Form 8-K (03-04-15)


 

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 4, 2015

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 4, 2015, the Company issued a press release regarding the Company’s results of operations for the fiscal quarter ended January 31, 2015. 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 4, 2015





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 4, 2015
By:
 /s/ Scott W. Andreasen
 
 
 
Scott W. Andreasen
 
 
 
Vice President and Secretary







EXHIBIT INDEX

Exhibit 99.1        Press Release Issued March 4, 2015


Form 8-K (03-04-15) Exhibit 99.1

Exhibit 99.1
News Release
For Immediate Release: March 4, 2015
H&R Block Announces Fiscal 2015 Third Quarter Results

KANSAS CITY, Mo. - H&R Block, Inc. (NYSE: HRB), the world's largest consumer tax services provider, today released its financial results for the fiscal 2015 third quarter ended January 31, 2015 and U.S tax volume through February 28.

As a result of an earlier opening of the Internal Revenue Service's (IRS) e-file system this tax season, the company reported a $309 million1 increase in revenues, to $509 million for the fiscal third quarter. This resulted in an improvement in its fiscal third quarter seasonal net loss from continuing operations to $0.13 per share.2 A majority of the company's revenues and all of its fiscal 2015 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 continued its focus on driving revenue growth through improved monetization and product attach rates and believes it is on pace to achieve these goals in fiscal 2015. As of February 28, 2015, total U.S. tax returns prepared by and through H&R Block declined 4.2% as compared to the prior fiscal year. Changing tax filer timing, Affordable Care Act (ACA) form delays and errors, the carryover impact of eliminating certain promotions last tax season, competitor pricing actions and continued industry-wide fraud issues have resulted in a decline in lower-value returns.

"Despite being disappointed by the decline in early season volume, we are pleased with our monetization, overall return mix, and Tax Plus product attach rates through both our assisted channel and digital do-it-yourself products," said Bill Cobb, H&R Block's president and chief executive officer. "I'm also proud of how our organization has handled the implementation of the Affordable Care Act, which is the most significant change to the tax code in decades. Though it's too early to determine the impact of the ACA on this tax season, we are well positioned to deliver exceptional value to our clients as this plays out over the next several years."

Tax Industry Fraud

As the industry leader, H&R Block remains focused on addressing the growing industry-wide issue of tax fraud.  Tax fraud is not new to the tax preparation industry and recent media coverage of fraud related to do-it-yourself tax software shows how aggressive those perpetrating fraud are becoming.  The problem is growing rapidly, with the IRS estimating the total impact of tax identity fraud at greater than $5 billion in 2013.  Similarly, the U.S. Treasury Department has estimated that improper payments related to the Earned Income Tax Credit (EITC) amount to $16 to $19 billion annually, up from estimates of $13 to $15 billion last year. 


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.


H&R Block will continue to advocate for change that benefits consumers by strengthening anti-fraud measures.  The company's efforts are having an impact, as evidenced by Congress's direction last year to the U.S. Treasury Department to implement consistent requirements across all tax preparation methods for those applying for the EITC.  H&R Block continues to advocate for a clear implementation plan from the Treasury Department that puts these new standards in place in time for the 2016 tax season.  The company is also continuing to advocate for minimum federal standards for all paid tax preparers.  Without minimum standards, taxpayers will continue to be victimized by individuals who are insufficiently trained or worse, knowingly commit fraud. 

"We have led the conversation regarding tax return fraud and the need for reform for years, while our competitors in the tax preparation industry have just recently joined the discussion," said Cobb.   "We urge the Treasury Department to implement Congress's direction in time for tax season 2016. We need all players in the industry - the IRS, Treasury, Congress, professional tax preparers, tax preparation software makers, and taxpayers - to join together to help create solutions.  These issues are taking tens of billions of dollars out of taxpayers' pockets."


Fiscal 2015 Third Quarter Highlights
Total revenues increased $309 million to $509 million primarily due to an earlier opening of the IRS's e-file system
Seasonal net loss from continuing operations improved to $35 million, or $0.13 per share
Non-GAAP adjusted loss per share3 from continuing operations is $0.13


Fiscal 2015 Third Quarter Results From Continuing Operations
 
 
Actual
 
Adjusted
(in millions, except EPS)
 
Fiscal Year 2015
 
Fiscal Year 2014
 
Fiscal Year 2015
 
Fiscal Year 2014
Revenue
 
$
509

 
$
200

 
$
509

 
$
200

EBITDA
 
$
(38
)
 
$
(302
)
 
$
(37
)
 
$
(301
)
Pretax Loss
 
$
(91
)
 
$
(348
)
 
$
(89
)
 
$
(347
)
Net Loss
 
$
(35
)
 
$
(213
)
 
$
(34
)
 
$
(212
)
Weighted-Avg. Shares - Diluted
 
275.2

 
274.1

 
275.2

 
274.1

EPS
 
$
(0.13
)
 
$
(0.78
)
 
$
(0.13
)
 
$
(0.78
)
 
 
 
 
 
 
 
 
 

Business Segment Financial Results and Highlights

Tax Services
Revenues increased 159.3% to $503 million, driven mainly by the earlier opening of the IRS's e-file system. In fiscal 2014, the IRS opened e-file on January 30, which resulted in a significant shift of revenue from the fiscal third quarter to the fiscal fourth quarter of that year.
Total operating expenses increased 12.3% to $571 million, driven by the variable costs associated with tax return preparation and increased training costs.


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).



Adjusted non-GAAP pretax loss decreased 77.1% to $74 million, primarily due to the timing shift in revenues mentioned above.

Corporate
Pretax loss decreased by $10 million to $15 million, primarily as a result of lower interest expense due to the repayment of a $400 million note in October 2014 and reduced legal and consulting fees.

Discontinued Operations
Sand Canyon Corporation (SCC), a separate legal entity from H&R Block, Inc., continued to engage in constructive settlement discussions with counterparties that have made and are expected to assert a significant majority of previously denied and possible future representation and warranty claims.
During the third quarter, SCC entered into a settlement agreement to resolve certain of these claims.  The settlement amount was fully covered by prior accruals and was paid in the fiscal third quarter.
SCC's accrual for contingent losses related to representation and warranty claims was $144 million at January 31.

Dividends
As just announced, a quarterly cash dividend of 20 cents per share is payable on April 1, 2015 to shareholders of record as of March 16, 2015. The April 1 dividend payment will be H&R Block's 210th consecutive quarterly dividend since the company went public in 1962.

Fiscal Third Quarter 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 4, 2015 for analysts, institutional investors, and shareholders to discuss the fiscal 2015 third quarter results, future 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 (866) 872-0323 or International (443) 842-7595
Conference ID: 72336180

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 4, 2015, and continuing until April 4, 2015, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 72336180. The webcast will be available for replay March 5, 2015 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 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 by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products. H&R Block 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 January 31,
 
 
Revenues
 
Income (loss)
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Tax Services
 
$
503,008

 
$
193,996

 
$
(75,428
)
 
$
(322,099
)
Corporate and Eliminations
 
6,066

 
5,774

 
(15,437
)
 
(25,726
)
 
 
$
509,074

 
$
199,770

 
(90,865
)
 
(347,825
)
Income tax benefit
 
 
 
 
 
(55,554
)
 
(135,074
)
Net loss from continuing operations
 
 
 
 
 
(35,311
)
 
(212,751
)
Net loss from discontinued operations
 
 
 
 
 
(1,637
)
 
(1,960
)
Net loss
 
 
 
 
 
$
(36,948
)
 
$
(214,711
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(0.13
)
 
$
(0.78
)
Discontinued operations
 
 
 
 
 

 

Consolidated
 
 
 
 
 
$
(0.13
)
 
$
(0.78
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
275,190

 
274,110

 
 
 
 
 
 
 
 
 
 
 
Nine months ended January 31,
 
 
Revenues
 
Income (loss)
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Tax Services
 
$
760,771

 
$
443,727

 
$
(402,630
)
 
$
(625,807
)
Corporate and Eliminations
 
16,517

 
17,578

 
(64,624
)
 
(85,874
)
 
 
$
777,288

 
$
461,305

 
(467,254
)
 
(711,681
)
Income tax benefit
 
 
 
 
 
(209,865
)
 
(282,645
)
Net loss from continuing operations
 
 
 
 
 
(257,389
)
 
(429,036
)
Net loss from discontinued operations
 
 
 
 
 
(7,789
)
 
(5,805
)
Net loss
 
 
 
 
 
$
(265,178
)
 
$
(434,841
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
(0.94
)
 
$
(1.57
)
Discontinued operations
 
 
 
 
 
(0.03
)
 
(0.02
)
Consolidated
 
 
 
 
 
$
(0.97
)
 
$
(1.59
)
 
 
 
 
 
 
 
 
 
Basic and diluted shares
 
 
 
 
 
274,957

 
273,699






CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s - except per share data)
 
As of
 
January 31, 2015

 
January 31, 2014

 
April 30, 2014

 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,321,134

 
$
437,404

 
$
2,185,307

Cash and cash equivalents — restricted
 
51,085

 
44,855

 
115,319

Receivables, net
 
777,453

 
677,221

 
191,618

Prepaid expenses and other current assets
 
260,802

 
345,231

 
198,267

Investments in available-for-sale securities
 
367,845

 

 
423,495

Total current assets
 
2,778,319

 
1,504,711

 
3,114,006

Mortgage loans held for investment, net
 
245,663

 
282,149

 
268,428

Investments in available-for-sale securities
 
7,883

 
443,770

 
4,329

Property and equipment, net
 
308,805

 
314,565

 
304,911

Intangible assets, net
 
443,329

 
318,719

 
355,622

Goodwill
 
442,961

 
437,386

 
436,117

Other assets
 
151,981

 
213,987

 
210,116

Total assets
 
$
4,378,941

 
$
3,515,287

 
$
4,693,529

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Commercial paper borrowings
 
$
591,486

 
$
194,984

 
$

Customer banking deposits
 
1,286,216

 
806,887

 
769,785

Accounts payable, accrued expenses and other current liabilities
 
472,490

 
520,121

 
569,007

Accrued salaries, wages and payroll taxes
 
118,512

 
108,583

 
167,032

Accrued income taxes
 
1,619

 
23,375

 
406,655

Current portion of long-term debt
 
781

 
400,570

 
400,637

Total current liabilities
 
2,471,104

 
2,054,520

 
2,313,116

Long-term debt
 
505,460

 
505,959

 
505,837

Other noncurrent liabilities
 
255,992

 
268,049

 
318,027

Total liabilities
 
3,232,556

 
2,828,528

 
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
 
778,845

 
762,102

 
766,654

Accumulated other comprehensive income (loss)
 
(1,263
)
 
(4,776
)
 
5,177

Retained earnings
 
1,158,376

 
734,233

 
1,589,297

Less treasury shares, at cost
 
(792,739
)
 
(807,966
)
 
(807,745
)
Total stockholders’ equity
 
1,146,385

 
686,759

 
1,556,549

Total liabilities and stockholders’ equity
 
$
4,378,941

 
$
3,515,287

 
$
4,693,529

 
 
 
 
 
 
 






CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended January 31,
 
Nine months ended January 31,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
Service revenues
 
$
406,441

 
$
138,613

 
$
637,356

 
$
358,845

Royalty, product and other revenues
 
63,335

 
23,788

 
81,905

 
43,268

Interest income
 
39,298

 
37,369

 
58,027

 
59,192

 
 
509,074

 
199,770

 
777,288

 
461,305

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
Compensation and benefits
 
186,656

 
160,830

 
307,892

 
267,668

Occupancy and equipment
 
92,303

 
88,387

 
263,235

 
249,481

Provision for bad debt and loan losses
 
39,283

 
31,420

 
44,032

 
45,760

Depreciation and amortization
 
29,181

 
25,267

 
82,695

 
65,982

Other
 
47,255

 
43,761

 
116,247

 
124,087

 
 
394,678

 
349,665

 
814,101

 
752,978

Selling, general and administrative:
 
 
 
 
 
 
 
 
Marketing and advertising
 
87,569

 
77,943

 
108,227

 
98,667

Compensation and benefits
 
60,380

 
60,211

 
175,697

 
168,076

Depreciation and amortization
 
14,110

 
6,544

 
33,211

 
15,371

Other selling, general and administrative
 
27,488

 
29,750

 
66,991

 
83,123

 
 
189,547

 
174,448

 
384,126

 
365,237

Total operating expenses
 
584,225

 
524,113

 
1,198,227

 
1,118,215

Other expense, net
 
6,666

 
9,610

 
9,629

 
13,295

Interest expense on borrowings (1)
 
9,048

 
13,872

 
36,686

 
41,476

Loss from continuing operations before income tax benefit
 
(90,865
)
 
(347,825
)
 
(467,254
)
 
(711,681
)
Income tax benefit
 
(55,554
)
 
(135,074
)
 
(209,865
)
 
(282,645
)
Net loss from continuing operations
 
(35,311
)
 
(212,751
)
 
(257,389
)
 
(429,036
)
Net loss from discontinued operations
 
(1,637
)
 
(1,960
)
 
(7,789
)
 
(5,805
)
NET LOSS
 
$
(36,948
)
 
$
(214,711
)
 
$
(265,178
)
 
$
(434,841
)
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.13
)
 
$
(0.78
)
 
$
(0.94
)
 
$
(1.57
)
Discontinued operations
 

 

 
(0.03
)
 
(0.02
)
Consolidated
 
$
(0.13
)
 
$
(0.78
)
 
$
(0.97
)
 
$
(1.59
)
 
 
 
 
 
 
 
 
 
(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)
 
Nine months ended January 31,
 
2015
 
2014
 
 
 
 
 
NET CASH USED IN OPERATING ACTIVITIES
 
$
(1,247,200
)
 
$
(1,120,322
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of available-for-sale securities
 
(100
)
 
(45,158
)
Maturities of and payments received on available-for-sale securities
 
68,013

 
72,502

Principal payments on mortgage loans held for investment, net
 
18,098

 
35,320

Capital expenditures
 
(98,876
)
 
(125,654
)
Payments made for business acquisitions, net of cash acquired
 
(112,163
)
 
(37,865
)
Proceeds received on notes receivable
 

 
64,865

Franchise loans:
 
 
 
 
Loans funded
 
(48,013
)
 
(62,039
)
Payments received
 
34,164

 
17,893

Other, net
 
6,179

 
12,227

Net cash used in investing activities
 
(132,698
)
 
(67,909
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Repayments of commercial paper
 
(457,576
)
 
(80,930
)
Proceeds from issuance of commercial paper
 
1,049,062

 
275,914

Repayments of long-term debt
 
(400,000
)
 

Customer banking deposits, net
 
515,015

 
(124,947
)
Dividends paid
 
(164,905
)
 
(164,134
)
Proceeds from exercise of stock options
 
16,026

 
28,083

Other, net
 
(26,348
)
 
(35,919
)
Net cash provided by (used in) financing activities
 
531,274

 
(101,933
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
(15,549
)
 
(20,016
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(864,173
)
 
(1,310,180
)
Cash and cash equivalents at beginning of the period
 
2,185,307

 
1,747,584

Cash and cash equivalents at end of the period
 
$
1,321,134

 
$
437,404

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
201,374

 
$
87,672

Interest paid on borrowings
 
43,561

 
43,297

Interest paid on deposits
 
523

 
1,696

Transfers of foreclosed loans to other assets
 
3,240

 
6,389

Accrued additions to property and equipment
 
1,986

 
4,113

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 January 31,
 
Nine months ended January 31,
 
 
2015
 
2014
 
2015
 
2014
Tax preparation fees:
 
 
 
 
 
 
 
 
U.S. assisted
 
$
283,692

 
$
72,108

 
$
341,107

 
$
123,145

International
 
10,021

 
9,253

 
94,308

 
82,915

U.S. digital
 
36,720

 
17,339

 
42,545

 
23,211

 
 
330,433

 
98,700

 
477,960

 
229,271

Royalties
 
52,284

 
15,061

 
68,508

 
31,150

Revenues from Refund Transfers
 
50,899

 
15,542

 
56,472

 
21,282

Revenues from Emerald Card®
 
13,910

 
12,689

 
39,479

 
37,299

Revenues from Peace of Mind® guarantees
 
13,492

 
12,684

 
54,308

 
59,661

Interest and fee income on Emerald Advance
 
30,288

 
27,656

 
31,439

 
28,602

Other
 
11,702

 
11,664

 
32,605

 
36,462

Total revenues
 
503,008

 
193,996

 
760,771

 
443,727

Compensation and benefits:
 
 
 
 
 
 
 
 
Field wages
 
161,921

 
136,885

 
264,822

 
226,320

Other wages
 
41,157

 
41,629

 
117,598

 
112,029

Benefits and other compensation
 
35,625

 
34,696

 
74,349

 
72,811

 
 
238,703

 
213,210

 
456,769

 
411,160

Occupancy and equipment
 
92,700

 
88,148

 
260,016

 
250,332

Marketing and advertising
 
87,569

 
77,852

 
106,477

 
97,435

Depreciation and amortization
 
43,287

 
31,808

 
115,896

 
81,242

Bad debt
 
38,928

 
31,420

 
42,942

 
38,535

Supplies
 
6,963

 
7,387

 
17,534

 
14,355

Other
 
63,012

 
58,982

 
152,204

 
160,505

Total operating expenses
 
571,162

 
508,807

 
1,151,838

 
1,053,564

Other expense, net
 
6,751

 
6,756

 
9,986

 
14,366

Interest expense on borrowings
 
523

 
532

 
1,577

 
1,604

Pretax loss
 
$
(75,428
)
 
$
(322,099
)
 
$
(402,630
)
 
$
(625,807
)
 
 
 
 
 
 
 
 
 






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

 
 
Nine months ended
 
 
 
Ten months ended
 
 
 
 
January 31,
 
 
 
February 28,
 
 
 
 
2015
 
2014
 
% Change
 
2015
 
2014
 
% Change
Tax Returns Prepared: (1,2)
 
 
 
 
 
 
 
 
 
 
 
 
H&R Block Company-Owned Operations
 
1,532

 
1,595

 
(3.9
)%
 
4,464

 
4,926

 
(9.4
)%
H&R Block Franchise Operations
 
947

 
958

 
(1.1
)%
 
2,679

 
2,894

 
(7.4
)%
   Total H&R Block Assisted
 
2,479

 
2,553

 
(2.9
)%
 
7,143

 
7,820

 
(8.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
H&R Block Desktop
 
180

 
137

 
31.4
 %
 
875

 
833

 
5.0
 %
H&R Block Online
 
1,027

 
654

 
57.0
 %
 
2,876

 
2,683

 
7.2
 %
Total H&R Block Tax Software
 
1,207

 
791

 
52.6
 %
 
3,751

 
3,516

 
6.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
H&R Block Free File Alliance
 
129

 
64

 
101.6
 %
 
383

 
436

 
(12.2
)%
Total H&R Block U.S. Returns
 
3,815

 
3,408

 
11.9
 %
 
11,277

 
11,772

 
(4.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  
Prior year numbers have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company during either year.
(2)
Assisted returns for at January 31, 2014 include 1.8 million returns which were completed as of that date but not yet electronically filed.  Revenue for these returns was recognized in the fourth quarter of fiscal year 2014.





NON-GAAP FINANCIAL MEASURES
 
 
 
 
Three months ended January 31, 2015
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(38,302
)
 
$
(90,865
)
 
$
(35,311
)
 
$
(0.13
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
337

 
337

 
207

 

Professional fees related to HRB Bank transaction
 
6

 
6

 
3

 

Loss on sales of tax offices/businesses
 
1,451

 
1,451

 
901

 

 
 
1,794

 
1,794

 
1,111

 

 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(36,508
)
 
$
(89,071
)
 
$
(34,200
)
 
$
(0.13
)
 
 
 
 
 
 
 
 
 
 
 
Three months ended January 31, 2014
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(301,571
)
 
$
(347,825
)
 
$
(212,751
)
 
$
(0.78
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
346

 
346

 
207

 

Severance
 
1,092

 
1,092

 
648

 

Professional fees related to HRB Bank transaction
 
171

 
171

 
95

 

Gain on sales of tax offices/businesses
 
(616
)
 
(616
)
 
(372
)
 

 
 
993

 
993

 
578

 

 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(300,578
)
 
$
(346,832
)
 
$
(212,173
)
 
$
(0.78
)
 
 
 
 
 
 
 
 
 
 
 
Nine months ended January 31, 2015
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(314,153
)
 
$
(467,254
)
 
$
(257,389
)
 
$
(0.94
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
609

 
609

 
376

 

Severance
 
1,051

 
1,051

 
654

 

Professional fees related to HRB Bank transaction
 
120

 
120

 
74

 

Gain on sales of AFS securities
 
(24
)
 
(24
)
 
(15
)
 

Loss on sales of tax offices/businesses
 
552

 
552

 
342

 

 
 
2,308

 
2,308

 
1,431

 

 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(311,845
)
 
$
(464,946
)
 
$
(255,958
)
 
$
(0.94
)
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
 
 
 
Nine months ended January 31, 2014
 
 
EBITDA
 
Pretax loss
 
Net loss
 
EPS
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(587,125
)
 
$
(711,681
)
 
$
(429,036
)
 
$
(1.57
)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
1,069

 
1,069

 
650

 

Severance
 
4,025

 
4,025

 
2,447

 
0.01

Professional fees related to HRB Bank transaction
 
1,978

 
1,978

 
1,203

 

Gain on sales of tax offices/businesses
 
(1,215
)
 
(1,215
)
 
(739
)
 

 
 
5,857

 
5,857

 
3,561

 
0.01

 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(581,268
)
 
$
(705,824
)
 
$
(425,475
)
 
$
(1.56
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended January 31,
 
Nine months ended January 31,
EBITDA
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Net loss - as reported
$
(36,948
)
 
$
(214,711
)
 
$
(265,178
)
 
$
(434,841
)
 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
Discontinued operations
 
1,637

 
1,960

 
7,789

 
5,805

Income taxes
 
(55,554
)
 
(135,074
)
 
(209,865
)
 
(282,645
)
Interest expense
 
9,272

 
14,443

 
37,195

 
43,203

Depreciation and amortization
 
43,291

 
31,811

 
115,906

 
81,353

 
 
(1,354
)
 
(86,860
)
 
(48,975
)
 
(152,284
)
 
 
 
 
 
 
 
 
 
EBITDA from continuing operations
 
$
(38,302
)
 
$
(301,571
)
 
$
(314,153
)
 
$
(587,125
)
 
 
 
 
 
 
 
 
 
 
 
Three months ended January 31,
 
Nine months ended January 31,
Supplemental Information
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
 
 
 
Pretax
 
$
6,090

 
$
4,715

 
$
20,689

 
$
15,477

After-tax
 
3,678

 
2,809

 
12,763

 
9,410

Amortization of intangible assets:
 
 
 
 
 
 
 
 
Pretax
 
$
16,743

 
$
8,757

 
$
41,206

 
$
21,351

After-tax
 
10,197

 
5,256

 
25,420

 
12,981

 
 
 
 
 
 
 
 
 




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 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.