Form 8-K (12-08-14)


 

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): December 8, 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 December 8, 2014, the Company issued a press release regarding the Company's results of operations for the fiscal quarter ended October 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 December 8, 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:
December 8, 2014
By:
  /s/ Scott W. Andreasen
 
 
 
Scott W. Andreasen
 
 
 
Vice President and Secretary







EXHIBIT INDEX

Exhibit 99.1        Press Release Issued December 8, 2014


Form 8-K (12-08-14) Exhibit 99.1

Exhibit 99.1
News Release
For Immediate Release: December 8, 2014
H&R Block Announces Fiscal 2015 Second Quarter Results
KANSAS CITY, Mo. - H&R Block, Inc. (NYSE: HRB), the world’s largest consumer tax services provider, today announced its financial results for the fiscal 2015 second quarter ended October 31, 2014. The company typically reports a second quarter operating loss due to the seasonality of its core U.S. tax business.

Second Quarter 2015 Highlights1 
Total revenues increased to $135 million
Seasonal net loss from continuing operations increased 10 percent to $113 million, or $0.41 per share2 
Non-GAAP adjusted loss per share3 from continuing operations of $0.45
Declared 209th consecutive quarterly dividend

CEO Perspective
“I am pleased with the progress we’ve made this offseason in preparation for tax season 2015. We’ve made important investments in our business this year, which will enable us to improve the customer experience and operate more productively in the coming years,” said Bill Cobb, H&R Block’s president and chief executive officer. “Our Tax Plus strategy is yielding results, and we look forward to continuing our strong momentum this tax season.”

Second Quarter Results From Continuing Operations
 
 
Actual
 
Adjusted
(in millions, except EPS)
 
Fiscal Year 2015
 
Fiscal Year 2014
 
Fiscal Year 2015
 
Fiscal Year 2014
Revenue
 
$
135

 
$
134

 
$
135

 
$
134

EBITDA
 
$
(148
)
 
$
(138
)
 
$
(149
)
 
$
(142
)
Pretax Loss
 
$
(201
)
 
$
(179
)
 
$
(202
)
 
$
(183
)
Net Loss
 
$
(113
)
 
$
(103
)
 
$
(126
)
 
$
(112
)
Weighted-Avg. Shares - Diluted
 
275.1

 
273.9

 
275.1

 
273.9

EPS
 
$
(0.41
)
 
$
(0.38
)
 
$
(0.45
)
 
$
(0.42
)
 
 
 
 
 
 
 
 
 

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




Business Segment Results and Highlights
Tax Services
Revenues increased 1 percent to $129 million, driven by higher tax prep fees in the U.S. and Australia, and improved off season usage of the H&R Block Prepaid MasterCard, the Emerald Card®
Total operating expenses increased 6 percent to $302 million, driven by higher depreciation and amortization from planned office and technology upgrades and increased wages
Adjusted non-GAAP pretax loss increased 13 percent to $178 million
Corporate
Total expenses increased $1 million to $30 million, primarily due to higher wages, partially offset by lower provisions for losses on mortgage loans held for investment
Pretax loss increased by $4 million to $24 million
Discontinued Operations
Net income of $1 million compared to net loss of $2 million in the prior year
Sand Canyon Corporation (SCC), a separate legal entity from H&R Block, Inc., continued to engage in constructive settlement discussions with counterparties that have made and are expected to assert a significant majority of previously denied and possible future representation and warranty claims
On December 5, SCC entered into a settlement agreement to resolve certain of these claims.  The amount to be paid under the settlement agreement is fully covered by prior accruals
SCC's accrual for contingent losses related to representation and warranty claims remained unchanged at $194 million at October 31
Dividends
A previously announced quarterly cash dividend of 20 cents per share is payable on Jan. 2, 2015 to shareholders of record as of Dec. 8, 2014. The January 2 dividend payment will be H&R Block’s 209th consecutive quarterly dividend since the company went public in 1962.

Investor Conference
At 8:30 a.m. EST on Tuesday, December 9, the company will hold its investor conference in New York City. H&R Block's senior leaders will outline the company's strategies and outlook, and provide a general business update including discussion of fiscal 2015 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, 2015.

About H&R Block
H&R Block, Inc. (NYSE: HRB) is the world’s largest consumer tax services provider. More than 650 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2014, H&R Block had annual revenues over $3.0 billion with 24.2 million tax returns prepared worldwide. Tax return preparation services are provided in approximately 12,000 company-owned and franchise retail tax





offices worldwide by professional tax preparers, and through H&R Block Tax Software products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom at http://newsroom.hrblock.com/.
About Non-GAAP Financial Information
This press release and the accompanying tables include non-GAAP financial information. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled "Non-GAAP Financial Information.”
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “targets,” “would,” “will,” “should,” “could” or “may” or other similar expressions. Forward-looking statements provide management’s current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management’s plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company’s control and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2014 in the section entitled “Risk Factors,” as well as additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
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, in 000s - except per share data)
 
 
 
Three months ended October 31,
 
 
Revenues
 
Income (loss)
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Tax Services
 
$
128,683

 
$
128,040

 
$
(176,642
)
 
$
(159,314
)
Corporate and Eliminations
 
5,945

 
6,300

 
(23,931
)
 
(20,048
)
 
 
$
134,628

 
$
134,340

 
(200,573
)
 
(179,362
)
Income tax benefit
 
 
 
 
 
(87,346
)
 
(76,347
)
Net loss from continuing operations
 
 
 
 
 
(113,227
)
 
(103,015
)
Net income (loss) from discontinued operations
 
 
 
 
 
1,229

 
(1,928
)
Net loss
 
 
 
 
 
$
(111,998
)
 
$
(104,943
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(0.41
)
 
$
(0.38
)
Discontinued operations
 
 
 
 
 

 
(0.01
)
Consolidated
 
 
 
 
 
$
(0.41
)
 
$
(0.39
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
275,106

 
273,907

 
 
 
 
 
 
 
 
 
 
 
Six months ended October 31,
 
 
Revenues
 
Income (loss)
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Tax Services
 
$
257,763

 
$
249,731

 
$
(327,202
)
 
$
(303,708
)
Corporate and Eliminations
 
10,451

 
11,804

 
(49,187
)
 
(60,148
)
 
 
$
268,214

 
$
261,535

 
(376,389
)
 
(363,856
)
Income tax benefit
 
 
 
 
 
(154,311
)
 
(147,571
)
Net loss from continuing operations
 
 
 
 
 
(222,078
)
 
(216,285
)
Net loss from discontinued operations
 
 
 
 
 
(6,152
)
 
(3,845
)
Net loss
 
 
 
 
 
$
(228,230
)
 
$
(220,130
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(0.81
)
 
$
(0.79
)
Discontinued operations
 
 
 
 
 
(0.02
)
 
(0.01
)
Consolidated
 
 
 
 
 
$
(0.83
)
 
$
(0.80
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
274,841

 
273,494






CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s - except per share data)
 
As of
 
October 31, 2014

 
October 31, 2013

 
April 30, 2014

 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
627,490

 
$
790,772

 
$
2,185,307

Cash and cash equivalents — restricted
 
55,543

 
47,521

 
115,319

Receivables, net
 
107,705

 
131,701

 
191,618

Prepaid expenses and other current assets
 
285,463

 
225,660

 
198,267

Investments in available-for-sale securities
 
381,180

 

 
423,495

Total current assets
 
1,457,381

 
1,195,654

 
3,114,006

Mortgage loans held for investment, net
 
251,092

 
295,907

 
268,428

Investments in available-for-sale securities
 
9,774

 
465,344

 
4,329

Property and equipment, net
 
318,225

 
311,157

 
304,911

Intangible assets, net
 
414,045

 
296,213

 
355,622

Goodwill
 
464,182

 
442,812

 
436,117

Other assets
 
176,591

 
267,426

 
210,116

Total assets
 
$
3,091,290

 
$
3,274,513

 
$
4,693,529

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Customer banking deposits
 
$
454,860

 
655,129

 
$
769,785

Accounts payable, accrued expenses and other current liabilities
 
436,830

 
426,994

 
569,007

Accrued salaries, wages and payroll taxes
 
36,215

 
41,584

 
167,032

Accrued income taxes
 
147,000

 
22,475

 
406,655

Current portion of long-term debt
 
772

 
400,503

 
400,637

Total current liabilities
 
1,075,677

 
1,546,685

 
2,313,116

Long-term debt
 
505,588

 
506,078

 
505,837

Other noncurrent liabilities
 
271,349

 
266,775

 
318,027

Total liabilities
 
1,852,614

 
2,319,538

 
3,136,980

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

 
3,166

 
3,166

Convertible preferred stock, no par, stated value $0.01 per share
 

 

 

Additional paid-in capital
 
772,662

 
757,828

 
766,654

Accumulated other comprehensive income
 
6,577

 
1,463

 
5,177

Retained earnings
 
1,250,465

 
1,003,842

 
1,589,297

Less treasury shares, at cost
 
(794,194
)
 
(811,324
)
 
(807,745
)
Total stockholders’ equity
 
1,238,676

 
954,975

 
1,556,549

Total liabilities and stockholders’ equity
 
$
3,091,290

 
$
3,274,513

 
$
4,693,529

 
 
 
 
 
 
 






CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended October 31,
 
Six months ended October 31,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
Service revenues
 
$
115,442

 
$
112,432

 
$
230,915

 
$
220,232

Royalty, product and other revenues
 
9,756

 
11,282

 
18,570

 
19,480

Interest income
 
9,430

 
10,626

 
18,729

 
21,823

 
 
134,628

 
134,340

 
268,214

 
261,535

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
Compensation and benefits
 
69,381

 
60,526

 
121,236

 
106,838

Occupancy and equipment
 
87,626

 
82,358

 
170,932

 
161,094

Provision for bad debt and loan losses
 
385

 
2,849

 
4,749

 
14,340

Depreciation and amortization
 
28,429

 
22,095

 
53,514

 
40,715

Other
 
35,876

 
39,235

 
68,992

 
80,326

 
 
221,697

 
207,063

 
419,423

 
403,313

Selling, general and administrative:
 
 
 
 
 
 
 
 
Marketing and advertising
 
12,513

 
13,601

 
20,658

 
20,724

Compensation and benefits
 
54,353

 
54,818

 
115,317

 
107,865

Depreciation and amortization
 
10,500

 
4,573

 
19,101

 
8,827

Other selling, general and administrative
 
20,013

 
21,100

 
39,503

 
53,373

 
 
97,379

 
94,092

 
194,579

 
190,789

Total operating expenses
 
319,076

 
301,155

 
614,002

 
594,102

Other income (expense), net
 
(2,282
)
 
1,254

 
(2,963
)
 
(3,685
)
Interest expense on borrowings (1)
 
13,843

 
13,801

 
27,638

 
27,604

Loss from continuing operations before income tax benefit
 
(200,573
)
 
(179,362
)
 
(376,389
)
 
(363,856
)
Income tax benefit
 
(87,346
)
 
(76,347
)
 
(154,311
)
 
(147,571
)
Net loss from continuing operations
 
(113,227
)
 
(103,015
)
 
(222,078
)
 
(216,285
)
Net income (loss) from discontinued operations
 
1,229

 
(1,928
)
 
(6,152
)
 
(3,845
)
NET LOSS
 
$
(111,998
)
 
$
(104,943
)
 
$
(228,230
)
 
$
(220,130
)
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.41
)
 
$
(0.38
)
 
$
(0.81
)
 
$
(0.79
)
Discontinued operations
 

 
(0.01
)
 
(0.02
)
 
(0.01
)
Consolidated
 
$
(0.41
)
 
$
(0.39
)
 
$
(0.83
)
 
$
(0.80
)
 
 
 
 
 
 
 
 
 
(1) 
The presentation of interest expense from borrowings has been restated to correct errors in presentation, whereby we reclassified such interest expense from cost of revenues to a separate caption.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Six months ended October 31,
 
2014
 
2013
 
 
 
 
 
NET CASH USED IN OPERATING ACTIVITIES
 
$
(627,577
)
 
$
(492,373
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of available-for-sale securities
 
(100
)
 
(45,158
)
Maturities of and payments received on available-for-sale securities
 
49,013

 
55,615

Principal payments on mortgage loans held for investment, net
 
13,451

 
24,340

Capital expenditures
 
(70,927
)
 
(86,926
)
Payments made for business acquisitions, net of cash acquired
 
(94,230
)
 
(20,927
)
Franchise loans:
 
 
 
 
Loans funded
 
(18,251
)
 
(22,114
)
Payments received
 
29,637

 
15,883

Other, net
 
10,685

 
15,255

Net cash used in investing activities
 
(80,722
)
 
(64,032
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Repayments of long-term debt
 
(400,000
)
 

Customer banking deposits, net
 
(316,269
)
 
(275,800
)
Dividends paid
 
(109,871
)
 
(109,324
)
Proceeds from exercise of stock options
 
14,477

 
24,536

Other, net
 
(33,639
)
 
(31,948
)
Net cash used in financing activities
 
(845,302
)
 
(392,536
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
(4,216
)
 
(7,871
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(1,557,817
)
 
(956,812
)
Cash and cash equivalents at beginning of the period
 
2,185,307

 
1,747,584

Cash and cash equivalents at end of the period
 
$
627,490

 
$
790,772

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
157,680

 
$
116,099

Interest paid on borrowings
 
27,379

 
27,804

Interest paid on deposits
 
341

 
1,180

Transfers of foreclosed loans to other assets
 
3,155

 
3,889

Accrued additions to property and equipment
 
3,243

 
6,729

Conversion of investment in preferred stock to available-for-sale common stock
 
5,000

 

Transfer of mortgage loans held for investment to held for sale
 

 
7,608

 
 
 
 
 





TAX SERVICES – FINANCIAL RESULTS
 
 
 
 
 
(unaudited, amounts in 000s)
 
 
 
Three months ended October 31,
 
Six months ended October 31,
 
 
2014
 
2013
 
2014
 
2013
Tax preparation fees:
 
 
 
 
 
 
 
 
U.S.
 
$
31,926

 
$
29,011

 
$
57,415

 
$
51,037

International
 
42,831

 
41,568

 
84,287

 
73,662

 
 
74,757

 
70,579

 
141,702

 
124,699

Royalties
 
8,582

 
9,527

 
16,224

 
16,089

Revenues from Emerald Card®
 
11,524

 
9,999

 
25,569

 
24,610

Revenues from Peace of Mind® guarantees
 
16,563

 
19,151

 
40,816

 
46,977

Other
 
17,257

 
18,784

 
33,452

 
37,356

Total revenues
 
128,683

 
128,040

 
257,763

 
249,731

 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
Field wages
 
56,904

 
49,531

 
102,901

 
89,435

Other wages
 
37,724

 
35,665

 
76,441

 
70,400

Benefits and other compensation
 
19,902

 
22,178

 
38,724

 
38,115

 
 
114,530

 
107,374

 
218,066

 
197,950

Occupancy and equipment
 
84,218

 
83,634

 
167,316

 
162,184

Marketing and advertising
 
11,521

 
12,566

 
18,908

 
19,583

Depreciation and amortization
 
38,926

 
26,632

 
72,609

 
49,434

Other
 
53,223

 
54,958

 
103,777

 
115,606

Total operating expenses
 
302,418

 
285,164

 
580,676

 
544,757

Other income (expense), net
 
(2,381
)
 
(1,655
)
 
(3,235
)
 
(7,610
)
Interest expense on borrowings
 
526

 
535

 
1,054

 
1,072

Pretax loss
 
$
(176,642
)
 
$
(159,314
)
 
$
(327,202
)
 
$
(303,708
)
 
 
 
 
 
 
 
 
 






NON-GAAP FINANCIAL MEASURES
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended October 31, 2014
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(147,661
)
 
$
(200,573
)
 
$
(113,227
)
 
$
(0.41
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
44

 
44

 
28

 

Severance
 
238

 
238

 
150

 

Professional fees related to HRB Bank transaction
 
89

 
89

 
56

 

Asset impairments
 
433

 
433

 
272

 

Gain on sales of AFS securities
 
(1,398
)
 
(1,398
)
 
(870
)
 

Gain on sales of tax offices/businesses
 
(899
)
 
(899
)
 
(559
)
 

Discrete tax items
 

 

 
(12,100
)
 
(0.04
)
 
 
(1,493
)
 
(1,493
)
 
(13,023
)
 
(0.04
)
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(149,154
)
 
$
(202,066
)
 
$
(126,250
)
 
$
(0.45
)
 
 
 
 
 
 
 
 
 
 
 
Three months ended October 31, 2013
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(138,380
)
 
$
(179,362
)
 
$
(103,015
)
 
$
(0.38
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
350

 
350

 
214

 

Severance
 
1,828

 
1,828

 
1,122

 

Professional fees related to HRB Bank transaction
 
(5,217
)
 
(5,217
)
 
(3,198
)
 
(0.01
)
Gain on sales of tax offices/businesses
 
(599
)
 
(599
)
 
(367
)
 

Discrete tax items
 

 

 
(7,061
)
 
(0.03
)
 
 
(3,638
)
 
(3,638
)
 
(9,290
)
 
(0.04
)
 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(142,018
)
 
$
(183,000
)
 
$
(112,305
)
 
$
(0.42
)
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
(unaudited, in 000s - except per share amounts)
 
 
 
Six months ended October 31, 2014
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(275,851
)
 
$
(376,389
)
 
$
(222,078
)
 
$
(0.81
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
272

 
272

 
169

 

Severance
 
1,051

 
1,051

 
654

 

Professional fees related to HRB Bank transaction
 
114

 
114

 
71

 

Asset impairments
 
1,374

 
1,374

 
855

 

Gain on sales of AFS securities
 
(1,398
)
 
(1,398
)
 
(870
)
 

Gain on sales of tax offices/businesses
 
(899
)
 
(899
)
 
(559
)
 

Discrete tax items
 

 

 
(12,149
)
 
(0.04
)
 
 
514

 
514

 
(11,829
)
 
(0.04
)
As adjusted - from continuing operations
 
$
(275,337
)
 
$
(375,875
)
 
$
(233,907
)
 
$
(0.85
)
 
 
 
 
 
 
 
 
 
 
 
Six months ended October 31, 2013
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(285,554
)
 
$
(363,856
)
 
$
(216,285
)
 
$
(0.79
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
723

 
723

 
443

 

Severance
 
2,933

 
2,933

 
1,799

 
0.01

Professional fees related to HRB Bank transaction
 
1,807

 
1,807

 
1,108

 

Gain on sales of tax offices/businesses
 
(599
)
 
(599
)
 
(367
)
 

Discrete tax items
 

 

 
(6,904
)
 
(0.03
)
 
 
4,864

 
4,864

 
(3,921
)
 
(0.02
)
As adjusted - from continuing operations
 
$
(280,690
)
 
$
(358,992
)
 
$
(220,206
)
 
$
(0.81
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended October 31,
 
Six months ended October 31,
EBITDA
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Net loss - as reported
$
(111,998
)
 
$
(104,943
)
 
$
(228,230
)
 
$
(220,130
)
 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
Discontinued operations
 
(1,229
)
 
1,928

 
6,152

 
3,845

Income taxes
 
(87,346
)
 
(76,347
)
 
(154,311
)
 
(147,571
)
Interest expense
 
13,983

 
14,314

 
27,923

 
28,760

Depreciation and amortization
 
38,929

 
26,668

 
72,615

 
49,542

 
 
(35,663
)
 
(33,437
)
 
(47,621
)
 
(65,424
)
 
 
 
 
 
 
 
 
 
EBITDA from continuing operations
 
$
(147,661
)
 
$
(138,380
)
 
$
(275,851
)
 
$
(285,554
)
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended October 31,
 
Six months ended October 31,
Supplemental Information
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
 
 
 
Pretax
 
$
7,140

 
$
6,210

 
$
14,599

 
$
10,762

After-tax
 
4,465

 
3,810

 
9,085

 
6,601

Amortization of intangible assets:
 
 
 
 
 
 
 
 
Pretax
 
$
13,219

 
$
6,523

 
$
24,463

 
$
12,594

After-tax
 
8,258

 
4,003

 
15,223

 
7,725

 
 
 
 
 
 
 
 
 




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