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): August 28, 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 August 28, 2018, the Company issued a press release regarding the Company’s results of operations for the fiscal quarter ended July 31, 2018. 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 August 28, 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:
August 28, 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: August 28, 2018
H&R Block Announces Fiscal 2019 First Quarter Results
KANSAS CITY, Mo. - H&R Block, Inc. (NYSE: HRB) today released its financial results for the fiscal 2019 first quarter ended July 31, 2018. The company normally reports a fiscal first quarter loss due to the seasonality of its tax business. The fiscal first quarter typically represents less than 5 percent of annual revenues and less than 15 percent of annual expenses.
Fiscal First Quarter Highlights1 
Fiscal first quarter financial results were in line with expectations.
Revenues increased $7 million, or 5 percent, to $145 million primarily due to the timing of revenues related to the company's Tax Plus products.
Pretax loss improved 3 percent to $199 million; loss per share from continuing operations2 increased $0.10 to $0.72 due to a lower effective tax rate, which negatively impacts those fiscal quarters with a seasonal net loss.
The company repurchased and retired approximately 4.2 million shares at an aggregate price of $97 million, or $23.27 per share.
The company reiterated its financial outlook for the full fiscal year.

"We are hard at work on our strategic initiatives for fiscal 2019, which include delivering an improved value proposition for our clients and differentiating H&R Block as the best choice for consumers," said Jeff Jones, H&R Block's president and chief executive officer. "By investing in pricing, technology, and operational excellence, we are positioning the company to accomplish our goal of sustainably growing clients, revenue, and earnings. We look forward to sharing more details on our progress throughout the 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 at the end of the corresponding period.










Fiscal 2019 First Quarter Results From Continuing Operations
"Our fiscal first quarter results were in line with expectations and reflect the seasonality of our business, as well as investments related to the strategic initiatives we outlined in June," said Tony Bowen, H&R Block's chief financial officer. "We are on track to achieve our financial outlook for the fiscal year."

(in millions, except EPS)
 
Q1 FY2019
 
Q1 FY2018
Revenue
 
$
145

 
$
138

Pretax Loss
 
$
(199
)
 
$
(205
)
Net Loss
 
$
(149
)
 
$
(128
)
Weighted-Avg. Shares - Diluted
 
207.7

 
207.9

EPS2
 
$
(0.72
)
 
$
(0.62
)
EBITDA3
 
$
(137
)
 
$
(140
)
 
 
 
 
 
Key Financial Metrics
Total revenues increased $7.4 million, or 5.4 percent, to $145.2 million primarily due to the timing of revenues from the Peace of Mind® Extended Service Plan and Tax Identity Shield®, partially offset by lower revenues from Refund Transfer.
Total operating expenses increased $4.3 million, or 1.3 percent, to $327.3 million primarily due to increases in compensation and consulting expenses, partially offset by lower depreciation and amortization and bad debt expense.
Pretax loss improved $6.5 million, or 3.1 percent, to $198.8 million.
Loss per share from continuing operations increased $0.10, from $0.62 to $0.72, due to a lower effective tax rate, which negatively impacts those fiscal quarters with a seasonal net loss.
 
Share Repurchases and Dividends
During the first quarter of fiscal 2019, the company repurchased and retired approximately 4.2 million shares at an aggregate price of $97.1 million, or $23.27 per share.
As previously announced, a quarterly cash dividend of $0.25 per share is payable on October 1, 2018 to shareholders of record as of September 12, 2018. H&R Block has paid quarterly dividends consecutively since the company went public in 1962.
Discontinued Operations
For 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 2019 first quarter results, future outlook, and a general business update will occur during the company’s previously announced fiscal first quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on August 28,

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).



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: 8159739
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 August 28, 2018, and continuing until September 28, 2018, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 8159739. The webcast will be available for replay beginning on August 29, 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, market share, industry volumes 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, that are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2018 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. In addition, 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. 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 July 31,
 
 
2018
 
2017
 
 
 
 
 
REVENUES:
 
 
 
 
Service revenues
 
$
126,860

 
$
124,695

Royalty, product and other revenues
 
18,323

 
13,107

 
 
145,183

 
137,802

OPERATING EXPENSES:
 
 
 
 
Costs of revenues
 
221,560

 
227,715

Selling, general and administrative
 
105,740

 
95,249

Total operating expenses
 
327,300

 
322,964

 
 
 
 
 
Other income (expense), net
 
4,542

 
1,220

Interest expense on borrowings
 
(21,190
)
 
(21,277
)
Loss from continuing operations before income tax benefit
 
(198,765
)
 
(205,219
)
Income tax benefit
 
(49,968
)
 
(77,401
)
Net loss from continuing operations
 
(148,797
)
 
(127,818
)
Net loss from discontinued operations
 
(3,873
)
 
(2,749
)
NET LOSS
 
$
(152,670
)
 
$
(130,567
)
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
Continuing operations
 
$
(0.72
)
 
$
(0.62
)
Discontinued operations
 
(0.02
)
 
(0.01
)
Consolidated
 
$
(0.74
)
 
$
(0.63
)
 
 
 
 
 
WEIGHTED AVERAGE BASIC AND DILUTED SHARES
 
207,673

 
207,935

 
 
 
 
 






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CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s - except per share data)
 
As of
 
July 31, 2018
 
July 31, 2017
 
April 30, 2018
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
979,116

 
$
551,566

 
$
1,544,944

Cash and cash equivalents - restricted
 
131,376

 
116,594

 
118,734

Receivables, net
 
70,576

 
91,004

 
146,774

Income taxes receivable
 
15,776

 

 
12,310

Prepaid expenses and other current assets
 
85,279

 
74,776

 
68,951

Total current assets
 
1,282,123

 
833,940

 
1,891,713

Property and equipment, net
 
227,003

 
253,255

 
231,888

Intangible assets, net
 
354,831

 
393,972

 
373,981

Goodwill
 
507,941

 
493,991

 
507,871

Deferred tax assets and income taxes receivable
 
131,683

 
54,348

 
34,095

Other noncurrent assets
 
101,457

 
102,742

 
101,401

Total assets
 
$
2,605,038

 
$
2,132,248

 
$
3,140,949

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
145,471

 
$
161,751

 
$
251,975

Accrued salaries, wages and payroll taxes
 
37,468

 
35,063

 
141,499

Accrued income taxes and reserves for uncertain tax positions
 
178,313

 
176,909

 
263,050

Current portion of long-term debt
 
1,038

 
992

 
1,026

Deferred revenue and other current liabilities
 
201,706

 
187,791

 
186,101

Total current liabilities
 
563,996

 
562,506

 
843,651

Long-term debt
 
1,495,006

 
1,493,422

 
1,494,609

Deferred tax liabilities and reserves for uncertain tax positions
 
231,292

 
159,233

 
229,430

Deferred revenue and other noncurrent liabilities
 
122,735

 
131,415

 
179,548

Total liabilities
 
2,413,029

 
2,346,576

 
2,747,238

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
Common stock, no par, stated value $.01 per share
 
2,420

 
2,462

 
2,462

Additional paid-in capital
 
752,109

 
746,761

 
760,250

Accumulated other comprehensive loss
 
(16,034
)
 
(12,837
)
 
(14,303
)
Retained earnings (deficit)
 
163,567

 
(229,647
)
 
362,980

Less treasury shares, at cost
 
(710,053
)
 
(721,067
)
 
(717,678
)
Total stockholders' equity (deficiency)
 
192,009

 
(214,328
)
 
393,711

Total liabilities and stockholders' equity
 
$
2,605,038

 
$
2,132,248

 
$
3,140,949

 
 
 
 
 
 
 






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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Three months ended July 31,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net loss
 
$
(152,670
)
 
$
(130,567
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
40,432

 
43,598

Provision for bad debt
 
1,617

 
2,459

Deferred taxes
 
9,595

 
20,796

Stock-based compensation
 
4,359

 
4,816

Changes in assets and liabilities, net of acquisitions:
 
 
 
 
Receivables
 
66,960

 
64,985

Prepaid expenses and other current assets
 
(16,191
)
 
(8,695
)
Other noncurrent assets
 
3,272

 
5,499

Accounts payable and accrued expenses
 
(99,658
)
 
(66,729
)
Accrued salaries, wages and payroll taxes
 
(103,824
)
 
(149,441
)
Deferred revenue and other current liabilities
 
(782
)
 
464

Deferred revenue and other noncurrent liabilities
 
(39,978
)
 
(32,510
)
Income tax receivables, accrued income taxes and income tax reserves
 
(89,661
)
 
(149,542
)
Other, net
 
966

 
(14,248
)
Net cash used in operating activities
 
(375,563
)
 
(409,115
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures
 
(12,057
)
 
(13,094
)
Payments made for business acquisitions, net of cash acquired
 
(1,449
)
 
(1,440
)
Franchise loans funded
 
(1,805
)
 
(4,527
)
Payments received on franchise loans
 
5,104

 
4,727

Other, net
 
3,645

 
1,371

Net cash used in investing activities
 
(6,562
)
 
(12,963
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Dividends paid
 
(52,104
)
 
(49,905
)
Repurchase of common stock, including shares surrendered
 
(101,665
)
 
(7,508
)
Proceeds from exercise of stock options
 
1,355

 
27,418

Other, net
 
(17,494
)
 
2,545

Net cash used in financing activities
 
(169,908
)
 
(27,450
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
(1,153
)
 
149

 
 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
 
(553,186
)
 
(449,379
)
Cash, cash equivalents and restricted cash, beginning of period
 
1,663,678

 
1,117,539

Cash, cash equivalents and restricted cash, end of period
 
$
1,110,492

 
$
668,160

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
31,969

 
$
57,901

Interest paid on borrowings
 
15,519

 
15,519

Accrued additions to property and equipment
 
9,974

 
4,757

 
 
 
 
 






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FINANCIAL RESULTS
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended July 31,
 
 
2018
 
2017
REVENUES:
 
 
 
 
U.S. assisted tax preparation fees
 
$
31,104

 
$
29,963

U.S. royalties
 
7,571

 
6,967

U.S. DIY tax preparation fees
 
2,781

 
3,226

International revenues
 
39,179

 
40,417

Revenues from Refund Transfers
 
1,424

 
2,816

Revenues from Emerald Card®
 
14,246

 
14,987

Revenues from Peace of Mind® Extended Service Plan
 
36,577

 
31,943

Revenues from Tax Identity Shield®
 
4,741

 
254

Interest and fee income on Emerald Advance
 
447

 
664

Other
 
7,113

 
6,565

 
 
145,183

 
137,802

Compensation and benefits:
 
 
 
 
Field wages
 
49,932

 
48,123

Other wages
 
47,822

 
43,197

Benefits and other compensation
 
22,931

 
20,645

 
 
120,685

 
111,965

Occupancy and equipment
 
90,726

 
90,291

Marketing and advertising
 
6,894

 
7,104

Depreciation and amortization
 
40,432

 
43,598

Bad debt
 
(858
)
 
2,459

Supplies
 
2,204

 
2,734

Other
 
67,217

 
64,813

Total operating expenses
 
327,300

 
322,964

 
 
 
 
 
Other income (expense), net
 
4,542

 
1,220

Interest expense on borrowings
 
(21,190
)
 
(21,277
)
Pretax loss
 
(198,765
)
 
(205,219
)
Income tax benefit
 
(49,968
)
 
(77,401
)
Net loss from continuing operations
 
(148,797
)
 
(127,818
)
Net loss from discontinued operations
 
(3,873
)
 
(2,749
)
NET LOSS
 
$
(152,670
)
 
$
(130,567
)
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
Continuing operations
 
$
(0.72
)
 
$
(0.62
)
Discontinued operations
 
(0.02
)
 
(0.01
)
Consolidated
 
$
(0.74
)
 
$
(0.63
)
 
 
 
 
 
Weighted average basic and diluted shares
 
207,673

 
207,935

 
 
 
 
 
EBITDA from continuing operations (1)
 
$
(137,143
)
 
$
(140,344
)
 
 
 
 
 
(1) 
See "Non-GAAP Financial Information" for a reconciliation of non-GAAP measures.






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Three months ended July 31,
NON-GAAP FINANCIAL MEASURE - EBITDA
 
2018
 
2017
 
 
 
 
 
Net loss - as reported
 
$
(152,670
)
 
$
(130,567
)
Discontinued operations, net
 
3,873

 
2,749

Net loss from continuing operations - as reported
 
(148,797
)
 
(127,818
)
Add back:
 
 
 
 
Income taxes of continuing operations
 
(49,968
)
 
(77,401
)
Interest expense of continuing operations
 
21,190

 
21,277

Depreciation and amortization of continuing operations
 
40,432

 
43,598

 
 
11,654

 
(12,526
)
 
 
 
 
 
EBITDA from continuing operations
 
$
(137,143
)
 
$
(140,344
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended July 31,
Supplemental Information
 
2018
 
2017
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
Pretax
 
$
4,359

 
$
4,816

After-tax
 
3,274

 
3,123

Amortization of intangible assets:
 
 
 
 
Pretax
 
$
18,139

 
$
19,235

After-tax
 
13,622

 
12,472

 
 
 
 
 
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, EBITDA margin, and free cash flow. We also use EBITDA from continuing operations and pretax income from continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.