H&R Block Announces Fiscal 2014 Results

KANSAS CITY, MO - (Marketwired) - June 11, 2014 - H&R Block, Inc. (NYSE: HRB)

  • Total revenues increased $118 million, or 4%, to $3.024 billion1
  • EBITDA increased 8% to $940 million, or 31% of revenues2
  • Non-GAAP adjusted earnings per share3from continuing operations up 5% to $1.67 

H&R Block, Inc. (NYSE: HRB), the world's largest consumer tax services provider, today announced its financial results for the fiscal year ended April 30, 2014. Revenues increased 4.1 percent, to $3.024 billion, driven by improved return mix and changes to the company's pricing strategy in its retail locations, digital tax software product enhancements and monetization efforts, and increased Tax Plus financial services product revenues. Returns prepared by and through H&R Block declined 2.6% to 24.2 million worldwide, primarily due to the company's decision to discontinue its U.S.-based free federal 1040EZ promotion in virtually all markets. Earnings per share from continuing operations increased to $1.81. On an adjusted non-GAAP basis, earnings per share from continuing operations increased 5.0 percent to $1.67.

The company's increase in revenues in fiscal 2014 was consistent with its recently outlined strategy to grow revenues through a balance of improved return mix and increased product attachments. This included the discontinuation of the company's free federal 1040EZ promotion in virtually all markets, the exit from unprofitable retail partnerships, and enhancements to its online digital tax software offering focused on improving monetization and conversion. Additionally, the company achieved EBITDA margin expansion, while continuing to invest in initiatives that contributed to improved client satisfaction and helped maintain retention levels for clients filing forms other than the 1040EZ.

The company also served a greater proportion of its clients with its Tax Plus financial services products and increased year-round usage of its best-in-class general purpose reloadable debit card, the award winning Emerald Prepaid MasterCard®. Revenue per card increased 13 percent, driven by an increase in reloader rates and average deposits per card. The company issued 2.4 million Emerald Cards in fiscal 2014 with approximately $9.2 billion in total deposits.

CEO Perspective

"We delivered a strong year of both revenue and earnings growth and lived up to our long-standing tradition of being the world's leading tax services provider," said Bill Cobb, H&R Block's president and chief executive officer. "Though we anticipated an overall decline in return counts, our Tax Plus strategy is working, and we will continue to focus on enhancing the client experience and delivering best-in-class products and services to drive profitable growth. Our improving client satisfaction scores are a testament to the value we bring to our clients, positioning us well for 2015 and beyond," added Cobb.

Fiscal 2014 Results From Continuing Operations

         
    Actual   Adjusted *
(in millions, except EPS)   Fiscal Year 2014   Fiscal Year 2013   Fiscal Year 2014   Fiscal Year 2013
Revenue   $ 3,024   $ 2,906   $ 3,024   $ 2,906
EBITDA *   $ 940   $ 874   $ 933   $ 884
Pretax Income   $ 767   $ 702   $ 760   $ 712
Net Income   $ 500   $ 465   $ 462   $ 438
Weighted-Avg. Shares - Diluted     276.0     274.4     276.0     274.4
EPS   $ 1.81   $ 1.69   $ 1.67   $ 1.59
                         

*Adjusted amounts and EBITDA (earnings before interest, taxes, depreciation and amortization) are non-GAAP financial measures. See "About Non-GAAP Financial Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).

CFO Perspective

"By executing on our Tax Plus objectives, we delivered exceptional results this year, growing both our top and bottom line," said Greg Macfarlane, H&R Block's chief financial officer. "Our productivity initiatives enabled us to manage our costs more efficiently and drive margin expansion, while continuing to invest in our business, ultimately creating shareholder value."

Business Segment Results and Highlights

Tax Services

  • Revenues increased 4.2 percent to $3.0 billion, driven by improved mix and changes to the company's pricing strategy in its retail locations, digital tax software product enhancements and monetization efforts, and increased Tax Plus financial services product revenues
  • U.S. assisted tax preparation fees and royalties increased 4.0 percent to $2.1 billion, primarily due to incremental revenue from the company's decision to discontinue its free federal 1040EZ promotion in virtually all markets, pricing changes, and improved return mix
  • Revenues related to Tax Plus financial services products increased 11.2 percent to $432 million, primarily due to pricing changes in the company's refund transfer offering, higher Peace of Mind revenues, and increased usage and average deposit per card on its Emerald Prepaid Master Card
  • International revenue decreased 6.7 percent to $232 million, driven by unfavorable exchange rates and timing differences due to a 5-day extension in the Canadian tax season this year to May 5, which is subsequent to the company's fiscal year end. Including revenues from returns prepared through May 5, international revenues increased 5.6 percent in local currency.
  • Total expenses increased 2.9 percent to $2.1 billion, driven by increased compensation and benefits, including variable compensation resulting from higher tax preparation fees, and depreciation and amortization expenses
  • Adjusted non-GAAP pretax income improved 6.3 percent to $874 million

Corporate

  • Pretax loss improved by $20 million to $99 million, primarily due to a non-recurring gain from the sale of residual interests in mortgage loan securitizations
  • Net balance of mortgage loans held for investment declined $70 million to $268 million, while provision for loan losses declined 38 percent to $8 million
  • Effective tax rate from continuing operations increased to 34.8 percent, due to discrete tax adjustments

Discontinued Operations

  • Reduction of net loss to $25 million compared to $31 million in the prior year
  • Sand Canyon Corporation (SCC), a separate legal entity of H&R Block, Inc., continued to engage in settlement discussions with counterparties that represent a significant majority of previously denied and expected future representation and warranty claims. Based on these actions, SCC recorded a provision of $25 million during the fourth quarter, increasing its accrual for contingent losses related to representations and warranty claims to$184 million at April 30.

Balance Sheet

  • As of April 30, the company had unrestricted cash of $2.2 billion and total outstanding debt of $906.5 million
  • Shareholder equity at April 30 was $1.6 billion 

Dividends

A previously announced quarterly cash dividend of 20 cents per share is payable on July 1, 2014 to shareholders of record as of June 16, 2014. The July 1 dividend payment will be H&R Block's 207th consecutive quarterly dividend since the company went public in 1962.

Conference Call

In conjunction with the announcement of fiscal 2014 results, the company will host a conference call at 8:30 a.m. Eastern time on June 11, 2014 for analysts, institutional investors, and shareholders to discuss fiscal 2014 results, future 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: 34435396

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 11:30 a.m. Eastern time on June 11, 2014, and continuing untilJuly 12, 2014, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 34435396. The webcast will be available for replay June 11, 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 650 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2014, H&R Block had annual revenues over $3.0 billion with 24.2 million tax returns prepared worldwide. Tax return preparation services are provided in approximately 12,000 company-owned and franchise retail tax offices worldwide by professional tax preparers, and through H&R Block Tax Software products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom.

About Non-GAAP Financial Information

This press release and the accompanying tables include non-GAAP financial information. 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 "Non-GAAP Financial Information."

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.

1All amounts in this release are unaudited. Unless otherwise noted, all comparisons refer to the current fiscal year to the prior fiscal year.

2EBITDA (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 Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).

3All per share amounts are based on fully diluted shares.

KEY OPERATING RESULTS   (unaudited, in 000s - except per share data)  
    Three months ended April 30,  
    Revenues   Income (loss)  
    2014   2013   2014     2013  
                             
Tax Services   $ 2,555,733      $ 2,193,261      $ 1,492,174        $ 1,156,346  
Corporate and Eliminations     7,257     6,951     (13,377 )     (26,510 )
    $ 2,562,990   $ 2,200,212     1,478,797       1,129,836  
Income taxes                 549,664       440,914  
Net income from continuing operations                 929,133       688,922  
Net loss from discontinued operations                 (19,135 )     (24,582 )
Net income               $ 909,998     $ 664,340  
                             
Basic earnings (loss) per share:                            
  Continuing operations               $ 3.38     $ 2.53  
  Discontinued operations                 (0.07 )     (0.09 )
  Consolidated               $ 3.31     $ 2.44  
                             
Basic shares                 274,222       272,384  
                             
Diluted earnings (loss) per share:                            
  Continuing operations               $ 3.36     $ 2.51  
  Discontinued operations                 (0.07 )     (0.09 )
  Consolidated               $ 3.29     $ 2.42  
                             
Diluted shares                 276,406       274,715  
                             
    Twelve months ended April 30,  
    Revenues   Income (loss)  
    2014   2013   2014     2013  
                             
Tax Services   $ 2,999,460   $ 2,877,967   $ 866,367     $ 821,143  
Corporate and Eliminations     24,835     27,976     (99,251 )     (119,132 )
    $ 3,024,295   $ 2,905,943     767,116       702,011  
Income taxes                 267,019       236,853  
Net income from continuing operations                 500,097       465,158  
Net loss from discontinued operations                 (24,940 )     (31,210 )
Net income               $ 475,157     $ 433,948  
                             
Basic earnings (loss) per share:                            
  Continuing operations               $ 1.82     $ 1.70  
  Discontinued operations                 (0.09 )     (0.11 )
  Consolidated               $ 1.73     $ 1.59  
                             
Basic shares                 273,830       273,057  
                             
Diluted earnings (loss) per share:                            
  Continuing operations               $ 1.81     $ 1.69  
  Discontinued operations                 (0.09 )     (0.11 )
  Consolidated               $ 1.72     $ 1.58  
                             
Diluted shares                 276,027       274,359  
                             
                             
                             

 

     
CONSOLIDATED BALANCE SHEETS   (unaudited, in 000s - except per share data)
As of April 30,   2014     2013  
                 
ASSETS                
  Cash and cash equivalents   $ 2,185,307     $ 1,747,584  
  Cash and cash equivalents -- restricted     115,319       117,837  
  Receivables, net     191,618       206,835  
  Prepaid expenses and other current assets     198,267       390,087  
  Investments in available-for-sale securities     423,495       --  
    Total current assets     3,114,006       2,462,343  
  Mortgage loans held for investment, net     268,428       338,789  
  Investments in available-for-sale securities     4,329       486,876  
  Property and equipment, net     304,911       267,880  
  Intangible assets, net     355,622       284,439  
  Goodwill     436,117       434,782  
  Other assets     210,116       262,670  
    Total assets   $ 4,693,529     $ 4,537,779  
LIABILITIES AND STOCKHOLDERS' EQUITY                
LIABILITIES:                
  Customer banking deposits   $ 769,785     $ 936,464  
  Accounts payable, accrued expenses and other current liabilities     569,007       523,921  
  Accrued salaries, wages and payroll taxes     167,032       134,970  
  Accrued income taxes     406,655       416,128  
  Current portion of long-term debt     400,637       722  
    Total current liabilities     2,313,116       2,012,205  
  Long-term debt     505,837       905,958  
  Other noncurrent liabilities     318,027       356,069  
    Total liabilities     3,136,980       3,274,232  
COMMITMENTS AND CONTINGENCIES                
STOCKHOLDERS' EQUITY:                
  Common stock, no par, stated value $.01 per share     3,166       3,166  
  Convertible preferred stock, no par, stated value $0.01 per share     --       --  
  Additional paid-in capital     766,654       752,483  
  Accumulated other comprehensive income     5,177       10,550  
  Retained earnings     1,589,297       1,333,445  
  Less treasury shares, at cost     (807,745 )     (836,097 )
    Total stockholders' equity     1,556,549       1,263,547  
      Total liabilities and stockholders' equity   $ 4,693,529     $ 4,537,779  
                 
                 
                 

 

         
CONSOLIDATED STATEMENTS OF INCOME     (unaudited, in 000s - except per share amounts)  
    Three Months Ended
April 30,
    Twelve months ended
April 30,
 
    2014     2013     2014     2013  
REVENUES:                                
  Service revenues   $ 2,211,428     $ 1,884,472     $ 2,570,273     $ 2,443,000  
  Royalty, product and other revenues     312,660       274,943       355,928       364,114  
  Interest income     38,902       40,797       98,094       98,829  
      2,562,990       2,200,212       3,024,295       2,905,943  
OPERATING EXPENSES:                                
  Cost of revenues:                                
    Compensation and benefits     548,955       514,731       816,623       769,161  
    Occupancy and equipment     113,301       107,553       362,782       354,612  
    Provision for bad debt and loan losses     34,247       39,287       80,007       90,685  
    Interest     14,185       15,062       57,388       79,957  
    Depreciation and amortization     27,277       20,930       93,259       75,229  
    Other     95,237       124,172       217,597       235,144  
      833,202       821,735       1,627,656       1,604,788  
  Selling, general and administrative:                                
    Marketing and advertising     140,096       152,352       238,763       270,783  
    Compensation and benefits     107,286       85,180       249,779       213,987  
    Depreciation and amortization     6,974       4,235       22,345       17,178  
    Other selling, general and administrative     13,835       9,900       122,541       102,521  
      268,191       251,667       633,428       604,469  
      Total operating expenses     1,101,393       1,073,402       2,261,084       2,209,257  
Operating income     1,461,597       1,126,810       763,211       696,686  
Other income, net     17,200       3,026       3,905       5,325  
Income from continuing operations before income taxes     1,478,797       1,129,836       767,116       702,011  
Income taxes     549,664       440,914       267,019       236,853  
Net income from continuing operations     929,133       688,922       500,097       465,158  
Net loss from discontinued operations     (19,135 )     (24,582 )     (24,940 )     (31,210 )
NET INCOME   $ 909,998     $ 664,340     $ 475,157     $ 433,948  
                                          
BASIC EARNINGS (LOSS) PER SHARE:                                
  Continuing operations   $ 3.38     $ 2.53     $ 1.82     $ 1.70  
  Discontinued operations     (0.07 )     (0.09 )     (0.09 )     (0.11 )
  Consolidated   $ 3.31     $ 2.44     $ 1.73     $ 1.59  
                                 
DILUTED EARNINGS (LOSS) PER SHARE:                                
  Continuing operations   $ 3.36     $ 2.51     $ 1.81     $ 1.69  
  Discontinued operations     (0.07 )     (0.09 )     (0.09 )     (0.11 )
  Consolidated   $ 3.29     $ 2.42     $ 1.72     $ 1.58  
                                 
                                 
                                 

 

       
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   (unaudited, in 000s)  
Twelve months ended April 30,   2014     2013  
                 
NET CASH PROVIDED BY OPERATING ACTIVITIES   $ 809,581        $ 497,108  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Purchases of available-for-sale securities     (45,158 )     (227,177 )
  Sales, maturities and payments received on available-for-sale securities     107,101       118,411  
  Principal payments on mortgage loans held for investment, net     46,664       44,031  
  Capital expenditures     (147,011 )     (113,239 )
  Payments made for business acquisitions, net of cash acquired     (68,428 )     (20,742 )
  Proceeds from sale of businesses, net     942       3,785  
  Proceeds from notes receivable     64,865       --  
  Franchise loans:                
    Franchise loans funded     (63,960 )     (70,807 )
    Payments received on franchise loans     87,220       83,445  
  Surrender of company-owned life insurance policies     --       81,125  
  Other, net     28,455       (9,769 )
      Net cash provided by (used in) investing activities     10,690       (110,937 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Repayments of commercial paper and other short-term borrowings     (316,000 )     (1,214,238 )
  Proceeds from issuance of commercial paper and other short-term borrowings     316,000       1,214,238  
  Repayments of long-term debt     --       (636,621 )
  Proceeds from issuance of long-term debt     --       497,185  
  Customer banking deposits, net     (163,952 )     103,608  
  Dividends paid     (218,980 )     (217,201 )
  Repurchase of common stock, including shares surrendered     (6,106 )     (340,413 )
  Proceeds from exercise of stock options     28,246       25,139  
  Other, net     (4,138 )     (16,238 )
    Net cash used in financing activities     (364,930 )     (584,541 )
                 
Effects of exchange rate changes on cash     (17,618 )     1,620  
                 
Net increase (decrease) in cash and cash equivalents     437,723       (196,750 )
Cash and cash equivalents at beginning of the year     1,747,584       1,944,334  
Cash and cash equivalents at end of the year   $ 2,185,307     $ 1,747,584  
                 
SUPPLEMENTARY CASH FLOW DATA:                
  Income taxes paid, net of refunds received   $ 155,735     $ 155,617  
  Interest paid on borrowings     55,221       73,559  
  Interest paid on deposits     2,162       5,665  
  Transfers of foreclosed loans to other assets     7,644       10,357  
  Transfer of mortgage loans held for investment to held for sale     7,608       --  
  Accrued additions to property and equipment     5,257       4,261  
                 
                 
                 

 

           
WORLDWIDE OPERATING DATA   (unaudited, in 000s)
Twelve months ended April 30,   2014   2013   % Change
U.S. Tax Returns Prepared: (1)              
  H&R Block Company-Owned Operations   8,342   9,065   (8.0 )%
  H&R Block Franchise Operations   5,268   5,440   (3.2 )%
    Total H&R Block Assisted Returns   13,610   14,505   (6.2 )%
               
  H&R Block Desktop (2)   2,026   2,055   (1.4 )%
  H&R Block Online (2)   4,389   4,356   0.8 %
    Sub-Total (2)   6,415   6,411   0.1 %
               
  H&R Block Free File Alliance (2)   767   663   15.7 %
  Total H&R Block Tax Software (2)   7,182   7,074   1.5 %
      Total H&R Block U.S. Returns   20,792   21,579   (3.6 )%
International Tax Returns Prepared:              
    Canada (3)   2,642   2,517   5.0 %
    Australia   746   741   0.7 %
  Total International Tax Returns   3,388   3,258   4.0 %
Tax Returns Prepared Worldwide   24,180   24,837   (2.6 )%
               
               
               

 

(1) Prior year numbers have been reclassified between company-owned and franchise operations for offices which were refranchised or repurchased by the company during either year.
(2) Previously reported return counts for fiscal year 2013 have been restated to primarily reflect accepted e-files. No changes were made to previously reported assisted return counts.
(3) In fiscal year 2014, the end of the Canadian tax season was extended from April 30 to May 5, 2014. Tax returns prepared in Canada in fiscal year 2014 includes approximately 141 thousand returns in both company-owned and franchise offices which were accepted by the client after April 30. The revenues related to these returns will be recognized in fiscal year 2015.
   
   

 

     
TAX SERVICES - FINANCIAL RESULTS   (unaudited, amounts in 000s)
Twelve months ended April 30,   2014   2013
Tax preparation fees:            
  U.S.   $ 1,794,043      $ 1,712,319
  International     200,152     220,870
      1,994,195     1,933,189
Royalties     316,153     318,386
Fees from refund anticipation checks     181,394     158,176
Fees from Emerald Card     103,730     98,896
Fees from Peace of Mind® guarantees     89,685     71,355
Interest and fee income on Emerald Advance     56,877     59,657
Other     257,426     238,308
    Total revenues     2,999,460     2,877,967
             
Compensation and benefits:            
  Field wages     702,312     654,794
  Other wages     169,583     150,306
  Benefits and other compensation     158,203     148,492
      1,030,098     953,592
Occupancy and equipment     363,590     354,430
Marketing and advertising     237,214     270,240
Depreciation and amortization     115,488     92,004
Bad debt     71,733     77,402
Supplies     36,454     40,131
Impairment of goodwill and intangible assets     277     3,581
Other     278,239     265,444
      Total expenses     2,133,093     2,056,824
Pretax income   $ 866,367   $ 821,143
             
             
             

 

     
NON-GAAP FINANCIAL MEASURES (unaudited, in 000s - except per share amounts)  
  Twelve months ended April 30, 2014  
  Revenues   Expenses     EBITDA     Pretax income     Net income     EPS  
                                             
As reported - from continuing operations $ 3,024,295      $ 2,261,084        $ 940,108        $ 767,116        $ 500,097        $ 1.81  
                                             
Adjustments:                                            
  Loss contingencies - litigation   --     1,844       1,844       1,844       1,122       --  
  Impairment of goodwill and intangible assets   --     277       277       277       169       --  
  Severance   --     5,204       5,204       5,204       3,166       0.01  
  Professional fees related to HRB Bank transaction   --     2,747       2,747       2,747       1,671       0.01  
  Impairment of AFS securities   --     --       12,414       12,414       7,553       0.03  
  Gain on sale of residual interests in securitizations   --     --       (18,250 )     (18,250 )     (11,104 )     (0.04 )
  Gain on sales of tax offices/businesses   --     (1,613 )     (11,738 )     (11,738 )     (7,142 )     (0.03 )
  Discrete tax items   --     --       --       --       (33,347 )     (0.12 )
    --     8,459       (7,502 )     (7,502 )     (37,912 )     (0.14 )
As adjusted - from continuing operations $ 3,024,295   $ 2,252,625     $ 932,606     $ 759,614     $ 462,185     $ 1.67  
                                             
  Twelve months ended April 30, 2013  
  Revenues   Expenses     EBITDA     Pretax income     Net income     EPS  
                                             
As reported - from continuing operations $ 2,905,943   $ 2,209,257     $ 874,375     $ 702,011     $ 465,158     $ 1.69  
                                             
Adjustments:                                            
  Loss contingencies - litigation   --     (4,579 )     (4,579 )     (4,579 )     (2,817 )     (0.01 )
  Impairment of goodwill and intangible assets   --     3,581       3,581       3,581       2,203       0.01  
  Severance   --     4,785       4,785       4,785       2,944       0.01  
  Professional fees related to HRB Bank transaction   --     1,565       1,565       1,565       963       --  
  Loss on extinguishment of debt   --     --       5,790       5,790       3,562       0.01  
  Gain on sales of tax offices/businesses   --     (1,272 )     (1,272 )     (1,272 )     (782 )     --  
  Discrete tax items   --     --       --       --       (33,302 )     (0.12 )
    --     4,080       9,870       9,870       (27,229 )     (0.10 )
As adjusted - from continuing operations $ 2,905,943   $ 2,205,177     $ 884,245     $ 711,881     $ 437,929     $ 1.59  
                               
                               
                               

 

             
    Three Months Ended
April 30,
  Twelve months ended
April 30,
EBITDA   2014   2013   2014   2013
                         
Net income - as reported   $ 909,998   $ 664,340   $ 475,157   $ 433,948
                         
Add back :                        
  Discontinued operations     19,135     24,582     24,940     31,210
  Income taxes     549,664     440,914     267,019     236,853
  Interest expense     14,185     15,062     57,388     79,957
  Depreciation and amortization     34,251     25,165     115,604     92,407
      617,235     505,723     464,951     440,427
                         
EBITDA from continuing operations   $ 1,527,233   $ 1,170,063   $ 940,108   $ 874,375
                         
      Three Months Ended
April 30,
    Twelve months ended
April 30,
Supplemental Information     2014     2013     2014     2013
                         
Stock-based compensation expense:                        
  Pretax   $ 4,581   $ 3,879   $ 20,058   $ 15,293
  After-tax     2,794     2,407     12,204     9,408
Amortization of intangible assets:                        
  Pretax   $ 9,544   $ 6,085   $ 30,895   $ 24,215
  After-tax     5,817     3,775     18,798     14,896
                         
                         
                         

NON-GAAP FINANCIAL INFORMATION

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 for 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 losses from settlements and estimated contingent losses from litigation and favorable reserve adjustments. This does not include legal defense costs.
  • We exclude 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 severance and other restructuring charges in connection with the termination of personnel, closure of offices and related costs.
  • We exclude the gains and losses on business dispositions, including investment banking, legal and accounting fees from both business dispositions and acquisitions.
  • We exclude the gains and losses on extinguishment of debt.
  • We exclude 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 and adjusted pretax income of continuing operations. Adjusted EBITDA and adjusted pretax income 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. We also use EBITDA and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.

SOURCE H & R Block

Contacts:

Colby Brown
Investor Relations
(816) 854-4559

Gene King
Media Relations
(816) 854-4672

###

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