Form 8-K (03-06-14)


 

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): March 6, 2014

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 March 6, 2014, the Company issued a press release regarding the Company's results of operations for the fiscal quarter ended January 31, 2014. 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 March 6, 2014






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:
March 6, 2014
By:
 /s/ Scott W. Andreasen
 
 
 
Scott W. Andreasen
 
 
 
Vice President and Secretary






EXHIBIT INDEX

Exhibit 99.1        Press Release Issued March 6, 2014


Exhibit 99.1 (03-06-14)

Exhibit 99.1
News Release
For Immediate Release: March 6, 2014
H&R Block Reports U.S. Tax Volume Through Feb. 28; Fiscal 2014 Third Quarter Earnings

KANSAS CITY, Mo. - H&R Block, Inc. (NYSE: HRB) the world’s largest consumer tax services provider, today released U.S. tax volume through Feb. 28 and earnings for its fiscal 2014 third quarter ended January 31, 2014.
As a result of the delayed opening of the Internal Revenue Service’s (IRS) e-file system to Jan. 31, revenue related to tax returns prepared but not yet filed totaling $277 million shifted to the company’s fiscal fourth quarter ending April 30. A majority of the company’s revenues and all of its fiscal 2014 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 recently outlined its strategy to grow revenues through a balance of improved client mix and increased product attachments and believes it remains on track to achieve these goals. Consistent with this strategy, the company discontinued its free federal 1040EZ promotion in virtually all markets and exited unprofitable retail partnerships. As a result, total U.S. tax returns prepared by and through H&R Block were lower by 6 percent through Feb. 28.
 
CEO Perspective
“In line with the strategy outlined at our most recent investor day last December, we entered this tax season with a solid plan focused on growing Tax Plus revenue” said Bill Cobb, H&R Block’s president and chief executive officer. “While there is still over a month left in this tax season, our early results indicate that we are on track to achieve our objectives this year,” added Cobb.

Fiscal 2014 Third Quarter Highlights1 
Revenues decreased 58 percent2, or $272 million, to $200 million primarily due to $277 million of revenue related to tax returns prepared but not yet filed which will be recorded during the company's fiscal fourth quarter
Adjusted net loss from continuing operations increased to $209 million, or $(0.77) per share, due almost entirely to the timing shift in revenues described above
Company declares 206th consecutive quarterly dividend






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.



Fiscal 2014 Third Quarter Results From Continuing Operations3 
 
 
Actual
 
Adjusted
(in millions, except EPS)
 
Fiscal Year 2014
 
Fiscal Year 2013
 
Fiscal Year 2014
 
Fiscal Year 2013
Revenue
 
$
200

 
$
472

 
$
200

 
$
472

EBITDA
 
$
(302
)
 
$
(52
)
 
$
(301
)
 
$
(47
)
Pretax Loss
 
$
(348
)
 
$
(96
)
 
$
(347
)
 
$
(91
)
Net Loss
 
$
(213
)
 
$
(17
)
 
$
(209
)
 
$
(57
)
Weighted-Avg. Shares - Diluted
 
274.1

 
271.5

 
274.1

 
271.5

EPS
 
$
(0.78
)
 
$
(0.06
)
 
$
(0.77
)
 
$
(0.21
)
 
 
 
 
 
 
 
 
 

Business Segment Financial Results and Highlights
CFO Perspective
"For the second consecutive year we’ve seen a late start to the tax season, resulting in the majority of our business occurring in the fiscal fourth quarter. Given the seasonal nature of our business, the focus remains on our performance for the full year,” said Greg Macfarlane, H&R Block’s chief financial officer. “We’re pleased with our early season financial results, and continue to expect our full year EBITDA margin to be consistent with last year.”

Business Segment Results and Highlights
Tax Services
Revenues decreased $271 million to $194 million, primarily due to a $277 million shift of revenue from the fiscal third quarter to the fiscal fourth quarter related to completed tax returns that were not filed by Jan. 31
Operating expenses decreased $13 million to $516 million
Pretax loss increased to $322 million, primarily due to the timing shift in revenues mentioned above

Corporate
Total operating expenses decreased $8 million to $32 million, primarily due to lower interest expense and mortgage loan loss provisions
Pretax loss decreased $6 million to $26 million

Discontinued Operations
Net loss of $2 million improved by $1 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 $1 million
SCC's accrual for contingent losses relating to representations and warranties remained unchanged at $159 million

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).




Dividend
A previously announced quarterly cash dividend of 20 cents per share is payable April 1, 2014, to shareholders of record as of March 17, 2014.
The April 1 dividend payment will mark H&R Block’s 206th consecutive quarterly dividend since the company went public in 1962.

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 6, 2014 for analysts, institutional investors, and shareholders to discuss the fiscal 2014 third quarter results, fiscal year 2014 outlook and a general business update. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:
U.S./Canada (888) 895-5260 or International (443) 842-7595
Conference ID: 51003273
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 6, 2014, and continuing until April 7, 2014, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 51003273. The webcast will be available for replay March 7, 2014 at http://investors.hrblock.com.
  
About H&R Block
H&R Block, Inc. (NYSE: HRB) is the world's largest consumer tax services provider. More than 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 24.8 million tax returns prepared worldwide. Tax return preparation services are provided in over 11,000 company-owned and franchise retail tax offices worldwide by professional tax preparers, 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

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).



operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management's plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company's control and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2013 in the section entitled “Risk Factors,” as well as additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

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


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).





KEY OPERATING RESULTS
 
(unaudited, amounts in thousands, except per share data)
 
 
 
Three months ended January 31,
 
 
Revenues
 
Income (loss)
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Tax Services
 
$
193,996

 
$
464,634

 
$
(322,099
)
 
$
(64,189
)
Corporate and Eliminations
 
5,774

 
7,345

 
(25,726
)
 
(32,079
)
 
 
$
199,770

 
$
471,979

 
(347,825
)
 
(96,268
)
Income tax benefit
 
 
 
 
 
(135,074
)
 
(79,353
)
Net loss from continuing operations
 
 
 
 
 
(212,751
)
 
(16,915
)
Net loss from discontinued operations
 
 
 
 
 
(1,960
)
 
(793
)
Net loss
 
 
 
 
 
$
(214,711
)
 
$
(17,708
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(0.78
)
 
$
(0.06
)
Discontinued operations
 
 
 
 
 

 
(0.01
)
Consolidated
 
 
 
 
 
$
(0.78
)
 
$
(0.07
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
274,110

 
271,542

 
 
 
 
 
 
 
 
 
 
 
Nine months ended January 31,
 
 
Revenues
 
Income (loss)
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Tax Services
 
$
443,727

 
$
684,706

 
$
(625,807
)
 
$
(335,203
)
Corporate and Eliminations
 
17,578

 
21,025

 
(85,874
)
 
(92,622
)
 
 
$
461,305

 
$
705,731

 
(711,681
)
 
(427,825
)
Income tax benefit
 
 
 
 
 
(282,645
)
 
(204,061
)
Net loss from continuing operations
 
 
 
 
 
(429,036
)
 
(223,764
)
Net loss from discontinued operations
 
 
 
 
 
(5,805
)
 
(6,628
)
Net loss
 
 
 
 
 
$
(434,841
)
 
$
(230,392
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(1.57
)
 
$
(0.82
)
Discontinued operations
 
 
 
 
 
(0.02
)
 
(0.02
)
Consolidated
 
 
 
 
 
$
(1.59
)
 
$
(0.84
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
273,699

 
273,281

 
 
 
 
 
 
 
 
 







CONSOLIDATED BALANCE SHEETS
 
(amounts in thousands, except per share data)
 
As of
 
January 31, 2014

 
January 31, 2013

 
April 30, 2013

 
 
(unaudited)

 
(unaudited)

 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
437,404

 
$
418,385

 
$
1,747,584

Cash and cash equivalents — restricted
 
44,855

 
37,958

 
117,837

Receivables, net
 
677,221

 
949,160

 
206,835

Prepaid expenses and other current assets
 
345,231

 
331,046

 
390,087

Total current assets
 
1,504,711

 
1,736,549

 
2,462,343

Mortgage loans held for investment, net
 
282,149

 
357,887

 
338,789

Investments in available-for-sale securities
 
443,770

 
396,312

 
486,876

Property and equipment, net
 
314,565

 
273,450

 
267,880

Intangible assets, net
 
318,719

 
288,238

 
284,439

Goodwill
 
437,386

 
435,256

 
434,782

Other assets
 
213,987

 
444,804

 
262,670

Total assets
 
$
3,515,287

 
$
3,932,496

 
$
4,537,779

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Commercial paper borrowings
 
$
194,984

 
$
424,967

 
$

Customer banking deposits
 
806,887

 
1,036,968

 
936,464

Accounts payable, accrued expenses and other current liabilities
 
520,121

 
479,660

 
523,921

Accrued salaries, wages and payroll taxes
 
108,583

 
103,538

 
134,970

Accrued income taxes
 
23,375

 
17,348

 
416,128

Current portion of long-term debt
 
400,570

 
713

 
722

Total current liabilities
 
2,054,520

 
2,063,194

 
2,012,205

Long-term debt
 
505,959

 
906,012

 
905,958

Other noncurrent liabilities
 
268,049

 
328,402

 
356,069

Total liabilities
 
2,828,528

 
3,297,608

 
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
 
762,102

 
747,398

 
752,483

Accumulated other comprehensive income (loss)
 
(4,776
)
 
9,055

 
10,550

Retained earnings
 
734,233

 
723,676

 
1,333,445

Less treasury shares, at cost
 
(807,966
)
 
(848,407
)
 
(836,097
)
Total stockholders’ equity
 
686,759

 
634,888

 
1,263,547

Total liabilities and stockholders’ equity
 
$
3,515,287

 
$
3,932,496

 
$
4,537,779

 
 
 
 
 
 
 






CONSOLIDATED STATEMENTS OF OPERATIONS
 
(unaudited, in 000s, except per share amounts)
 
 
 
Three months ended
 
Nine months ended
 
 
January 31,
 
January 31,
 
 
2014
 
2013
 
2014
 
2013
REVENUES:
 
 
 
 
 
 
 
 
Service revenues
 
$
138,613

 
$
362,194

 
$
358,845

 
$
558,528

Product and other revenues
 
23,788

 
71,485

 
43,268

 
89,171

Interest income
 
37,369

 
38,300

 
59,192

 
58,032

 
 
199,770

 
471,979

 
461,305

 
705,731

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
Compensation and benefits
 
160,830

 
160,081

 
267,668

 
254,430

Occupancy and equipment
 
88,387

 
84,710

 
249,481

 
247,059

Provision for bad debt and loan losses
 
31,420

 
43,028

 
45,760

 
51,398

Interest
 
14,443

 
19,428

 
43,203

 
64,895

Depreciation of property and equipment
 
23,054

 
18,381

 
60,002

 
49,111

Other
 
45,403

 
51,990

 
128,340

 
116,160

 
 
363,537

 
377,618

 
794,454

 
783,053

Selling, general and administrative
 
174,448

 
186,997

 
365,237

 
352,802

 
 
537,985

 
564,615

 
1,159,691

 
1,135,855

Operating loss
 
(338,215
)
 
(92,636
)
 
(698,386
)
 
(430,124
)
Other income (expense), net
 
(9,610
)
 
(3,632
)
 
(13,295
)
 
2,299

Loss from continuing operations before income tax benefit
 
(347,825
)
 
(96,268
)
 
(711,681
)
 
(427,825
)
Income tax benefit
 
(135,074
)
 
(79,353
)
 
(282,645
)
 
(204,061
)
Net loss from continuing operations
 
(212,751
)
 
(16,915
)
 
(429,036
)
 
(223,764
)
Net loss from discontinued operations
 
(1,960
)
 
(793
)
 
(5,805
)
 
(6,628
)
NET LOSS
 
$
(214,711
)
 
$
(17,708
)
 
$
(434,841
)
 
$
(230,392
)
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.78
)
 
$
(0.06
)
 
$
(1.57
)
 
$
(0.82
)
Discontinued operations
 

 
(0.01
)
 
(0.02
)
 
(0.02
)
Consolidated
 
$
(0.78
)
 
$
(0.07
)
 
$
(1.59
)
 
$
(0.84
)
 
 
 
 
 
 
 
 
 






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Nine months ended January 31,
 
2014
 
2013
 
 
 
 
 
NET CASH USED IN OPERATING ACTIVITIES
 
$
(1,120,322
)
 
$
(1,311,926
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of available-for-sale securities
 
(45,158
)
 
(108,351
)
Maturities of and payments received on available-for-sale securities
 
72,502

 
86,808

Principal payments on mortgage loans held for investment, net
 
35,320

 
31,205

Capital expenditures
 
(125,654
)
 
(96,063
)
Payments made for business acquisitions, net of cash acquired
 
(37,865
)
 
(20,662
)
Proceeds received on notes receivable
 
64,865

 

Franchise loans:
 
 
 
 
Loans funded
 
(62,039
)
 
(68,874
)
Payments received
 
17,893

 
9,594

Other, net
 
12,227

 
(13,973
)
Net cash used in investing activities
 
(67,909
)
 
(180,316
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Repayments of commercial paper and other short-term borrowings
 
(80,930
)
 
(789,271
)
Proceeds from issuance of commercial paper and other short-term borrowings
 
275,914

 
1,214,238

Repayments of long-term debt
 

 
(636,621
)
Proceeds from issuance of long-term debt
 

 
497,185

Customer banking deposits, net
 
(124,947
)
 
208,753

Dividends paid
 
(164,134
)
 
(162,692
)
Repurchase of common stock, including shares surrendered
 
(6,047
)
 
(340,298
)
Proceeds from exercise of stock options
 
28,083

 
11,529

Other, net
 
(29,872
)
 
(36,113
)
Net cash used in financing activities
 
(101,933
)
 
(33,290
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
(20,016
)
 
(417
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(1,310,180
)
 
(1,525,949
)
Cash and cash equivalents at beginning of the period
 
1,747,584

 
1,944,334

Cash and cash equivalents at end of the period
 
$
437,404

 
$
418,385

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
87,672

 
$
104,986

Interest paid on borrowings
 
43,297

 
62,160

Interest paid on deposits
 
1,696

 
4,377

Transfers of foreclosed loans to other assets
 
6,389

 
7,208

Accrued additions to property and equipment
 
4,113

 
1,001

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

 

 
 
 
 
 






U.S. TAX OPERATING DATA
 
 
 
 
 
 
 
 
 
 
 
(in 000s)

 
 
Nine months ended
 
 
 
Ten months ended
 
 
 
 
January 31,
 
 
 
February 28,
 
 
 
 
2014
 
2013
 
% Change
 
2014
 
2013
 
% Change
Tax Returns Prepared: (1,2)
 
 
 
 
 
 
 
 
 
 
 
 
H&R Block Company-Owned Operations
 
1,516

 
1,724

 
(12.1
)%
 
4,689

 
5,287

 
(11.3
)%
H&R Block Franchise Operations
 
1,037

 
1,114

 
(6.9
)%
 
3,131

 
3,313

 
(5.5
)%
   Total H&R Block Assisted Returns
 
2,553

 
2,838

 
(10.0
)%
 
7,820

 
8,600

 
(9.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
H&R Block Desktop (3)
 
137

 
143

 
(4.2
)%
 
833

 
824

 
1.1
 %
H&R Block Online (3)
 
654

 
865

 
(24.4
)%
 
2,683

 
2,714

 
(1.1
)%
  Sub-Total (3)
 
791

 
1,008

 
(21.5
)%
 
3,516

 
3,538

 
(0.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
H&R Block Free File Alliance (3)
 
64

 
65

 
(1.5
)%
 
436

 
367

 
18.8
 %
  Total H&R Block Tax Software (3)
 
855

 
1,073

 
(20.3
)%
 
3,952

 
3,905

 
1.2
 %
Total H&R Block U.S. Returns
 
3,408

 
3,911

 
(12.9
)%
 
11,772

 
12,505

 
(5.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  
Prior year numbers have been reclassified between company-owned and franchise operations for offices which were refranchised during either year.
(2)
Amounts shown include 1.8 million and 0.2 million returns at January 31, 2014 and 2013, respectively, which were completed as of January 31, but not yet electronically filed.
(3)
Previously reported tax software return counts for fiscal year 2013 has been restated to primarily reflect accepted e-files. No changes were made to previously reported assisted return counts.

HISTORICAL FULL YEAR U.S. TAX OPERATING DATA (REVISED)
 
 
 


 
(in 000s)

 
 
Fiscal Year
 
 
2013
 
2012
 
2011
Tax Returns Prepared:
 
 
 
 
 
 
H&R Block Company-Owned Operations
 
8,907

 
9,207

 
9,168

H&R Block Franchise Operations
 
5,598

 
5,693

 
5,588

   Total H&R Block Assisted Returns
 
14,505

 
14,900

 
14,756

 
 
 
 
 
 
 
H&R Block Desktop (1)
 
2,055

 
2,124

 
2,013

H&R Block Online (1)
 
4,356

 
3,932

 
3,314

  Sub-Total (1)
 
6,411

 
6,056

 
5,327

 
 
 
 
 
 
 
H&R Block Free File Alliance (1)
 
663

 
721

 
659

  Total H&R Block Tax Software (1)
 
7,074

 
6,777

 
5,986

Total H&R Block U.S. Returns
 
21,579

 
21,677

 
20,742

 
 
 
 
 
 
 
(1)
Previously reported tax software return counts for fiscal years 2013 and prior have been restated to primarily reflect accepted e-files. No changes were made to previously reported assisted return counts.





TAX SERVICES – FINANCIAL RESULTS
 
 
 
 
 
(unaudited, amounts in 000s)
 
 
 
Three months ended
 
Nine months ended
 
 
January 31,
 
January 31,
 
 
2014
 
2013
 
2014
 
2013
Tax preparation fees:
 
 
 
 
 
 
 
 
U.S.
 
$
72,108

 
$
254,225

 
$
123,145

 
$
296,865

International
 
9,253

 
19,960

 
82,915

 
85,543

 
 
81,361

 
274,185

 
206,060

 
382,408

Royalties
 
15,061

 
56,211

 
31,150

 
71,692

Fees from refund anticipation checks
 
15,542

 
44,706

 
21,282

 
49,176

Fees from Emerald Card
 
12,689

 
11,379

 
37,299

 
31,716

Fees from Peace of Mind® guarantees
 
12,684

 
11,950

 
59,661

 
57,505

Interest and fee income on Emerald Advance
 
27,656

 
28,399

 
28,602

 
30,074

Other
 
29,003

 
37,804

 
59,673

 
62,135

Total revenues
 
193,996

 
464,634

 
443,727

 
684,706

 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
Field wages
 
136,885

 
136,532

 
226,320

 
214,230

Other wages
 
41,629

 
37,039

 
112,029

 
105,998

Benefits and other compensation
 
34,696

 
32,369

 
72,811

 
65,908

 
 
213,210

 
205,940

 
411,160

 
386,136

Occupancy and equipment
 
88,148

 
84,631

 
250,332

 
246,749

Marketing and advertising
 
77,852

 
99,262

 
97,435

 
118,100

Depreciation and amortization
 
31,819

 
24,557

 
81,253

 
68,421

Bad debt
 
31,420

 
39,528

 
38,535

 
41,148

Supplies
 
7,387

 
8,724

 
14,355

 
15,155

Other
 
66,259

 
66,181

 
176,464

 
144,200

Total expenses
 
516,095

 
528,823

 
1,069,534

 
1,019,909

Pretax loss
 
$
(322,099
)
 
$
(64,189
)
 
$
(625,807
)
 
$
(335,203
)
 
 
 
 
 
 
 
 
 






NON-GAAP FINANCIAL MEASURES
 
(unaudited, amounts in thousands, except per share amounts)
 
 
 
Three months ended January 31, 2014
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
199,770

 
$
537,985

 
$
(301,571
)
 
$
(347,825
)
 
$
(212,751
)
 
$
(0.78
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
346

 
346

 
346

 
207

 

Impairment of goodwill and intangible assets
 

 
11

 
11

 
11

 
7

 

Severance
 

 
1,092

 
1,092

 
1,092

 
648

 

Professional fees related to HRB Bank transaction
 

 
171

 
171

 
171

 
95

 

Gain on sales of tax offices
 

 
(616
)
 
(616
)
 
(616
)
 
(372
)
 

Discrete tax items
 

 

 

 

 
3,238

 
0.01

 
 

 
1,004

 
1,004

 
1,004

 
3,823

 
0.01

 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
199,770

 
$
536,981

 
$
(300,567
)
 
$
(346,821
)
 
$
(208,928
)
 
$
(0.77
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended January 31, 2013
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
471,979

 
$
564,615

 
$
(52,202
)
 
$
(96,268
)
 
$
(16,915
)
 
$
(0.06
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
(190
)
 
(190
)
 
(190
)
 
(126
)
 

Impairment of goodwill and intangible assets
 

 

 

 

 
3

 

Severance
 

 
(582
)
 
(582
)
 
(582
)
 
(355
)
 

Professional fees related to HRB Bank transaction
 

 
383

 
383

 
383

 
235

 

Loss on extinguishment of debt
 

 
5,790

 
5,790

 
5,790

 
3,552

 

Gain on sales of tax offices
 

 
(352
)
 
(352
)
 
(352
)
 
(217
)
 
0.01

Discrete tax items
 

 

 

 

 
(42,852
)
 
(0.16
)
 
 

 
5,049

 
5,049

 
5,049

 
(39,760
)
 
(0.15
)
 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
471,979

 
$
559,566

 
$
(47,153
)
 
$
(91,219
)
 
$
(56,675
)
 
$
(0.21
)
 
 
 
 
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
(unaudited, amounts in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended January 31, 2014
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
461,305

 
$
1,159,691

 
$
(587,125
)
 
$
(711,681
)
 
$
(429,036
)
 
$
(1.57
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
1,069

 
1,069

 
1,069

 
650

 

Impairment of goodwill and intangible assets
 

 
11

 
11

 
11

 
7

 

Severance
 

 
4,025

 
4,025

 
4,025

 
2,447

 
0.01

Professional fees related to HRB Bank transaction
 

 
1,978

 
1,978

 
1,978

 
1,203

 

Gain on sales of tax offices
 

 
(1,215
)
 
(1,215
)
 
(1,215
)
 
(739
)
 

Discrete tax items
 

 

 

 

 
(3,666
)
 
(0.01
)
 
 

 
5,868

 
5,868

 
5,868

 
(98
)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
461,305

 
$
1,153,823

 
$
(581,257
)
 
$
(705,813
)
 
$
(429,134
)
 
$
(1.57
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended January 31, 2013
 
 
Revenues
 
Expenses
 
EBITDA
 
Pretax income (loss)
 
Net income (loss)
 
EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
705,731

 
$
1,135,855

 
$
(295,688
)
 
$
(427,825
)
 
$
(223,764
)
 
$
(0.82
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 

 
(4,943
)
 
(4,943
)
 
(4,943
)
 
(3,032
)
 
(0.01
)
Impairment of goodwill and intangible assets
 

 
1,421

 
1,421

 
1,421

 
872

 

Severance
 

 
475

 
475

 
475

 
291

 

Professional fees related to HRB Bank transaction
 

 
430

 
430

 
430

 
264

 

Loss on extinguishment of debt
 

 
5,790

 
5,790

 
5,790

 
3,552

 

Gain on sales of tax offices
 

 
(876
)
 
(876
)
 
(876
)
 
(537
)
 
0.01

Discrete tax items
 

 

 

 

 
(38,679
)
 
(0.14
)
 
 

 
2,297

 
2,297

 
2,297

 
(37,269
)
 
(0.14
)
 
 
 
 
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
705,731

 
$
1,133,558

 
$
(293,391
)
 
$
(425,528
)
 
$
(261,033
)
 
$
(0.96
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
 
 
 
 
 
January 31,
 
January 31,
 
 
EBITDA
 
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss from continuing operations - as reported
 
$
(212,751
)
 
$
(16,915
)
 
$
(429,036
)
 
$
(223,764
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
 
 
 
 
Income taxes
 
 
 
(135,074
)
 
(79,353
)
 
(282,645
)
 
(204,061
)
 
 
Interest expense
 
 
 
14,443

 
19,428

 
43,203

 
64,895

 
 
Depreciation and amortization
 
 
 
31,811

 
24,638

 
81,353

 
67,242

 
 
 
 
 
 
(88,820
)
 
(35,287
)
 
(158,089
)
 
(71,924
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA from continuing operations
 
 
 
$
(301,571
)
 
$
(52,202
)
 
$
(587,125
)
 
$
(295,688
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
(unaudited, amounts in thousands, except per share amounts)
 
 
 
 
 
Three months ended
 
Nine months ended
 
 
 
 
 
 
January 31,
 
January 31,
 
 
Supplemental Information
 
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
 
 
 
 
 
 
 
Pretax
 
 
 
$
4,715

 
$
3,677

 
$
15,477

 
$
11,414

 
 
After-tax
 
 
 
2,809

 
2,271

 
9,410

 
7,001

 
 
Amortization of intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Pretax
 
 
 
$
8,757

 
$
6,256

 
$
21,351

 
$
18,130

 
 
After-tax
 
 
 
5,256

 
3,862

 
12,981

 
11,121

 
 




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 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 and adjusted EPS. We also use EBITDA and pretax income of continuing operations as performance metrics in incentive compensation calculations 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.