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Form 8-K (6-12-13)


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, 2013

H&R BLOCK, INC.
(Exact name of registrant as specified in charter)
Missouri
(State of Incorporation)
1-6089
(Commission File Number)
44-0607856
(I.R.S. Employer
Identification Number)

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 June 12, 2013, the Company issued a press release regarding the Company's results of operations for the fiscal year ended April 30, 2013. 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.

(a)
Exhibits

Exhibit Number
Description








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, 2013
By: /s/ Scott W. Andreasen
 
Scott W. Andreasen
 
Vice President and Secretary








EXHIBIT INDEX

Exhibit 99.1    Press Release Issued June 12, 2013.




Exhibit 99.1 (6-12-13)


Exhibit 99.1
News Release            
For Immediate Release: June12, 2013
        
H&R Block Announces Fiscal 2013 Results
▪
Earnings per share1 from continuing operations of $1.69, up 46% from prior year2 
▪
Total revenues increase 0.4% to $2.9 billion
▪
Successful cost reduction initiatives contribute to $126 million, or 22%, increase in pretax earnings from continuing operations
▪
EBITDA increased 15% to $874 million, or 30% of revenues3 

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 year ended April 30, 2013. Earnings per share from continuing operations increased 46 percent to $1.69. On an adjusted non-GAAP basis, earnings per share from continuing operations increased 25 percent to $1.59, largely driven by the successful execution of the company's previously announced cost reduction initiatives. Total revenues increased 0.4 percent to $2.9 billion, while total expenses fell 5 percent to $2.2 billion.

The 2013 U.S. tax season experienced unprecedented challenges, including significant tax legislation changes that occurred shortly before the traditional opening of the tax season, delays related to the opening of the Internal Revenue Service's (IRS) e-file system, and increased fraud controls at the IRS affecting several forms, among other matters. Based on data through April 30, the company estimates total filings at the IRS during tax season 2013 decreased approximately 0.6 percent to 133 million returns, and that the company maintained its share of total U.S. tax returns. International returns increased 1.3 percent to 3.3 million. Total tax returns prepared worldwide by and through H&R Block were 25.4 million in fiscal 2013.

CEO Perspective

“Considering the challenges the industry faced this tax season, we're pleased to have executed well and delivered improved profits,” said Bill Cobb, H&R Block's president and chief executive officer. “While there is opportunity for improvement, we remain committed to our long-term strategy of balancing client acquisition with earnings growth. Consistent with this strategy, we made a number of decisions this year to optimize our promotional offerings and distribution channels in both the assisted and digital do-it-yourself categories. Though some of these actions negatively impact total client volume, we improved overall profitability, while maintaining our overall share of the U.S. market. We also gained share for the third consecutive year in the important digital online category,” added Cobb.
___________________________

1 All per share amounts are based on fully diluted shares.
2 Unless otherwise noted, all comparisons, including those made to the “prior year,” refer to the current period compared to the prior year period.
3 EBITDA (earnings before interest, taxes, depreciation and amortization) is non-GAAP financial measures. See “About Non-GAAP Financial Measures” below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).






Fiscal 2013 Results From Continuing Operations
 
Actual
Adjusted*
in millions, except EPS
Fiscal Year
2013
Fiscal Year
2012
Fiscal Year
2013
Fiscal Year
2012
Revenue
$2,906
$2,894
$2,906
$2,894
EBITDA*
$874
$757
$883
$808
Pretax Income
$702
$576
$710
$626
Net Income
$465
$346
$437
$380
Weighted Avg. Shares - Diluted
274.4
298.6
274.4
298.6
EPS
$1.69
$1.16
$1.59
$1.27

*Adjusted amounts and EBITDA (earnings before interest, taxes, depreciation and amortization) are non-GAAP financial measures. See “About Non-GAAP Financial Measures” below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).

CFO Perspective

“While we would have preferred to see stronger revenue growth, I'm pleased that we remained disciplined and exceeded our previously stated goal of reducing costs $85 to $100 million,” said Greg Macfarlane, H&R Block's chief financial officer. “Despite the industry challenges we faced, we were able to deliver modest revenue growth along with significant expansion in our EBITDA margin, which increased four full points to 30%. We remain committed to providing shareholder return, evidenced by share repurchases and dividends totaling $532 million this fiscal year, and appreciation in our stock price that outpaced the S&P 500 benchmark during the last 12 months.”

Business Segment Results and Highlights

Tax Services

▪
Revenues increased 0.5 percent to $2.9 billion, primarily due to changes in promotional offerings such as the Free Refund Anticipation Check (RAC) and an increase in digital online filings
▪
U.S. assisted tax preparation fees and royalties declined 1 percent to $2.0 billion due to a 2.7 percent decrease in assisted returns prepared, partially offset by a 1.7 percent increase in price
▪
Revenues related to core financial services increased 7 percent to $317 million, primarily due to the discontinuation of the Free RAC promotion in fiscal 2013, partially offset by lower Emerald Card fees compared to the prior year
▪
International revenue increased 7 percent to $249 million, with strong performance in both Canada and Australia
▪
Total expenses declined 4.7 percent to $2.1 billion, driven by previously announced cost reduction initiatives that included lower compensation and occupancy costs.
▪
Adjusted, non-GAAP pretax income improved 9 percent to $823 million, primarily due to successful cost reduction initiatives mentioned above





Corporate

▪
Pretax loss improved by $9 million to $119 million, due to lower interest expense resulting from the refinancing of our medium term notes during this fiscal year. Additionally, the provision for loan loss decreased reflecting lower delinquencies in the mature and declining legacy mortgage loan portfolio noted below.
▪
Net balance of mortgage loans held for investment declined $67 million to $339 million, while provision for loan losses declined 45 percent to $13.3 million
▪
Effective tax rate from continuing operations improved approximately 6.2 points to 33.7%, driven by a $43 million tax benefit related to the settlement of substantially all outstanding issues in our 1999 through 2007 tax returns with the IRS

Discontinued Operations

▪
Net loss of $31 million compared to $80 million net loss in prior year as fiscal 2012 results included a loss on the sale of RSM McGladrey
▪
Sand Canyon Corporation (SCC), a separate legal entity from H&R Block, Inc., received new claims during the quarter for alleged breaches of representations and warranties in the principal amount of $23 million
▪
SCC reviewed claims in the principal amount of $26 million during the quarter, all of which were deemed invalid
▪
During the latter half of fiscal 2013, SCC entered into tolling agreements with certain counterparties from which SCC had received a significant majority of its asserted claims. During the fourth quarter SCC engaged in settlement discussions with these counterparties related to previously denied and future claims. Based on these actions and other considerations, SCC recorded a provision of $40 million during the fourth quarter, increasing its accrual for contingent losses related to representations and warranties to $159 million at April 30.

Balance Sheet

•
As of April 30, 2013 the company had unrestricted cash of $1.7 billion and total outstanding debt of $0.9 billion
•
Shareholder equity at April 30 was $1.3 billion

Share Repurchases and Dividends

During fiscal 2013, the company repurchased and retired 21.3 million shares at an aggregate price of $315.0 million, or $14.82 per share. The purchase represented an approximate 8 percent reduction in shares outstanding. As of April 30, 2013, 272.6 million shares remained outstanding.

A previously announced quarterly cash dividend of 20 cents per share is payable on July 1, 2013 to shareholders of record as of June 17, 2013. The July 1 dividend payment will mark H&R Block's 203rd consecutive quarterly dividend since the company went public in 1962.





Conference Call

At 4:30 p.m. Eastern on June 12, 2013, the company will host a conference call for analysts, institutional investors and shareholders. To access the call, please dial the number below approximately 5 to 10 minutes prior to the scheduled starting time:

U.S./Canada (877) 809-6980 or International (706) 758-0071
Conference ID: 57796144

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 on June 12, 2013, and continuing until July 12, 2013, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 57796144. The webcast will be available for replay June 13, 2013 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 600 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2013, H&R Block had annual revenues of $2.9 billion with 25.4 million tax returns prepared worldwide. Tax return preparation services are provided in company-owned and franchise retail tax offices by approximately 90,000 professional tax preparers, and through H&R Block At Home™ digital products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Online Press Center.

About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, please see the section of the accompanying tables titled “About Non-GAAP Financial Measures.”

Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “targets,” “would,” “will,” “should,” “could” or “may” or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address 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, 2012 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, amounts in thousands, except per share data
 
 
Three months ended April 30,
 
 
Revenues
 
Income (loss)
 
 
2013
 
2012
 
2013
 
2012
Tax Services
 
$
2,193,261

 
$
1,994,234

 
$
1,156,346

 
$
1,015,735

Corporate and Eliminations
 
6,951

 
6,440

 
(26,510
)
 
(34,109
)
 
 
$
2,200,212

 
$
2,000,674

 
1,129,836

 
981,626

Income taxes
 
 
 
 
 
440,914

 
389,923

Net income from continuing operations
 
 
 
688,922

 
591,703

Net loss from discontinued operations
 
 
 
(24,582
)
 
(5,600
)
Net income
 
 
 
 
 
$
664,340

 
$
586,103

Basic earnings per share:
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
2.53

 
$
2.02

Discontinued operations
 
 
 
 
 
(0.09
)
 
(0.02
)
Consolidated
 
 
 
 
 
$
2.44

 
$
2.00

 
 
 
 
 
 
 
 
 
Basic shares
 
 
 
 
 
272,384

 
293,103

Diluted earnings per share:
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
2.51

 
$
2.01

Discontinued operations
 
 
 
 
 
(0.09
)
 
(0.02
)
Consolidated
 
 
 
 
 
$
2.42

 
$
1.99

 
 
 
 
 
 
 
 
 
Diluted shares
 
 
 
 
 
274,715

 
293,985






 
 
Twelve months ended April 30,
 
 
Revenues
 
Income (loss)
 
 
2013
 
2012
 
2013
 
2012
Tax Services
 
$
2,877,967

 
$
2,862,378

 
$
821,143

 
$
704,002

Corporate and Eliminations
 
27,976

 
31,393

 
(119,132
)
 
(127,932
)
 
 
$
2,905,943

 
$
2,893,771

 
702,011

 
576,070

Income taxes
 
 
 
 
 
236,853

 
230,102

Net income from continuing operations
 
 
 
465,158

 
345,968

Net loss from discontinued operations
 
 
 
(31,210
)
 
(80,036
)
Net income
 
 
 
 
 
$
433,948

 
$
265,932

Basic earnings per share:
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
1.70

 
$
1.16

Discontinued operations
 
 
 
 
 
(0.11
)
 
(0.27
)
Consolidated
 
 
 
 
 
$
1.59

 
$
0.89

Basic shares
 
 
 
 
 
273,057

 
297,863

Diluted earnings per share:
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
$
1.69

 
$
1.16

Discontinued operations
 
 
 
 
 
(0.11
)
 
(0.27
)
Consolidated
 
 
 
 
 
$
1.58

 
$
0.89

 
 
 
 
 
 
 
 
 
Diluted shares
 
 
 
 
 
274,359

 
298,601


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic earnings per share is computed using the two-class method and is based on the weighted average number of shares outstanding. The dilutive effect of potential common shares is included in diluted earnings per share, except in those periods with a loss from continuing operations.
On October 25, 2012, we issued $500.0 million aggregate principal amount of our 5.50% Senior Notes due 2022 for aggregate proceeds of $497.2 million. The notes bear interest at 5.50% per annum, subject to adjustment based upon our credit ratings. Interest is payable on May 1 and November 1 of each year beginning on May 1, 2013 until the stated maturity date of November 1, 2022. The notes were issued by our wholly-owned subsidiary, Block Financial LLC (Block Financial), and were fully and unconditionally guaranteed by H&R Block, Inc.
On October 25, 2012, we provided notice to the trustee of our intention to redeem the entire $600.0 million aggregate principal amount of our 7.785% Senior Notes that were due to mature in January 2013. The redemption settled on November 26, 2012 for an aggregate price of $623.0 million, which included full payment of principal, a make-whole premium of $5.8 million and interest accrued up to the redemption date of $17.2 million. Proceeds of the issuance of our 5.50% Senior Notes, together with cash balances on hand, were used to redeem the 7.875% Senior Notes. We recognized a loss on the extinguishment of this debt of $5.8 million in fiscal year 2013, which primarily represents the interest that would have been paid on these notes if they had not been redeemed prior to maturity. This loss is included in other income, net on our consolidated statements of income.




CONSOLIDATED BALANCE SHEETS
Unaudited, amounts in thousands, except per share data
 
April 30, 2013
April 30, 2012
ASSETS
 
 
Current assets:
 
 
  Cash and cash equivalents
$
1,747,584

$
1,944,334

  Cash and cash equivalents - restricted
117,837

48,100

  Receivables, net
206,835

193,858

  Prepaid expenses and other current assets
390,087

314,702

    Total current assets
2,462,343

2,500,994

 
 
 
  Mortgage loans held for investment, net
338,789

406,201

  Investments in available-for-sale securities
486,876

371,315

  Property and equipment, net
267,880

240,772

  Intangible assets, net
284,439

276,664

  Goodwill
434,782

427,566

  Other assets
262,670

426,055

Total assets
$
4,537,779

$
4,649,567

 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
Current liabilities:
 
 
  Customer banking deposits
$
936,464

$
827,549

  Accounts payable, accrued expenses and other current liabilities
523,921

567,079

  Accrued salaries, wages and payroll taxes
134,970

163,992

  Accrued income taxes
416,128

336,374

  Current portion of long-term debt
722

631,434

    Total current liabilities
2,012,205

2,526,428

 
 
 
  Long-term debt
905,958

409,115

  Other noncurrent liabilities
356,069

388,132

      Total liabilities
3,274,232

3,323,675

Stockholders' equity:
 
 
  Common stock, no par, stated value $.01 per share
3,166

3,979

  Additional paid-in capital
752,483

796,784

  Accumulated other comprehensive income
10,550

12,145

  Retained earnings
1,333,445

2,523,997

  Less treasury shares, at cost
(836,097
)
(2,011,013
)
      Total stockholders' equity
1,263,547

1,325,892

Total liabilities and stockholders' equity
$
4,537,779

$
4,649,567





CONSOLIDATED STATEMENTS OF INCOME
Unaudited, amounts in thousands, except per share data
 
Three months ended April 30,
 
Twelve months ended April 30,
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
Service revenues
$
1,884,472

 
$
1,717,064

 
$
2,443,000

 
$
2,434,307

Product and other revenues
274,943

 
243,547

 
364,114

 
359,664

Interest income
40,797

 
40,063

 
98,829

 
99,800

 
2,200,212

 
2,000,674

 
2,905,943

 
2,893,771

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
Compensation and benefits
514,731

 
512,634

 
769,161

 
828,773

Occupancy and equipment
107,553

 
118,122

 
354,612

 
381,200

Provision for bad debt and loan losses
39,287

 
23,734

 
90,685

 
92,157

Interest
15,062

 
22,737

 
79,957

 
92,089

Depreciation and amortization of property and equipment
19,081

 
16,470

 
68,192

 
61,390

Other
126,021

 
112,561

 
242,181

 
246,086

 
821,735

 
806,258

 
1,604,788

 
1,701,695

Impairment of goodwill
—

 
3,152

 
—

 
7,409

Selling, general and administrative expenses
251,667

 
210,231

 
604,469

 
618,375

 
1,073,402

 
1,019,641

 
2,209,257

 
2,327,479

 
 
 
 
 
 
 
 
Operating income
1,126,810

 
981,033

 
696,686

 
566,292

Other income, net
3,026

 
593

 
5,325

 
9,778

 
 
 
 
 
 
 
 
Income from continuing operations before taxes
1,129,836

 
981,626

 
702,011

 
576,070

Income taxes
440,914

 
389,923

 
236,853

 
230,102

 
 
 
 
 
 
 
 
Net income from continuing operations
688,922

 
591,703

 
465,158

 
345,968

Net loss from discontinued operations
(24,582
)
 
(5,600
)
 
(31,210
)
 
(80,036
)
 
 
 
 
 
 
 
 
Net income
$
664,340

 
$
586,103

 
$
433,948

 
$
265,932

 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
2.53

 
$
2.02

 
$
1.70

 
$
1.16

Discontinued operations
(0.09
)
 
(0.02
)
 
(0.11
)
 
(0.27
)
Consolidated
$
2.44

 
$
2.00

 
$
1.59

 
$
0.89

 
 
 
 
 
 
 
 
Basic shares
272,384

 
293,103

 
273,057

 
297,863

 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
2.51

 
$
2.01

 
$
1.69

 
$
1.16

Discontinued operations
(0.09
)
 
(0.02
)
 
(0.11
)
 
(0.27
)
Consolidated
$
2.42

 
$
1.99

 
$
1.58

 
$
0.89

 
 
 
 
 
 
 
 
Diluted shares
274,715

 
293,985

 
274,359

 
298,601





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited, amounts in thousands
 
 
Twelve months ended April 30,
 
 
2013
 
2012
 
 
 
 
 
Net cash provided by operating activities
 
$
497,108

 
$
362,049

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of available-for-sale securities
 
(227,177
)
 
(256,173
)
Sales, maturities and payments received on available-for-sale securities
 
118,411

 
66,382

Principal repayments on mortgage loans held for investment, net
 
44,031

 
49,142

Purchases of property and equipment, net
 
(113,239
)
 
(82,457
)
Payments made for acquisitions of businesses and intangibles, net
 
(20,742
)
 
(15,258
)
Proceeds from sale of businesses, net
 
3,785

 
560,499

Franchise loans:
 
 
 
 
Loans funded
 
(70,807
)
 
(46,246
)
Payments received
 
83,445

 
56,591

Surrender of company-owned life insurance policies
 
81,125

 
—

Other, net
 
(9,769
)
 
19,387

Net cash provided by (used in) investing activities
 
(110,937
)
 
351,867

 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Repayments of commercial paper
 
(1,214,238
)
 
(664,167
)
Proceeds from commercial paper
 
1,214,238

 
664,167

Repayments of long-term debt
 
(636,621
)
 
—

Proceeds from issuance of long-term debt
 
497,185

 
—

Repayments of FHLB borrowings
 
—

 
(25,000
)
Customer banking deposits, net
 
103,608

 
(26,091
)
Dividends paid
 
(217,201
)
 
(208,801
)
Repurchase of common stock, including shares surrendered
 
(340,413
)
 
(180,592
)
Proceeds from exercise of stock options, net
 
25,139

 
12,275

Other, net
 
(16,238
)
 
(16,853
)
Net cash used in financing activities
 
(584,541
)
 
(445,062
)
 
 
 
 
 
Effects of exchange rates on cash
 
1,620

 
(2,364
)
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(196,750
)
 
266,490

Cash and cash equivalents at beginning of the year
 
1,944,334

 
1,677,844

Cash and cash equivalents at end of the year
 
$
1,747,584

 
$
1,944,334

 
 
 
 
 
Supplementary cash flow data:
 
 
 
 
Income taxes paid, net
 
$
155,617

 
$
218,444

Interest paid on borrowings
 
73,559

 
69,681

Interest paid on deposits
 
5,665

 
6,843

Transfers of foreclosed loans to other assets
 
10,357

 
10,308

Accrued additions to property and equipment
 
4,261

 
801

Accrued purchase of common stock
 
—

 
22,484





U.S. Tax Operating Data
(in thousands)
 
Fiscal Year to Date through 4/30/13
 
Fiscal Year to Date through 4/30/12
 
Percent change
Total returns prepared: (1)
 
 
 
 
 
H&R Block Company-Owned Operations
8,907

 
9,203

 
(3.2
)%
H&R Block Franchise Operations
5,598

 
5,697

 
(1.7
)%
Total H&R Block Assisted Returns
14,505

 
14,900

 
(2.7
)%
 
 
 
 
 
 
H&R Block At Home Desktop
2,004

 
2,158

 
(7.1
)%
H&R Block At Home Online
4,892

 
4,419

 
10.7
 %
Sub-total
6,896

 
6,577

 
4.9
 %
 
 
 
 
 
 
H&R Block Free File Alliance
774

 
861

 
(10.1
)%
Total H&R Block at Home
7,670

 
7,438

 
3.1
 %
 
 
 
 
 
 
Total H&R Block U.S. Returns
22,175

 
22,338

 
(0.7
)%

(1) Prior year numbers have been reclassified between company-owned and franchise operations for offices that were refranchised during either year.





NON-GAAP FINANCIAL MEASURES
Unaudited, amounts in thousands, except per share amounts
 
 
Three months ended
April 30,
 
Twelve months ended
April 30,
EBITDA and Adjusted EBITDA (1)
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Net income from continuing operations - as reported
 
$
688,922

 
$
591,703

 
$
465,158

 
$
345,968

 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
Income taxes
 
440,914

 
389,923

 
236,853

 
230,102

Interest expense
 
15,062

 
22,737

 
79,957

 
92,089

Depreciation and amortization
 
25,165

 
23,030

 
92,407

 
89,157

 
 
481,141

 
435,690

 
409,217

 
411,348

 
 
 
 
 
 
 
 
 
EBITDA from continuing operations
 
1,170,063

 
1,027,393

 
874,375

 
757,316

 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
364

 
(4,567
)
 
(4,579
)
 
22,961

Impairment of goodwill and intangible assets
 
2,160

 
3,152

 
3,581

 
11,389

Severance
 
4,310

 
30,554

 
4,785

 
32,474

Loss on extinguishment of debt
 
—

 
—

 
5,790

 
—

Gains on sales of tax offices
 
(396
)
 
(17,742
)
 
(1,272
)
 
(16,601
)
 
 
6,438

 
11,397

 
8,305

 
50,223

 
 
 
 
 
 
 
 
 
Adjusted EBITDA from continuing operations
 
$
1,176,501

 
$
1,038,790

 
$
882,680

 
$
807,539

(1) Earnings before interest, taxes, depreciation and amortization.
Non-GAAP Pretax Results
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax income from continuing operations - as reported
$
1,129,836

 
$
981,626

 
$
702,011

 
$
576,070

 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
364

 
(4,567
)
 
(4,579
)
 
22,961

Impairment of goodwill and intangible assets
 
2,160

 
3,152

 
3,581

 
11,389

Severance
 
4,310

 
30,554

 
4,785

 
32,474

Loss on extinguishment of debt
 
—

 
—

 
5,790

 
—

Gains on sales of tax offices
 
(396
)
 
(17,742
)
 
(1,272
)
 
(16,601
)
 
 
6,438

 
11,397

 
8,305

 
50,223

 
 
 
 
 
 
 
 
 
Pretax income from continuing operations - as adjusted
$
1,136,274

 
$
993,023

 
$
710,316

 
$
626,293






 
 
Three months ended
April 30,
 
Twelve months ended
April 30,
Non-GAAP After-Tax Results
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Net income from continuing operations - as reported
 
$
688,922

 
$
591,703

 
$
465,158

 
$
345,968

 
 
 
 
 
 
 
 
 
Add back (net of tax) :
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
215

 
(2,832
)
 
(2,817
)
 
13,935

Impairment of goodwill and intangible assets
 
1,331

 
1,895

 
2,203

 
6,912

Severance
 
2,653

 
18,539

 
2,944

 
19,708

Loss on extinguishment of debt
 
10

 
—

 
3,562

 
—

Gains on sales of tax offices
 
(245
)
 
(10,770
)
 
(782
)
 
(10,075
)
Discrete tax items
 
5,377

 
4,932

 
(33,302
)
 
3,643

 
 
9,341

 
11,764

 
(28,192
)
 
34,123

 
 
 
 
 
 
 
 
 
Net income from continuing operations - as adjusted
 
$
698,263

 
$
603,467

 
$
436,966

 
$
380,091

Non-GAAP EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EPS from continuing operations - as reported
 
$
2.51

 
$
2.01

 
$
1.69

 
$
1.16

 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
—

 
(0.01
)
 
(0.01
)
 
0.04

Impairment of goodwill and intangible assets
 
—

 
0.01

 
0.01

 
0.02

Severance
 
0.01

 
0.06

 
0.01

 
0.07

Gains on sales of tax offices
 
—

 
(0.04
)
 
—

 
(0.03
)
Loss on extinguishment of debt
 
—

 
—

 
0.01

 
—

Discrete tax items
 
0.02

 
0.02

 
(0.12
)
 
0.01

 
 
0.03

 
0.04

 
(0.1
)
 
0.11

 
 
 
 
 
 
 
 
 
EPS from continuing operations - as adjusted
 
$
2.54

 
$
2.05

 
$
1.59

 
$
1.27

Non-GAAP Pretax Results - Tax Services segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax income - as reported
 
$
1,156,346

 
$
1,015,735

 
$
821,143

 
$
704,002

 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
364

 
(4,390
)
 
(4,829
)
 
23,137

Impairment of goodwill and intangible assets
 
2,160

 
3,152

 
3,581

 
11,389

Severance
 
3,781

 
29,365

 
4,261

 
31,125

Gains on sales of tax offices
 
(396
)
 
(17,742
)
 
(1,272
)
 
(16,601
)
 
 
5,909

 
10,385

 
1,741

 
49,050

 
 
 
 
 
 
 
 
 
Pretax income - as adjusted
 
$
1,162,255

 
$
1,026,120

 
$
822,884

 
$
753,052

Supplemental Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
 
 
 
Pretax
 
$
3,879

 
$
3,166

 
$
15,293

 
$
14,213

After-tax
 
2,407

 
1,897

 
9,408

 
8,626

Amortization of intangible assets:
 
 
 
 
 
 
 
 
Pretax
 
$
6,085

 
$
6,560

 
$
24,215

 
$
27,767

After-tax
 
3,775

 
3,935

 
14,896

 
16,852





Tax Services Income Statement
Unaudited, dollars in thousands
 
 
Twelve months ended April 30,
 
 
2013
 
2012
Tax preparation fees:
 
 
 
 
U.S.
 
$
1,712,319

 
$
1,749,032

International
 
220,870

 
205,466

 
 
1,933,189

 
1,954,498

Royalties
 
318,386

 
308,561

Fees from RACs
 
158,176

 
132,361

Fees from Emerald Card
 
98,896

 
104,143

Fees from POM guarantees
 
71,355

 
75,603

Interest and fee income on EAs
 
59,657

 
59,660

Other
 
238,308

 
227,552

Total revenues
 
2,877,967

 
2,862,378

 
 
 
 
 
Compensation & benefits:
 
 
 
 
Field wages
 
654,794

 
691,680

Other wages
 
150,306

 
150,908

Benefits and other compensation
 
148,492

 
183,037

 
 
953,592

 
1,025,625

Occupancy and equipment
 
354,430

 
381,572

Marketing and advertising
 
270,240

 
278,231

Depreciation and amortization
 
92,004

 
88,836

Bad debt
 
77,402

 
68,082

Supplies
 
40,131

 
44,236

Impairment of goodwill and intangible assets
 
3,581

 
11,389

Other
 
265,444

 
260,405

Total expenses
 
2,056,824

 
2,158,376

Pretax income
 
$
821,143

 
$
704,002

 
 
 
 
 
Pretax margin
 
28.5
%
 
24.6
%




About Non-GAAP Financial Measures
The accompanying press release contains non-GAAP financial measures. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures in other companies.
We consider non-GAAP financial measures to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of items that are not indicative of our core operating performance.
The following are descriptions of adjustments we make for our non-GAAP financial measures:
▪
We exclude from our non-GAAP financial measures litigation charges we incur and favorable reserve adjustments. This does not include legal defense costs.
▪
We exclude from our non-GAAP financial measures non-cash charges to adjust the carrying values of goodwill, intangible assets, other long-lived assets and investments to their estimated fair values.
▪
We exclude from our non-GAAP financial measures severance and other restructuring charges in connection with the termination of personnel, closure of facilities and related costs.
▪
We exclude from our non-GAAP financial measures the gains and losses on business dispositions, including investment banking, legal and accounting fees.
▪
We exclude from our non-GAAP financial measures the gains and losses on extinguishment of debt.
▪
We exclude from our non-GAAP financial measures the effects of discrete income tax reserve and related adjustments recorded in a specific quarter.
We may consider whether other significant items that arise in the future should also be excluded from our non-GAAP financial measures.
We measure the performance of our business using a variety of metrics, including EBITDA, adjusted EBITDA, adjusted pretax and net income of continuing operations, adjusted EPS and adjusted pretax results of our Tax Services segment. We also use EBITDA and pretax income of continuing operations as factors in incentive compensation calculations for our employees. These adjusted results eliminate the impact of items that we do not consider indicative of our core operating performance and, we believe, provide meaningful information to assist in understanding our financial results, analyzing trends in our underlying business, and assessing our prospects for future performance.