JTH - 1.31.2015 10Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
FORM 10-Q
 
ý      Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended January 31, 2015
 
OR
 
o         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 001-35588
 
Liberty Tax, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
27-3561876
(State of incorporation)
 
(IRS employer identification no.)
 
1716 Corporate Landing Parkway
Virginia Beach, Virginia 23454
(Address of principal executive offices)
 (757) 493-8855
(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 ý  No o
 
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ý  No o
 
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o
 
Accelerated filer x
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a 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 o  No ý
 
The number of shares outstanding of the registrant’s Class A common stock as of February 27, 2015 was 11,786,491.

The number of shares outstanding of the registrant's Class B common stock as of February 27, 2015 was 900,000.



LIBERTY TAX, INC.
 
Form 10-Q for the Period Ended January 31, 2015
 
Table of Contents
 
 
 
Page
 
 
Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I 

ITEM 1
FINANCIAL STATEMENTS 

3


LIBERTY TAX, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 2015 (unaudited), January 31, 2014 (unaudited), and April 30, 2014
(In thousands, except share data)
 
 
January 31, 2015
 
January 31, 2014
 
April 30, 2014
Assets
 
 

 
 
 
 

Current assets:
 
 

 
 
 
 

Cash and cash equivalents
 
$
3,150

 
$
3,742

 
$
46,080

Receivables:
 
 

 
 
 
 

Accounts receivable
 
50,020

 
43,749

 
43,122

Notes receivable
 
76,233

 
89,566

 
27,715

Interest receivable, net
 
3,989

 
4,887

 
415

Allowance for doubtful accounts - current
 
(5,760
)
 
(4,636
)
 
(5,596
)
Total current receivables, net
 
124,482

 
133,566

 
65,656

Assets held for sale
 
5,613

 
—

 
4,413

Income taxes receivable
 
17,434

 
8,449

 
—

Deferred income tax asset
 
7,574

 
4,442

 
4,058

Other current assets
 
18,371

 
18,527

 
5,325

Total current assets
 
176,624

 
168,726

 
125,532

Property, equipment, and software, net of accumulated depreciation of $12,467, $21,229, and $22,311, respectively
 
42,615

 
37,553

 
38,343

Notes receivable - non-current
 
29,389

 
24,419

 
17,078

Allowance for doubtful accounts - non-current
 
(1,339
)
 
(774
)
 
(1,254
)
Total non-current notes receivable, net
 
28,050

 
23,645

 
15,824

Goodwill
 
3,185

 
6,279

 
2,997

Other intangible assets, net of accumulated amortization
 
17,358

 
17,645

 
14,295

Other assets
 
3,973

 
2,124

 
1,772

Total assets
 
$
271,805

 
$
255,972

 
$
198,763

Liabilities and Stockholders’ Equity
 
 

 
 
 
 

Current liabilities:
 
 

 
 
 
 

Current installments of long-term debt
 
$
4,107

 
$
6,649

 
$
6,797

Accounts payable and accrued expenses
 
27,787

 
12,804

 
15,023

Due to ADs
 
14,980

 
15,390

 
18,236

Income taxes payable
 
—

 
—

 
9,676

Deferred revenue - current
 
6,094

 
6,362

 
6,051

Total current liabilities
 
52,968

 
41,205

 
55,783

Long-term debt, excluding current installments
 
21,778

 
22,337

 
21,691

Revolving credit facility
 
110,762

 
104,592

 
—

Deferred revenue - non-current
 
7,777

 
8,510

 
8,059

Deferred income tax liability
 
6,705

 
2,030

 
3,045

Total liabilities
 
199,990

 
178,674

 
88,578

Commitments and contingencies
 
 

 
 
 
 

Stockholders’ equity:
 
 

 
 
 
 

Class A preferred stock, $0.01 par value per share, 190,000 shares authorized, 0 shares issued and outstanding
 
—

 
—

 
—

Special voting preferred stock, $0.01 par value per share, 10 shares authorized, issued and outstanding
 
—

 
—

 
—

Class A common stock, $0.01 par value per share, 21,200,000 shares authorized, 11,785,705, 12,153,278, and 12,409,208 shares issued and outstanding, respectively
 
118

 
122

 
124

Class B common stock, $0.01 par value per share, 1,000,000 shares authorized, 900,000 shares issued and outstanding
 
9

 
9

 
9

Exchangeable shares, $0.01 par value per share, 1,000,000 shares issued and outstanding
 
10

 
10

 
10

Additional paid-in capital
 
2,049

 
9,044

 
9,402

Accumulated other comprehensive income (loss), net of taxes
 
(1,171
)
 
(129
)
 
66

Retained earnings
 
70,800

 
68,242

 
100,574

Total stockholders’ equity
 
71,815

 
77,298

 
110,185

Total liabilities and stockholders’ equity
 
$
271,805

 
$
255,972

 
$
198,763


See accompanying notes to condensed consolidated financial statements.

4


LIBERTY TAX, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three and nine months ended January 31, 2015 and 2014 (unaudited)
(In thousands, except for share and per share data)
 
 
 
Three Months Ended January 31,
 
Nine Months Ended January 31,
 
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 

 
 

 
 

 
 

Franchise fees
 
$
968

 
$
1,247

 
$
2,996

 
$
3,172

AD fees
 
1,592

 
1,311

 
5,066

 
4,994

Royalties and advertising fees
 
25,457

 
22,081

 
28,350

 
24,710

Financial products
 
13,370

 
9,864

 
14,027

 
10,482

Interest income
 
3,222

 
3,001

 
7,200

 
7,435

Tax preparation fees, net of discounts
 
1,942

 
2,054

 
2,848

 
2,682

Other revenue
 
1,129

 
1,182

 
2,766

 
2,647

Total revenues
 
47,680

 
40,740

 
63,253

 
56,122

Operating expenses:
 
 

 
 

 
 

 
 

Employee compensation and benefits
 
10,546

 
10,318

 
28,626

 
24,603

Selling, general, and administrative expenses
 
13,041

 
9,121

 
30,919

 
23,131

AD expense
 
9,111

 
7,909

 
10,776

 
9,442

Advertising expense
 
8,161

 
5,860

 
14,022

 
11,051

Depreciation, amortization, and impairment charges
 
2,527

 
2,267

 
6,855

 
5,590

Total operating expenses
 
43,386

 
35,475

 
91,198

 
73,817

Income (loss) from operations
 
4,294

 
5,265

 
(27,945
)
 
(17,695
)
Other income (expense):
 
 
 
 
 
 
 
 
Foreign currency transaction loss
 
(35
)
 
(3
)
 
(45
)
 
(15
)
Gain on sale of available-for-sale securities
 
—

 
1,995

 
—

 
2,183

Interest expense
 
(683
)
 
(464
)
 
(1,550
)
 
(1,066
)
Income (loss) before income taxes
 
3,576

 
6,793

 
(29,540
)

(16,593
)
Income tax expense (benefit)
 
1,657

 
2,737

 
(11,487
)
 
(6,244
)
Net income (loss)
 
1,919

 
4,056

 
(18,053
)
 
(10,349
)
Less: Net income attributable to participating securities
 
(140
)
 
(290
)
 
—

 
—

Net income (loss) attributable to Class A and Class B common stockholders
 
$
1,779

 
$
3,766

 
$
(18,053
)
 
$
(10,349
)
 
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to Class A and Class B common stockholders:
 


 


 
 
 


Basic
 
$
0.14

 
$
0.29

 
$
(1.42
)
 
$
(0.80
)
Diluted
 
0.13

 
0.28

 
(1.42
)
 
(0.80
)
 
 
 
 
 
 
 
 
 
Weighted-average shares used to compute earnings per share attributable to Class A and Class B common stockholders:
 
 
 
 
 
 
 
 
Basic
 
12,679,286

 
12,991,857

 
12,742,288

 
12,937,734

Diluted
 
14,227,163

 
14,654,666

 
12,742,288

 
12,937,734


See accompanying notes to condensed consolidated financial statements.

5


LIBERTY TAX, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
Three and nine months ended January 31, 2015 and 2014 (unaudited)
(In thousands)
 
 
 
Three Months Ended January 31,
 
Nine Months Ended January 31,
 
 
2015
 
2014
 
2015
 
2014
Net income (loss)
 
$
1,919

 
$
4,056

 
$
(18,053
)
 
$
(10,349
)
Unrealized gain on available-for-sale securities, net of taxes of $-, $26, $-, and $608, respectively
 
—

 
44

 
—

 
975

Reclassified gain on sale of available-for-sale securities included in income, net of taxes of $-, $803, $-, and $821, respectively
 
—

 
(1,192
)
 
—

 
(1,362
)
Foreign currency translation adjustment
 
(1,339
)
 
(839
)
 
(1,508
)
 
(1,155
)
Forward contracts related to foreign currency exchange rates
 
271

 
220

 
271

 
220

Comprehensive income (loss)
 
$
851

 
$
2,289

 
$
(19,290
)
 
$
(11,671
)

 See accompanying notes to condensed consolidated financial statements.

6


LIBERTY TAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended January 31, 2015 and 2014 (unaudited)
(In thousands)
 
 
 
2015
 
2014
Cash flows from operating activities:
 
 

 
 

Net loss
 
$
(18,053
)
 
$
(10,349
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 

 
 

Provision for doubtful accounts
 
4,453

 
5,886

Depreciation, amortization, and impairment charges
 
6,855

 
5,590

Stock-based compensation expense related to equity classified awards
 
2,002

 
1,394

Stock-based compensation income related to liability classified awards
 
—

 
(872
)
Gain on bargain purchases and sales of Company-owned offices
 
(310
)
 
(629
)
Deferred tax expense
 
144

 
955

Gain on sale of available-for-sale securities
 
—

 
(2,183
)
Changes in other assets and liabilities
 
(49,312
)
 
(50,642
)
Net cash used in operating activities
 
(54,221
)
 
(50,850
)
Cash flows from investing activities:
 
 

 
 

Issuance of operating loans to franchisees
 
(74,298
)
 
(62,218
)
Payments received on operating loans to franchisees
 
16,410

 
1,532

Purchases of Company-owned offices, AD rights, and acquired customer lists
 
(8,218
)
 
(6,585
)
Proceeds from sale of Company-owned offices and AD rights
 
3,690

 
2,368

Proceeds from sale of available-for-sale securities
 
—

 
5,163

Purchases of property, equipment, and software
 
(9,532
)
 
(7,652
)
Net cash used in investing activities
 
(71,948
)
 
(67,392
)
Cash flows from financing activities:
 
 

 
 

Proceeds from the exercise of stock options
 
10,053

 
6,122

Repurchase of common stock
 
(35,910
)
 
(5,174
)
Repayment of amounts due to former ADs
 
(4,211
)
 
(1,439
)
Repayment of other long-term debt
 
(949
)
 
(1,458
)
Borrowings under revolving credit facility
 
136,565

 
110,694

Repayments under revolving credit facility
 
(25,803
)
 
(6,102
)
Payment for debt issue costs
 
(917
)
 
—

Tax benefit of stock option exercises
 
4,776

 
554

Net cash provided by financing activities
 
83,604

 
103,197

Effect of exchange rate changes on cash, net
 
(365
)
 
(226
)
Net decrease in cash and cash equivalents
 
(42,930
)
 
(15,271
)
Cash and cash equivalents at beginning of period
 
46,080

 
19,013

Cash and cash equivalents at end of period
 
$
3,150

 
$
3,742


  See accompanying notes to condensed consolidated financial statements.






7


LIBERTY TAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended January 31, 2015 and 2014 (unaudited)
(In thousands)
 
 
 
2015
 
2014
Supplemental disclosures of cash flow information:
 
 

 
 

Cash paid for interest, net of capitalized interest of $135 and $376, respectively
 
$
948

 
$
851

Cash paid for taxes, net of refunds
 
10,849

 
6,388

Accrued capitalized software costs included in accounts payable
 
252

 
182

During the nine months ended January 31, 2015 and 2014, the Company acquired certain assets from franchisees, ADs, and third parties as follows:
 
 

 
 

Fair value of assets purchased
 
$
16,531

 
$
16,444

Receivables applied, net of amounts due ADs and related deferred revenue
 
(5,472
)
 
(3,086
)
Bargain purchase gains
 
(275
)
 
(457
)
Notes and accounts payable issued
 
(2,566
)
 
(6,316
)
Cash paid to franchisees, ADs, and third parties
 
$
8,218

 
$
6,585

During the nine months ended January 31, 2015 and 2014, the Company sold certain assets to franchisees and ADs as follows:
 
 

 
 

Book value of assets sold
 
$
9,868

 
$
6,209

Loss on sale - loss recognized
 
(125
)
 
(160
)
Gain on sale - revenue deferred
 
2,000

 
1,080

Notes received
 
(8,053
)
 
(4,761
)
Cash received from franchisees and ADs
 
$
3,690

 
$
2,368


See accompanying notes to condensed consolidated financial statements.

8


LIBERTY TAX, INC. AND SUBSIDIARIES
 
Notes to Condensed Consolidated Financial Statements
 
January 31, 2015 and 2014 (Unaudited)
 
(1) Organization and Significant Accounting Policies
 
Description of Business
 
Liberty Tax, Inc. (the "Company") was incorporated in Delaware in September 2010 as a holding company engaged through its subsidiaries as a franchisor and, to a lesser degree, an operator of a system of income tax preparation offices located in the United States and Canada. In July 2014, the corporate name was changed to Liberty Tax, Inc. from JTH Holding, Inc. The Company’s principal operations are conducted through JTH Tax, Inc. (d/b/a Liberty Tax Service), the Company’s largest subsidiary. Through this system of income tax preparation offices, the Company also facilitates refund-based tax settlement financial products, such as refund transfer products and personal income tax refund discounting. The Company also offers online tax preparation services.

The Company’s operating revenues are seasonal in nature with peak revenues occurring in the months of January through April.  Therefore, results for interim periods are not indicative of results to be expected for the full year.
 
Unless specifically noted otherwise, as used throughout these condensed consolidated financial statements, the term “Company” or “Liberty” refers to the consolidated entities of Liberty Tax, Inc.
 
Basis of Presentation
 
The condensed consolidated financial statements include the accounts of Liberty Tax, Inc. and its wholly-owned subsidiaries. Assets and liabilities of the Company’s Canadian operations have been translated into U.S. dollars using the exchange rate in effect at the end of the period. Revenues and expenses have been translated using the average exchange rates in effect each month of the period. Foreign exchange transaction gains and losses are recognized when incurred. The Company consolidates any variable interest entities of which it is the primary beneficiary. When the Company does not have a controlling interest in an entity, but exerts significant influence over the entity, the Company applies the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.
 
The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information.  The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures only required in annual financial statements.  Consolidated balance sheet data as of April 30, 2014 was derived from the Company’s April 30, 2014 Annual Report on Form 10-K.
 
In the opinion of management, all adjustments necessary for a fair presentation of such financial statements in accordance with GAAP have been recorded.  These adjustments consisted only of normal recurring items.  The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in its April 30, 2014 Annual Report on Form 10-K.














 

9


Office Count

The following table shows the U.S. office activity and the number of Canadian and Company-owned offices for the 2015, 2014, and 2013 tax seasons:
 
 
Tax Season
 
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
U.S. Office Locations:
 
 
 
 
 
 
Permanent Office Locations:
 
 
 
 
 
 
Operated during the prior tax season
 
3,663

 
3,816

 
3,730

Offices opened
 
397

 
289

 
405

Offices closed
 
(296
)
 
(442
)
 
(319
)
Operated during the current tax season
 
3,764

 
3,663

 
3,816

Seasonal Office Locations:
 
 
 
 
 
 
Operated during the prior tax season
 
486

 
427

 
176

Offices opened
 
118

 
334

 
344

Offices closed
 
(342
)
 
(275
)
 
(93
)
Operated during the current tax season
 
262

 
486

 
427

 
 
 
 
 
 
 
Processing Centers
 
43

 
26

 
19

Total U.S. Office Locations
 
4,069

 
4,175

 
4,262

 
 
 
 
 
 
 
Canada Office Locations
 
259

 
263

 
258

 
 
 
 
 
 
 
Total Office Locations
 
4,328

 
4,438

 
4,520

 
 
 
 
 
 
 
Additional Office Information:
 
 
 
 
 
 
Company-owned offices
 
192

 
216

 
261

Franchised offices
 
4,136

 
4,222

 
4,259

Total office locations
 
4,328

 
4,438

 
4,520


Our new brand, SiempreTax+, operated 57 offices during the 2015 tax season. These offices consist of second offices opened by current franchisees in territories they already owned, conversions of existing Liberty Tax offices, and offices opened in new territories.

Territory Sales

During the first nine months of fiscal 2015, we sold approximately 160 new territories, compared to approximately 132 during the first nine months of fiscal 2014 and 311 during the same period of 2013. The 2013 number of new territories includes 134 territories purchased under the now discontinued "zero franchise fee" program. The 2013 number, net of these zero franchise fee purchases, was approximately 177. New territories include territories sold to new franchisees and additional territories sold to existing franchisees.

Use of Estimates
 
Management has made a number of estimates and assumptions related to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period to prepare these condensed consolidated financial statements and accompanying notes in conformity with GAAP. Actual results could differ from those estimates.



10


Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360). This update changes the criteria for reporting discontinued operations for all public and nonpublic entities as well as requiring new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. Public business entities should apply the amendments in this update prospectively to all disposals of components of an entity and all business or nonprofit activities that, on acquisition, are classified as held-for-sale that occur within annual periods beginning on or after December 15, 2014 and interim periods within those years. The adoption of the new guidance is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for the Company on May 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its condensed consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810), which amends certain requirements for determining whether a variable interest entity must be consolidated. The amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The adoption of the new guidance is not expected to have a material impact on the Company’s condensed consolidated financial statements.
 
Foreign Operations
 
Canadian operations contributed $252 thousand and $1.4 million in revenues for the three and nine months ended January 31, 2015, respectively, and $352 thousand and $1.2 million in revenues for the three and nine months ended January 31, 2014, respectively.
 
(2) Accounts and Notes Receivable
 
The Company provides financing to franchisees and area developers ("ADs") for the purchase of franchises, areas, Company-owned offices, and operating loans for working capital and equipment needs. The franchise-related notes generally are payable over five years and the operating loans generally are due within one year. Most notes bear interest at 12%. Notes and interest receivable, net of unrecognized revenue, as of January 31, 2015, January 31, 2014, and April 30, 2014 are presented in the consolidated balance sheets as follows:

 
 
January 31, 2015
 
January 31, 2014
 
April 30, 2014
 
 
(In thousands)
Notes receivable, net of unrecognized revenue:
 
 
 
 
 
 
Notes receivable - current
 
$
76,233

 
$
89,566

 
$
27,715

Notes receivable - non-current
 
29,389

 
24,419

 
17,078

Interest, net of uncollectible amounts
 
3,989

 
4,887

 
415

Total notes and interest receivable, net
 
$
109,611

 
$
118,872

 
$
45,208


Most of the notes receivable are due from the Company's franchisees and ADs and are collateralized by the underlying franchise and, when the franchise or AD is an entity, are guaranteed by the owners of the respective entity. The debtors' ability to repay the notes is dependent upon both the performance of the tax preparation industry as a whole and the individual franchisees' or ADs' areas.
Unrecognized revenue relates to the financed portion of franchise fees and AD fees and, in the case of sales of Company-owned offices, the financed portion of gains related to these sales in each case where revenue has not yet been recognized. For franchise fees and gains related to the sale of Company-owned offices, revenue is recorded as note payments are received by the Company. Payments on AD fee notes receivable generate a corresponding increase in deferred revenue, which is amortized into revenue over the life of the AD contract, historically 10 years. The Company recently changed the term of new and renewal AD contracts to 6 years and the revenue for these contracts will be recognized over that period, subject to the receipt of cash. Unrecognized revenue was $42.0 million, $41.7 million, and $39.7 million at January 31, 2015, January 31, 2014, and April 30, 2014, respectively.
Accounts and notes receivable include royalties billed and franchise fees that relate to territories operated by franchisees located in AD territories and a portion of those accounts and notes are payable to the AD. The Company has recorded amounts payable to ADs for their share of these receivables of $15.0 million, $15.4 million, and $18.2 million at January 31, 2015, January 31, 2014, and April 30, 2014, respectively.
At January 31, 2015, the Company had unfunded lending commitments for operating loans to franchisees of $9.5 million.


11


Allowance for Doubtful Accounts
The adequacy of the allowance for doubtful accounts is assessed and adjusted as deemed necessary on a quarterly basis. Management believes that the recorded allowance is adequate based upon its consideration of the estimated value of the franchises and AD areas supporting the receivables. Any adverse change in the tax preparation industry or the individual franchisees' or ADs' areas could affect the Company's estimate of the allowance.
Activity in the allowance for doubtful accounts for the three and nine months ended January 31, 2015 and 2014 was as follows: 
 
 
Three Months Ended January 31,
 
Nine Months Ended January 31,
 
 
2015
 
2014
 
2015
 
2014
 
 
(In thousands)
Balance at beginning of period
 
$
7,145

 
$
6,048

 
$
6,850

 
$
6,684

Provision for doubtful accounts
 
1,245

 
2,456

 
4,453

 
5,886

Write-offs
 
(1,131
)
 
(3,039
)
 
(4,024
)
 
(7,067
)
Foreign currency adjustment
 
(160
)
 
(55
)
 
(180
)
 
(93
)
Balance at end of period
 
$
7,099

 
$
5,410

 
$
7,099

 
$
5,410


Management considers specific accounts and notes receivable to be impaired if the net amounts due exceed the fair value of the underlying franchise during the annual evaluation and estimates an allowance for doubtful accounts based on that excess. While not specifically identifiable as of the balance sheet date, the Company's experience also indicates that a portion of other accounts and notes receivable are also impaired, as management does not expect to collect all principal and interest due under the current contractual terms. Net amounts due include contractually obligated accounts and notes receivable plus accrued interest, net of unrecognized revenue, reduced by the allowance for uncollected interest, amounts due ADs, related deferred revenue, and amounts owed to the franchisee by the Company. In establishing the fair value of the underlying franchise, management considers recent sales between franchisees, net fees of open offices earned during the most recently completed tax season, and the number of unopened offices.

12


The allowance for doubtful accounts at January 31, 2015, January 31, 2014, and April 30, 2014 was allocated as follows:
 
 
January 31, 2015
 
January 31, 2014
 
April 30, 2014
 
 
(In thousands)
Impaired:
 
 

 
 
 
 

Accounts receivable
 
$
3,478

 
$
2,855

 
$
5,351

Notes and interest receivable, net of unrecognized revenue
 
6,128

 
7,159

 
8,527

Less amounts due to ADs and franchisees
 
(416
)
 
(536
)
 
(1,166
)
Amounts receivable less amounts due to ADs and franchisees
 
$
9,190

 
$
9,478

 
$
12,712

 
 
 
 
 
 
 
Allowance for doubtful accounts for impaired notes and accounts receivable
 
$
4,709

 
$
4,366

 
$
6,131

 
 
 
 
 
 
 
Non-impaired:
 
 

 
 
 
 

Accounts receivable
 
$
46,542

 
$
40,894

 
$
37,771

Notes and interest receivable, net of unrecognized revenue
 
103,483

 
111,713

 
36,681

Less amounts due to ADs and franchisees
 
(15,186
)
 
(15,592
)
 
(17,818
)
Amounts receivable less amounts due to ADs and franchisees
 
$
134,839

 
$
137,015

 
$
56,634

 
 
 
 
 
 
 
Allowance for doubtful accounts for non-impaired notes and accounts receivable
 
$
2,390

 
$
1,044

 
$
719

 
 
 
 
 
 
 
Total:
 
 
 
 
 
 
Accounts receivable
 
$
50,020

 
$
43,749

 
$
43,122

Notes and interest receivable, net of unrecognized revenue
 
109,611

 
118,872

 
45,208

Less amounts due to ADs and franchisees
 
(15,602
)
 
(16,128
)
 
(18,984
)
Amounts receivable less amounts due to ADs and franchisees
 
$
144,029

 
$
146,493

 
$
69,346

 
 
 
 
 
 
 
Total allowance for doubtful accounts
 
$
7,099

 
$
5,410

 
$
6,850


The Company’s average investment in impaired notes receivable during the nine months ended January 31, 2015 and 2014 was $7.7 million and $8.5 million, respectively.
 
Analysis of Past Due Receivables
The breakdown of accounts and notes receivable past due at January 31, 2015 was as follows:
 
 
Total
Past Due
 
Current
 
Allowance for Uncollectible Interest
 
Net Receivables
 
 
(In thousands)
Accounts receivable
 
$
27,333

 
$
25,626

 
$
(2,939
)
 
$
50,020

Notes and interest receivable, net
 
7,631

 
102,948

 
(968
)
 
109,611

Total accounts, notes, and interest receivable, net
 
$
34,964

 
$
128,574

 
$
(3,907
)
 
$
159,631

 
Accounts receivable are considered to be past due if unpaid 30 days after billing and notes receivable are considered past due if unpaid 90 days after the due date, at which time the notes are put on nonaccrual status. The Company’s investment in notes receivable on nonaccrual status at January 31, 2015, January 31, 2014, and April 30, 2014 was $6.7 million, $6.5 million, and $10.8 million, respectively. Payments received on notes in nonaccrual status are applied to interest income first until the note is current and then to the principal note balance. Nonaccrual notes that are paid current are moved back into accrual status during the next annual review.


13


(3) Investments
 
During fiscal 2013, the Company purchased corporate equity securities, as a strategic investment in a business partner, for $3.0 million and classified them as available for sale.  These securities were sold during the second and third quarters of fiscal 2014. A gross gain on the sale of $2.2 million was recognized and reclassified out of accumulated other comprehensive income and recorded as other income. There were no such investments at January 31, 2015 or April 30, 2014.
 
(4) Goodwill and Intangible Assets 
At the end of the fourth quarter of fiscal 2014, assets associated with tax offices acquired from U.S. franchisees were transferred out of goodwill and intangible assets and classified as assets held for sale. Changes in the carrying amount of goodwill for the nine months ended January 31, 2015 and 2014 were as follows:
 
 
Nine Months Ended January 31,
 
 
2015
 
2014
 
 
(In thousands)
Balance at beginning of period
 
$
2,978

 
$
5,685

Acquisitions of assets from franchisees
 
330

 
4,071

Disposals and foreign currency changes, net
 
(123
)
 
(3,342
)
Impairments
 
—

 
(135
)
Balance at end of period
 
$
3,185

 
$
6,279

Components of intangible assets were as follows as of January 31, 2015, January 31, 2014, and April 30, 2014:
 
 
January 31, 2015
 
 
Weighted average amortization period
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
 
(In thousands)
Amortizable intangible assets:
 
 
 
 
 
 
 
 
Customer lists acquired from unrelated third parties
 
6 years
 
$
4,816

 
$
(2,038
)
 
$
2,778

Assets acquired from franchisees:
 
 
 
 
 
 
 
 
Customer lists
 
4 years
 
968

 
(450
)
 
518

Reacquired rights
 
2 years
 
785

 
(397
)
 
388

AD rights
 
10 years
 
17,345

 
(3,671
)
 
13,674

Total intangible assets
 
 
 
$
23,914

 
$
(6,556
)
 
$
17,358


 
 
January 31, 2014
 
 
Weighted average amortization period
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
 
(In thousands)
Amortizable intangible assets:
 
 
 
 
 
 
 
 
Customer lists acquired from unrelated third parties
 
6 years
 
$
4,816

 
$
(634
)
 
$
4,182

Assets acquired from franchisees:
 
 
 
 
 
 
 
 
Customer lists
 
4 years
 
2,199

 
(744
)
 
1,455

Reacquired rights
 
2 years
 
1,964

 
(1,217
)
 
747

AD rights
 
10 years
 
14,443

 
(3,182
)
 
11,261

Total intangible assets
 
 
 
$
23,422

 
$
(5,777
)
 
$
17,645



14


 
 
April 30, 2014
 
 
Weighted average amortization period
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
 
(In thousands)
Amortizable intangible assets:
 
 
 
 
 
 
 
 
Customer lists acquired from unrelated third parties
 
6 years
 
$
4,816

 
$
(995
)
 
$
3,821

Assets acquired from franchisees:
 
 
 
 
 
 
 
 
Customer lists
 
4 years
 
551

 
(387
)
 
164

Reacquired rights
 
2 years
 
481

 
(338
)
 
143

AD rights
 
10 years
 
13,641

 
(3,474
)
 
10,167

Total intangible assets
 
 
 
$
19,489

 
$
(5,194
)
 
$
14,295

During the nine months ended January 31, 2015 and 2014, the Company acquired the assets of various franchisees for $1.5 million and $7.5 million, respectively. During the first nine months of fiscal 2014, both U.S. and Canadian franchise acquisitions were recorded as intangible assets; however, during the first nine months of fiscal 2015, the majority of U.S. franchise acquisitions were recorded as assets held for sale, while Canadian franchise acquisitions continued to be recorded as intangible assets. These acquisitions were accounted for as business combinations, with all value allocated to intangible assets. The purchase price of assets acquired from franchisees and recorded as customer lists, reacquired rights, and goodwill during the nine months ended January 31, 2015 and 2014 was allocated as follows:
 
 
Nine Months Ended January 31,
 
 
2015
 
2014
 
 
(In thousands)
Customer lists and reacquired rights
 
$
1,169

 
$
3,446

Goodwill
 
330

 
4,071

Purchase price of assets acquired from franchisees, not held for sale
 
$
1,499

 
$
7,517


(5) Assets Held For Sale
At the end of the fourth quarter of fiscal 2014, assets associated with tax offices acquired from U.S. franchisees were classified as assets held for sale. During the nine months ended January 31, 2015, the Company acquired $6.7 million in assets from U.S. franchisees. These acquisitions were first accounted for as business combinations, with the value allocated to customer lists and reacquired rights of $3.2 million and goodwill of $3.5 million prior to being reclassified to assets held for sale.  The acquired businesses are operated as Company-owned offices until a buyer is located and a new franchise agreement is entered into.

Changes in the carrying amount of assets held for sale for the nine months ended January 31, 2015 were as follows:
 
 
Nine Months Ended 
 January 31, 2015
 
 
(In thousands)
Balance at beginning of period
 
$
4,413

Acquisitions of assets from franchisees
 
6,656

Dispositions
 
(5,456
)
Balance at end of period
 
$
5,613


(6) Debt
 
In October 2014, the Company amended its credit facility. The amended credit facility consists of a $21.2 million term loan and a revolving credit facility that currently allows borrowing of up to $203.8 million with an accordion feature that permits the Company to request an increase in availability of up to an additional $50.0 million. Outstanding borrowings accrue interest at one-month London Interbank Offered Rate ("LIBOR") plus a margin ranging from 1.50% to 2.25% depending on the Company’s leverage ratio. At January 31, 2015 and 2014, the interest rate was 1.79% and 1.92%, respectively, and the average interest rate paid during the nine months ended January 31, 2015 was 1.78%. The indebtedness is collateralized by substantially all the assets of the Company and both loans mature on April 30, 2019 (except as to the commitments of one
lender under the revolving credit facility, which mature on September 30, 2017).  The credit facility contains certain financial covenants that the Company must meet, including leverage and fixed-charge coverage ratios as well as minimum net worth requirements.  The Company was in compliance with the financial covenants at January 31, 2015. 
Debt at January 31, 2015, January 31, 2014, and April 30, 2014 consisted of the following:
 
 
January 31, 2015
 
January 31, 2014
 
April 30, 2014
 
 
(In thousands)
Credit Facility:
 
 

 
 
 
 

Revolver
 
$
110,762

 
$
104,592

 
$
—

Term loan
 
20,984

 
22,344

 
21,875

Amounts due to former ADs and mortgages
 
4,901

 
6,642

 
6,613

Total debt
 
136,647

 
133,578

 
28,488

Less: current portion
 
(4,107
)
 
(6,649
)
 
(6,797
)
Long-term debt
 
$
132,540

 
$
126,929

 
$
21,691

 
(7) Forward Contracts Related to Foreign Currency Exchange Rates

In connection with short-term advances made to its Canadian subsidiary related to personal income tax refund discounting, the Company periodically enters into forward contracts to eliminate the exposure related to foreign currency fluctuations. Under the terms of the forward currency contracts, the exchange rate for repayments is fixed at the time an

15


advance is made and the advances are repaid prior to April 30 of the fiscal year of the advance. These forward contracts are designated as cash flow hedges. At January 31, 2015 and 2014, the fair value of foreign currency contracts included in other assets was $271 thousand and $220 thousand, respectively. The Company had no outstanding forward contracts at April 30, 2014. During the nine months ended January 31, 2015 and 2014, these foreign currency hedges were effective and, therefore, no amounts were recognized in the consolidated statements of operations.

(8) Income Taxes
 
The Company computes its provision for or benefit from income taxes by applying the estimated annual effective tax rate to income or loss from recurring operations and adjusting the effects of any discrete income tax items specific to the period, if applicable.

(9) Stockholders’ Equity

Stockholders' Equity Activity
During the nine months ended January 31, 2015 and 2014, activity in stockholders’ equity was as follows:
 
 
Nine Months Ended 
 January 31, 2015
 
Nine Months Ended 
 January 31, 2014
 
 
(In thousands)
Class A common shares issued from the exercise of stock options
 
630

 
409

Class A common shares issued from the vesting of restricted stock
 
15

 
15

Proceeds from exercise of stock options
 
$
10,053

 
$
6,122

Class A common shares repurchased
 
1,271

 
246

Payments for repurchased shares
 
$
35,910

 
$
5,174

Tax benefit of stock option exercises
 
$
4,776

 
$
554








Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) at January 31, 2015, January 31, 2014, and April 30, 2014 were as follows:
 
 
January 31, 2015
 
January 31, 2014
 
April 30, 2014
 
 
(In thousands)
Foreign currency adjustment
 
$
(1,442
)
 
$
(349
)
 
$
66

Forward contracts related to foreign currency exchange rates
 
271

 
220

 
—

Total accumulated other comprehensive income (loss)
 
$
(1,171
)
 
$
(129
)
 
$
66


Net Income (Loss) per Share
 
Net income (loss) per share of Class A and Class B common stock is computed using the two-class method. Basic net income (loss) per share is computed by allocating undistributed earnings to common shares and participating securities (exchangeable shares) and using the weighted-average number of common shares outstanding during the period.  Undistributed losses are not allocated to participating securities because they do not meet the required criteria for such allocation. 
 
Diluted net income (loss) per share is computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock units. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. Additionally, the computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of Class B common stock and exchangeable shares, if dilutive, while the diluted net loss per share of Class B common stock does not assume conversion of those shares.
 
The rights, including liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, with the exception of the election of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common stock as if the earnings for the year had been distributed.  Participating securities have dividend rights that are identical to Class A and Class B common stock.

















16


The computation of basic and diluted net loss per share for the three and nine months ended January 31, 2015 and 2014 was as follows:
 
 
Three Months Ended 
 January 31, 2015
 
 
Class A
 
Class B
 
 
Common Stock
 
Common Stock
 
 
(In thousands, except for share and per
share amounts)
Basic net income per share:
 
 

 
 

Numerator
 
 

 
 

Allocation of undistributed earnings
 
$
1,783

 
$
136

Amounts allocated to participating securities:
 
 

 
 

Exchangeable shares
 
(130
)
 
(10
)
Net income attributable to common stockholders
 
$
1,653

 
$
126

Denominator
 
 
 
 
Weighted-average common shares outstanding
 
11,779,286

 
900,000

 
 
 
 
 
Basic net income per share
 
$
0.14

 
$
0.14

 
 
 
 
 
Diluted net income per share:
 
 
 
 
Numerator
 
 
 
 
Allocation of undistributed earnings for basic computation
 
$
1,653

 
$
126

Reallocation of undistributed earnings as a result of assumed conversion of:
 
 
 
 
Class B common stock to Class A common stock
 
126

 
—

Exchangeable shares to Class A common stock
 
140

 
—

Net income attributable to stockholders
 
$
1,919

 
$
126

Denominator
 
 

 
 

Number of shares used in basic computation
 
11,779,286

 
900,000

Weighted-average effect of dilutive securities:
 
 
 
 
Class B common stock to Class A common stock
 
900,000

 
—

Exchangeable shares to Class A common stock
 
1,000,000

 
—

Employee stock options and restricted stock units
 
547,877

 
36,046

Weighted-average diluted shares outstanding
 
14,227,163

 
936,046

 
 
 
 
 
Diluted net income per share
 
$
0.13

 
$
0.13


 
 
Nine Months Ended 
 January 31, 2015
 
 
Class A
 
Class B
 
 
Common Stock
 
Common Stock
 
 
(In thousands, except for share and per
share amounts)
Basic and diluted net loss per share:
 
 

 
 

Numerator
 
 

 
 

Allocation of undistributed losses
 
$
(16,778
)
 
$
(1,275
)
Denominator
 
 
 
 

Weighted-average common shares outstanding
 
11,842,288

 
900,000

 
 
 
 
 
Basic and diluted net loss per share
 
$
(1.42
)
 
$
(1.42
)


17


Diluted net income (loss) per share excludes the impact of shares of potential common stock from the exercise of options and vesting of restricted stock units to purchase 140,416 and 1,160,106 shares for the three and nine months ended January 31, 2015, respectively, because the effect would be antidilutive.

 
 
Three Months Ended 
 January 31, 2014
 
 
Class A
 
Class B
 
 
Common Stock
 
Common Stock
 
 
(In thousands, except for share and per
share amounts)
Basic net income per share:
 
 

 
 

Numerator
 
 

 
 

Allocation of undistributed earnings
 
$
3,775

 
$
281

Amounts allocated to participating securities:
 
 
 
 
Exchangeable shares
 
(270
)
 
(20
)
Net income attributable to common stockholders
 
$
3,505

 
$
261

Denominator
 
 
 
 
Weighted-average common shares outstanding
 
12,091,857

 
900,000

 
 
 
 
 
Basic net income per share
 
$
0.29

 
$
0.29

 
 
 
 
 
Diluted net income per share:
 
 
 
 
Numerator
 
 
 
 
Allocation of undistributed earnings for basic computation
 
$
3,505

 
$
261

Reallocation of undistributed earnings as a result of assumed conversion of:
 
 
 
 
Class B common stock to Class A common stock
 
261

 
—

Exchangeable shares to Class A common stock
 
290

 
—

Net income attributable to stockholders
 
$
4,056

 
$
261

Denominator
 
 

 
 

Number of shares used in basic computation
 
12,091,857

 
900,000

Weighted-average effect of dilutive securities:
 
 
 
 
Class B common stock to Class A common stock
 
900,000

 
—

Exchangeable shares to Class A common stock
 
1,000,000

 
—

Employee stock options and restricted stock units
 
662,809

 
42,634

Weighted-average diluted shares outstanding
 
14,654,666

 
942,634

 
 
 
 
 
Diluted net income per share
 
$
0.28

 
$
0.28


 
 
Nine Months Ended 
 January 31, 2014
 
 
Class A
 
Class B
 
 
Common Stock
 
Common Stock
 
 
(In thousands, except for share and per
share amounts)
Basic and diluted net loss per share:
 
 

 
 

Numerator
 
 

 
 

Allocation of undistributed losses
 
$
(9,629
)
 
$
(720
)
Denominator
 
 
 
 

Weighted-average common shares outstanding
 
12,037,734

 
900,000

 
 
 
 
 
Basic and diluted net loss per share
 
$
(0.80
)
 
$
(0.80
)

18


 
Diluted net income (loss) per share excludes the impact of shares of potential common stock from the exercise of options and vesting of restricted stock units to purchase 225,000 and 2,190,000 shares for the three and nine months ended January 31, 2014, respectively, because the effect would be antidilutive.

(10) Stock Compensation Plans
 
Stock Options
 
In August 2011, the Board of Directors approved the JTH Holding, Inc. 2011 Equity and Cash Incentive Plan. Employees and outside directors are eligible to receive awards and a total of 2,500,000 shares of Class A common stock were authorized for grant under the plan. At January 31, 2015, 1,486,592 shares of Class A common stock remained available for grant.
The following table summarizes the information for options granted during the nine months ended January 31, 2015:
Weighted average fair value of options granted
 
$
10.13

Dividend yield
 
0.0
%
Expected volatility
 
31.2%

Expected terms (in years)
 
5.0

Risk-free interest rates
 
1.6%-1.9%

Stock option activity during the nine months ended January 31, 2015 was as follows:
 
 
Number of
options
 
Weighted
average
exercise price
Balance at beginning of period
 
1,940,406

 
$
16.68

Granted
 
140,416

 
33.60

Exercised
 
(629,663
)
 
15.97

Canceled
 
(4,950
)
 
15.00

Balance at end of period
 
1,446,209

 
18.64


Intrinsic value is defined as the fair value of the stock less the cost to exercise. The total intrinsic value of options exercised during the nine months ended January 31, 2015 was approximately $11.4 million. The total intrinsic value of stock options outstanding at January 31, 2015 was $25.1 million. Stock options have vesting schedules that range from six months to six years and expire from four to five years after the vesting date.
Nonvested stock options (options that had not vested in the period reported) activity during the nine months ended January 31, 2015 was as follows: 
 
 
Nonvested
options
 
Weighted
average
exercise price
Balance at beginning of period
 
485,000

 
$
20.92

Granted
 
140,416

 
33.60

Vested
 
(155,000
)
 
20.46

Balance at end of period
 
470,416

 
24.86

 
At January 31, 2015, unrecognized compensation costs related to nonvested stock options were $3.0 million. These costs are expected to be recognized through fiscal 2021.





19


The following table summarizes information about stock options outstanding and exercisable at January 31, 2015:
 
 
Options Outstanding
 
Options Exercisable
Range of exercise prices
 
Number of shares outstanding at
 
Weighted average exercise price
 
Weighted average remaining contractual life (in years)
 
Number of options exercisable at
 
Weighted average exercise price
 
January 31, 2015
 
 
 
January 31, 2015
 
$
10.50

 
25,000

 
$
10.50

 
0.7
 
25,000

 
$
10.50

15.00

 
824,197

 
15.00

 
2.1
 
784,197

 
15.00

16.38-19.75

 
281,596

 
17.88

 
4.7
 
131,596

 
17.66

26.18

 
175,000

 
26.18

 
6.9
 
35,000

 
26.18

33.38-33.79

 
140,416

 
33.60

 
6.7
 
—

 
—



 
1,446,209

 
18.64

 

 
975,793

 
15.64


During the fiscal year ended April 30, 2013, the settlement of certain stock option transactions caused a change in the classification of the related outstanding stock options to liability instruments from equity instruments, which resulted in an increase in stock compensation expense of $2.6 million. At April 30, 2013, the value of the liability for the 997,824 options that changed classifications from equity to liability instruments was $5.1 million. On June 11, 2013, the Company's board of directors voted to prohibit those types of transactions, therefore, the Company reclassified the stock options back to equity instruments, resulting in a reduction to stock compensation expense of $872 thousand. The liability was removed and the remainder was reclassified to additional paid-in capital.

Restricted Stock Units
 
Restricted stock activity during the nine months ended January 31, 2015 was as follows:
 
 
Number of
RSUs
 
Weighted
average fair value at grant date
Balance at beginning of period
 
21,445

 
$
16.87

Granted
 
26,889

 
33.38

Vested
 
(14,746
)
 
16.38

Canceled
 
(2,895
)
 
25.72

Balance at end of period
 
30,693

 
30.74

 
At January 31, 2015, unrecognized compensation costs related to restricted stock units were $766 thousand. These costs are expected to be recognized through fiscal 2022.

(11) Fair Value of Financial Instruments
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 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. Valuation methodologies for the fair value hierarchy are as follows:
 
•
Level 1 — Quoted prices for identical assets and liabilities in active markets.
 
•
Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

•
Level 3 — Unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The Company measures or monitors certain of its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for those assets and liabilities for which fair value is the primary basis of accounting. Other assets and liabilities are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments in certain circumstances,

20


such as when there is evidence of impairment. The following tables present, for each of the fair value hierarchy levels, the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis at January 31, 2015, January 31, 2014, and April 30, 2014 (In thousands):
 
 
January 31, 2015
 
 
 
 
Fair value measurements using
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Recurring:
 
 

 
 

 
 

 
 

Forward contracts related to foreign currency exchange rates
 
$
271

 
$
—

 
$
271

 
$
—

Nonrecurring:
 
 

 
 

 
 

 
 

Impaired accounts and notes receivable
 
4,897

 
—

 
—

 
4,897

Total recurring and nonrecurring assets
 
$
5,168

 
$
—

 
$
271

 
$
4,897



 
 
January 31, 2014
 
 
 
 
Fair value measurements using
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Recurring:
 
 

 
 

 
 

 
 

Forward contracts related to foreign currency exchange rates
 
$
220

 
$
—

 
$
220

 
$
—

Nonrecurring:
 
 

 
 

 
 

 
 

Impaired accounts and notes receivable
 
5,647

 
—

 
—

 
5,647

Total recurring and nonrecurring assets
 
$
5,867

 
$
—

 
$
220

 
$
5,647



 
 
April 30, 2014
 
 
 
 
Fair value measurements using
 
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Recurring:
 
 

 
 

 
 

 
 

Cash equivalents
 
$
42,918

 
$
42,918

 
$
—

 
$
—

Nonrecurring:
 
 

 
 

 
 

 
 

Impaired accounts and notes receivable
 
7,747

 
—

 
—

 
7,747

Impaired goodwill
 
86

 
—

 
—

 
86

Impaired reacquired rights
 
42

 
—

 
—

 
42

Impaired customer lists
 
52

 
—

 
—

 
52

Assets held for sale
 
4,413

 
—

 
—

 
4,413

Total nonrecurring assets
 
12,340

 
—

 
—

 
12,340

Total recurring and nonrecurring assets
 
$
55,258

 
$
42,918

 
$
—

 
$
12,340