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H&R Block Announces Fiscal 2016 Results and Dividend Increase

By: H&R Block |  0 Shares     92 Reads

KANSAS CITY, MO - (Marketwired) - June 9, 2016 -

Company to focus on arresting client decline and reducing costs in fiscal 2017

• Revenues declined $40.5 million, or 1.3%, in fiscal year 2016 to just over $3 billion primarily due to lower return volume, the impact of the divestiture of H&R Block Bank, and the impact of foreign currency exchange rate fluctuations, partially offset by increased pricing and improved form mix ¹
• GAAP earnings per share from continuing operations of $1.53; non-GAAP adjusted earnings per share from continuing operations of $1.59 2,3
• Company announced 10% dividend increase and intent to review dividend on an annual basis
• Repurchased approximately 3.9 million shares during the fourth quarter, bringing total fiscal year 2016 repurchases to 56.4 million shares, or 20.5% of outstanding shares

H&R Block, Inc. (NYSE: HRB), the world's largest consumer tax services provider, today released its financial results for the fiscal year ended April 30, 2016. Total revenues decreased $40.5 million, or 1.3%, to just over $3.0 billion, primarily due to lower worldwide client volumes of 4.1%, and the impacts of the divestiture of H&R Block Bank and foreign currency exchange rate fluctuations. This was partially offset by increased pricing and improved form mix in both the assisted and DIY channels as well as improved monetization in DIY. Excluding the impact of the bank divestiture and foreign exchange, total revenues would have increased 0.5%. The company's net income totaled $374.3 million and adjusted EBITDA from continuing operations was $838.7 million. The company's adjusted EBITDA margin from continuing operations was 28%. GAAP earnings per share from continuing operations declined $0.22 to $1.53.

"As I said in April, this season's results are not acceptable," said Bill Cobb, H&R Block's president and chief executive officer. "We are ready to move on. Going forward, we are committed to arresting the client decline and ultimately achieving client growth. We are developing aggressive plans for tax season 2017 that we believe will enable us to achieve this objective."

The company is making strategic changes which it believes will yield positive results in the short- and long-term. Specifically, the company is investing in initiatives aimed at driving client volumes for fiscal year 2017. Such initiatives will be funded through the Company's previously announced cost reduction efforts. Long term, the company is developing innovative solutions designed to enhance the client experience, regardless of how the client chooses to be served.

"I'm excited about the future for this company and the plans we are working on for next tax season," said Cobb. "These plans will challenge us to think differently about certain parts of our business, while building on those areas of the business in which we were successful, such as pricing, mix, improved product attach levels, and the successful launch of our new Block Advisors brand. And having divested H&R Block Bank, we'll execute against those plans with the right capital structure, which reflects the repurchase of 20.5% of our outstanding shares during fiscal 2016 and the 10% increase in our quarterly dividend."

Fiscal 2016 Results From Continuing Operations
		Actual						Non-GAAP Adjusted 2
(in millions, except EPS)		Fiscal Year 2016			Fiscal Year 2015			Fiscal Year 2016			Fiscal Year 2015
Revenue		$	3,038		$	3,079			N/A			N/A
Pretax Income		$	569		$	743		$	596		$	745
Net Income		$	384		$	487		$	400		$	488
Weighted-Avg. Shares - Diluted			250.8			277.1			N/A			N/A
EPS		$	1.53		$	1.75		$	1.59		$	1.75
EBITDA 2		$	812		$	949		$	839		$	951

CFO Commentary

"Strong cash flow, healthy margins and a history of returning capital to shareholders continue to be the foundation of our operating model and capital strategy," stated Tony Bowen, H&R Block's chief financial officer. "We are confident about the future of H&R Block, which is demonstrated through the repurchase of $2 billion of shares during fiscal year 2016, and our commitment to an annual dividend review announced today."

Income Statement

• Revenues decreased 1.3% to just over $3.0 billion, due primarily to lower tax return volumes, the impact of the divestiture of H&R Block Bank, and the impact of foreign currency exchange rate fluctuations. These decreases were partially offset by improved price and form mix in both the U.S. assisted and DIY categories, revenues from acquisitions of franchisees and independent tax preparation businesses, and improved monetization in DIY.
• Total operating expenses increased $121.0 million, or 5.3%. The increase was mainly due to occupancy costs and amortization expense which increased as a result of acquisitions of franchisees and independent tax preparation businesses, increased marketing expenses, and fees related to the divestiture of H&R Block Bankand capital structure changes. These increases were partially offset by decreases in compensation and benefits, primarily related to the decrease in tax return volume.
• Other income increased $16.4 million primarily as a result of financial reporting changes related to the divestiture of H&R Block Bank.
• Interest expense increased $23.7 million from the prior year due to the issuance of $1 billion of long-term debt in September 2015 and increased borrowings under the company's line of credit.
• Pretax income decreased 23.3% to $569.5 million.

Balance Sheet

• Cash balances decreased $1.1 billion from the prior year mainly due to the net cash payment to the company's bank partner for the transfer of deposit liabilities related to the divestiture of H&R Block Bank and the net impact of capital structure changes, including share repurchases.
• Upon divestiture of H&R Block Bank in the second quarter of fiscal 2016, available for sale securities, previously held to meet bank regulatory requirements, were liquidated for approximately $388 million. Additionally, certain liabilities, including all customer banking deposits, were transferred to the company's bank partner.
• Long-term debt increased $1 billion from April 30, 2015 due to the issuance of $650 million of 4.125% Senior Notes due 2020 and $350 million of 5.250% Senior Notes due 2025. As of April 30, 2016, the company did not have an outstanding balance on its line of credit.
• Stockholders' equity was reduced by repurchases and subsequent retirements of 56.4 million shares of common stock, representing 20.5% of outstanding shares, during the fiscal year for $2.0 billion.
• Details regarding the bank divestiture and related agreements, capital structure transactions and share repurchase program can be found in previously issued press releases, as well as Forms 10-Q and 8-K filed with the Securities and Exchange Commission, during fiscal 2016.

Share Repurchases

During the fourth quarter of fiscal 2016, the company repurchased and retired approximately 3.9 million shares at an aggregate amount of $108.4 million, or $27.80 per share. As of April 30, 2016, 220.5 million shares were outstanding.

The company completed these share repurchases under a $3.5 billion share repurchase program approved by the company's board of directors in August 2015. Under this program, the company has repurchased approximately 56.4 million shares of its common stock, or 20.5% of outstanding shares, for an aggregate purchase amount of$2.0 billion.

Dividends

The Company announced that the board of directors approved an increase in its quarterly dividend of 10%, to$0.22 per share. Going forward, the company is committed to an annual review of its dividend following the end of each fiscal year. Future actions regarding dividends will be dependent upon the board's approval following consideration of operating results, market conditions, and capital needs, among other factors.

A quarterly cash dividend of $0.22 per share is payable on July 1, 2016 to shareholders of record as of June 20, 2016. The July 1 dividend payment will be H&R Block's 215th consecutive quarterly dividend since the company went public in 1962.

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 a significant majority of previously denied and possible future representation and warranty claims.
• SCC's accrual for contingent losses related to representation and warranty claims was $65 million at April 30, 2016.

Conference Call

Discussion of the fiscal 2016 results, future outlook and a general business update will occur during the company's previously announced fiscal fourth quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on June 9, 2016. 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: 80848967

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 7:30 p.m. Eastern time on June 9, 2016, and continuing until July 9, 2016, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 80848967. The webcast will be available for replay June 10, 2016 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 700 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2016, H&R Block had annual revenues of over $3.0 billion with 23.2 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 also offers adjacent Tax Plus 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 contains 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," "goal," "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, cost savings, capital expenditures, dividends, share repurchases, 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, that are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2015 in the section entitled "Risk Factors" and additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You may get such filings for free at our website at http://investors.hrblock.com. 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 period compared to the corresponding prior year period.
²The company reports adjusted financial performance, and other non-GAAP financial measures, which it believes are a better indication of the company's core operations. See "About Non-GAAP Financial Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).
³ All per share amounts are based on fully diluted shares at the end of the corresponding period.

CONSOLIDATED STATEMENTS OF OPERATIONS									(unaudited, in 000s - except per share amounts)
					Three months ended April 30,								Year ended April 30,
					2016				2015				2016				2015
REVENUES:
	Service revenues				$	2,032,580			$	2,013,701			$	2,653,936			$	2,651,057
	Royalty, product and other revenues					264,897				287,669				384,217				427,601
						2,297,477				2,301,370				3,038,153				3,078,658
OPERATING EXPENSES:
	Cost of revenues:
		Compensation and benefits				544,799				544,588				845,197				852,480
		Occupancy and equipment				124,016				115,389				405,123				378,624
		Provision for bad debt and loan losses				36,474				30,961				75,395				74,993
		Depreciation and amortization				31,670				29,166				115,907				111,861
		Other				116,171				96,285				243,930				212,532
						853,130				816,389				1,685,552				1,630,490
	Selling, general and administrative:
		Marketing and advertising				182,558				165,455				297,762				273,682
		Compensation and benefits				48,863				62,830				228,778				238,527
		Depreciation and amortization				14,182				14,731				57,691				47,943
		Other selling, general and administrative				37,895				26,360				135,178				93,350
						283,498				269,376				719,409				653,502
			Total operating expenses			1,136,628				1,085,765				2,404,961				2,283,992
Other income						3,708				487				17,701				1,314
Interest expense on borrowings						(22,633	)			(8,560	)			(68,962	)			(45,246	)
Other expenses						(1,117	)			2,527				(12,452	)			(7,929	)
Income from continuing operations before income taxes						1,140,807				1,210,059				569,479				742,805
Income taxes						439,582				465,926				185,926				256,061
Net income from continuing operations						701,225				744,133				383,553				486,744
Net loss from discontinued operations						(563	)			(5,292	)			(9,286	)			(13,081	)
NET INCOME					$	700,662			$	738,841			$	374,267			$	473,663
BASIC EARNINGS (LOSS) PER SHARE:
	Continuing operations				$	3.15			$	2.70			$	1.54			$	1.77
	Discontinued operations					-				(0.02	)			(0.04	)			(0.05	)
	Consolidated				$	3.15			$	2.68			$	1.50			$	1.72
WEIGHTED AVERAGE BASIC SHARES						222,098				275,260				249,009				275,033
DILUTED EARNINGS (LOSS) PER SHARE:
	Continuing operations				$	3.13			$	2.68			$	1.53			$	1.75
	Discontinued operations					-				(0.02	)			(0.04	)			(0.04	)
	Consolidated				$	3.13			$	2.66			$	1.49			$	1.71
WEIGHTED AVERAGE DILUTED SHARES						223,622				277,612				250,818				277,136

 

CONSOLIDATED BALANCE SHEETS					(unaudited, in 000s - except per share amounts)
As of April 30,					2016				2015
ASSETS
	Cash and cash equivalents				$	896,801			$	2,007,190
	Cash and cash equivalents - restricted					104,110				91,972
	Receivables, net					153,116				167,964
	Deferred tax assets and income taxes receivable					-				174,267
	Prepaid expenses and other current assets					67,138				70,283
	Investments in available-for-sale securities					1,133				439,625
		Total current assets				1,222,298				2,951,301
	Mortgage loans held for investment, net					202,385				239,338
	Property and equipment, net					293,565				311,387
	Intangible assets, net					433,885				432,142
	Goodwill					470,757				441,831
	Deferred tax assets and income taxes receivable					120,123				13,461
	Other noncurrent assets					114,762				125,960
		Total assets			$	2,857,775			$	4,515,420
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
	Customer banking deposits				$	-			$	744,241
	Accounts payable and accrued expenses					259,586				231,322
	Accrued salaries, wages and payroll taxes					161,786				144,744
	Accrued income taxes					373,754				434,684
	Current portion of long-term debt					826				790
	Deferred revenue and other current liabilities					243,653				322,508
		Total current liabilities				1,039,605				1,878,289
	Long-term debt					1,501,925				505,298
	Deferred tax liabilities and reserves for uncertain tax positions					132,960				142,586
	Deferred revenue and other noncurrent liabilities					160,182				156,298
		Total liabilities				2,834,672				2,682,471
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
	Common stock, no par, stated value $.01 per share					2,602				3,166
	Additional paid-in capital					758,230				783,793
	Accumulated other comprehensive income (loss)					(11,233	)			1,740
	Retained earnings					40,347				1,836,442
	Less treasury shares, at cost					(766,843	)			(792,192	)
		Total stockholders' equity				23,103				1,832,949
			Total liabilities and stockholders' equity		$	2,857,775			$	4,515,420

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS					(unaudited, in 000s)
Year ended April 30,					2016				2015
NET CASH PROVIDED BY OPERATING ACTIVITIES					$	532,394			$	626,608
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of available-for-sale securities					-				(90,581	)
	Sales, maturities of and payments received on available-for-sale securities					436,471				91,878
	Principal payments on mortgage loans held for investment, net					33,721				23,886
	Capital expenditures					(99,923	)			(123,158	)
	Payments made for business acquisitions, net of cash acquired					(88,776	)			(113,252	)
	Franchise loans:
		Loans funded				(22,820	)			(49,695	)
		Payments received				55,007				90,636
	Other, net					15,835				21,354
			Net cash provided by (used in) investing activities			329,515				(148,932	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Repayments of commercial paper					-				(1,049,136	)
	Proceeds from issuance of commercial paper					-				1,049,136
	Repayments of long-term debt					(1,465,000	)			(400,000	)
	Proceeds from issuance of long-term debt					2,461,831				-
	Customer banking deposits, net					(326,705	)			(28,544	)
	Transfer of HRB Bank deposits					(419,028	)			-
	Dividends paid					(201,688	)			(219,960	)
	Repurchase of common stock, including shares surrendered					(2,018,338	)			(10,449	)
	Proceeds from exercise of stock options					25,775				16,522
	Other, net					(18,576	)			(3,376	)
		Net cash used in financing activities				(1,961,729	)			(645,807	)
Effects of exchange rate changes on cash						(10,569	)			(9,986	)
Net decrease in cash and cash equivalents						(1,110,389	)			(178,117	)
Cash and cash equivalents at beginning of the year						2,007,190				2,185,307
Cash and cash equivalents at end of the year					$	896,801			$	2,007,190
SUPPLEMENTARY CASH FLOW DATA:
	Income taxes paid, net of refunds received				$	165,154			$	236,624
	Interest paid on borrowings					59,058				44,847
	Transfers of foreclosed loans to other assets					3,863				4,805
	Accrued additions to property and equipment					2,822				14,282
	Conversion of investment in preferred stock to available-for-sale common stock					-				5,000

 

FINANCIAL RESULTS				(unaudited, in 000s - except per share amounts)
				Three months ended April 30,								Year ended April 30,
				2016				2015				2016				2015
Tax preparation fees:
	U.S. assisted			$	1,557,712			$	1,524,331			$	1,890,175			$	1,865,438
	International				110,894				113,464				190,527				207,772
	U.S. digital				188,442				189,309				234,341				231,854
					1,857,048				1,827,104				2,315,043				2,305,064
Royalties					207,173				224,235				266,418				292,743
Revenues from Refund Transfers					110,370				114,622				165,152				171,094
Revenues from Emerald Card®					53,755				63,821				92,608				103,300
Revenues from Peace of Mind® Extended Service Plan					24,066				27,243				86,830				81,551
Interest and fee income on Emerald Advance					24,934				25,763				57,268				57,202
Other					20,131				18,582				54,834				67,704
		Total revenues			2,297,477				2,301,370				3,038,153				3,078,658
Compensation and benefits:
	Field wages				470,458				466,487				724,019				731,309
	Other wages				29,663				45,153				166,445				176,697
	Benefits and other compensation				93,542				95,778				183,512				183,001
					593,663				607,418				1,073,976				1,091,007
Occupancy and equipment					124,540				115,512				405,493				375,743
Marketing and advertising					182,558				165,455				297,762				273,682
Depreciation and amortization					45,852				43,898				173,598				159,804
Bad debt					36,474				30,961				75,395				74,993
Supplies					22,994				25,290				36,340				42,872
Other					130,547				97,231				342,397				265,891
		Total operating expenses			1,136,628				1,085,765				2,404,961				2,283,992
Other income, net					3,708				487				17,701				1,314
Interest expense on borrowings					(22,633	)			(8,560	)			(68,962	)			(45,246	)
Other expenses, net					(1,117	)			2,527				(12,452	)			(7,929	)
Income from continuing operations before income taxes					1,140,807				1,210,059				569,479				742,805
Income taxes					439,582				465,926				185,926				256,061
Net income from continuing operations					701,225				744,133				383,553				486,744
Net loss from discontinued operations					(563	)			(5,292	)			(9,286	)			(13,081	)
Net income				$	700,662			$	738,841			$	374,267			$	473,663

 

U.S. TAX OPERATING DATA						(unaudited, in 000s)
Year ended April 30,				2016		2015		% Change
U.S. Tax Returns Prepared: (1)
	Company-Owned Operations			8,103		8,634		(6.2	)%
	Franchise Operations			4,159		4,381		(5.1	)%
		Total H&R Block Assisted (3)		12,262		13,015		(5.8	)%
	Desktop (4)			2,085		2,168		(3.8	)%
	Online (5)			4,670		4,765		(2.0	)%
		Total H&R Block Tax Software		6,755		6,933		(2.6	)%
	Free File Alliance			678		676		0.3	%
		Total H&R Block U.S. Returns		19,695		20,624		(4.5	)%
International Tax Returns Prepared:
	Canada (2)			2,551		2,658		(4.0	)%
	Australia			769		768		0.1	%
	Other			153		115		33.0	%
		Total International Tax Returns		3,473		3,541		(1.9	)%
Tax Returns Prepared Worldwide				23,168		24,165		(4.1	)%

 

(1)	Amounts have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company during either year.
(2)	In fiscal years 2016 and 2015, the end of the Canadian tax season was extended from April 30 into May. Tax returns prepared in Canada in fiscal years 2016 and 2015 includes approximately 93 thousand and 131 thousand returns, respectively, in both company-owned and franchise offices which were accepted by the client after April 30. The revenues related to these returns were recognized in fiscal years 2017 and 2016, respectively.
(3)	An assisted return is defined as an individual tax return that has been accepted by the client who has either paid for tax preparation services or settled with a refund transfer. It also includes extensions and business returns.
(4)	A desktop return is defined as an individual tax return that has been electronically filed and accepted by the IRS.
(5)	An online return is defined as an individual tax return that has been electronically filed and accepted by the IRS or purchased with a credit card and printed for mailing.

 

NON-GAAP FINANCIAL MEASURES			(unaudited, in 000s - except per share amounts)
Reconciliation of EBITDA from Continuing Operations			Three months ended April 30,						Year ended April 30,
			2016			2015			2016			2015
Net income - as reported			$	700,662		$	738,841		$	374,267		$	473,663
Add back :
	Discontinued operations			563			5,292			9,286			13,081
	Income taxes			439,582			465,926			185,926			256,061
	Interest expense			22,634			8,733			69,141			45,928
	Depreciation and amortization			45,852			43,898			173,598			159,804
				508,631			523,849			437,951			474,874
EBITDA from continuing operations				1,209,293			1,262,690			812,218			948,537

 

NON-GAAP FINANCIAL MEASURES											(unaudited, in 000s - except per share amounts)
Reconciliation of Other Non-			Three months ended April 30,
GAAP Financial Measures			2016												2015
			Pretax												Pretax
			income				Net income				EBITDA				income				Net income				EBITDA
From continuing operations			$	1,140,807			$	701,225			$	1,209,293			$	1,210,059			$	744,133			$	1,262,690
Adjustments (pretax):
	Loss contingencies - litigation			961				961				961				(4,545	)			(4,545	)			(4,545	)
	Severance			12,001				12,001				12,001				5,648				5,648				5,648
	Costs related to HRB Bank and recapitalization transactions			-				-				-				118				118				118
	Losses (gains) on AFS securities			-				-				-				148				148				148
	Gain on sales of tax offices/businesses			-				-				-				(1,208	)			(1,208	)			(1,208	)
	Tax effect of adjustments(2)			-				(5,047	)			-				-				(86	)			-
				12,962				7,915				12,962				161				75				161
As adjusted - from continuing operations			$	1,153,769			$	709,140			$	1,222,255			$	1,210,220			$	744,208			$	1,262,851
Adjusted EBITDA margin (1)												53	%											55	%
Adjusted EPS							$	3.16											$	2.68

 

Reconciliation of Other Non-				Year ended April 30,
GAAP Financial Measures				2016												2015
			Pretax												Pretax
			income				Net income				EBITDA				income				Net income				EBITDA
From continuing operations			$	569,479			$	383,553			$	812,218			$	742,805			$	486,744			$	948,537
Adjustments (pretax):
	Loss contingencies - litigation			1,978				1,978				1,978				(3,936	)			(3,936	)			(3,936	)
	Severance			12,001				12,001				12,001				6,699				6,699				6,699
	Costs related to HRB Bank and recapitalization transactions			20,722				20,722				20,722				238				238				238
	Losses (gains) on AFS securities			(8,138	)			(8,138	)			(8,138	)			124				124				124
	Gain on sales of tax offices/businesses			(127	)			(127	)			(127	)			(656	)			(656	)			(656	)
	Tax effect of adjustments (2)			-				(10,176	)			-				-				(963	)			-
				26,436				16,260				26,436				2,469				1,506				2,469
As adjusted - from continuing
operations			$	595,915			$	399,813			$	838,654			$	745,274			$	488,250			$	951,006
Adjusted EBITDA margin (1)												28	%											31	%
Adjusted EPS							$	1.59											$	1.75

 

1	Adjusted EBITDA margin from continuing operations is computed as adjusted EBITDA from continuing operations divided by revenues from continuing operations.
2	Tax effect of adjustments is computed as the pretax effect of the adjustments multiplied by our effective tax rate before discrete items.

 

NON-GAAP FINANCIAL MEASURES			(unaudited, in 000s - except per share amounts)
			Three months ended April 30,						Year ended April 30,
Supplemental Information			2016			2015			2016			2015
Stock-based compensation expense:
	Pretax		$	2,434		$	5,379		$	23,540		$	26,068
	After-tax			1,405			3,155			14,478			15,918
Amortization of intangible assets:
	Pretax		$	18,130		$	17,315		$	72,762		$	58,521
	After-tax			10,913			10,316			44,752			35,736

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 our non-GAAP financial measures to be performance measures and 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 from continuing operations, adjusted EBITDA and EBITDA margin from continuing operations, adjusted pretax and net income of continuing operations, and adjusted diluted earnings per share from continuing operations. Adjusted EBITDA from continuing operations, adjusted pretax and net income from continuing operations, and adjusted diluted earnings per share from continuing operations 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 from continuing operations and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.

SOURCE H & R BlockInvestor Relations:

Contacts:

Colby Brown
Investor Relations
(816) 854-4559

Gene King
Media Relations
(816) 854-4672

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