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H&R Block Reports U.S. Tax Volume Through Feb. 28; Fiscal 2014 Third Quarter Earnings

By: H&R Block |  0 Shares     87 Reads

KANSAS CITY, MO - (Marketwired) - March 6, 2014 - H&R Block, Inc. (NYSE: HRB) the world's largest consumer tax services provider, today released U.S. tax volume through Feb. 28 and earnings for its fiscal 2014 third quarter ended January 31, 2014.

As a result of the delayed opening of the Internal Revenue Service's (IRS) e-file system to Jan. 31, revenue related to tax returns prepared but not yet filed totaling $277 million shifted to the company's fiscal fourth quarter ending April 30. A majority of the company's revenues and all of its fiscal 2014 earnings will occur during its fiscal fourth quarter, and thus fiscal third quarter results are not indicative of expected performance for the full year.

The company recently outlined its strategy to grow revenues through a balance of improved client mix and increased product attachments and believes it remains on track to achieve these goals. Consistent with this strategy, the company discontinued its free federal 1040EZ promotion in virtually all markets and exited unprofitable retail partnerships. As a result, total U.S. tax returns prepared by and through H&R Block were lower by 6 percent through Feb. 28.

CEO Perspective

"In line with the strategy outlined at our most recent investor day last December, we entered this tax season with a solid plan focused on growing Tax Plus revenue," said Bill Cobb, H&R Block's president and chief executive officer. "While there is still over a month left in this tax season, our early results indicate that we are on track to achieve our objectives this year," added Cobb.

Fiscal 2014 Third Quarter Highlights¹

• Revenues decreased 58 percent², or $272 million, to $200 million primarily due to $277 million of revenue related to tax returns prepared but not yet filed which will be recorded during the company's fiscal fourth quarter
• Adjusted net loss from continuing operations increased to $209 million, or $(0.77) per share, due almost entirely to the timing shift in revenues described above
• Company declares 206th consecutive quarterly dividend

Fiscal 2014 Third Quarter Results From Continuing Operations³

		Actual								Adjusted
(in millions, except EPS)		Fiscal Year 2014				Fiscal Year 2013				Fiscal Year 2014				Fiscal Year 2013
Revenue		$	200			$	472			$	200			$	472
EBITDA		$	(302	)		$	(52	)		$	(301	)		$	(47	)
Pretax Loss		$	(348	)		$	(96	)		$	(347	)		$	(91	)
Net Loss		$	(213	)		$	(17	)		$	(209	)		$	(57	)
Weighted-Avg. Shares - Diluted			274.1				271.5				274.1				271.5
EPS		$	(0.78	)		$	(0.06	)		$	(0.77	)		$	(0.21	)

Business Segment Financial Results and Highlights

CFO Perspective
"For the second consecutive year we've seen a late start to the tax season, resulting in the majority of our business occurring in the fiscal fourth quarter. Given the seasonal nature of our business, the focus remains on our performance for the full year," said Greg Macfarlane, H&R Block's chief financial officer. "We're pleased with our early season financial results, and continue to expect our full year EBITDA margin to be consistent with last year."

Business Segment Results and Highlights

Tax Services

• Revenues decreased $271 million to $194 million, primarily due to a $277 million shift of revenue from the fiscal third quarter to the fiscal fourth quarter related to completed tax returns that were not filed by Jan. 31
• Operating expenses decreased $13 million to $516 million
• Pretax loss increased to $322 million, primarily due to the timing shift in revenues mentioned above

Corporate

• Total operating expenses decreased $8 million to $32 million, primarily due to lower interest expense and mortgage loan loss provisions
• Pretax loss decreased $6 million to $26 million

Discontinued Operations

• Net loss of $2 million improved by $1 million from the prior year
• Sand Canyon Corporation (SCC), a separate legal entity of H&R Block, Inc., received new claims for alleged breaches of representations and warranties in the principal amount of $1 million
• SCC's accrual for contingent losses relating to representations and warranties remained unchanged at $159 million

Dividend

A previously announced quarterly cash dividend of 20 cents per share is payable April 1, 2014, to shareholders of record as of March 17, 2014.

The April 1 dividend payment will mark H&R Block's 206th consecutive quarterly dividend since the company went public in 1962.

Conference Call

In conjunction with the fiscal third quarter results, the company will host a conference call at 4:30 p.m. Eastern time on March 6, 2014 for analysts, institutional investors, and shareholders to discuss the fiscal 2014 third quarter results, fiscal year 2014 outlook and a general business update. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (888) 895-5260 or International (443) 842-7595
Conference ID: 51003273

The call will also be webcast in a listen-only format for the media and public. The link to the webcast can be accessed directly at http://investors.hrblock.com.

A replay of the call will be available beginning at 6:30 p.m. Eastern time on March 6, 2014, and continuing until April 7, 2014, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 51003273. The webcast will be available for replay March 7, 2014 at http://investors.hrblock.com.

About H&R Block

H&R Block, Inc. (NYSE: HRB) is the world's largest consumer tax services provider. More than 625 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2013, H&R Block had annual revenues of $2.9 billion with 24.8 million tax returns prepared worldwide. Tax return preparation services are provided in over 11,000 company-owned and franchise retail tax offices worldwide by professional tax preparers, and through H&R Block digital products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom.

About Non-GAAP Financial Measures

This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled "About Non-GAAP Financial Measures."

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "could" or "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management's plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company's control and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2013 in the section entitled "Risk Factors," as well as additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties. 

1	All per share amounts are based on fully diluted shares.
2	Unless otherwise noted, all comparisons, including those made to the "prior year," refer to the current period compared to the prior year period.
3	EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-GAAP financial measure, which the company finds relevant when measuring its performance. The company also reports adjusted financial performance, which it believes is a better indication of the company's recurring operations. See "About Non-GAAP Financial Measures" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).

TABLES FOLLOW

KEY OPERATING RESULTS			(unaudited, amounts in thousands, except per share data)
			Three months ended January 31,
			Revenues						Income (loss)
			2014			2013			2014				2013
Tax Services			$	193,996		$	464,634		$	(322,099	)		$	(64,189	)
Corporate and Eliminations				5,774			7,345			(25,726	)			(32,079	)
			$	199,770		$	471,979			(347,825	)			(96,268	)
Income tax benefit										(135,074	)			(79,353	)
Net loss from continuing operations										(212,751	)			(16,915	)
Net loss from discontinued operations										(1,960	)			(793	)
Net loss									$	(214,711	)		$	(17,708	)
Basic and diluted loss per share:
	Continuing operations								$	(0.78	)		$	(0.06	)
	Discontinued operations									--				(0.01	)
	Consolidated								$	(0.78	)		$	(0.07	)
Basic and diluted shares										274,110				271,542

			Nine months ended January 31,
			Revenues						Income (loss)
			2014			2013			2014				2013
Tax Services			$	443,727		$	684,706		$	(625,807	)		$	(335,203	)
Corporate and Eliminations				17,578			21,025			(85,874	)			(92,622	)
			$	461,305		$	705,731			(711,681	)			(427,825	)
Income tax benefit										(282,645	)			(204,061	)
Net loss from continuing operations										(429,036	)			(223,764	)
Net loss from discontinued operations										(5,805	)			(6,628	)
Net loss									$	(434,841	)		$	(230,392	)
Basic and diluted loss per share:
	Continuing operations								$	(1.57	)		$	(0.82	)
	Discontinued operations									(0.02	)			(0.02	)
	Consolidated								$	(1.59	)		$	(0.84	)
Basic and diluted shares										273,699				273,281

CONSOLIDATED BALANCE SHEETS					(amounts in thousands, except per share data)
As of					January 31, 2014				January 31, 2013				April 30, 2013
					(unaudited)				(unaudited)
ASSETS
	Cash and cash equivalents				$	437,404			$	418,385			$	1,747,584
	Cash and cash equivalents -- restricted					44,855				37,958				117,837
	Receivables, net					677,221				949,160				206,835
	Prepaid expenses and other current assets					345,231				331,046				390,087
		Total current assets				1,504,711				1,736,549				2,462,343
	Mortgage loans held for investment, net					282,149				357,887				338,789
	Investments in available-for-sale securities					443,770				396,312				486,876
	Property and equipment, net					314,565				273,450				267,880
	Intangible assets, net					318,719				288,238				284,439
	Goodwill					437,386				435,256				434,782
	Other assets					213,987				444,804				262,670
		Total assets			$	3,515,287			$	3,932,496			$	4,537,779
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
	Commercial paper borrowings				$	194,984			$	424,967			$	--
	Customer banking deposits					806,887				1,036,968				936,464
	Accounts payable, accrued expenses and other current liabilities					520,121				479,660				523,921
	Accrued salaries, wages and payroll taxes					108,583				103,538				134,970
	Accrued income taxes					23,375				17,348				416,128
	Current portion of long-term debt					400,570				713				722
		Total current liabilities				2,054,520				2,063,194				2,012,205
	Long-term debt					505,959				906,012				905,958
	Other noncurrent liabilities					268,049				328,402				356,069
		Total liabilities				2,828,528				3,297,608				3,274,232
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
	Common stock, no par, stated value $.01 per share					3,166				3,166				3,166
	Additional paid-in capital					762,102				747,398				752,483
	Accumulated other comprehensive income (loss)					(4,776	)			9,055				10,550
	Retained earnings					734,233				723,676				1,333,445
	Less treasury shares, at cost					(807,966	)			(848,407	)			(836,097	)
		Total stockholders' equity				686,759				634,888				1,263,547
			Total liabilities and stockholders' equity		$	3,515,287			$	3,932,496			$	4,537,779

CONSOLIDATED STATEMENTS OF OPERATIONS								(unaudited, in 000s, except per share amounts)
				Three months ended								Nine months ended
				January 31,								January 31,
				2014				2013				2014				2013
REVENUES:
	Service revenues			$	138,613			$	362,194			$	358,845			$	558,528
	Product and other revenues				23,788				71,485				43,268				89,171
	Interest income				37,369				38,300				59,192				58,032
					199,770				471,979				461,305				705,731
OPERATING EXPENSES:
	Cost of revenues:
		Compensation and benefits			160,830				160,081				267,668				254,430
		Occupancy and equipment			88,387				84,710				249,481				247,059
		Provision for bad debt and loan losses			31,420				43,028				45,760				51,398
		Interest			14,443				19,428				43,203				64,895
		Depreciation of property and equipment			23,054				18,381				60,002				49,111
		Other			45,403				51,990				128,340				116,160
					363,537				377,618				794,454				783,053
	Selling, general and administrative				174,448				186,997				365,237				352,802
					537,985				564,615				1,159,691				1,135,855
Operating loss					(338,215	)			(92,636	)			(698,386	)			(430,124	)
Other income (expense), net					(9,610	)			(3,632	)			(13,295	)			2,299
Loss from continuing operations before income tax benefit					(347,825	)			(96,268	)			(711,681	)			(427,825	)
Income tax benefit					(135,074	)			(79,353	)			(282,645	)			(204,061	)
Net loss from continuing operations					(212,751	)			(16,915	)			(429,036	)			(223,764	)
Net loss from discontinued operations					(1,960	)			(793	)			(5,805	)			(6,628	)
NET LOSS				$	(214,711	)		$	(17,708	)		$	(434,841	)		$	(230,392	)
BASIC AND DILUTED LOSS PER SHARE:
	Continuing operations			$	(0.78	)		$	(0.06	)		$	(1.57	)		$	(0.82	)
	Discontinued operations				--				(0.01	)			(0.02	)			(0.02	)
	Consolidated			$	(0.78	)		$	(0.07	)		$	(1.59	)		$	(0.84	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS					(unaudited, in 000s)
Nine months ended January 31,					2014				2013
NET CASH USED IN OPERATING ACTIVITIES					$	(1,120,322	)		$	(1,311,926	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of available-for-sale securities					(45,158	)			(108,351	)
	Maturities of and payments received on available-for-sale securities					72,502				86,808
	Principal payments on mortgage loans held for investment, net					35,320				31,205
	Capital expenditures					(125,654	)			(96,063	)
	Payments made for business acquisitions, net of cash acquired					(37,865	)			(20,662	)
	Proceeds received on notes receivable					64,865				--
	Franchise loans:
		Loans funded				(62,039	)			(68,874	)
		Payments received				17,893				9,594
	Other, net					12,227				(13,973	)
			Net cash used in investing activities			(67,909	)			(180,316	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Repayments of commercial paper and other short-term borrowings					(80,930	)			(789,271	)
	Proceeds from issuance of commercial paper and other short-term borrowings					275,914				1,214,238
	Repayments of long-term debt					--				(636,621	)
	Proceeds from issuance of long-term debt					--				497,185
	Customer banking deposits, net					(124,947	)			208,753
	Dividends paid					(164,134	)			(162,692	)
	Repurchase of common stock, including shares surrendered					(6,047	)			(340,298	)
	Proceeds from exercise of stock options					28,083				11,529
	Other, net					(29,872	)			(36,113	)
			Net cash used in financing activities			(101,933	)			(33,290	)
Effects of exchange rate changes on cash						(20,016	)			(417	)
Net decrease in cash and cash equivalents						(1,310,180	)			(1,525,949	)
Cash and cash equivalents at beginning of the period						1,747,584				1,944,334
Cash and cash equivalents at end of the period					$	437,404			$	418,385
SUPPLEMENTARY CASH FLOW DATA:
	Income taxes paid, net of refunds received				$	87,672			$	104,986
	Interest paid on borrowings					43,297				62,160
	Interest paid on deposits					1,696				4,377
	Transfers of foreclosed loans to other assets					6,389				7,208
	Accrued additions to property and equipment					4,113				1,001
	Transfer of mortgage loans held for investment to held for sale					7,608				--

U.S. TAX OPERATING DATA														(in 000s)
					Nine months ended							Ten months ended
					January 31,							February 28,
					2014		2013		% Change			2014		2013		% Change
Tax Returns Prepared: (1,2)
	H&R Block Company-Owned Operations				1,516		1,724		(12.1	)%		4,689		5,287		(11.3	)%
	H&R Block Franchise Operations				1,037		1,114		(6.9	)%		3,131		3,313		(5.5	)%
		Total H&R Block Assisted Returns			2,553		2,838		(10.0	)%		7,820		8,600		(9.1	)%
	H&R Block Desktop (3)				137		143		(4.2	)%		833		824		1.1	%
	H&R Block Online (3)				654		865		(24.4	)%		2,683		2,714		(1.1	)%
		Sub-Total (3)			791		1,008		(21.5	)%		3,516		3,538		(0.6	)%
	H&R Block Free File Alliance (3)				64		65		(1.5	)%		436		367		18.8	%
		Total H&R Block Tax Software (3)			855		1,073		(20.3	)%		3,952		3,905		1.2	%
			Total H&R Block U.S. Returns		3,408		3,911		(12.9	)%		11,772		12,505		(5.9	)%

(1)	Prior year numbers have been reclassified between company-owned and franchise operations for offices which were refranchised during either year.
(2)	Amounts shown include 1.8 million and 0.2 million returns at January 31, 2014 and 2013, respectively, which were completed as of January 31, but not yet electronically filed.
(3)	Previously reported tax software return counts for fiscal year 2013 has been restated to primarily reflect accepted e-files. No changes were made to previously reported assisted return counts.

HISTORICAL FULL YEAR U.S. TAX OPERATING DATA (REVISED)							(in 000s)
					Fiscal Year
					2013		2012		2011
Tax Returns Prepared:
	H&R Block Company-Owned Operations				8,907		9,207		9,168
	H&R Block Franchise Operations				5,598		5,693		5,588
		Total H&R Block Assisted Returns			14,505		14,900		14,756
	H&R Block Desktop (1)				2,055		2,124		2,013
	H&R Block Online (1)				4,356		3,932		3,314
		Sub-Total (1)			6,411		6,056		5,327
	H&R Block Free File Alliance (1)				663		721		659
		Total H&R Block Tax Software (1)			7,074		6,777		5,986
			Total H&R Block U.S. Returns		21,579		21,677		20,742

(1)	Previously reported tax software return counts for fiscal years 2013 and prior have been restated to primarily reflect accepted e-files. No changes were made to previously reported assisted return counts.

TAX SERVICES - FINANCIAL RESULTS				(unaudited, amounts in 000s)
				Three months ended								Nine months ended
				January 31,								January 31,
				2014				2013				2014				2013
Tax preparation fees:
	U.S.			$	72,108			$	254,225			$	123,145			$	296,865
	International				9,253				19,960				82,915				85,543
					81,361				274,185				206,060				382,408
Royalties					15,061				56,211				31,150				71,692
Fees from refund anticipation checks					15,542				44,706				21,282				49,176
Fees from Emerald Card					12,689				11,379				37,299				31,716
Fees from Peace of Mind® guarantees					12,684				11,950				59,661				57,505
Interest and fee income on Emerald Advance					27,656				28,399				28,602				30,074
Other					29,003				37,804				59,673				62,135
		Total revenues			193,996				464,634				443,727				684,706
Compensation and benefits:
	Field wages				136,885				136,532				226,320				214,230
	Other wages				41,629				37,039				112,029				105,998
	Benefits and other compensation				34,696				32,369				72,811				65,908
					213,210				205,940				411,160				386,136
Occupancy and equipment					88,148				84,631				250,332				246,749
Marketing and advertising					77,852				99,262				97,435				118,100
Depreciation and amortization					31,819				24,557				81,253				68,421
Bad debt					31,420				39,528				38,535				41,148
Supplies					7,387				8,724				14,355				15,155
Other					66,259				66,181				176,464				144,200
		Total expenses			516,095				528,823				1,069,534				1,019,909
Pretax loss				$	(322,099	)		$	(64,189	)		$	(625,807	)		$	(335,203	)

NON-GAAP FINANCIAL MEASURES		(unaudited, amounts in thousands, except per share amounts)
		Three months ended January 31, 2014
		Revenues		Expenses				EBITDA				Pretax income (loss)				Net income (loss)				EPS
As reported - from continuing operations		$199,770		$	537,985			$	(301,571	)		$	(347,825	)		$	(212,751	)		$	(0.78	)
Adjustments:
	Loss contingencies - litigation	--			346				346				346				207				--
	Impairment of goodwill and intangible assets	--			11				11				11				7				--
	Severance	--			1,092				1,092				1,092				648				--
	Professional fees related to HRB Bank transaction	--			171				171				171				95				--
	Gain on sales of tax offices	--			(616	)			(616	)			(616	)			(372	)			--
	Discrete tax items	--			--				--				--				3,238				0.01
		--			1,004				1,004				1,004				3,823				0.01
As adjusted - from continuing operations		$199,770		$	536,981			$	(300,567	)		$	(346,821	)		$	(208,928	)		$	(0.77	)
		Three months ended January 31, 2013
		Revenues		Expenses				EBITDA				Pretax income (loss)				Net income (loss)				EPS
As reported - from continuing operations		$471,979		$	564,615			$	(52,202	)		$	(96,268	)		$	(16,915	)		$	(0.06	)
Adjustments:
	Loss contingencies - litigation	--			(190	)			(190	)			(190	)			(126	)			--
	Impairment of goodwill and intangible assets	--			--				--				--				3				--
	Severance	--			(582	)			(582	)			(582	)			(355	)			--
	Professional fees related to HRB Bank transaction	--			383				383				383				235				--
	Loss on extinguishment of debt	--			5,790				5,790				5,790				3,552				--
	Gain on sales of tax offices	--			(352	)			(352	)			(352	)			(217	)			0.01
	Discrete tax items	--			--				--				--				(42,852	)			(0.16	)
		--			5,049				5,049				5,049				(39,760	)			(0.15	)
As adjusted - from continuing operations		$471,979		$	559,566			$	(47,153	)		$	(91,219	)		$	(56,675	)		$	(0.21	)
		Nine months ended January 31, 2014
		Revenues		Expenses				EBITDA				Pretax income (loss)				Net income (loss)				EPS
As reported - from continuing operations		$461,305		$	1,159,691			$	(587,125	)		$	(711,681	)		$	(429,036	)		$	(1.57	)
Adjustments:
	Loss contingencies - litigation	--			1,069				1,069				1,069				650				--
	Impairment of goodwill and intangible assets	--			11				11				11				7				--
	Severance	--			4,025				4,025				4,025				2,447				0.01
	Professional fees related to HRB Bank transaction	--			1,978				1,978				1,978				1,203				--
	Gain on sales of tax offices	--			(1,215	)			(1,215	)			(1,215	)			(739	)			--
	Discrete tax items	--			--				--				--				(3,666	)			(0.01	)
		--			5,868				5,868				5,868				(98	)			--
As adjusted - from continuing operations		$461,305		$	1,153,823			$	(581,257	)		$	(705,813	)		$	(429,134	)		$	(1.57	)
		Nine months ended January 31, 2013
		Revenues		Expenses				EBITDA				Pretax income (loss)				Net income (loss)				EPS
As reported - from continuing operations		$705,731		$	1,135,855			$	(295,688	)		$	(427,825	)		$	(223,764	)		$	(0.82	)
Adjustments:
	Loss contingencies - litigation	--			(4,943	)			(4,943	)			(4,943	)			(3,032	)			(0.01	)
	Impairment of goodwill and intangible assets	--			1,421				1,421				1,421				872				--
	Severance	--			475				475				475				291				--
	Professional fees related to HRB Bank transaction	--			430				430				430				264				--
	Loss on extinguishment of debt	--			5,790				5,790				5,790				3,552				--
	Gain on sales of tax offices	--			(876	)			(876	)			(876	)			(537	)			0.01
	Discrete tax items	--			--				--				--				(38,679	)			(0.14	)
		--			2,297				2,297				2,297				(37,269	)			(0.14	)
As adjusted - from continuing operations		$705,731		$	1,133,558			$	(293,391	)		$	(425,528	)		$	(261,033	)		$	(0.96	)

				Three months ended								Nine months ended
				January 31,								January 31,
EBITDA				2014				2013				2014				2013
Net loss from continuing operations - as reported				$	(212,751	)		$	(16,915	)		$	(429,036	)		$	(223,764	)
Add back :
	Income taxes				(135,074	)			(79,353	)			(282,645	)			(204,061	)
	Interest expense				14,443				19,428				43,203				64,895
	Depreciation and amortization				31,811				24,638				81,353				67,242
					(88,820	)			(35,287	)			(158,089	)			(71,924	)
EBITDA from continuing operations				$	(301,571	)		$	(52,202	)		$	(587,125	)		$	(295,688	)
				Three months ended								Nine months ended
				January 31,								January 31,
Supplemental Information				2014				2013				2014				2013
Stock-based compensation expense:
	Pretax			$	4,715			$	3,677			$	15,477			$	11,414
	After-tax				2,809				2,271				9,410				7,001
Amortization of intangible assets:
	Pretax			$	8,757			$	6,256			$	21,351			$	18,130
	After-tax				5,256				3,862				12,981				11,121

About NON-GAAP Financial Measures

The accompanying press release contains non-GAAP financial measures. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures in other companies.

We consider non-GAAP financial measures to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of items that are not indicative of our core operating performance.

The following are descriptions of adjustments we make for our non-GAAP financial measures:

• We exclude from our non-GAAP financial measures litigation charges we incur and favorable reserve adjustments. This does not include legal defense costs.
• We exclude from our non-GAAP financial measures non-cash charges to adjust the carrying values of goodwill, intangible assets, other long-lived assets and investments to their estimated fair values.
• We exclude from our non-GAAP financial measures severance and other restructuring charges in connection with the termination of personnel, closure of offices and related costs.
• We exclude from our non-GAAP financial measures the gains and losses on business dispositions, including investment banking, legal and accounting fees.
• We exclude from our non-GAAP financial measures the gains and losses on extinguishment of debt.
• We exclude from our non-GAAP financial measures the effects of discrete income tax reserve and related adjustments recorded in a specific quarter.

We may consider whether other significant items that arise in the future should also be excluded from our non-GAAP financial measures.

We measure the performance of our business using a variety of metrics, including EBITDA, adjusted EBITDA, adjusted pretax and net income (loss) of continuing operations and adjusted EPS. We also use EBITDA and pretax income of continuing operations as performance metrics in incentive compensation calculations for our employees. These adjusted results eliminate the impact of items that we do not consider indicative of our core operating performance and, we believe, provide meaningful information to assist in understanding our financial results, analyzing trends in our underlying business, and assessing our prospects for future performance.

Contacts:

Investor Relations
Colby Brown
(816) 854-4559t

Media Relations
Gene King
(816) 854-4672

SOURCE H & R Block

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