Form 8-K (12-11-13)


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): December 10, 2013

H&R BLOCK, INC.
(Exact name of registrant as specified in charter)
MISSOURI
1-6089
44-0607856
(State or other jurisdiction of
(Commission File Number)
(I.R.S. Employer
incorporation or organization)
 
Identification No.)

One H&R Block Way, Kansas City, MO 64105
(Address of Principal Executive Offices) (Zip Code)

(816) 854-3000
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 







Item 2.02.    Results of Operations and Financial Condition.
On December 10, 2013, the Company issued a press release regarding the Company's results of operations for the fiscal quarter ended October 31, 2013. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01.    Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number
Description
 
99.1
Press Release Issued
December 10, 2013







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
H&R BLOCK, INC.
 
 
 
Date:
December 10, 2013
By: /s/ Scott W. Andreasen
 
 
Scott W. Andreasen
 
 
Vice President and Secretary






EXHIBIT INDEX
Exhibit 99.1
Press Release Issued
December 10, 2013



Exhibit 99.1 (12-11-13)

Exhibit 99.1
News Release
For Immediate Release: December 10, 2013
H&R Block Reports Fiscal 2014 Second Quarter Earnings; Focuses on Tax Season 2014 Readiness
KANSAS CITY, Mo. - H&R Block, Inc. (NYSE: HRB) today announced financial results for its fiscal 2014 second quarter ended October 31, 2013. The company typically reports a second quarter operating loss due to the seasonality of the tax business.

Fiscal 2014 Second Quarter Highlights1 
Revenues decreased 2 percent, or $3 million, to $134 million2 
Seasonal adjusted net loss from continuing operations increased 12 percent to $112 million, or $(0.42) per share
Net loss from continuing operations increased 2 percent to $103 million, or $(0.38) per share
Company continues the process of divesting its Bank
Declares 205th consecutive quarterly dividend

CEO Perspective
“I’m pleased with the initiatives we have in place for the upcoming tax season and am confident that we are well positioned to again deliver strong results this year,” said Bill Cobb, H&R Block’s president and chief executive officer. “We've also made progress in the process of divesting our bank, and remain committed to continue offering best-in-class financial products,” added Cobb.

Fiscal 2014 Second Quarter Results From Continuing Operations3 
 
 
Actual
 
Adjusted
(in millions, except EPS)
 
Fiscal Year 2014
 
Fiscal Year 2013
 
Fiscal Year 2014
 
Fiscal Year 2013
Revenue
 
$
134

 
$
137

 
$
134

 
$
137

EBITDA
 
$
(138
)
 
$
(117
)
 
$
(142
)
 
$
(117
)
Pretax Loss
 
$
(179
)
 
$
(162
)
 
$
(183
)
 
$
(162
)
Net Loss
 
$
(103
)
 
$
(101
)
 
$
(112
)
 
$
(100
)
Weighted-Avg. Shares - Diluted
 
273.9

 
271.1

 
273.9

 
271.1

EPS
 
$
(0.38
)
 
$
(0.37
)
 
$
(0.42
)
 
$
(0.37
)
 
 
 
 
 
 
 
 
 

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


CFO Perspective
"Given the seasonality of our business, our offseason results are not indicative of our performance for the full year," said Greg Macfarlane, H&R Block's chief financial officer. "While expenses have increased modestly year to date, we continue to expect EBITDA margins to be generally consistent with last year's results."

Business Segment Results and Highlights
Tax Services
Revenues decreased $2 million to $128 million, primarily due to timing differences in our Australian operations, partially offset by increased Emerald Card fee revenue from increased year-round usage
Operating expenses increased $27 million to $287 million due to timing of seasonal compensation, higher legal fees, and depreciation expense
Pretax loss increased $29 million to $159 million
Corporate
Total operating expenses declined $13 million to $26 million, primarily due to lower interest expense and mortgage loan loss provisions
Pretax loss decreased $12 million to $20 million
Discontinued Operations
Net loss of $2 million improved by $2 million from the prior year
Sand Canyon Corporation (SCC), a separate legal entity of H&R Block, Inc., received new claims for alleged breaches of representations and warranties in the principal amount of less than $1 million
SCC's accrual for contingent losses relating to representations and warranties remained unchanged at $159 million

Dividend
A previously announced quarterly cash dividend of 20 cents per share is payable on January 2, 2014 to shareholders of record as of December 9, 2013. The January 2 payment marks the company's 205th consecutive quarterly dividend since the company went public in 1962.

Investor Conference
At 8:30 a.m. EST on Wednesday, December 11, the company will hold its investor conference in New York City. H&R Block’s senior leaders will outline the company’s growth strategies and outlook, and provide a general business update including discussion of fiscal 2014 second quarter results.

The event will be broadcast live in a listen-only format for the media and public on H&R Block’s investor relations website at http://investors.hrblock.com. A replay will be available on the company’s website two hours after the conference ends and continuing until February 28, 2014.



About H&R Block
H&R Block, Inc. (NYSE: HRB) is the world's largest consumer tax services provider. More than 625 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2013, H&R Block had annual revenues of $2.9 billion with 25.4 million tax returns prepared worldwide. Tax return preparation services are provided in company-owned and franchise retail tax offices by over 80,000 professional tax preparers and associates worldwide, and through H&R Block digital products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled "About Non-GAAP Financial Measures.”
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “targets,” “would,” “will,” “should,” “could” or “may” or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management's plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company's control and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2013 in the section entitled “Risk Factors,” as well as additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. In addition, there can be no assurances regarding the ability to obtain all required regulatory and other approvals, the ability of the parties to negotiate and execute the additional required agreements as expected, or the terms and conditions of the additional agreements. 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.
For Further Information
Investor Relations:    Colby Brown, (816) 854-4559, colby.brown@hrblock.com
Media Relations:    Gene King, (816) 854-4672, gene.king@hrblock.com



TABLES FOLLOW






KEY OPERATING RESULTS
 
(unaudited, amounts in thousands, except per share data)
 
 
 
Three months ended October 31,
 
 
Revenues
 
Income (loss)
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Tax Services
 
$
128,040

 
$
129,819

 
$
(159,314
)
 
$
(130,109
)
Corporate and Eliminations
 
6,300

 
7,444

 
(20,048
)
 
(32,179
)
 
 
$
134,340

 
$
137,263

 
(179,362
)
 
(162,288
)
Income tax benefit
 
 
 
 
 
(76,347
)
 
(61,089
)
Net loss from continuing operations
 
 
 
 
 
(103,015
)
 
(101,199
)
Net loss from discontinued operations
 
 
 
 
 
(1,928
)
 
(4,044
)
Net loss
 
 
 
 
 
$
(104,943
)
 
$
(105,243
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(0.38
)
 
$
(0.37
)
Discontinued operations
 
 
 
 
 
(0.01
)
 
(0.02
)
Consolidated
 
 
 
 
 
$
(0.39
)
 
$
(0.39
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
273,907

 
271,145

 
 
 
 
 
 
 
 
 
 
 
Six months ended October 31,
 
 
Revenues
 
Income (loss)
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Tax Services
 
$
249,731

 
$
220,072

 
$
(303,708
)
 
$
(271,014
)
Corporate and Eliminations
 
11,804

 
13,680

 
(60,148
)
 
(60,543
)
 
 
$
261,535

 
$
233,752

 
(363,856
)
 
(331,557
)
Income tax benefit
 
 
 
 
 
(147,571
)
 
(124,708
)
Net loss from continuing operations
 
 
 
 
 
(216,285
)
 
(206,849
)
Net loss from discontinued operations
 
 
 
 
 
(3,845
)
 
(5,835
)
Net loss
 
 
 
 
 
$
(220,130
)
 
$
(212,684
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(0.79
)
 
$
(0.76
)
Discontinued operations
 
 
 
 
 
(0.01
)
 
(0.02
)
Consolidated
 
 
 
 
 
$
(0.80
)
 
$
(0.78
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
273,494

 
274,150

 
 
 
 
 
 
 
 
 







CONSOLIDATED BALANCE SHEETS
 
(amounts in thousands, except per share data)
 
As of
 
October 31, 2013

 
October 31, 2012

 
April 30, 2013

 
 
(unaudited)

 
(unaudited)

 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
790,772

 
$
1,260,901

 
$
1,747,584

Cash and cash equivalents — restricted
 
47,521

 
38,667

 
117,837

Receivables, net
 
131,701

 
124,511

 
206,835

Prepaid expenses and other current assets
 
225,660

 
282,874

 
390,087

Total current assets
 
1,195,654

 
1,706,953

 
2,462,343

Mortgage loans held for investment, net
 
295,907

 
370,850

 
338,789

Investments in available-for-sale securities
 
465,344

 
388,640

 
486,876

Property and equipment, net
 
311,157

 
272,438

 
267,880

Intangible assets, net
 
296,213

 
275,193

 
284,439

Goodwill
 
442,812

 
434,492

 
434,782

Other assets
 
267,426

 
448,164

 
262,670

Total assets
 
$
3,274,513

 
$
3,896,730

 
$
4,537,779

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Customer banking deposits
 
$
655,129

 
$
790,106

 
$
936,464

Accounts payable, accrued expenses and other current liabilities
 
426,994

 
406,447

 
523,921

Accrued salaries, wages and payroll taxes
 
41,584

 
39,345

 
134,970

Accrued income taxes
 
22,475

 
95,126

 
416,128

Current portion of long-term debt
 
400,503

 
600,678

 
722

Total current liabilities
 
1,546,685

 
1,931,702

 
2,012,205

Long-term debt
 
506,078

 
906,125

 
905,958

Other noncurrent liabilities
 
266,775

 
365,970

 
356,069

Total liabilities
 
2,319,538

 
3,203,797

 
3,274,232

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
Common stock, no par, stated value $.01 per share
 
3,166

 
3,166

 
3,166

Additional paid-in capital
 
757,828

 
748,298

 
752,483

Accumulated other comprehensive income
 
1,463

 
8,685

 
10,550

Retained earnings
 
1,003,842

 
795,707

 
1,333,445

Less treasury shares, at cost
 
(811,324
)
 
(862,923
)
 
(836,097
)
Total stockholders’ equity
 
954,975

 
692,933

 
1,263,547

Total liabilities and stockholders’ equity
 
$
3,274,513

 
$
3,896,730

 
$
4,537,779

 
 
 
 
 
 
 






CONSOLIDATED STATEMENTS OF OPERATIONS
 
(unaudited, in 000s, except per share amounts)
 
 
 
Three months ended
 
Six months ended
 
 
October 31,
 
October 31,
 
 
2013
 
2012
 
2013
 
2012
REVENUES:
 
 
 
 
 
 
 
 
Service revenues
 
$
112,432

 
$
116,438

 
$
220,232

 
$
196,334

Product and other revenues
 
11,282

 
10,966

 
19,480

 
17,686

Interest income
 
10,626

 
9,859

 
21,823

 
19,732

 
 
134,340

 
137,263

 
261,535

 
233,752

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
Compensation and benefits
 
60,526

 
54,764

 
106,838

 
94,349

Occupancy and equipment
 
82,358

 
82,398

 
161,094

 
162,349

Provision for bad debt and loan losses
 
2,849

 
3,725

 
14,340

 
8,370

Interest
 
14,314

 
23,390

 
28,760

 
45,467

Depreciation of property and equipment
 
20,144

 
16,196

 
36,948

 
30,730

Other
 
40,673

 
31,538

 
82,937

 
64,170

 
 
220,864

 
212,011

 
430,917

 
405,435

Selling, general and administrative
 
94,092

 
90,327

 
190,789

 
165,805

 
 
314,956

 
302,338

 
621,706

 
571,240

Operating loss
 
(180,616
)
 
(165,075
)
 
(360,171
)
 
(337,488
)
Other income (expense), net
 
1,254

 
2,787

 
(3,685
)
 
5,931

Loss from continuing operations before income tax benefit
 
(179,362
)
 
(162,288
)
 
(363,856
)
 
(331,557
)
Income tax benefit
 
(76,347
)
 
(61,089
)
 
(147,571
)
 
(124,708
)
Net loss from continuing operations
 
(103,015
)
 
(101,199
)
 
(216,285
)
 
(206,849
)
Net loss from discontinued operations
 
(1,928
)
 
(4,044
)
 
(3,845
)
 
(5,835
)
NET LOSS
 
$
(104,943
)
 
$
(105,243
)
 
$
(220,130
)
 
$
(212,684
)
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.38
)
 
$
(0.37
)
 
$
(0.79
)
 
$
(0.76
)
Discontinued operations
 
(0.01
)
 
(0.02
)
 
(0.01
)
 
(0.02
)
Consolidated
 
$
(0.39
)
 
$
(0.39
)
 
$
(0.80
)
 
$
(0.78
)
 
 
 
 
 
 
 
 
 






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Six months ended October 31,
 
2013
 
2012
 
 
 
 
 
NET CASH USED IN OPERATING ACTIVITIES
 
$
(492,373
)
 
$
(567,036
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of available-for-sale securities
 
(45,158
)
 
(67,474
)
Maturities of and payments received on available-for-sale securities
 
55,615

 
53,098

Principal payments on mortgage loans held for investment, net
 
24,340

 
23,608

Purchases of property and equipment
 
(86,926
)
 
(60,720
)
Payments made for business acquisitions, net of cash acquired
 
(20,927
)
 
(10,442
)
Franchise loans:
 
 
 
 
Loans funded
 
(22,114
)
 
(20,670
)
Payments received
 
15,883

 
8,303

Other, net
 
15,255

 
10,218

Net cash used in investing activities
 
(64,032
)
 
(64,079
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Repayments of long-term debt
 

 
(30,831
)
Proceeds from issuance of long-term debt
 

 
497,185

Customer banking deposits, net
 
(275,800
)
 
(37,913
)
Dividends paid
 
(109,324
)
 
(108,428
)
Repurchase of common stock, including shares surrendered
 
(5,329
)
 
(339,919
)
Proceeds from exercise of stock options
 
24,536

 
1,288

Other, net
 
(26,619
)
 
(33,004
)
Net cash used in financing activities
 
(392,536
)
 
(51,622
)
 
 
 
 
 
Effects of exchange rates on cash
 
(7,871
)
 
(696
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(956,812
)
 
(683,433
)
Cash and cash equivalents at beginning of the period
 
1,747,584

 
1,944,334

Cash and cash equivalents at end of the period
 
$
790,772

 
$
1,260,901

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
116,099

 
$
48,201

Interest paid on borrowings
 
27,804

 
42,106

Interest paid on deposits
 
1,180

 
2,683

Transfers of foreclosed loans to other assets
 
3,889

 
5,312

Accrued additions to property and equipment
 
6,729

 
10,273

Transfer of mortgage loans held for investment to held for sale
 
7,608

 

 
 
 
 
 






TAX SERVICES – FINANCIAL RESULTS
 
 
 
 
 
(unaudited, amounts in 000s)
 
 
 
Three months ended
 
Six months ended
 
 
October 31,
 
October 31,
 
 
2013
 
2012
 
2013
 
2012
Tax preparation fees:
 
 
 
 
 
 
 
 
U.S.
 
$
29,011

 
$
23,805

 
$
51,037

 
$
42,640

International
 
41,568

 
51,525

 
73,662

 
65,583

 
 
70,579

 
75,330

 
124,699

 
108,223

Royalties
 
9,527

 
9,630

 
16,089

 
15,481

Fees from Emerald Card
 
9,999

 
8,281

 
24,610

 
20,337

Fees from Peace of Mind® guarantees
 
19,151

 
18,572

 
46,977

 
45,555

Other
 
18,784

 
18,006

 
37,356

 
30,476

Total revenues
 
128,040

 
129,819

 
249,731

 
220,072

 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
Field wages
 
49,531

 
45,290

 
89,435

 
77,698

Other wages
 
35,665

 
34,592

 
70,400

 
68,959

Benefits and other compensation
 
22,178

 
18,765

 
38,115

 
33,539

 
 
107,374

 
98,647

 
197,950

 
180,196

Occupancy and equipment
 
83,634

 
82,267

 
162,184

 
162,118

Marketing and advertising
 
12,566

 
11,386

 
19,583

 
18,838

Depreciation and amortization
 
26,632

 
23,393

 
49,434

 
43,864

Other
 
57,148

 
44,235

 
124,288

 
86,070

Total expenses
 
287,354

 
259,928

 
553,439

 
491,086

Pretax loss
 
$
(159,314
)
 
$
(130,109
)
 
$
(303,708
)
 
$
(271,014
)
 
 
 
 
 
 
 
 
 






NON-GAAP FINANCIAL MEASURES
 
(unaudited, amounts in thousands, except per share amounts)
 
 
 
Three months ended October 31, 2013
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
134,340

 
$
314,956

 
$
(138,380
)
 
$
(179,362
)
 
$
(103,015
)
 
$
(0.38
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
350

 
350

 
350

 
214

 

Severance
 

 
1,828

 
1,828

 
1,828

 
1,122

 

Professional fees related to HRB Bank transaction
 

 
(5,217
)
 
(5,217
)
 
(5,217
)
 
(3,198
)
 
(0.01
)
Gain on sales of tax offices
 

 
(599
)
 
(599
)
 
(599
)
 
(367
)
 

Discrete tax items
 

 

 

 

 
(7,061
)
 
(0.03
)
 
 

 
(3,638
)
 
(3,638
)
 
(3,638
)
 
(9,290
)
 
(0.04
)
 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
134,340

 
$
311,318

 
$
(142,018
)
 
$
(183,000
)
 
$
(112,305
)
 
$
(0.42
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended October 31, 2012
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
137,263

 
$
302,338

 
$
(116,845
)
 
$
(162,288
)
 
$
(101,199
)
 
$
(0.37
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
(2,451
)
 
(2,451
)
 
(2,451
)
 
(1,506
)
 
(0.01
)
Impairment of goodwill and intangible assets
 

 
1,421

 
1,421

 
1,421

 
869

 

Severance
 

 
1,558

 
1,558

 
1,558

 
951

 

Professional fees related to HRB Bank transaction
 

 
47

 
47

 
47

 
29

 

Gain on sales of tax offices
 

 
(754
)
 
(754
)
 
(754
)
 
(460
)
 

Discrete tax items
 

 

 

 

 
1,472

 
0.01

 
 

 
(179
)
 
(179
)
 
(179
)
 
1,355

 

 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
137,263

 
$
302,159

 
$
(117,024
)
 
$
(162,467
)
 
$
(99,844
)
 
$
(0.37
)
 
 
 
 
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
(unaudited, amounts in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended October 31, 2013
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
261,535

 
$
621,706

 
$
(285,554
)
 
$
(363,856
)
 
$
(216,285
)
 
$
(0.79
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
723

 
723

 
723

 
443

 

Severance
 

 
2,933

 
2,933

 
2,933

 
1,799

 
0.01

Professional fees related to HRB Bank transaction
 

 
1,807

 
1,807

 
1,807

 
1,108

 

Gain on sales of tax offices
 

 
(599
)
 
(599
)
 
(599
)
 
(367
)
 

Discrete tax items
 

 

 

 

 
(6,904
)
 
(0.03
)
 
 

 
4,864

 
4,864

 
4,864

 
(3,921
)
 
(0.02
)
 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
261,535

 
$
626,570

 
$
(280,690
)
 
$
(358,992
)
 
$
(220,206
)
 
$
(0.81
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended October 31, 2012
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
233,752

 
$
571,240

 
$
(243,486
)
 
$
(331,557
)
 
$
(206,849
)
 
$
(0.76
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
(4,753
)
 
(4,753
)
 
(4,753
)
 
(2,906
)
 
(0.01
)
Impairment of goodwill and intangible assets
 

 
1,421

 
1,421

 
1,421

 
869

 

Severance
 

 
1,057

 
1,057

 
1,057

 
646

 

Professional fees related to HRB Bank transaction
 

 
47

 
47

 
47

 
29

 

Gain on sales of tax offices
 

 
(524
)
 
(524
)
 
(524
)
 
(320
)
 

Discrete tax items
 

 

 

 

 
4,173

 
0.02

 
 

 
(2,752
)
 
(2,752
)
 
(2,752
)
 
2,491

 
0.01

 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
233,752

 
$
568,488

 
$
(246,238
)
 
$
(334,309
)
 
$
(204,358
)
 
$
(0.75
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Six months ended
 
 
 
 
 
 
October 31,
 
October 31,
 
 
EBITDA
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations - as reported
 
$
(103,015
)
 
$
(101,199
)
 
$
(216,285
)
 
$
(206,849
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
 
 
 
 
Income taxes
 
 
 
(76,347
)
 
(61,089
)
 
(147,571
)
 
(124,708
)
 
 
Interest expense
 
 
 
14,314

 
23,390

 
28,760

 
45,467

 
 
Depreciation and amortization
 
 
 
26,668

 
22,053

 
49,542

 
42,604

 
 
 
 
 
 
(35,365
)
 
(15,646
)
 
(69,269
)
 
(36,637
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA from continuing operations
 
 
 
$
(138,380
)
 
$
(116,845
)
 
$
(285,554
)
 
$
(243,486
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
(unaudited, amounts in thousands, except per share amounts)
 
 
 
 
 
Three months ended
 
Six months ended
 
 
 
 
 
 
October 31,
 
October 31,
 
 
Supplemental Information
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
 
 
 
 
 
 
 
Pretax
 
 
 
$
6,210

 
$
5,384

 
$
10,762

 
$
7,737

 
 
After-tax
 
 
 
3,810

 
3,299

 
6,601

 
4,730

 
 
Amortization of intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Pretax
 
 
 
$
6,523

 
$
5,857

 
$
12,594

 
$
11,874

 
 
After-tax
 
 
 
4,003

 
3,599

 
7,725

 
7,259

 
 

ABOUT NON-GAAP FINANCIAL MEASURES
The accompanying press release contains non-GAAP financial measures. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures in other companies.
We consider non-GAAP financial measures to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of items that are not indicative of our core operating performance.
The following are descriptions of adjustments we make for our non-GAAP financial measures:
We exclude from our non-GAAP financial measures litigation charges we incur and favorable reserve adjustments. This does not include legal defense costs.
We exclude from our non-GAAP financial measures non-cash charges to adjust the carrying values of goodwill, intangible assets, other long-lived assets and investments to their estimated fair values.
We exclude from our non-GAAP financial measures severance and other restructuring charges in connection with the termination of personnel, closure of tax offices and related costs.
We exclude from our non-GAAP financial measures the gains and losses on business dispositions, including investment banking, legal and accounting fees.
We exclude from our non-GAAP financial measures the gains and losses on extinguishment of debt.
We exclude from our non-GAAP financial measures the effects of discrete income tax reserve and related adjustments recorded in a specific quarter.
We may consider whether other significant items that arise in the future should also be excluded from our non-GAAP financial measures.
We measure the performance of our business using a variety of metrics, including EBITDA, adjusted EBITDA, adjusted pretax and net income (loss) of continuing operations, adjusted EPS and adjusted pretax results of our Tax Services segment. We also use EBITDA and pretax income of continuing operations as performance metrics in incentive compensation plans for our employees. These adjusted results eliminate the impact of items that we do not consider indicative of our core operating performance and, we believe, provide meaningful information to assist in understanding our financial results, analyzing trends in our underlying business, and assessing our prospects for future performance.