Document


 

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): June 12, 2018

H&R BLOCK, INC.
(Exact name of registrant as specified in charter)
MISSOURI
1-06089
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 








Item 2.02.    Results of Operations and Financial Condition.
On June 12, 2018, the Company issued a press release regarding the Company’s results of operations for the fiscal year ended April 30, 2018. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
As announced in the press release described under Item 2.02 and furnished as Exhibit 99.1 to this Current Report on Form 8-K, the Company’s Board of Directors has approved an increase in its quarterly dividend of 4%, to $0.25 per share, and declared a quarterly cash dividend of $0.25 per share payable on July 2, 2018 to shareholders of record as of June 22, 2018.
Item 9.01.    Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number    Description
99.1 Press Release Issued June 12, 2018






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:
June 12, 2018
By:
/s/ Scott W. Andreasen
 
 
 
Scott W. Andreasen
 
 
 
Vice President and Secretary



Exhibit

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Exhibit 99.1
News Release
For Immediate Release: June 12, 2018
H&R Block Reports Improved Results for Fiscal 2018 and Dividend Increase; To Provide Outlook for Fiscal 2019
Revenues increased 4 percent to $3.2 billion1 driven by improvement in the company's U.S. Assisted and do-it-yourself (DIY) businesses
Pretax income increased 6% to $669 million; earnings per share from continuing operations2 increased $1.02, or 52 percent, to $2.98, due to the increase in pretax income and the company's lower effective tax rate resulting from the recently-enacted federal corporate tax legislation
Announced a dividend increase to an annual rate of $1.00, or $0.25 per quarter, representing a 4 percent increase over the prior year
Company will share initial thoughts on its multi-year enterprise strategic framework and financial outlook for fiscal 2019 during its earnings conference call today at 4:30 p.m. Eastern time
KANSAS CITY, Mo. - H&R Block, Inc. (NYSE: HRB) today released its financial results for the fiscal year ended April 30, 2018. Revenues increased 4 percent, driven by improved client volumes and net average charge in its U.S. tax businesses. Earnings per share from continuing operations increased 52 percent, to $2.98, primarily driven by the company's lower effective tax rate, as well as improved pretax earnings.
For fiscal 2018, approximately 20.0 million returns were prepared by or through H&R Block in the U.S., a 2.5 percent increase over fiscal 2017. Client trajectory improved in the company's U.S. Assisted business as a result of stronger client retention, with a 0.6 percent decline in returns compared to a 2.5 percent decline in fiscal 2017. Growth in online U.S. DIY returns outpaced the industry at 10.3 percent due to product enhancements and more effective marketing. Additionally, the company reported increases in net average charge in both Assisted and DIY.
"We achieved our goal of improving the client trajectory and delivered positive financial results for the fiscal year," said Jeff Jones, H&R Block's president and chief executive officer. "We're also making progress on our multi-year strategic framework. As we look ahead to fiscal 2019, we will make strategic investments to enhance the relevance of our brand, strengthen technology platforms, and improve the fundamental value clients receive from H&R Block. I'm excited about the future and look forward to sharing more about our plans on our investor call this afternoon."


1 
All amounts in this release are unaudited. Unless otherwise noted, all comparisons refer to the current period compared to the corresponding prior year period.
2 All per share amounts are based on fully diluted shares at the end of the corresponding period.








Fiscal 2018 Results From Continuing Operations
"We are pleased with our financial performance this year, with revenue growth, strong margins, and improved earnings," said Tony Bowen, H&R Block's chief financial officer. "Our improved results, along with our strong balance sheet and cash position, provide a solid foundation as we invest in our strategic evolution."
(in millions, except EPS)
 
Fiscal Year 2018
 
Fiscal Year 2017
Revenue
 
$
3,160

 
$
3,036

Pretax Income
 
$
669

 
$
629

Net Income
 
$
627

 
$
421

Weighted-Avg. Shares - Diluted
 
210.2

 
214.1

EPS2
 
$
2.98

 
$
1.96

EBITDA3
 
$
941

 
$
904

 
 
 
 
 
Key Financial Metrics
Total revenues increased $124 million, or 4.1 percent, to approximately $3.2 billion, driven by:
Increased U.S. Assisted tax preparation fees resulting from favorable net average charge and mix, partially offset by a decline in return volumes; and
Increased U.S. DIY tax preparation fees resulting from increased return volumes and net average charge, which was due to favorable product mix.
Total operating expenses increased $88 million, or 3.8 percent, primarily due to increases in compensation costs, occupancy costs, and bad debt expense, partially offset by lower marketing and advertising expenses.
Pretax income increased $39 million, or 6.3 percent, to $669 million.
The company's effective tax rate decreased to 6.3 percent in fiscal 2018 from 33.1 percent in fiscal 2017. A significant portion of the items generating the rate reduction in fiscal 2018 are related to the recently-enacted federal corporate tax legislation, which became effective during fiscal 2018. Starting in fiscal 2019, the company currently estimates its annual effective tax rate will be approximately 23 to 25 percent. For additional information on the impact of the recently-enacted federal corporate tax legislation, please refer to disclosures in the company's reports on Form 10-K, 10-Q, and other filings with the SEC.
Net income from continuing operations increased 48.9 percent to $627 million, primarily due to changes to the company's effective tax rate, as well as the improvement in pretax income. EBITDA from continuing operations increased 4.1 percent, to $941 million, reflecting an EBITDA margin of 29.8 percent.3 
Diluted earnings per share from continuing operations increased $1.02, or 52.0 percent, to $2.98 due to the increase in net income noted above. Approximately $0.85 of the $1.02 increase is due to a lower effective tax rate.


3 The company reports non-GAAP financial measures of performance, including earnings before interest, tax, depreciation, and amortization (EBITDA), EBITDA margin and free cash flow, which it considers to be useful metrics for management and investors to evaluate and compare the ongoing operating performance of the company. See "About Non-GAAP Financial Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).



Dividends
The company announced that the Board of Directors approved a 4 percent increase in its quarterly dividend, to $0.25 per share. Future actions regarding dividends will be dependent upon the Board's annual review and approval following consideration of operating results, market conditions, and capital needs, among other factors.
A quarterly cash dividend of $0.25 per share is payable on July 2, 2018 to shareholders of record as of June 22, 2018. H&R Block has paid quarterly dividends consecutively since the company went public in 1962.
Discontinued Operations
During fiscal 2018, Sand Canyon Corporation made payments of $4.5 million pursuant to a settlement agreement entered into in fiscal 2016. The full amount of the payments had been previously accrued by the company. For additional information on Sand Canyon, please refer to disclosures in the company’s reports on Forms 10-K, 10-Q, and other filings with the SEC.
Conference Call
Discussion of the fiscal 2018 results, future outlook, and a general business update will occur during the company’s previously announced fiscal earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on June 12, 2018. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:
U.S./Canada (855) 702-5257 or International (213) 358-0868
Conference ID: 3975526
The call, along with a presentation for viewing, 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. The presentation will be posted on the Webcasts and Presentations page at http://investors.hrblock.com following the conclusion of the call.
A replay of the call will be available beginning at 7:30 p.m. Eastern time on June 12, 2018, and continuing until July 12, 2018, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 3975526. The webcast will be available for replay beginning on June 13, 2018 and continuing for 90 days at http://investors.hrblock.com.
About H&R Block
H&R Block, Inc. (NYSE: HRB) is a global consumer tax services provider. Tax return preparation services are provided by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products for the DIY consumer. H&R Block also offers adjacent Tax Plus products and services. In fiscal 2018, H&R Block had annual revenues of over $3.1 billion with over 23 million tax returns prepared worldwide. For more information, visit the H&R Block Newsroom.
About Non-GAAP Financial Information
This press release and the accompanying tables include non-GAAP financial information. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable



financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled "Non-GAAP Financial Information."
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "commits," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "goal," "could" or "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, client trajectory, income, effective tax rate, earnings per share, cost savings, capital expenditures, dividends, share repurchases, liquidity, capital structure or other financial items, descriptions of management’s plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. Factors that may cause the company’s actual estimated effective tax rate to differ from estimates include the company’s actual results from operations compared to current estimates, future discrete items, changes in interpretations and assumptions the company has made, guidance from the Internal Revenue Service, SEC, or the Financial Accounting Standards Board about the Tax Legislation, and future actions of the company. All forward-looking statements speak only as of the date they are made and reflect the company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to a variety of economic, competitive and regulatory factors, many of which are beyond the company's control, that are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017 in the section entitled "Risk Factors" and additional factors we may describe from time to time in other filings with the Securities and Exchange Commission. You may get such filings for free at our website at http://investors.hrblock.com. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
For Further Information
Investor Relations:    Colby Brown, (816) 854-4559, colby.brown@hrblock.com
Media Relations:    Susan Waldron, (816) 854-5522, susan.waldron@hrblock.com


TABLES FOLLOW





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CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended April 30,
 
Year ended April 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
Service revenues
 
$
2,125,037

 
$
2,055,628

 
$
2,766,426

 
$
2,648,349

Royalty, product and other revenues
 
267,812

 
272,287

 
393,505

 
387,965

 
 
2,392,849

 
2,327,915

 
3,159,931

 
3,036,314

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Costs of revenues
 
855,394

 
818,812

 
1,739,729

 
1,644,377

Selling, general and administrative
 
286,959

 
275,581

 
668,152

 
675,953

Total operating expenses
 
1,142,353

 
1,094,393

 
2,407,881

 
2,320,330

 
 
 
 
 
 
 
 
 
Other income (expense), net
 
2,795

 
1,306

 
6,054

 
6,254

Interest expense on borrowings
 
(22,270
)
 
(22,925
)
 
(89,372
)
 
(92,951
)
Income from continuing operations before income taxes
 
1,231,021

 
1,211,903

 
668,732

 
629,287

Income taxes
 
85,057

 
425,333

 
41,823

 
208,370

Net income from continuing operations
 
1,145,964

 
786,570

 
626,909

 
420,917

Net loss from discontinued operations
 
(3,037
)
 
(3,218
)
 
(13,760
)
 
(11,972
)
NET INCOME
 
$
1,142,927

 
$
783,352

 
$
613,149

 
$
408,945

 
 
 
 
 
 
 
 
 
BASIC EARNINGS (LOSS) PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
5.47

 
$
3.79

 
$
2.99

 
$
1.97

Discontinued operations
 
(0.02
)
 
(0.02
)
 
(0.06
)
 
(0.05
)
Consolidated
 
$
5.45

 
$
3.77

 
$
2.93

 
$
1.92

 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE BASIC SHARES
 
209,230

 
207,170

 
208,824

 
212,809

 
 
 
 
 
 
 
 
 
DILUTED EARNINGS (LOSS) PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
5.43

 
$
3.76

 
$
2.98

 
$
1.96

Discontinued operations
 
(0.01
)
 
(0.01
)
 
(0.07
)
 
(0.05
)
Consolidated
 
$
5.42

 
$
3.75

 
$
2.91

 
$
1.91

 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE DILUTED SHARES
 
210,527

 
208,605

 
210,213

 
214,095

 
 
 
 
 
 
 
 
 






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CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s - except per share data)
 
As of April 30,
 
2018
 
2017
 
 
 
 
 
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
1,544,944

 
$
1,011,331

Cash and cash equivalents - restricted
 
118,734

 
106,208

Receivables, net
 
146,774

 
162,775

Income taxes receivable
 
12,310

 

Prepaid expenses and other current assets
 
68,951

 
65,725

Total current assets
 
1,891,713

 
1,346,039

Property and equipment, net
 
231,888

 
263,827

Intangible assets, net
 
373,981

 
409,364

Goodwill
 
507,871

 
491,207

Deferred tax assets and income taxes receivable
 
34,095

 
83,728

Other noncurrent assets
 
101,401

 
99,943

Total assets
 
$
3,140,949

 
$
2,694,108

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
LIABILITIES:
 
 
 
 
Accounts payable and accrued expenses
 
$
251,975

 
$
217,028

Accrued salaries, wages and payroll taxes
 
141,499

 
183,856

Accrued income taxes and reserves for uncertain tax positions
 
263,050

 
348,199

Current portion of long-term debt
 
1,026

 
981

Deferred revenue and other current liabilities
 
186,101

 
189,216

Total current liabilities
 
843,651

 
939,280

Long-term debt
 
1,494,609

 
1,493,017

Deferred tax liabilities and reserves for uncertain tax positions
 
229,430

 
159,085

Deferred revenue and other noncurrent liabilities
 
179,548

 
163,609

Total liabilities
 
2,747,238

 
2,754,991

COMMITMENTS AND CONTINGENCIES
 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
 
Common stock, no par, stated value $.01 per share
 
2,462

 
2,462

Additional paid-in capital
 
760,250

 
754,912

Accumulated other comprehensive loss
 
(14,303
)
 
(15,299
)
Retained earnings (deficit)
 
362,980

 
(48,206
)
Less treasury shares, at cost
 
(717,678
)
 
(754,752
)
Total stockholders' equity (deficiency)
 
393,711

 
(60,883
)
Total liabilities and stockholders' equity
 
$
3,140,949

 
$
2,694,108

 
 
 
 
 






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CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Year ended April 30,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
613,149

 
$
408,945

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
183,295

 
182,168

Provision for bad debt
 
74,489

 
52,776

Deferred taxes
 
112,140

 
46,455

Stock-based compensation
 
21,954

 
19,285

Changes in assets and liabilities, net of acquisitions:
 
 
 
 
Receivables
 
(65,602
)
 
(77,873
)
Prepaid expenses and other current assets
 
(3,365
)
 
(4,542
)
Other noncurrent assets
 
(1,421
)
 
(6,364
)
Accounts payable and accrued expenses
 
32,610

 
(30,472
)
Accrued salaries, wages and payroll taxes
 
(43,142
)
 
22,789

Deferred revenue and other current liabilities
 
(3,562
)
 
(59,998
)
Deferred revenue and other noncurrent liabilities
 
12,689

 
4,314

Income tax receivables, accrued income taxes and income tax reserves
 
(75,491
)
 
129

Other, net
 
(7,740
)
 
(5,415
)
Net cash provided by operating activities
 
850,003

 
552,197

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Sales, maturities of and payments received on available-for-sale securities
 

 
1,144

Principal payments and sales of mortgage loans and real estate owned, net
 

 
207,174

Capital expenditures
 
(98,583
)
 
(89,255
)
Payments made for business acquisitions, net of cash acquired
 
(42,539
)
 
(54,816
)
Franchise loans funded
 
(22,320
)
 
(34,473
)
Payments received on franchise loans
 
39,968

 
61,437

Other, net
 
11,417

 
8,108

Net cash provided by (used in) investing activities
 
(112,057
)
 
99,319

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Repayments of line of credit borrowings
 
(830,000
)
 
(1,700,000
)
Proceeds from line of credit borrowings
 
830,000

 
1,700,000

Dividends paid
 
(200,469
)
 
(187,115
)
Repurchase of common stock, including shares surrendered
 
(9,147
)
 
(322,850
)
Proceeds from exercise of stock options
 
28,340

 
2,371

Other, net
 
(9,388
)
 
(22,830
)
Net cash used in financing activities
 
(190,664
)
 
(530,424
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
(1,143
)
 
(4,464
)
 
 
 
 
 
Net increase in cash, cash equivalents and restricted cash
 
546,139

 
116,628

Cash, cash equivalents and restricted cash, beginning of period
 
1,117,539

 
1,000,911

Cash, cash equivalents and restricted cash, end of period
 
$
1,663,678

 
$
1,117,539

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
8,276

 
$
163,539

Interest paid on borrowings
 
84,320

 
87,185

Accrued additions to property and equipment
 
3,010

 
2,433

 
 
 
 
 
Note: Effective May 1, 2017, we adopted the provisions of Accounting Standards Update No. 2016-18, "Restricted Cash (a consensus of the FASB Emerging Issues Task Force)," (ASU 2016-18) on a retrospective basis. Accordingly, the statements of cash flows explain the change in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents per ASU 2016-18. Amounts for prior periods have been retrospectively adjusted to conform to the current period presentation.





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FINANCIAL RESULTS
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended April 30,
 
Year ended April 30,
 
 
2018
 
2017
 
2018
 
2017
REVENUES:
 
 
 
 
 
 
 
 
U.S. assisted tax preparation fees
 
$
1,613,204

 
$
1,596,182

 
$
1,947,160

 
$
1,902,212

U.S. royalties
 
186,049

 
193,663

 
245,444

 
250,270

U.S. DIY tax preparation fees
 
204,348

 
182,375

 
243,159

 
219,123

International revenues
 
126,607

 
116,992

 
227,266

 
210,320

Revenues from Refund Transfers
 
117,238

 
96,898

 
171,959

 
148,212

Revenues from Emerald Card®
 
62,348

 
59,412

 
102,640

 
95,221

Revenues from Peace of Mind® Extended Service Plan
 
25,077

 
24,965

 
101,572

 
92,820

Interest and fee income on Emerald Advance
 
24,653

 
25,503

 
56,986

 
57,022

Other
 
33,325

 
31,925

 
63,745

 
61,114

 
 
2,392,849

 
2,327,915

 
3,159,931

 
3,036,314

Compensation and benefits:
 
 
 
 
 
 
 
 
Field wages
 
478,809

 
465,295

 
740,675

 
702,518

Other wages
 
51,344

 
52,256

 
191,981

 
181,735

Benefits and other compensation
 
86,837

 
80,749

 
173,221

 
163,368

 
 
616,990

 
598,300

 
1,105,877

 
1,047,621

Occupancy (1)
 
118,769

 
105,982

 
401,524

 
377,420

Marketing and advertising
 
166,267

 
157,618

 
249,142

 
261,281

Depreciation and amortization
 
46,417

 
49,976

 
183,295

 
182,168

Provision for bad debt
 
41,060

 
23,142

 
74,489

 
52,776

Supplies
 
18,974

 
22,380

 
31,026

 
33,847

Other (1)
 
133,876

 
136,995

 
362,528

 
365,217

Total operating expenses
 
1,142,353

 
1,094,393

 
2,407,881

 
2,320,330

 
 
 
 
 
 
 
 
 
Other income (expense), net
 
2,795

 
1,306

 
6,054

 
6,254

Interest expense on borrowings
 
(22,270
)
 
(22,925
)
 
(89,372
)
 
(92,951
)
Income from continuing operations before income taxes
 
1,231,021

 
1,211,903

 
668,732

 
629,287

Income taxes
 
85,057

 
425,333

 
41,823

 
208,370

Net income from continuing operations
 
1,145,964

 
786,570

 
626,909

 
420,917

Net loss from discontinued operations
 
(3,037
)
 
(3,218
)
 
(13,760
)
 
(11,972
)
NET INCOME
 
$
1,142,927

 
$
783,352

 
$
613,149

 
$
408,945

 
 
 
 
 
 
 
 
 
BASIC EARNINGS (LOSS) PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
5.47

 
$
3.79

 
$
2.99

 
$
1.97

Discontinued operations
 
(0.02
)
 
(0.02
)
 
(0.06
)
 
(0.05
)
Consolidated
 
$
5.45

 
$
3.77

 
$
2.93

 
$
1.92

 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE BASIC SHARES
 
209,230

 
207,170

 
208,824

 
212,809

 
 
 
 
 
 
 
 
 
DILUTED EARNINGS (LOSS) PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
5.43

 
$
3.76

 
$
2.98

 
$
1.96

Discontinued operations
 
(0.01
)
 
(0.01
)
 
(0.07
)
 
(0.05
)
Consolidated
 
$
5.42

 
$
3.75

 
$
2.91

 
$
1.91

 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE DILUTED SHARES
 
210,527

 
208,605

 
210,213

 
214,095

 
 
 
 
 
 
 
 
 
EBITDA from continuing operations (2)
 
$
1,299,708

 
$
1,284,804

 
$
941,399

 
$
904,406

EBITDA margin of continuing operations (2)
 
54.3
%
 
55.2
%
 
29.8
%
 
29.8
%
 
 
 
 
 
 
 
 
 
(1) 
We reclassified $11.7 million and $37.6 million of software and information technology (IT) maintenance expenses from occupancy and equipment to other expenses for the three and twelve months ended April 30, 2017, respectively, to conform with current period presentation, which was changed during our fourth quarter.
(2) 
See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.





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TAX OPERATING DATA
 
 
 
 
 
 
Year ended April 30,
 
2018
 
2017
 
% Change
 
 
 
 
 
 
 
U.S. Tax Returns Prepared: (in 000s) (1) (2)
 
 
 
 
 
 
Company-Owned Operations
 
8,050

 
8,140

 
(1.1
)%
Franchise Operations
 
3,769

 
3,755

 
0.4
 %
   Total H&R Block Assisted
 
11,819

 
11,895

 
(0.6
)%
 
 
 
 
 
 
 
Desktop
 
2,031

 
2,003

 
1.4
 %
Online
 
5,502

 
4,988

 
10.3
 %
Total H&R Block DIY
 
7,533

 
6,991

 
7.8
 %
 
 
 
 
 
 
 
IRS Free File
 
613

 
588

 
4.3
 %
Total H&R Block U.S. Returns
 
19,965

 
19,474

 
2.5
 %
 
 
 
 
 
 
 
International tax returns prepared: (in 000s)
 
 
 
 
 
 
Canada (3)
 
2,423

 
2,460

 
(1.5
)%
Australia
 
757

 
750

 
0.9
 %
Other
 
187

 
293

 
(36.2
)%
Total international returns
 
3,367

 
3,503

 
(3.9
)%
Tax returns prepared worldwide
 
23,332

 
22,977

 
1.5
 %
 
 
 
 
 
 
 
Net Average Charge (U.S. only): (4)
 
 
 
 
 
 
Company-Owned Operations
 
$
241.35

 
$
237.11

 
1.8
 %
Franchise Operations (5)
 
211.88

 
207.33

 
2.2
 %
DIY
 
32.28

 
31.34

 
3.0
 %
 
 
 
 
 
 
 
(1)  
An assisted tax return is defined as a current or prior year individual tax return that has been accepted and paid for by the client.  Also included are business returns. The count methodology has been adjusted in the current and prior years periods to exclude business extensions and to recognize the corresponding tax returns when filed. A DIY return is defined as a return that has been electronically filed and accepted by the IRS.  Also included are online returns paid and printed.
(2)  
Amounts have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company during the year.
(3) 
In fiscal year 2017, the end of the Canadian tax season was extended from April 30 into May. Tax returns prepared in Canada in fiscal year 2017 includes approximately 59 thousand returns in both company-owned and franchise offices which were accepted by the client after April 30. The revenues related to these returns were recognized in fiscal year 2018.
(4)  
Net average charge is calculated as tax preparation fees divided by tax returns prepared. For DIY, net average charge excludes IRS Free File.
(5) 
Net average charge related to H&R Block Franchise Operations represents tax preparation fees collected by H&R Block franchisees divided by returns prepared in franchise offices. H&R Block will recognize a portion of franchise revenues as franchise royalties based on the terms of franchise agreements.





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Three months ended April 30,
 
Year ended April 30,
NON-GAAP FINANCIAL MEASURE - EBITDA
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Net income - as reported
 
$
1,142,927

 
$
783,352

 
$
613,149

 
$
408,945

Discontinued operations, net
 
3,037

 
3,218

 
13,760

 
11,972

Net income from continuing operations - as reported
 
1,145,964

 
786,570

 
626,909

 
420,917

Add back:
 
 
 
 
 
 
 
 
Income taxes of continuing operations
 
85,057

 
425,333

 
41,823

 
208,370

Interest expense of continuing operations
 
22,270

 
22,925

 
89,372

 
92,951

Depreciation and amortization of continuing operations
 
46,417

 
49,976

 
183,295

 
182,168

 
 
153,744

 
498,234

 
314,490

 
483,489

 
 
 
 
 
 
 
 
 
EBITDA from continuing operations
 
$
1,299,708

 
$
1,284,804

 
$
941,399

 
$
904,406

 
 
 
 
 
 
 
 
 
EBITDA margin from continuing operations (1)
 
54.3
%
 
55.2
%
 
29.8
%
 
29.8
%
 
 
 
 
 
 
 
 
 
 
 
Three months ended April 30,
 
Year ended April 30,
Supplemental Information
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
 
 
 
Pretax
 
$
4,889

 
$
2,340

 
$
21,954

 
$
19,285

After-tax
 
4,551

 
1,448

 
20,571

 
12,342

Amortization of intangible assets:
 
 
 
 
 
 
 
 
Pretax
 
$
20,418

 
$
21,611

 
$
79,883

 
$
78,935

After-tax
 
19,007

 
13,664

 
74,850

 
50,518

 
 
 
 
 
 
 
 
 
(1)
EBITDA margin from continuing operations is computed as EBITDA from continuing operations divided by revenues from continuing operations.
NON-GAAP FINANCIAL INFORMATION
The accompanying press release contains non-GAAP financial measures. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies.
We consider our non-GAAP financial measures to be performance measures and a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business.
We may consider whether significant items that arise in the future should be excluded from our non-GAAP financial measures.
We measure the performance of our business using a variety of metrics, including EBITDA from continuing operations and free cash flow. We also use EBITDA from continuing operations and pretax income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.