offices for which we recognize service revenues primarily for the
preparation of tax returns.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Jackson Hewitt Tax Service Inc. is the second largest paid individual tax return preparer in
the United States based upon the number of individual tax returns prepared and filed with the Internal Revenue Service (IRS). In fiscal 2009, our network consisted of approximately 6,600 franchised and company-owned offices and prepared
2.96 million tax returns. We estimate our network prepared between 3-4% of all tax returns prepared by a paid tax return preparer. Our revenues consist of fees paid by our franchisees, service revenues earned at company-owned offices, and
financial product fees. Jackson Hewitt, the Company, we, our, and us are used interchangeably in this report to refer to Jackson Hewitt Tax Service Inc. and its subsidiaries,
appropriate to the context.

Seasonality of Operations

The tax return preparation business is highly seasonal, and we historically generate substantially all of our revenues during the period from January 1 through April 30. In fiscal 2009, we earned 95% of our
revenues during this period. We operate at a loss during the period from May 1 through December 31, during which we incur costs associated with preparing for the upcoming tax season.

Financial Products Agreements

We earn
financial product fees primarily from financial institutions that collectively provide financial products, including Refund Anticipation Loans (RALs) and Assisted Refunds, to the entire network of Jackson Hewitt Tax Service offices
during the tax season in the third and fourth fiscal quarters. We have agreements under which these financial institutions pay us a fixed fee to offer, process and administer such financial products through Jackson Hewitt Tax Service locations as
well as variable payments upon the attainment of certain contractual growth thresholds. These Agreements expire on October 31, 2010.

We have recently learned of potential structural changes under consideration with respect to the offering of RAL and Assisted Refund products by certain of our bank partners, including lowering the APR in the RAL program. These changes,
which could go into effect as early as the 2010 Tax Season, have not been finalized. If these changes were to be implemented, such changes would likely impact the economics to us under these programs. If this were to occur, we would likely give
consideration to changes in our client pricing structure with the goal to effectively offset the potential reduction in economics from these programs.

Walmart Update

In March 2009, we entered into an agreement with Walmart that grants us the exclusive right to
provide tax preparation services within Wal-Mart stores during the 2010 and 2011 tax seasons. Under the expanded Walmart



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opportunity, we will be adding new Walmart store locations to our overall distribution network, and will work closely with Walmart to jointly drive tax
preparation customers and Walmart associates to our Walmart store locations.

We are in the process of finalizing Walmart store locations
and expect to be in approximately 1,500 to 1,750 Walmart stores in the 2010 tax season. This effort will likely be completed by the end of September 2009. The range in Walmart store locations is somewhat below the previously anticipated number of
Walmart store locations, but still provides for a solid incremental growth opportunity. The lower Walmart store count is the result of Walmarts initiation of a remodeling effort in its smaller stores, which has resulted in our inability to
fit into certain Walmart store locations. We are continuing to work with Walmart to optimize the opportunity to operate in these smaller stores in 2010.

Management Consultant Engagement Concluded

In August 2009, the management consulting firm
that we retained to work jointly with us to more fully understand the sources of our weak performance in the 2009 tax season concluded their engagement. Some of their findings were not entirely new to us, but the relative impact on our business and
what we needed to do differently was more clearly defined. The following areas represent the principal initiatives we will focus our attention on and we believe will result in improved operational and financial performance in the 2010 tax season:



| |  |  | Put into practice a renewed focus on our core business  tax return preparation with a keen emphasis on client satisfaction and retention;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Improve tax return preparer training and retention;
| | - |  | ---------------------------------------------------



| |  |  | Effectively execute a more impactful pre-season financial product;
| | - |  | ------------------------------------------------------------------



| |  |  | Significantly enhance our overall marketing program with local marketing effectiveness at the forefront;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Employ a more effective pricing strategy;
| | - |  | -----------------------------------------



| |  |  | Improve the performance of our company-owned office operations segment;
| | - |  | -----------------------------------------------------------------------



| |  |  | Effectively execute on our exclusive Walmart arrangement;
| | - |  | ---------------------------------------------------------



| |  |  | Successfully launch our first-ever online tax return preparation product; and
| | - |  | -----------------------------------------------------------------------------



| |  |  | Achieve a more collaborative partnership with our franchise community.
| | - |  | ----------------------------------------------------------------------

We believe this strategy begins with getting back to basics  our core business of providing quality, accurate tax return preparation  and
doing so with a focus on meeting and exceeding the needs of our clients in terms of pricing, value, and their overall experience at Jackson Hewitt.

Management Change

On June 4, 2009, the employment of Michael C. Yerington, formerly our Chief Executive Officer
and President, was terminated. Upon termination, Mr. Yerington also resigned as a director of our Board. On the same day, our Board of Directors announced that Harry W. Buckley was appointed Chief Executive Officer, President and a director on
our Board.



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RESULTS OF OPERATIONS

Our consolidated results of operations are set forth below and are followed by a more detailed discussion of each of our business segments, as well as a detailed discussion of certain corporate and other expenses.

Condensed Consolidated Results of Operations



|                                                      |  |                            |         |   |      |   |         |  
|----------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                      |  | Three Months EndedJuly 31, |        
|                                                      |  | 2009                       |         |   | 2008 |  
|                                                      |  | (in thousands)             |        
|Revenues                                              |  |                            |         |   |      |   |         |  
|Franchise operations revenues:                        |  |                            |         |   |      |   |         |  
|Royalty                                               |  | $                          | 556     |   |      | $ | 627     |  
|Marketing and advertising                             |  |                            | 245     |   |      |   | 277     |  
|Financial product fees                                |  |                            | 3,320   |   |      |   | 2,622   |  
|Other                                                 |  |                            | 336     |   |      |   | 349     |  
|Service revenues from company-owned office operations |  |                            | 588     |   |      |   | 412     |  
|                                                      |  |                            |         |   |      |   |         |  
|Total revenues                                        |  |                            | 5,045   |   |      |   | 4,287   |  
|                                                      |  |                            |         |   |      |   |         |  
|Expenses                                              |  |                            |         |   |      |   |         |  
|Cost of franchise operations                          |  |                            | 7,488   |   |      |   | 8,612   |  
|Marketing and advertising                             |  |                            | 3,015   |   |      |   | 4,169   |  
|Cost of company-owned office operations               |  |                            | 6,996   |   |      |   | 9,307   |  
|Selling, general and administrative                   |  |                            | 16,726  |   |      |   | 10,448  |  
|Depreciation and amortization                         |  |                            | 3,325   |   |      |   | 3,207   |  
|                                                      |  |                            |         |   |      |   |         |  
|Total expenses                                        |  |                            | 37,550  |   |      |   | 35,743  |  
|                                                      |  |                            |         |   |      |   |         |  
|Loss from operations                                  |  |                            | (32,505 | ) |      |   | (31,456 | )
|Other income/(expense):                               |  |                            |         |   |      |   |         |  
|Interest and other income                             |  |                            | 598     |   |      |   | 400     |  
|Interest expense                                      |  |                            | (5,029  | ) |      |   | (3,006  | )
|                                                      |  |                            |         |   |      |   |         |  
|Loss before income taxes                              |  |                            | (36,936 | ) |      |   | (34,062 | )
|Benefit from income taxes                             |  |                            | 15,096  |   |      |   | 13,518  |  
|                                                      |  |                            |         |   |      |   |         |  
|Net loss                                              |  | $                          | (21,840 | ) |      | $ | (20,544 | )
|                                                      |  |                            |         |   |      |   |         |  

Given the seasonal nature of the tax return preparation business, approximately 2% of the total
tax returns prepared by our network in fiscal 2009 were prepared in the first two fiscal quarters. Consequently, the number of tax returns prepared during the first two fiscal quarters and the corresponding revenues are not indicative of the overall
trends of our business for the fiscal year. Most tax returns prepared in the first two fiscal quarters are related to either tax returns for which filing extensions had been applied for by the customer or amendments to previously filed tax returns.

Three Months Ended July 31, 2009 as Compared to Three Months Ended July 31, 2008

Total Revenues

Total revenues increased $0.8 million,
or 18%, primarily due to higher financial product fees earned in connection with our prepaid debit card program. Please see Franchise Results of Operations and Company-Owned Office Results of Operations for additional highlights.



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Total Expenses

Total operating expenses increased $1.8 million, or 5%. Highlights were as follows:

Cost of franchise
operations: Cost of franchise operations decreased $1.1 million, or 13%, primarily due to lower compensation-related costs of $0.9 million as a result of fiscal 2009 workforce reductions and other employee departures.

Marketing and Advertising: Marketing and advertising expenses decreased $1.2 million, or 28%, primarily due to lower sponsorship-related expenses
of $0.8 million and lower media expense of $0.4 million.

Cost of company-owned office operations: Cost of company-owned office
operations decreased $2.3 million, or 25%, primarily due to lower lease termination and related expenses of $1.6 million, and lower labor costs of $0.4 million and lower storefront occupancy costs of $0.3 million due to fewer locations as a
result of last years lease termination actions.

Selling, general and administrative: Selling, general and administrative
expenses increased $6.3 million, or 60%, primarily due to (i) a $4.3 million termination charge related to the departure of our former Chief Executive Officer in June 2009; (ii) higher external legal fees of $1.7 million; (iii) the
absence of a $1.5 million insurance recovery related to a legal settlement; and (iv) higher management consulting fees of $1.4 million.

The overall increase in selling, general and administrative expenses was partially offset by (i) lower employee termination expenses (other than in connection with the termination of our former Chief Executive Officer in June 2009) of
$1.4 million; (ii) lower share-based compensation of $0.6 million; and (iii) lower compensation-related expenses of $0.5 million as a result of the fiscal 2009 workforce reductions and other employee departures.

Other income (expense)

Interest expense:
Interest expense increased $2.0 million, or 67%, primarily due to the higher credit spread under our amended credit facility, and higher amortization of deferred financing costs of $0.4 million partially offset by lower market interest rates. Our
average cost of debt was 7.8% and 4.7% in the first quarter of fiscal 2010 and first quarter of fiscal 2009, respectively.



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##### Table of Contents

Segment Results and Corporate and Other

Franchise Operations



|                                    |  |                            |        |   |      |   |         |  
|----------------------------------- |  | -------------------------- | ------ | - | ---- | - | ------- | -
|                                    |  | Three Months EndedJuly 31, |       
|                                    |  | 2009                       |        |   | 2008 |  
|                                    |  | (in thousands)             |       
|Results of Operations:              |  |                            |        |   |      |   |         |  
|Revenues                            |  |                            |        |   |      |   |         |  
|Royalty                             |  | $                          | 556    |   |      | $ | 627     |  
|Marketing and advertising           |  |                            | 245    |   |      |   | 277     |  
|Financial product fees              |  |                            | 3,320  |   |      |   | 2,622   |  
|Other                               |  |                            | 336    |   |      |   | 349     |  
|                                    |  |                            |        |   |      |   |         |  
|Total revenues                      |  |                            | 4,457  |   |      |   | 3,875   |  
|                                    |  |                            |        |   |      |   |         |  
|Expenses                            |  |                            |        |   |      |   |         |  
|Cost of operations                  |  |                            | 7,488  |   |      |   | 8,612   |  
|Marketing and advertising           |  |                            | 2,919  |   |      |   | 4,108   |  
|Selling, general and administrative |  |                            | 851    |   |      |   | 1,067   |  
|Depreciation and amortization       |  |                            | 2,293  |   |      |   | 2,193   |  
|                                    |  |                            |        |   |      |   |         |  
|Total expenses                      |  |                            | 13,551 |   |      |   | 15,980  |  
|                                    |  |                            |        |   |      |   |         |  
|Loss from operations                |  |                            | (9,094 | ) |      |   | (12,105 | )
|Other income/(expense):             |  |                            |        |   |      |   |         |  
|Interest and other income           |  |                            | 598    |   |      |   | 376     |  
|                                    |  |                            |        |   |      |   |         |  
|Loss before income taxes            |  | $                          | (8,496 | ) |      | $ | (11,729 | )
|                                    |  |                            |        |   |      |   |         |  

Three Months Ended July 31, 2009 as Compared to Three Months Ended July 31, 2008

Total Revenues

Total revenues
increased $0.6 million, or 15%. Highlights were as follows:

Financial product fees:Financial product fees increased $0.7 million,
or 27%, principally due to higher financial product fees earned from the financial institution that issues and manages our prepaid debit card program and provides line of credit products related to the card.

Other revenues: Other revenues decreased slightly. We did not sell any territories in the first quarter of fiscal 2010 as compared to the sale of
four territories in the first quarter of fiscal 2009. We believe the absence of territory sales was due in part to the ongoing difficult economic environment.

Total Expenses

Total operating expenses decreased $2.4 million, or 15%. Highlights were as
follows:

Cost of operations: Cost of operations decreased as discussed in the Condensed Consolidated Results of Operations.

Marketing and Advertising: Marketing and advertising expenses decreased $1.2 million, or 29%, as discussed in the Condensed
Consolidated Results of Operations.

Selling, general and administrative: Selling, general and administrative expenses decreased
$0.2 million, or 20%, primarily due to lower compensation-related expenses due to workforce reductions.



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##### Table of Contents

Company-Owned Office Operations



|                                    |  |                            |        |   |      |   |         |  
|----------------------------------- |  | -------------------------- | ------ | - | ---- | - | ------- | -
|                                    |  | Three Months EndedJuly 31, |       
|                                    |  | 2009                       |        |   | 2008 |  
|                                    |  | (in thousands)             |       
|Results of Operations:              |  |                            |        |   |      |   |         |  
|Revenues                            |  |                            |        |   |      |   |         |  
|Service revenues from operations    |  | $                          | 588    |   |      | $ | 412     |  
|                                    |  |                            |        |   |      |   |         |  
|Expenses                            |  |                            |        |   |      |   |         |  
|Cost of operations                  |  |                            | 6,996  |   |      |   | 9,307   |  
|Marketing and advertising           |  |                            | 96     |   |      |   | 61      |  
|Selling, general and administrative |  |                            | 895    |   |      |   | 1,894   |  
|Depreciation and amortization       |  |                            | 1,032  |   |      |   | 1,014   |  
|                                    |  |                            |        |   |      |   |         |  
|Total expenses                      |  |                            | 9,019  |   |      |   | 12,276  |  
|                                    |  |                            |        |   |      |   |         |  
|Loss from operations                |  |                            | (8,431 | ) |      |   | (11,864 | )
|                                    |  |                            |        |   |      |   |         |  
|Loss before income taxes            |  | $                          | (8,431 | ) |      | $ | (11,864 | )
|                                    |  |                            |        |   |      |   |         |  

Three Months Ended July 31, 2009 as Compared to Three Months Ended July 31, 2008

Total Expenses

Total operating
expenses decreased $3.3 million, or 27%. Highlights were as follows:

Cost of operations: Cost of operations decreased as
discussed in the Condensed Consolidated Results of Operations.

Selling, general and administrative: Selling, general and
administrative decreased $1.0 million, or 53%, primarily due to lower employee termination expenses of $0.7 million.

Corporate and Other

Corporate and other expenses include unallocated corporate overhead supporting both segments, including legal, finance, human
resources, real estate facilities and strategic development activities, as well as share-based compensation and financing costs.



|                              |  |                            |         |   |      |   |         |  
|----------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                              |  | Three Months EndedJuly 31, |        
|                              |  | 2009                       |         |   | 2008 |  
|                              |  | (in thousands)             |        
|Expenses (a)                  |  |                            |         |   |      |   |         |  
|General and administrative    |  | $                          | 9,922   |   |      | $ | 7,155   |  
|Insurance settlement          |  |                            |        |   |      |   | (1,500  | )
|Employee termination expenses |  |                            | 4,256   |   |      |   | 414     |  
|Share-based compensation      |  |                            | 802     |   |      |   | 1,418   |  
|                              |  |                            |         |   |      |   |         |  
|Total expenses                |  |                            | 14,980  |   |      |   | 7,487   |  
|                              |  |                            |         |   |      |   |         |  
|Loss from operations          |  |                            | (14,980 | ) |      |   | (7,487  | )
|Other income/(expense):       |  |                            |         |   |      |   |         |  
|Interest and other income     |  |                            |        |   |      |   | 24      |  
|Interest expense              |  |                            | (5,029  | ) |      |   | (3,006  | )
|                              |  |                            |         |   |      |   |         |  
|Loss before income taxes      |  | $                          | (20,009 | ) |      | $ | (10,469 | )
|                              |  |                            |         |   |      |   |         |  



|(a) | Included in selling, general and administrative in the Condensed Consolidated Statements of Operations.
|--- | -------------------------------------------------------------------------------------------------------



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Three Months Ended July 31, 2009 as Compared to Three Months Ended July 31, 2008

Loss from operations

Loss from operations
increased $7.5 million, or 100%, primarily due to (i) a $4.3 million termination charge related to the departure of our former Chief Executive Officer in June 2009; (ii) higher external legal fees of $1.7 million; (iii) the
absence of a $1.5 million insurance recovery related to a legal settlement; and (iv) higher management consulting fees of $1.4 million.

The overall increase in selling, general and administrative expenses was partially offset by (i) lower share-based compensation of $0.6 million; (ii) lower employee termination expenses (other than in connection with the
termination of our former Chief Executive Officer in June 2009) of $0.5 million; and (iii) lower compensation-related expenses of $0.3 million as a result of fiscal 2009 workforce reductions and other employee departures.

Other income/(expense)

Interest expense:
Interest expense increased as discussed in the Condensed Consolidated Results of Operations.

Liquidity and Capital Resources

Historical Sources and Uses of Cash from Operations

Seasonality of Cash Flows

The tax return preparation business is highly seasonal resulting in substantially all of
our revenues and cash flow being generated during the period from January 1 through April 30. Following the tax season, from May 1 through December 31, we primarily rely on excess operating cash flow from the previous tax season
and our credit facility to fund our operating expenses and to reinvest in our business to support future growth. Given the nature of the franchise business model, our business is generally not capital intensive and has historically generated strong
operating cash flow from operations on an annual basis.

Sources and Uses of Cash

Operating activities

In the
three months ended July 31, 2009, we used $1.5 million more cash for operations as compared to the three months ended July 31, 2008 due to the following:



| |  |  | Payment of $2.8 million related to a previously accrued legal settlement;
| | - |  | -------------------------------------------------------------------------



| |  |  | Higher external legal fee payments of $1.6 million;
| | - |  | ---------------------------------------------------



| |  |  | Lease termination payments of $1.4 million; and
| | - |  | -----------------------------------------------



| |  |  | Higher employee termination payments of $1.3 million.
| | - |  | -----------------------------------------------------

Partially offsetting the factors discussed above were:



| |  |  | Lower employee payroll payments of $1.8 million primarily due to reductions in workforce in fiscal 2009 and other employee departures;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower income tax payments of $1.6 million primarily due to the decrease in operating income between years;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Lower bonus payments for full-time employees as we did not pay a bonus in the three months ended July 31, 2009 as compared to payments of $1.4 million in the
three months ended July 31, 2008 (accrued in fiscal 2008); and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower incentive payments to franchisees of $0.5 million.
| | - |  | --------------------------------------------------------



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Investing activities

In the three months ended July 31, 2009, we used $7.0 million less cash for investing activities as compared to the three months ended July 31,
2008 primarily due to a $10.4 reduction in cash paid for the acquisition of tax return preparation businesses partially offset by higher capital expenditures of $3.6 million, which included $2.3 million paid for kiosks in support of our expanded
Wal-Mart opportunity.

Financing activities

In the three months ended July 31, 2009, we received $1.4 million less cash from financing activities as compared to the three months ended July 31, 2008 primarily due to a reduction in net borrowings under
our credit facility of $8.0 million partially offset by lower dividend payments of $5.1 million.

Future Cash Requirements and Sources of Cash

Future Cash Requirements

Over the next 12 months, our primary cash requirements will be the funding of our operating activities (including contractual obligations and commitments), capital expenditure requirements, the funding of franchisee
office expansion, repaying debt outstanding, and making periodic interest payments on our debt outstanding, as described more fully below.



| |  |  | Marketing and advertisingWe receive marketing and advertising payments from franchisees to fund our budget for most of these expenses. Marketing and
advertising expenses include regional and local campaigns designed to increase brand awareness and attract both early season and late season customers. Such expenses are seasonal in nature and typically increase in our third and fourth fiscal
quarters when most of our revenues are earned.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Company-owned officesExpenses to operate our company-owned offices begin to increase during the third fiscal quarter and peak during the fourth fiscal
quarter primarily due to the labor costs related to the seasonal employees who provide tax return preparation services to our customers. We also continue to pursue selective acquisition opportunities for our company-owned office segment in
economically attractive, high growth markets adjacent to our current operations. Under the terms of the April 2009 Amended and Restated Credit Agreement, we are limited to annual acquisitions of $7.0 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lease termination paymentsWe anticipate spending approximately $2 million over the next 12 months in connection with lease terminations previously
accrued for (based on certain assumptions and if we are successful in buying out of these lease commitments).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Capital expendituresWe anticipate spending between $13 million and $16 million on capital expenditures over the remaining nine months of fiscal 2010,
nearly half of which will be related to kiosks purchased in support of our expanded Wal-Mart opportunity. The majority of the remaining capital expenditures are planned for information technology upgrades, including personnel related payments
capitalized for the development of internal use software.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Franchisee fundingWe anticipate providing franchisees with funding as we look to build a stronger distribution system.
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | Debt serviceAs of August 31, 2009, we had $289.0 million outstanding under our April 2009 Amended and Restated Credit Agreement. Under the terms
of the April 2009 amendment, a mandatory payment of $25.0 million is due in April 2010 in connection with the amortizing term loan of $225.0 million. Additionally, we anticipate having to spend between $17 million and $20 million on interest over
the remaining nine months of fiscal 2010.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | SeveranceWe anticipate spending approximately $2.8 million over the next 12 months in connection with executed separation agreements with certain
former executives, including $2.3 million due our former Chief Executive Officer in the third quarter of fiscal 2010.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Future Sources of Cash

We borrow against our amended credit facility to fund operations with increases particularly during the first nine months of the fiscal year. Beginning in
the fourth fiscal quarter, we expect our primary sources of cash to be royalty and marketing & advertising fees from franchisees, service revenues earned at company-owned offices, and financial product fees.

Critical Accounting Policies

Our Condensed
Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the amounts reported therein. Events that are outside of
our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our
consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our Condensed Consolidated Financial Statements were the most appropriate at that time. The following critical
accounting policies may affect reported results resulting in variations in our financial results both on an interim and fiscal year basis.

Goodwill

We have $418.7 million in goodwill as of July 31, 2009. The recoverability of goodwill is subject to an
annual impairment test based on the estimated fair value of our underlying businesses. We test goodwill for impairment annually in our fourth fiscal quarter, which coincides with the development of our five-year strategic operating plan.
Additionally, goodwill is tested for impairment when an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Significant management judgment is required in assessing whether goodwill is impaired. The carrying value of each reporting unit is determined by
specifically identifying and allocating all of our consolidated assets and liabilities to each reporting unit based on various methods we deemed reasonable. Fair value of each reporting unit is estimated using an income approach which discounts
future net cash flows to their present value at a rate that reflects the current return requirements of the market and risks inherent in the business. Factors affecting these future cash flows include, but are not limited to, markets and market
share, tax return sales volumes and prices, cost structure, and working capital changes. Estimates are also used for our weighted average cost of capital in discounting the projected future cash flows and our long-term growth rates. In addition to
the income approach, we corroborated our results with the use of market multiples for comparable companies to our reporting units.

If our
estimates of fair value change due to changes in our businesses or other factors, including if we are unable to mitigate the effect on our future cash flows in the 2010 tax season and beyond that may result from operating in a lower than originally
anticipated number of Walmart locations as well as a potential reduction in economics under certain of our financial product agreements, we may determine that an impairment charge is necessary. Such a non-cash charge would be equal in amount to the
excess of the carrying amount of a reporting units goodwill over its implied fair value and would be recognized as a component of operating income in the reporting period identified. We consider historical experience and all available
information at the time the fair value of our reporting units are estimated. However, fair values that could be realized in an actual transaction may differ from those used by us to evaluate the impairment of our goodwill. We concluded as of
April 30, 2009, which was the date of our most recent impairment test for goodwill, that the fair value exceeded the net carrying value for each of our reporting units, thereby indicating no impairment in fiscal 2009. There were not any changes
in our underlying business projections, as of July 31, 2009, that would cause us to change our conclusion from the April 30, 2009 evaluation.



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Other Indefinite-Lived Intangible Assets

We have $83.6 million in indefinite-lived intangible assets as of July 31, 2009. Other indefinite-lived intangibles, which consist of our trademarks
and reacquired rights under franchise agreements from acquisitions, are recorded at their fair value as determined through purchase accounting. Our trademarks are reviewed for impairment annually in our fourth fiscal quarter. Additionally, we review
the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. If the fair value of our trademarks is less than the carrying amount, an impairment loss would be recognized in
an amount equal to the difference.

For purposes of impairment testing, we estimate fair value using the relief from royalty approach,
which is an income based approach. We evaluated our estimates, which are based on historical experience and various other assumptions that are believed to be reasonable, including a fair royalty rate, revenues from our five-year strategic operating
plan, our weighted average cost of capital and long-term growth rate.

A significant downward revision in the present value of estimated
future cash flows for our trademarks could result in an impairment. Such a non-cash charge would be limited to the difference between the carrying amount of the intangible asset and its fair value and would be recognized as a component of operating
income in the reporting period identified. We concluded as of April 30, 2009, which was the date of our most recent impairment test for other indefinite-lived intangibles, that the fair value exceeded the carrying value of our trademarks,
thereby indicating no impairment in fiscal 2009. There were not any changes in our underlying business projections, as of July 31, 2009, that would cause us to change our conclusion from the April 30, 2009 evaluation.

ACCOUNTING STANDARD ISSUED BUT NOT YET ADOPTED

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles (FAS 168). This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes only two levels of U.S. generally accepted
accounting principles (GAAP)authoritative and non-authoritative. The FASB Accounting Standards Codification (the Codification) will become the source of authoritative, nongovernmental GAAP, except for rules and
interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. This standard is effective for
financial statements for interim or annual reporting periods ending after September 15, 2009. We will use the new guidelines and numbering system prescribed by the Codification when referring to GAAP beginning in our Quarterly Report on Form
10-Q for the period ended October 31, 2009. As the Codification was not intended to change or alter existing GAAP, the adoption of FAS 168 will have no impact on our Consolidated Financial Statements.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

We have entered into interest rate swap agreements with financial institutions to convert a notional amount of $100.0 million of floating-rate borrowings into fixed-rate debt, with the intention of mitigating the
economic impact of changing interest rates. Under these interest rate swap agreements, the first $50.0 million of which became effective in October 2005 and the remaining $50.0 million in November 2007, we receive a floating interest rate based on
the three-month LIBOR (in arrears) and pay a fixed interest rate averaging from 4.4% to 4.5%. These interest rate swap agreements were determined to be cash flow hedges in accordance with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities as amended by SFAS No. 137, No. 138 and No. 149.

In connection with extending the
maturity date under the amended and restated credit facility in October 2006, we entered into interest rate collar agreements to become effective after the initial interest rate swap



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agreements terminate. The interest rate collar agreements were entered into with financial institutions to limit the variability of expense/payments on
$50.0 million of floating-rate borrowings during the period from July 2010 to October 2011 to a range of 5.5% (the cap) and 4.6% (the floor). These interest rate collar agreements were determined to be cash flow hedges in accordance with SFAS
No. 133, as amended.

We have financial market risk exposure related primarily to changes in interest rates. As discussed above, we
attempt to reduce this risk through the utilization of derivative financial instruments. A hypothetical 1% change in the interest rate on our floating-rate borrowings outstanding as of July 31, 2009, excluding our $100.0 million of hedged
borrowings whereby we fixed the interest rate, at an average ranging from 4.4% to 4.5%, would result in an annual increase or decrease in income before income taxes of $1.7 million. The estimated increase or decrease is based upon the level of
variable rate debt as of July 31, 2009 and assumes no changes in the volume or composition of debt.



|Item 4. | Controls and Procedures
|------- | -----------------------

(a) Evaluation of
Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive
Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, our Chief Executive Officer and our Chief Financial
Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

(b) Changes in
Internal Control over Financial Reporting.

During the first quarter of fiscal 2010, there were no changes that materially affected, or are
reasonably likely to materially affect, our internal controls over financial reporting.

PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

See Part 1 
Item 1  Note 8  Commitments and Contingencies, to our Condensed Consolidated Financial Statements, which is incorporated by reference herein.



|Item 1A. | Risk Factors.
|-------- | -------------

During the three months ended
July 31, 2009, there were no material changes from the risk factors as previously disclosed in Item 1A. to Part 1 of our Annual Report on Form 10-K for the fiscal year ended April 30, 2009.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities.
|------- | ------------------------------------------------------------------------------------------------------

Unregistered Sales of Equity Securities and Use of Proceeds:

There were no unregistered sales of equity securities during the three months ended July 31, 2009.

Issuer Purchases of Equity Securities:

There were no issuer purchases of equity securities during the three months
ended July 31, 2009.



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|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

There were no
defaults upon senior securities during the three months ended July 31, 2009.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

There were no submissions of matters to a vote of security holders during the three months ended July 31, 2009.



|Item 5. | Other Information.
|------- | ------------------

There is no other information
to be disclosed.



|Item 6. | Exhibits.
|------- | ---------

Exhibits:We have filed the
following exhibits in connection with this report:



|      |  |                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------
|10.1* |  | Executive Employment Agreement between Jackson Hewitt Tax Service Inc. and Harry W. Buckley, effective as of July 13, 2009            
|      | 
|10.2* |  | Separation Agreement and General Release, dated July 14, 2009, by and between Jackson Hewitt Tax Service Inc. and Michael C. Yerington
|      | 
|31.1  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                   
|      | 
|31.2  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                   
|      | 
|32.1  |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                   
|      | 
|32.2  |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                   



|* | Management contract or compensatory plan
|- | ----------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on September 3, 2009.



JACKSON HEWITT TAX SERVICE INC.By:

/s/ HARRY W. BUCKLEYHarry W. Buckley President and Chief Executive
Officer (Principal Executive Officer)/s/ DANIEL P. OBRIENDaniel P. OBrien Executive Vice President and
Chief Financial Officer/s/ CORRADO DE PINTOCorrado De Pinto Vice President and Chief Accounting Officer




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