H&R Block Announces Fiscal 2017 Second Quarter Results

KANSAS CITY, MO - (Marketwired) - December 07, 2016 - H&R Block, Inc. (NYSE: HRB) today released its financial results for the fiscal 2017 second quarter ended October 31, 2016. The company normally reports a second quarter operating loss due to the seasonality of its tax business. The fiscal second quarter typically represents less than 5% of annual revenues and approximately 15% of annual expenses.

Second Quarter Financial Summary1

  • Total revenues increased $3 million as a result of favorable foreign exchange rates and the recognition of deferred revenues associated with the Peace of Mind product
  • Total operating expenses declined $23 million due to one-time costs incurred in the prior year related to the divestiture of H&R Block Bank and capital structure transactions, coupled with savings from cost reduction efforts
  • Net loss from continuing operations was flat to prior year; loss per share increased $0.13 due entirely to reduction in share count, which will be accretive on a full year basis, but negatively impacts those quarters with a net loss
  • Repurchased approximately 7.6 million shares for an aggregate purchase price of $168 million during the second quarter, bringing total share repurchases for fiscal 2017 to 9.6 million shares

CEO Perspective

"I'm pleased with our second quarter results, as revenues were up and expenses were down. I'm also extremely excited for the upcoming tax season. We have been hard at work developing and implementing a comprehensive and aggressive plan designed to deliver stronger results in tax season 2017," said Bill Cobb, H&R Block's president and chief executive officer. "Our associates and franchisees are excited about our new promotional offerings, including the previously announced interest-free Refund Advance loan and planned changes to our service delivery models. We are ready for the tax season to begin."

Fiscal 2017 Second Quarter Results From Continuing Operations

    Actual     Adjusted 3  
(in millions, except EPS)   Fiscal Year 2017     Fiscal Year 2016     Fiscal Year 2017     Fiscal Year 2016  
Revenue   $ 131     $ 128     $ 131     $ 128  
Pretax Loss   $ (228 )   $ (238 )   $ (229 )   $ (225 )
Net Loss   $ (143 )   $ (143 )   $ (144 )   $ (135 )
Weighted-Avg. Shares - Diluted     215.5       266.3       215.5       266.3  
EPS2   $ (0.67 )   $ (0.54 )   $ (0.67 )   $ (0.51 )
EBITDA3   $ (160 )   $ (181 )   $ (161 )   $ (169 )
 

Income Statement

  • Total revenues increased $2.9 million to $131.3 million, partially as a result of favorable foreign exchange rates and tax preparation revenues in international operations. Additionally, deferred revenue recognition from increased Peace of Mind product sales in prior fiscal years also positively impacted revenues. These increases were partially offset by lower domestic tax preparation revenues as well as the impact of the divestiture of H&R Block Bank.
  • Total operating expenses decreased $22.9 million to $339.4 million. Contributing to the decline were the prior year one-time costs associated with the divestiture of H&R Block Bank and the subsequent capital structure transactions. Lower compensation expense resulting from the company's cost reduction efforts also positively impacted expenses. These were partially offset by increased occupancy and amortization expenses related to competitor and franchise acquisitions in the prior year.
  • Interest expense increased $8.4 million to $22.6 million primarily due to $1 billion of long-term debt issued in September 2015.
  • Pretax loss decreased $9.3 million to $228.5 million.
  • Loss per share from continuing operations increased $0.13 to $0.67, due entirely to the reduction in share count, which will be accretive on a full year basis, but negatively impacts those quarters with a net loss.

CFO Perspective

"Our expense reduction efforts are starting to bear results," said Tony Bowen, H&R Block's chief financial officer. "These reductions will enable us to fund client growth initiatives to deliver a successful fiscal year 2017."

Balance Sheet

  • Mortgage loans previously classified as held for investment were reclassified to mortgage loans held for sale as the company intends to liquidate the portfolio during the third fiscal quarter and receive approximately $190 million in cash proceeds.
  • Long-term debt increased due to line of credit borrowings of $475 million. Although these amounts are intended to cover short-term offseason liquidity needs, they are classified as long-term debt due to the maturity date of the line of credit agreement.
  • Stockholders' equity from October 31, 2015 was reduced by share repurchase and subsequent retirement of 25.5 million shares of common stock for approximately $717 million.
  • Details regarding the divestiture of H&R Block Bank and related agreements, capital structure transactions and share repurchase program can be found in previously filed press releases, and Forms 8-K filed with the Securities and Exchange Commission, in September and October of 2015.

Discontinued Operations

The accrual for contingent losses related to representation and warranty claims at Sand Canyon Corporation, a separate legal entity from H&R Block, Inc., remained unchanged at $26 million.

Share Repurchases and Dividends

During the second quarter of fiscal 2017, the company repurchased and retired approximately 7.6 million shares at an aggregate price of $168.4 million, or $22.16 per share. As of October 31, 2016, 211.5 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, which runs through June 2019. Under this program, the company has repurchased approximately 66 million shares of its common stock, or 23.9% of outstanding shares, for an aggregate purchase price of approximately $2.2 billion.

As previously announced, a quarterly cash dividend of 22 cents per share is payable on January 3, 2017 to shareholders of record as of December 5, 2016. H&R Block has paid quarterly dividends consecutively since the company went public in 1962.

Conference Call

Discussion of the fiscal 2017 second quarter results, future outlook and a general business update will occur during the company's previously announced fiscal second quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on December 7, 2016. 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: 89483597

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 December 7, 2016, and continuing until January 7, 2017, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 89483597. The webcast will be available for replay December 8, 2016 at http://investors.hrblock.com.

About H&R Block

H&R Block, Inc. (NYSE: HRB) is a global consumer tax services provider. 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 for the DIY consumer. H&R Block also offers adjacent Tax Plus products and services. In fiscal 2016, H&R Block had annual revenues of over $3 billion with 23.2 million tax returns prepared worldwide. 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, 2016 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.

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 at the end of the corresponding period.
3The 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).

       
CONSOLIDATED STATEMENTS OF OPERATIONS       (unaudited, in 000s - except per share amounts)
    Three months ended October 31,   Six months ended October 31,
    2016   2015   2016   2015
                         
REVENUES:                        
  Service revenues   $ 118,940     $ 113,420     $ 231,324     $ 231,854  
  Royalty, product and other revenues     12,392       14,995       25,193       34,279  
      131,332       128,415       256,517       266,133  
OPERATING EXPENSES:                        
  Cost of revenues:                        
    Compensation and benefits     57,728       62,694       110,083       118,483  
    Occupancy and equipment     99,067       95,051       193,492       184,906  
    Provision for bad debt     (131 )     1,182       1,286       3,187  
    Depreciation and amortization     29,911       28,358       57,378       55,442  
    Other     39,127       39,116       74,549       77,891  
      225,702       226,401       436,788       439,909  
  Selling, general and administrative:                        
    Marketing and advertising     12,001       12,965       19,562       21,496  
    Compensation and benefits     58,293       61,593       115,815       116,262  
    Depreciation and amortization     15,839       13,991       29,654       27,001  
    Other selling, general and administrative     27,519       47,298       47,444       69,280  
      113,652       135,847       212,475       234,039  
      Total operating expenses     339,354       362,248       649,263       673,948  
                         
Other income, net     2,180       10,505       5,148       10,938  
Interest expense on borrowings     (22,620 )     (14,181 )     (44,086 )     (22,756 )
Other expenses, net     (7 )     (210 )     (334 )     (5,195 )
Loss from continuing operations before income tax benefit     (228,469 )     (237,719 )     (432,018 )     (424,828 )
Income tax benefit     (85,054 )     (95,201 )     (167,577 )     (185,805 )
Net loss from continuing operations     (143,415 )     (142,518 )     (264,441 )     (239,023 )
Net loss from discontinued operations     (2,805 )     (2,489 )     (5,452 )     (5,643 )
NET LOSS   $ (146,220 )   $ (145,007 )   $ (269,893 )   $ (244,666 )
                         
BASIC AND DILUTED LOSS PER SHARE:                        
  Continuing operations   $ (0.67 )   $ (0.54 )   $ (1.21 )   $ (0.88 )
  Discontinued operations     (0.01 )     (0.01 )     (0.03 )     (0.02 )
  Consolidated   $ (0.68 )   $ (0.55 )   $ (1.24 )   $ (0.90 )
                         
WEIGHTED AVERAGE BASIC AND DILUTED SHARES     215,535       266,267       218,009       271,016  
                         

 

     
     
     
CONSOLIDATED BALANCE SHEETS   (unaudited, in 000s - except per share data)
As of   October 31, 2016   October 31, 2015   April 30, 2016
                   
ASSETS                  
  Cash and cash equivalents   $ 232,510     $ 360,681     $ 896,801  
  Cash and cash equivalents - restricted     109,538       42,781       104,110  
  Receivables, net     104,764       94,760       153,116  
  Deferred tax assets and income taxes receivable     -       145,912       -  
  Prepaid expenses and other current assets     73,555       80,764       66,574  
  Mortgage loans held for sale, net     183,107       -       -  
      Total current assets     703,474       724,898       1,220,601  
  Mortgage loans held for investment, net     -       220,671       202,385  
  Property and equipment, net     293,060       298,602       293,565  
  Intangible assets, net     433,135       466,224       433,885  
  Goodwill     477,360       442,068       470,757  
  Deferred tax assets and income taxes receivable     81,755       11,264       120,123  
  Other noncurrent assets     93,394       114,746       105,909  
      Total assets   $ 2,082,178     $ 2,278,473     $ 2,847,225  
LIABILITIES AND STOCKHOLDERS' EQUITY                  
LIABILITIES:                  
  Accounts payable and accrued expenses   $ 139,808     $ 141,070     $ 259,586  
  Accrued salaries, wages and payroll taxes     40,754       37,512       161,786  
  Accrued income taxes and reserves for uncertain tax positions     68,832       67,732       373,754  
  Current portion of long-term debt     903       808       826  
  Deferred revenue and other current liabilities     184,560       319,426       243,653  
      Total current liabilities     434,857       566,548       1,039,605  
  Long-term debt and line of credit borrowings     1,967,206       1,490,514       1,491,375  
  Deferred tax liabilities and reserves for uncertain tax positions     117,553       140,539       132,960  
  Deferred revenue and other noncurrent liabilities     120,033       108,115       160,182  
      Total liabilities     2,639,649       2,305,716       2,824,122  
COMMITMENTS AND CONTINGENCIES                  
STOCKHOLDERS' EQUITY:                  
  Common stock, no par, stated value $.01 per share     2,506       2,761       2,602  
  Additional paid-in capital     751,229       757,816       758,230  
  Accumulated other comprehensive loss     (17,122 )     (16,208 )     (11,233 )
  Retained earnings (deficit)     (538,242 )     3,573       40,347  
  Less treasury shares, at cost     (755,842 )     (775,185 )     (766,843 )
      Total stockholders' equity (deficiency)     (557,471 )     (27,243 )     23,103  
        Total liabilities and stockholders' equity   $ 2,082,178     $ 2,278,473     $ 2,847,225  
                   

Note: Effective May 1, 2016, we adopted the provisions of Accounting Standards Update No. 2015-3, "Interest - Imputation of Interest," (ASU 2015-3) on a retrospective basis. Accordingly, debt issuance costs related to our Senior Notes are included in long-term debt in the consolidated balance sheets. Amounts for prior periods have been retrospectively adjusted to conform to the current period presentation.

     
     
     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   (unaudited, in 000s)
Six months ended October 31,   2016   2015
CASH FLOWS FROM OPERATING ACTIVITIES:            
  Net loss   $ (269,893 )   $ (244,666 )
  Adjustments to reconcile net loss to net cash used in operating activities:            
    Depreciation and amortization     87,032       82,443  
    Provision for bad debt     1,286       3,187  
    Deferred taxes     6,489       20,282  
    Stock-based compensation     12,472       13,876  
    Changes in assets and liabilities, net of acquisitions:            
      Cash and cash equivalents - restricted     (5,421 )     49,113  
      Receivables     48,653       67,373  
      Prepaid expenses and other current assets     (7,386 )     (6,173 )
      Other noncurrent assets     7,713       7,518  
      Accounts payable and accrued expenses     (99,378 )     (79,918 )
      Accrued salaries, wages and payroll taxes     (120,672 )     (106,504 )
      Deferred revenue and other current liabilities     (46,531 )     (3,188 )
      Income tax receivables, accrued income taxes and income tax reserves     (282,234 )     (334,245 )
      Deferred revenue and other noncurrent liabilities     (52,548 )     (49,669 )
      Other, net     (5,379 )     (22,142 )
        Net cash used in operating activities     (725,797 )     (602,713 )
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
  Sales, maturities of and payments received on available-for-sale securities     144       434,261  
  Principal payments on mortgage loans, net     16,706       17,006  
  Capital expenditures     (44,918 )     (38,779 )
  Payments made for business acquisitions, net of cash acquired     (36,151 )     (61,846 )
  Franchise loans funded     (10,171 )     (10,281 )
  Payments received on franchise loans     14,263       17,473  
  Other, net     4,336       7,246  
        Net cash provided by (used in) investing activities     (55,791 )     365,080  
             
CASH FLOWS FROM FINANCING ACTIVITIES:            
  Repayments of line of credit borrowings     (50,000 )     -  
  Proceeds from line of credit borrowings     525,000       -  
  Proceeds from issuance of long-term debt     -       996,831  
  Customer banking deposits, net     -       (326,705 )
  Transfer of HRB Bank deposits     -       (419,028 )
  Dividends paid     (95,971 )     (110,338 )
  Repurchase of common stock, including shares surrendered     (215,511 )     (1,517,786 )
  Proceeds from exercise of stock options     1,630       16,875  
  Other, net     (43,734 )     (37,820 )
      Net cash provided by (used in) financing activities     121,414       (1,397,971 )
             
Effects of exchange rate changes on cash     (4,117 )     (10,905 )
             
Net decrease in cash and cash equivalents     (664,291 )     (1,646,509 )
Cash and cash equivalents at beginning of the period     896,801       2,007,190  
Cash and cash equivalents at end of the period   $ 232,510     $ 360,681  
             
SUPPLEMENTARY CASH FLOW DATA:            
  Income taxes paid, net of refunds received   $ 112,339     $ 132,096  
  Interest paid on borrowings     40,670       15,606  
  Accrued additions to property and equipment     12,920       4,573  
  Accrued purchase of common stock     7,143       -  
             

 

     
     
     
FINANCIAL RESULTS   (unaudited, in 000s - except per share amounts)
    Three months ended October 31,   Six months ended October 31,
    2016   2015   2016   2015
Revenues:                        
  U.S. assisted tax preparation fees   $ 35,339     $ 36,403     $ 60,768     $ 63,688  
  U.S. royalties     6,828       6,680       13,353       13,406  
  U.S. DIY tax preparation fees     3,089       3,469       6,003       6,648  
  International revenues     43,539       40,071       82,414       80,665  
  Revenues from Refund Transfers     757       821       3,991       2,992  
  Revenues from Emerald Card®     8,644       9,808       21,709       25,497  
  Revenues from Peace of Mind® Extended Service Plan     22,689       19,325       49,720       47,028  
  Interest and fee income on Emerald Advance     655       417       1,459       731  
  Other     9,792       11,421       17,100       25,478  
      131,332       128,415       256,517       266,133  
Compensation and benefits:                        
  Field wages     50,096       53,525       95,139       99,463  
  Other wages     42,207       46,127       84,307       87,996  
  Benefits and other compensation     23,718       24,635       46,452       47,286  
      116,021       124,287       225,898       234,745  
Occupancy and equipment     99,037       94,997       193,408       184,796  
Marketing and advertising     12,001       12,965       19,562       21,496  
Depreciation and amortization     45,750       42,349       87,032       82,443  
Bad debt     (131 )     1,182       1,286       3,187  
Supplies     4,937       4,728       7,014       7,127  
Other     61,739       81,740       115,063       140,154  
      Total operating expenses     339,354       362,248       649,263       673,948  
                         
Other income, net     2,180       10,505       5,148       10,938  
Interest expense on borrowings     (22,620 )     (14,181 )     (44,086 )     (22,756 )
Other expenses, net     (7 )     (210 )     (334 )     (5,195 )
Pretax loss     (228,469 )     (237,719 )     (432,018 )     (424,828 )
Income tax benefit     (85,054 )     (95,201 )     (167,577 )     (185,805 )
Net loss from continuing operations     (143,415 )     (142,518 )     (264,441 )     (239,023 )
Net loss from discontinued operations     (2,805 )     (2,489 )     (5,452 )     (5,643 )
Net loss   $ (146,220 )   $ (145,007 )   $ (269,893 )   $ (244,666 )
                         
Basic and diluted loss per share:                        
  Continuing operations   $ (0.67 )   $ (0.54 )   $ (1.21 )   $ (0.88 )
  Discontinued operations     (0.01 )     (0.01 )     (0.03 )     (0.02 )
  Consolidated   $ (0.68 )   $ (0.55 )   $ (1.24 )   $ (0.90 )
                         
Weighted average basic and diluted shares     215,535       266,267       218,009       271,016  
                         
EBITDA from continuing operations (1)   $ (160,099 )   $ (181,145 )   $ (300,900 )   $ (319,449 )
EBITDA from continuing operations - adjusted (1)     (160,676 )     (168,760 )     (300,665 )     (306,106 )
                         

(1) See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.

         
         
         
NON-GAAP FINANCIAL MEASURES        
                 
    Three months ended October 31,   Six months ended October 31,
EBITDA   2016   2015   2016   2015
                         
Net loss - as reported   $ (146,220 )   $ (145,007 )   $ (269,893 )   $ (244,666 )
                         
Add back :                        
  Discontinued operations, net     2,805       2,489       5,452       5,643  
  Income taxes of continuing operations     (85,054 )     (95,201 )     (167,577 )     (185,805 )
  Interest expense of continuing operations     22,620       14,225       44,086       22,936  
  Depreciation and amortization of continuing operations     45,750       42,349       87,032       82,443  
      (13,879 )     (36,138 )     (31,007 )     (74,783 )
                         
EBITDA from continuing operations   $ (160,099 )   $ (181,145 )   $ (300,900 )   $ (319,449 )
                         
Three months ended October 31,     2016      
      Pretax loss     Net loss     EBITDA      
                         
From continuing operations   $ (228,469 )   $ (143,415 )   $ (160,099 )      
                         
Adjustments (pretax):                        
  Loss contingencies - litigation     (577 )     (577 )     (577 )      
  Tax effect of adjustments     -       217       -        
      (577 )     (360 )     (577 )      
                         
  As adjusted - from continuing operations   $ (229,046 )   $ (143,775 )   $ (160,676 )      
                         
EPS - as reported         $ (0.67 )            
Impact of adjustments           -              
EPS - adjusted         $ (0.67 )            
                         
Three months ended October 31,     2015      
      Pretax loss     Net loss     EBITDA      
                         
From continuing operations   $ (237,719 )   $ (142,518 )   $ (181,145 )      
                         
Adjustments (pretax):                        
  Loss contingencies - litigation     71       71       71        
  Costs related to HRB Bank and recapitalization transactions     20,766       20,766       20,766        
  Gains on AFS securities     (8,426 )     (8,426 )     (8,426 )      
  Gain on sales of tax offices/businesses     (26 )     (26 )     (26 )      
  Tax effect of adjustments     -       (4,642 )     -        
      12,385       7,743       12,385        
                         
  As adjusted - from continuing operations   $ (225,334 )   $ (134,775 )   $ (168,760 )      
                         
EPS - as reported         $ (0.54 )            
Impact of adjustments           0.03              
EPS - adjusted         $ (0.51 )            

 

                 
                 
                 
Six months ended October 31,   2016    
         
    Pretax loss   Net loss   EBITDA    
                         
From continuing operations   $ (432,018 )   $ (264,441 )   $ (300,900 )      
                         
Adjustments (pretax):                        
  Loss contingencies - litigation     235       235       235        
  Tax effect of adjustments     -       (85 )     -        
      235       150       235        
                         
  As adjusted - from continuing operations   $ (431,783 )   $ (264,291 )   $ (300,665 )      
                         
EPS - as reported         $ (1.21 )            
Impact of adjustments           -              
EPS - adjusted         $ (1.21 )            
                         
Six months ended October 31,     2015      
      Pretax loss     Net loss     EBITDA      
                         
From continuing operations   $ (424,828 )   $ (239,023 )   $ (319,449 )      
                         
Adjustments (pretax):                        
  Loss contingencies - litigation     689       689       689        
  Costs related to HRB Bank and recapitalization transactions     20,818       20,818       20,818        
  Gains on AFS securities     (8,138 )     (8,138 )     (8,138 )      
  Gain on sales of tax offices/businesses     (26 )     (26 )     (26 )      
  Tax effect of adjustments     -       (5,000 )     -        
      13,343       8,343       13,343        
                         
  As adjusted - from continuing operations   $ (411,485 )   $ (230,680 )   $ (306,106 )      
                         
          $ (0.88 )            
            0.03              
Adjusted EPS         $ (0.85 )            
                         
      Three months ended October 31,     Six months ended October 31,
Supplemental Information     2016     2015     2016     2015
                         
Stock-based compensation expense:                        
    Pretax   $ 6,931     $ 7,858     $ 12,472     $ 13,876  
    After-tax     4,467       4,910       7,946       8,677  
Amortization of intangible assets:                        
    Pretax   $ 20,051     $ 17,865     $ 38,037     $ 34,479  
    After-tax     12,940       11,161       24,233       21,560  
                       

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 material 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 material severance and other restructuring charges in connection with the termination of personnel, closure of offices and related costs.
  • We exclude the material 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 and adjusted EBITDA 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 Block

Contacts:

Colby Brown 
Investor Relations
(816) 854-4559

Gene King
Media Relations
(816) 854-4672

###

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