H&R Block Announces Fiscal 2015 Third Quarter Results

KANSAS CITY, MO - (Marketwired) - March 04, 2015 - H&R Block, Inc. (NYSE: HRB), the world's largest consumer tax services provider, today released its financial results for the fiscal 2015 third quarter ended January 31, 2015 and U.S. tax volume through February 28.

As a result of an earlier opening of the Internal Revenue Service's (IRS) e-file system this tax season, the company reported a $309 million1 increase in revenues, to $509 million for the fiscal third quarter. This resulted in an improvement in its fiscal third quarter seasonal net loss from continuing operations to $0.13 per share.2 A majority of the company's revenues and all of its fiscal 2015 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 continued its focus on driving revenue growth through improved monetization and product attach rates and believes it is on pace to achieve these goals in fiscal 2015. As of February 28, 2015, total U.S. tax returns prepared by and through H&R Block declined 4.2% as compared to the prior fiscal year. Changing tax filer timing, Affordable Care Act (ACA) form delays and errors, the carryover impact of eliminating certain promotions last tax season, competitor pricing actions and continued industry-wide fraud issues have resulted in a decline in lower-value returns.

"Despite being disappointed by the decline in early season volume, we are pleased with our monetization, overall return mix, and Tax Plus product attach rates through both our assisted channel and digital do-it-yourself products," said Bill Cobb, H&R Block's president and chief executive officer. "I'm also proud of how our organization has handled the implementation of the Affordable Care Act, which is the most significant change to the tax code in decades. Though it's too early to determine the impact of the ACA on this tax season, we are well positioned to deliver exceptional value to our clients as this plays out over the next several years."

Tax Industry Fraud

As the industry leader, H&R Block remains focused on addressing the growing industry-wide issue of tax fraud. Tax fraud is not new to the tax preparation industry and recent media coverage of fraud related to do-it-yourself tax software shows how aggressive those perpetrating fraud are becoming. The problem is growing rapidly, with the IRS estimating the total impact of tax identity fraud at greater than $5 billion in 2013. Similarly, the U.S. Treasury Department has estimated that improper payments related to the Earned Income Tax Credit (EITC) amount to $16 to $19 billion annually, up from estimates of $13 to $15 billion last year.

H&R Block will continue to advocate for change that benefits consumers by strengthening anti-fraud measures. The company's efforts are having an impact, as evidenced by Congress's direction last year to the U.S. Treasury Department to implement consistent requirements across all tax preparation methods for those applying for the EITC. H&R Block continues to advocate for a clear implementation plan from the Treasury Department that puts these new standards in place in time for the 2016 tax season. The company is also continuing to advocate for minimum federal standards for all paid tax preparers. Without minimum standards, taxpayers will continue to be victimized by individuals who are insufficiently trained or worse, knowingly commit fraud.

"We have led the conversation regarding tax return fraud and the need for reform for years, while our competitors in the tax preparation industry have just recently joined the discussion," said Cobb. "We urge the Treasury Department to implement Congress's direction in time for tax season 2016. We need all players in the industry -- the IRS, Treasury, Congress, professional tax preparers, tax preparation software makers, and taxpayers -- to join together to help create solutions. These issues are taking tens of billions of dollars out of taxpayers' pockets."

Fiscal 2015 Third Quarter Highlights

  • Total revenues increased $309 million to $509 million primarily due to an earlier opening of the IRS's e-file system
  • Seasonal net loss from continuing operations improved to $35 million, or $0.13 per share
  • Non-GAAP adjusted loss per share3  from continuing operations is $0.13

Fiscal 2015 Third Quarter Results From Continuing Operations

             
    Actual     Adjusted  
(in millions, except EPS)   Fiscal Year 2015        Fiscal Year 2014        Fiscal Year 2015        Fiscal Year 2014  
Revenue   $ 509     $ 200     $ 509     $ 200  
EBITDA   $ (38 )   $ (302 )   $ (37 )   $ (301 )
Pretax Loss   $ (91 )   $ (348 )   $ (89 )   $ (347 )
Net Loss   $ (35 )   $ (213 )   $ (34 )   $ (212 )
Weighted-Avg. Shares - Diluted     275.2       274.1       275.2       274.1  
EPS   $ (0.13 )   $ (0.78 )   $ (0.13 )   $ (0.78 )
                                 

Business Segment Financial Results and Highlights

Tax Services

  • Revenues increased 159.3% to $503 million, driven mainly by the earlier opening of the IRS's e-file system. In fiscal 2014, the IRS opened e-file on January 30, which resulted in a significant shift of revenue from the fiscal third quarter to the fiscal fourth quarter of that year.
  • Total operating expenses increased 12.3% to $571 million, driven by the variable costs associated with tax return preparation and increased training costs.
  • Adjusted non-GAAP pretax loss decreased 77.1% to $74 million, primarily due to the timing shift in revenues mentioned above.

Corporate

  • Pretax loss decreased by $10 million to $15 million, primarily as a result of lower interest expense due to the repayment of a $400 million note in October 2014 and reduced legal and consulting fees.

Discontinued Operations

  • Sand Canyon Corporation (SCC), a separate legal entity from H&R Block, Inc., continued to engage in constructive settlement discussions with counterparties that have made and are expected to assert a significant majority of previously denied and possible future representation and warranty claims.
  • During the third quarter, SCC entered into a settlement agreement to resolve certain of these claims. The settlement amount was fully covered by prior accruals and was paid in the fiscal third quarter.
  • SCC's accrual for contingent losses related to representation and warranty claims was $144 million at January 31.

DividendsAs just announced, a quarterly cash dividend of 20 cents per share is payable on April 1, 2015 to shareholders of record as of March 16, 2015. The April 1 dividend payment will be H&R Block's 210th consecutive quarterly dividend since the company went public in 1962.

Fiscal Third Quarter 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 4, 2015 for analysts, institutional investors, and shareholders to discuss the fiscal 2015 third quarter 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 (866) 872-0323 or International (443) 842-7595
Conference ID: 72336180

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 4, 2015, and continuing until April 4, 2015, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 72336180. The webcast will be available for replay March 5, 2015 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 by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, 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 at http://newsroom.hrblock.com/.

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, 2014 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 amounts in this release are unaudited. Unless otherwise noted, all comparisons refer to the current period compared to the corresponding prior year period.
(2)   All per share amounts are based on fully diluted shares.
(3)   The company reports adjusted financial performance, which it believes is a better indication of the company's recurring operations. The company also reports EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP financial measure, which the company finds relevant when measuring its performance. See "About Non-GAAP Financial Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).

 

       
       
KEY OPERATING RESULTS   (unaudited, in 000s - except per share data)  
    Three months ended January 31,  
    Revenues   Income (loss)  
    2015      2014      2015        2014  
                             
Tax Services   $ 503,008   $ 193,996   $ (75,428 )   $ (322,099 )
Corporate and Eliminations     6,066     5,774     (15,437 )     (25,726 )
    $ 509,074   $ 199,770     (90,865 )     (347,825 )
Income tax benefit                 (55,554 )     (135,074 )
Net loss from continuing operations                 (35,311 )     (212,751 )
Net loss from discontinued operations                 (1,637 )     (1,960 )
Net loss               $ (36,948 )   $ (214,711 )
                             
Basic and diluted loss per share:                            
  Continuing operations               $ (0.13 )   $ (0.78 )
  Discontinued operations                 -       -  
  Consolidated               $ (0.13 )   $ (0.78 )
                             
Basic and diluted shares                 275,190       274,110  
                             
    Nine months ended January 31,  
    Revenues   Income (loss)  
    2015   2014   2015     2014  
                             
Tax Services   $ 760,771   $ 443,727   $ (402,630 )   $ (625,807 )
Corporate and Eliminations     16,517     17,578     (64,624 )     (85,874 )
    $ 777,288   $ 461,305     (467,254 )     (711,681 )
Income tax benefit                 (209,865 )     (282,645 )
Net loss from continuing operations                 (257,389 )     (429,036 )
Net loss from discontinued operations                 (7,789 )     (5,805 )
Net loss               $ (265,178 )   $ (434,841 )
                             
Basic and diluted loss per share:                            
  Continuing operations               $ (0.94 )   $ (1.57 )
  Discontinued operations                 (0.03 )     (0.02 )
  Consolidated               $ (0.97 )   $ (1.59 )
                             
Basic and diluted shares                 274,957       273,699  
                             
                             

 

CONSOLIDATED BALANCE SHEETS   (unaudited, in 000s - except per share data)  
As of   January
31, 2015
       January
31, 2014
       April
30, 2014
 
                         
ASSETS                        
Cash and cash equivalents   $ 1,321,134     $ 437,404     $ 2,185,307  
Cash and cash equivalents - restricted     51,085       44,855       115,319  
Receivables, net     777,453       677,221       191,618  
Prepaid expenses and other current assets     260,802       345,231       198,267  
Investments in available-for-sale securities     367,845       -       423,495  
  Total current assets     2,778,319       1,504,711       3,114,006  
Mortgage loans held for investment, net     245,663       282,149       268,428  
Investments in available-for-sale securities     7,883       443,770       4,329  
Property and equipment, net     308,805       314,565       304,911  
Intangible assets, net     443,329       318,719       355,622  
Goodwill     442,961       437,386       436,117  
Other assets     151,981       213,987       210,116  
  Total assets   $ 4,378,941     $ 3,515,287     $ 4,693,529  
LIABILITIES AND STOCKHOLDERS' EQUITY                        
LIABILITIES:                        
  Commercial paper borrowings   $ 591,486     $ 194,984     $ -  
  Customer banking deposits     1,286,216       806,887       769,785  
  Accounts payable, accrued expenses and other current liabilities     472,490       520,121       569,007  
  Accrued salaries, wages and payroll taxes     118,512       108,583       167,032  
  Accrued income taxes     1,619       23,375       406,655  
  Current portion of long-term debt     781       400,570       400,637  
    Total current liabilities     2,471,104       2,054,520       2,313,116  
  Long-term debt     505,460       505,959       505,837  
  Other noncurrent liabilities     255,992       268,049       318,027  
    Total liabilities     3,232,556       2,828,528       3,136,980  
COMMITMENTS AND CONTINGENCIES                        
STOCKHOLDERS' EQUITY:                        
  Common stock, no par, stated value $.01 per share     3,166       3,166       3,166  
  Convertible preferred stock, no par, stated value $0.01 per share     -       -       -  
  Additional paid-in capital     778,845       762,102       766,654  
  Accumulated other comprehensive income (loss)     (1,263 )     (4,776 )     5,177  
  Retained earnings     1,158,376       734,233       1,589,297  
  Less treasury shares, at cost     (792,739 )     (807,966 )     (807,745 )
    Total stockholders' equity     1,146,385       686,759       1,556,549  
      Total liabilities and stockholders' equity   $ 4,378,941     $ 3,515,287     $ 4,693,529  
                          
                         

 

CONSOLIDATED STATEMENTS OF OPERATIONS   (unaudited, in 000s - except per share amounts)  
    Three months ended January 31,     Nine months ended January 31,  
    2015     2014     2015     2014  
                                 
REVENUES:                                
  Service revenues   $ 406,441     $ 138,613     $ 637,356     $ 358,845  
  Royalty, product and other revenues     63,335       23,788       81,905       43,268  
  Interest income     39,298       37,369       58,027       59,192  
      509,074       199,770       777,288       461,305  
OPERATING EXPENSES:                                
  Cost of revenues:                                
    Compensation and benefits     186,656       160,830       307,892       267,668  
    Occupancy and equipment     92,303       88,387       263,235       249,481  
    Provision for bad debt and loan losses     39,283       31,420       44,032       45,760  
    Depreciation and amortization     29,181       25,267       82,695       65,982  
    Other     47,255       43,761       116,247       124,087  
      394,678       349,665       814,101       752,978  
Selling, general and administrative:                                
  Marketing and advertising     87,569       77,943       108,227       98,667  
  Compensation and benefits     60,380       60,211       175,697       168,076  
  Depreciation and amortization     14,110       6,544       33,211       15,371  
  Other selling, general and administrative     27,488       29,750       66,991       83,123  
      189,547       174,448       384,126       365,237  
    Total operating expenses     584,225       524,113       1,198,227       1,118,215  
Other expense, net     6,666       9,610       9,629       13,295  
Interest expense on borrowings (1)     9,048       13,872       36,686       41,476  
Loss from continuing operations before income tax benefit     (90,865 )     (347,825 )     (467,254 )     (711,681 )
Income tax benefit     (55,554 )     (135,074 )     (209,865 )     (282,645 )
Net loss from continuing operations     (35,311 )     (212,751 )     (257,389 )     (429,036 )
Net loss from discontinued operations     (1,637 )     (1,960 )     (7,789 )     (5,805 )
NET LOSS   $ (36,948 )   $ (214,711 )   $ (265,178 )   $ (434,841 )
                                 
BASIC AND DILUTED LOSS PER SHARE:                                
  Continuing operations   $ (0.13 )   $ (0.78 )   $ (0.94 )   $ (1.57 )
  Discontinued operations     -       -       (0.03 )     (0.02 )
  Consolidated   $ (0.13 )   $ (0.78 )   $ (0.97 )   $ (1.59 )
                                   

 

(1)    The presentation of interest expense from borrowings has been restated to correct errors in presentation, whereby we reclassified such interest expense from cost of revenues to a separate caption.

 

       
       
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   (unaudited, in 000s)  
Nine months ended January 31,   2015         2014  
                 
NET CASH USED IN OPERATING ACTIVITIES   $ (1,247,200 )   $ (1,120,322 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Purchases of available-for-sale securities     (100 )     (45,158 )
  Maturities of and payments received on available-for-sale securities     68,013       72,502  
  Principal payments on mortgage loans held for investment, net     18,098       35,320  
  Capital expenditures     (98,876 )     (125,654 )
  Payments made for business acquisitions, net of cash acquired     (112,163 )     (37,865 )
  Proceeds received on notes receivable     -       64,865  
  Franchise loans:                
    Loans funded     (48,013 )     (62,039 )
    Payments received     34,164       17,893  
  Other, net     6,179       12,227  
      Net cash used in investing activities     (132,698 )     (67,909 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Repayments of commercial paper     (457,576 )     (80,930 )
  Proceeds from issuance of commercial paper     1,049,062       275,914  
  Repayments of long-term debt     (400,000 )     -  
  Customer banking deposits, net     515,015       (124,947 )
  Dividends paid     (164,905 )     (164,134 )
  Proceeds from exercise of stock options     16,026       28,083  
  Other, net     (26,348 )     (35,919 )
    Net cash provided by (used in) financing activities     531,274       (101,933 )
                 
Effects of exchange rate changes on cash     (15,549 )     (20,016 )
                 
Net decrease in cash and cash equivalents     (864,173 )     (1,310,180 )
Cash and cash equivalents at beginning of the period     2,185,307       1,747,584  
Cash and cash equivalents at end of the period   $ 1,321,134     $ 437,404  
                 
SUPPLEMENTARY CASH FLOW DATA:                
  Income taxes paid, net of refunds received   $ 201,374     $ 87,672  
  Interest paid on borrowings     43,561       43,297  
  Interest paid on deposits     523       1,696  
  Transfers of foreclosed loans to other assets     3,240       6,389  
  Accrued additions to property and equipment     1,986       4,113  
  Conversion of investment in preferred stock to available-for-sale common stock     5,000       -  
  Transfer of mortgage loans held for investment to held for sale     -       7,608  
                   
                   

 

TAX SERVICES - FINANCIAL RESULTS (unaudited, amounts in 000s)  
    Three months ended January 31,     Nine months ended January 31,  
    2015     2014     2015     2014  
Tax preparation fees:                                        
  U.S. assisted   $ 283,692     $ 72,108     $ 341,107     $ 123,145  
  International     10,021       9,253       94,308       82,915  
  U.S. digital     36,720       17,339       42,545       23,211  
      330,433       98,700       477,960       229,271  
Royalties     52,284       15,061       68,508       31,150  
Revenues from Refund Transfers     50,899       15,542       56,472       21,282  
Revenues from Emerald Card(R)     13,910       12,689       39,479       37,299  
Revenues from Peace of Mind(R) guarantees     13,492       12,684       54,308       59,661  
Interest and fee income on Emerald Advance     30,288       27,656       31,439       28,602  
Other     11,702       11,664       32,605       36,462  
  Total revenues     503,008       193,996       760,771       443,727  
Compensation and benefits:                                
Field wages     161,921       136,885       264,822       226,320  
  Other wages     41,157       41,629       117,598       112,029  
  Benefits and other compensation     35,625       34,696       74,349       72,811  
      238,703       213,210       456,769       411,160  
Occupancy and equipment     92,700       88,148       260,016       250,332  
Marketing and advertising     87,569       77,852       106,477       97,435  
Depreciation and amortization     43,287       31,808       115,896       81,242  
Bad debt     38,928       31,420       42,942       38,535  
Supplies     6,963       7,387       17,534       14,355  
Other     63,012       58,982       152,204       160,505  
    Total operating expenses     571,162       508,807       1,151,838       1,053,564  
Other expense, net     6,751       6,756       9,986       14,366  
Interest expense on borrowings     523       532       1,577       1,604  
Pretax loss   $ (75,428 )   $ (322,099 )   $ (402,630 )   $ (625,807 )
                                 
                                 

 

U.S. TAX OPERATING DATA (in 000s)  
    Nine months ended         Ten months ended      
    January 31,         February 28,      
    2015   2014   % Change     2015   2014   % Change  
Tax Returns Prepared: (1,2)                            
  H&R Block Company-Owned Operations   1,532   1,595   (3.9 )%   4,464   4,926   (9.4 )%
  H&R Block Franchise Operations   947   958   (1.1 )%   2,679   2,894   (7.4 )%
    Total H&R Block Assisted   2,479   2,553   (2.9 )%   7,143   7,820   (8.7 )%
                               
  H&R Block Desktop   180   137   31.4 %   875   833   5.0 %
  H&R Block Online   1,027   654   57.0 %   2,876   2,683   7.2 %
    Total H&R Block Tax Software   1,207   791   52.6 %   3,751   3,516   6.7 %
                               
  H&R Block Free File Alliance   129   64   101.6 %   383   436   (12.2 )%
    Total H&R Block U.S. Returns   3,815   3,408   11.9 %   11,277   11,772   (4.2 )%
                             

 

(1)   Prior year numbers have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company during either year.
(2)   Assisted returns for at January 31, 2014 include 1.8 million returns which were completed as of that date but not yet electronically filed. Revenue for these returns was recognized in the fourth quarter of fiscal year 2014.

 

       
NON-GAAP FINANCIAL MEASURES      
    Three months ended January 31, 2015  
    EBITDA     Pretax loss     Net loss     EPS  
                                       
As reported - from continuing operations   $ (38,302 )   $ (90,865 )   $ (35,311 )   $ (0.13 )
                                 
Adjustments:                                
  Loss contingencies - litigation     337       337       207       -  
  Professional fees related to HRB Bank transaction     6       6       3       -  
  Loss on sales of tax offices/businesses     1,451       1,451       901       -  
      1,794       1,794       1,111       -  
                                 
As adjusted - from continuing operations   $ (36,508 )   $ (89,071 )   $ (34,200 )   $ (0.13 )
                                 
    Three months ended January 31, 2014  
    EBITDA     Pretax loss     Net loss     EPS  
                                 
As reported - from continuing operations   $ (301,571 )   $ (347,825 )   $ (212,751 )   $ (0.78 )
                                 
Adjustments:                                
  Loss contingencies - litigation     346       346       207       -  
  Severance     1,092       1,092       648       -  
  Professional fees related to HRB Bank transaction     171       171       95       -  
  Gain on sales of tax offices/businesses     (616 )     (616 )     (372 )     -  
      993       993       578       -  
                                 
As adjusted - from continuing operations   $ (300,578 )   $ (346,832 )   $ (212,173 )   $ (0.78 )
                                 
    Nine months ended January 31, 2015  
    EBITDA     Pretax loss     Net loss     EPS  
                                 
As reported - from continuing operations   $ (314,153 )   $ (467,254 )   $ (257,389 )   $ (0.94 )
                                 
Adjustments:                                
  Loss contingencies - litigation     609       609       376       -  
  Severance     1,051       1,051       654       -  
  Professional fees related to HRB Bank transaction     120       120       74       -  
  Gain on sales of AFS securities     (24 )     (24 )     (15 )     -  
  Loss on sales of tax offices/businesses     552       552       342       -  
      2,308       2,308       1,431       -  
                                 
As adjusted - from continuing operations   $ (311,845 )   $ (464,946 )   $ (255,958 )   $ (0.94 )
                                 
                                 

 

    Nine months ended January 31, 2014  
    EBITDA     Pretax loss     Net loss     EPS  
                                          
As reported - from continuing operations   $ (587,125 )   $ (711,681 )   $ (429,036 )   $ (1.57 )
                                 
Adjustments:                                
  Loss contingencies - litigation     1,069       1,069       650       -  
  Severance     4,025       4,025       2,447       0.01  
  Professional fees related to HRB Bank transaction     1,978       1,978       1,203       -  
  Gain on sales of tax offices/businesses     (1,215 )     (1,215 )     (739 )     -  
      5,857       5,857       3,561       0.01  
                                 
As adjusted - from continuing operations   $ (581,268 )   $ (705,824 )   $ (425,475 )   $ (1.56 )
                                 
                         
    Three months ended January 31,     Nine months ended January 31,  
EBITDA   2015     2014     2015     2014  
                                 
Net loss - as reported   $ (36,948 )   $ (214,711 )   $ (265,178 )   $ (434,841 )
                                 
Add back :                                
  Discontinued operations     1,637       1,960       7,789       5,805  
  Income taxes     (55,554 )     (135,074 )     (209,865 )     (282,645 )
  Interest expense     9,272       14,443       37,195       43,203  
  Depreciation and amortization     43,291       31,811       115,906       81,353  
      (1,354 )     (86,860 )     (48,975 )     (152,284 )
                                 
EBITDA from continuing operations   $ (38,302 )   $ (301,571 )   $ (314,153 )   $ (587,125 )
                                 
    Three months ended January 31,     Nine months ended January 31,  
Supplemental Information   2015     2014     2015     2014  
                                 
Stock-based compensation expense:                                
  Pretax   $ 6,090     $ 4,715     $ 20,689     $ 15,477  
  After-tax     3,678       2,809       12,763       9,410  
Amortization of intangible assets:                                
  Pretax   $ 16,743     $ 8,757     $ 41,206     $ 21,351  
  After-tax     10,197       5,256       25,420       12,981  
                                   

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 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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