8-K


 

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 3, 2016

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 3, 2016, the Company issued a press release regarding the Company’s results of operations for the fiscal quarter ended January 31, 2016. 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 3, 2016






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 3, 2016
By:
/s/ Scott W. Andreasen
 
 
 
Scott W. Andreasen
 
 
 
Vice President and Secretary







EXHIBIT INDEX

Exhibit 99.1        Press Release Issued March 3, 2016



Exhibit

Exhibit 99.1
News Release
For Immediate Release: March 3, 2016
H&R Block Announces Fiscal 2016 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 2016 third quarter ended January 31, 2016 and key operating data through February 28, 2016. The company typically reports a third quarter operating loss due to the seasonality of its tax business.
Third Quarter 2016 Highlights1 

Significant delays seen in U.S. tax industry as consumers modify tax filing behaviors and federal and state governments take new actions to combat tax fraud
Total revenues decreased $34.5 million to $474.5 million primarily due to lower client volumes in U.S. assisted offices, the impact of the divestiture of H&R Block Bank, and the impact of foreign currency exchange rate fluctuations, partially offset by increased pricing and improved form mix
Non-GAAP adjusted loss per share from continuing operations of $0.34 2, 3 
Repurchased approximately 12.0 million shares during the quarter, at an average price of $32.72; fiscal year-to-date repurchases through January 31, 2016 total 52.5 million shares, or approximately 19% of outstanding shares

"This tax season has been marked by the continued impact of fraud on the industry, the continuing trend of taxpayers filing their returns later in the season and tax refunds taking longer to process," said Bill Cobb, H&R Block's president and chief executive officer. "Significant initiatives by both federal and state governments to combat tax fraud are creating material changes in the industry. While we believe that there are additional efforts that need to be taken, such as EITC form parity and minimum standards for tax return preparers, we fully support the efforts being made this season."

The company reported a decrease in revenues of $34.5 million to $474.5 million, primarily due to lower client volumes in its U.S. assisted tax offices, the impact of the divestiture of H&R Block Bank, and the impact of foreign currency exchange rate fluctuations. The decline in volume was offset by improved pricing and form mix in both assisted and DIY categories. A majority of the company's revenues and all of its fiscal 2016 earnings will occur during its fiscal fourth quarter, and thus fiscal third quarter financial results are not indicative of expected performance for the full year.

The decline in the company's U.S. tax return volumes followed the industry-wide decline in filings through mid-February, which the company believes are primarily the result of the ongoing impact of tax fraud and related prevention measures, delayed refunds, and the effect of the Affordable Care Act (ACA). Total returns prepared by and through H&R Block declined 6.1% percent through February 28, 2016, to 10.6 million, which represented a 0.3% point improvement from the decline as of January 31, 2016, indicating positive momentum in the effort to reduce early season client loss. Additionally, the improved pricing and form mix noted in the fiscal third quarter continued through February 28.


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 
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).
3 
All per share amounts are based on fully diluted shares at the end of the corresponding period.


"Despite the impact these challenges have had on our early season volumes, I'm pleased with our monetization efforts as we've seen improvements in both form mix and price. Turning the early season client loss around will take time, but our results are starting to indicate that our efforts are working," said Cobb. "There is still a significant amount of the tax season remaining and we are focused on executing our Tax Plus strategy to help deliver a strong second half."

Fiscal 2016 Third Quarter Results From Continuing Operations
 
 
Actual
 
Adjusted2 
(in millions, except EPS)
 
Fiscal Year 2016
 
Fiscal Year 2015
 
Fiscal Year 2016
 
Fiscal Year 2015
Revenue
 
$
475

 
$
509

 
$
475

 
$
509

EBITDA
 
$
(78
)
 
$
(38
)
 
$
(77
)
 
$
(37
)
Pretax Loss
 
$
(147
)
 
$
(91
)
 
$
(146
)
 
$
(89
)
Net Loss
 
$
(79
)
 
$
(35
)
 
$
(79
)
 
$
(34
)
Weighted-Avg. Shares - Diluted
 
231.9

 
275.2

 
231.9

 
275.2

EPS
 
$
(0.34
)
 
$
(0.13
)
 
$
(0.34
)
 
$
(0.13
)
 
 
 
 
 
 
 
 
 

CFO Perspective
"As we are no longer regulated as a savings and loan holding company, we have been able to return to our historical practice of repurchasing shares opportunistically to create shareholder value," said Greg Macfarlane, H&R Block's chief financial officer. "In the last two fiscal quarters, we repurchased 52.5 million shares, or $1.9 billion of H&R Block stock, representing 19 percent of total outstanding shares. We are confident in the future of H&R Block and look forward to continuing as the leading tax preparation company for years to come."

"Additionally, Sand Canyon took significant steps toward the resolution of its representation and warranty obligations by settling with some of the counterparties that asserted claims against them," added Macfarlane. "While we believe the wind-down of Sand Canyon will continue to take time, it's positive to see progress." 4 

Financial Results and Highlights
Revenues decreased 6.8% to $475 million, due primarily to lower tax preparation volumes, the impact of the divestiture of H&R Block Bank, and the impact of foreign currency exchange rate fluctuations. These decreases were partially offset by improved price and return mix in both assisted and DIY categories.
Total operating expenses increased $10.2 million, or 1.7%. The increase was primarily due to occupancy costs and amortization expense which increased due to current year acquisitions of independent tax preparation and franchise businesses as well as the annualization of expenses related to acquisitions in the prior year and increased marketing expenses. These increases were partially offset by a decrease in field compensation resulting from lower tax preparation volume.
Other income increased $2.8 million primarily due to the accounting changes related to the divestiture of H&R Block Bank discussed above.

4 See the company's most recent Forms 10-K and 10-Q filed with the Securities and Exchange Commission for more information regarding Sand Canyon Corporation and related loss contingencies.



Interest expense increased $14.5 million from the prior year due to $1 billion of long-term debt issued in September 2015, and an increase in borrowings under the company's line of credit during the fiscal third quarter.
Pretax loss increased 61.2% to $147 million.

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 a significant majority of previously denied and possible future representation and warranty claims.
SCC's accrual for contingent losses related to representation and warranty claims decreased $89 million from the prior quarter to $65 million as a result of settlements with counterparties. The settlements were fully covered by prior accruals.

Balance Sheet
Cash balances decreased from January 31, 2015 mainly due to the net cash payment to the company's bank partner for the transfer of deposit liabilities related to the divestiture of H&R Block Bank and the net impact of capital structure changes, including share repurchases totaling $1.9 billion during the fiscal year.
Accounts receivable increased $52 million from January 31, 2015 due to the delayed timing of IRS funding of tax refunds.
Upon divestiture of H&R Block Bank in the second quarter of fiscal 2016, available for sale securities, previously held to meet bank regulatory requirements, were liquidated for approximately $388 million. Additionally, certain liabilities, including all customer banking deposits, were transferred to the company's bank partner.
Long-term debt increased $1 billion from January 31, 2015 due to the issuance of $650 million of 4.125% Senior Notes and $350 million of 5.250% Senior Notes. Long-term debt also increased as a result of outstanding borrowings under the company's line of credit, which at January 31, 2016 totaled $1.1 billion.
Stockholders' equity was impacted by repurchases and subsequent retirements of 52.5 million shares of common stock during the fiscal year for $1.9 billion, or an average price of $36.02 per share.
Details regarding the bank divestiture and related agreements, capital structure transactions and share repurchase program can be found in previously filed press releases issued, as well as Forms 8-K filed with the Securities and Exchange Commission, in September and October of 2015.


Share Repurchases and Dividends

During the third quarter of fiscal 2016, the company repurchased and retired approximately 12.0 million shares at an aggregate price of $392 million, or $32.72 per share. As of January 31, 2016, 224.4 million shares were outstanding.

The company completed these share repurchases under a $3.5 billion share repurchase program approved by the company’s board of directors in August 2015. Under this program, the company has repurchased



approximately 52.5 million shares of its common stock, or 19% of outstanding shares, for an aggregate purchase price of $1.9 billion.

As previously announced, a quarterly cash dividend of 20 cents per share is payable on April 1, 2016 to shareholders of record as of March 15, 2016. The April 1 dividend payment will be H&R Block's 214th consecutive quarterly dividend since the company went public in 1962.

Conference Call
Discussion of the fiscal 2016 third quarter results, future outlook and a general business update will occur during the company’s previously announced fiscal third quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on March 3, 2016. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

U.S./Canada (888) 895-5260 or International (443) 842-7595
Conference ID: 18401962

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 7:30 p.m. Eastern time on March 3, 2016, and continuing until April 3, 2016, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 18401962. The webcast will be available for replay March 4, 2016 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 680 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2015, H&R Block had annual revenues of nearly $3.1 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 also offers adjacent Tax Plus 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 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," "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, 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. 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, 2015 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:    Gene King, (816) 854-4672, gene.king@hrblock.com
TABLES FOLLOW





CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended January 31,
 
Nine months ended January 31,
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
Service revenues
 
$
389,502

 
$
406,441

 
$
621,356

 
$
637,356

Royalty, product and other revenues
 
85,041

 
102,633

 
119,320

 
139,932

 
 
474,543

 
509,074

 
740,676

 
777,288

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
Compensation and benefits
 
181,915

 
186,656

 
300,398

 
307,892

Occupancy and equipment
 
96,201

 
92,303

 
281,107

 
263,235

Provision for bad debt and loan losses
 
35,734

 
39,283

 
38,921

 
44,032

Depreciation and amortization
 
28,795

 
29,181

 
84,237

 
82,695

Other
 
49,868

 
47,255

 
127,759

 
116,247

 
 
392,513

 
394,678

 
832,422

 
814,101

Selling, general and administrative:
 
 
 
 
 
 
 
 
Marketing and advertising
 
93,708

 
87,569

 
115,204

 
108,227

Compensation and benefits
 
63,653

 
60,380

 
179,915

 
175,697

Depreciation and amortization
 
16,508

 
14,110

 
43,509

 
33,211

Other selling, general and administrative
 
28,003

 
27,488

 
97,283

 
66,991

 
 
201,872

 
189,547

 
435,911

 
384,126

Total operating expenses
 
594,385

 
584,225

 
1,268,333

 
1,198,227

 
 
 
 
 
 
 
 
 
Other income, net
 
3,055

 
304

 
13,993

 
827

Interest expense on borrowings
 
(23,573
)
 
(9,048
)
 
(46,329
)
 
(36,686
)
Other expenses, net
 
(6,140
)
 
(6,970
)
 
(11,335
)
 
(10,456
)
Loss from continuing operations before income tax benefit
 
(146,500
)
 
(90,865
)
 
(571,328
)
 
(467,254
)
Income tax benefit
 
(67,851
)
 
(55,554
)
 
(253,656
)
 
(209,865
)
Net loss from continuing operations
 
(78,649
)
 
(35,311
)
 
(317,672
)
 
(257,389
)
Net loss from discontinued operations
 
(3,080
)
 
(1,637
)
 
(8,723
)
 
(7,789
)
NET LOSS
 
$
(81,729
)
 
$
(36,948
)
 
$
(326,395
)
 
$
(265,178
)
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.34
)
 
$
(0.13
)
 
$
(1.23
)
 
$
(0.94
)
Discontinued operations
 
(0.01
)
 

 
(0.04
)
 
(0.03
)
Consolidated
 
$
(0.35
)
 
$
(0.13
)
 
$
(1.27
)
 
$
(0.97
)
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE BASIC AND DILUTED SHARES
 
231,904

 
275,190

 
257,979

 
274,957

 
 
 
 
 
 
 
 
 






CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s - except per share data)
 
As of
 
January 31, 2016

 
January 31, 2015

 
April 30, 2015

 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
189,511

 
$
1,321,134

 
$
2,007,190

Cash and cash equivalents — restricted
 
69,649

 
51,085

 
91,972

Receivables, net
 
829,774

 
777,453

 
167,964

Deferred tax assets and income taxes receivable
 
29,411

 
167,826

 
174,267

Prepaid expenses and other current assets
 
101,169

 
92,976

 
70,283

Investments in available-for-sale securities
 
1,145

 
367,845

 
439,625

Total current assets
 
1,220,659

 
2,778,319

 
2,951,301

Mortgage loans held for investment, net
 
212,106

 
245,663

 
239,338

Property and equipment, net
 
290,202

 
308,805

 
311,387

Intangible assets, net
 
473,732

 
443,329

 
432,142

Goodwill
 
443,418

 
442,961

 
441,831

Deferred tax assets and income taxes receivable
 
113,887

 
13,441

 
13,461

Other noncurrent assets
 
120,042

 
146,423

 
125,960

Total assets
 
$
2,874,046

 
$
4,378,941

 
$
4,515,420

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Commercial paper borrowings
 
$

 
$
591,486

 
$

Customer banking deposits
 

 
1,286,216

 
744,241

Accounts payable and accrued expenses
 
205,981

 
172,328

 
231,322

Accrued salaries, wages and payroll taxes
 
123,289

 
118,512

 
144,744

Accrued income taxes and reserves for uncertain tax positions
 
8,099

 
1,619

 
434,684

Current portion of long-term debt
 
817

 
781

 
790

Deferred revenue and other current liabilities
 
250,846

 
300,162

 
322,508

Total current liabilities
 
589,032

 
2,471,104

 
1,878,289

Long-term debt
 
2,626,933

 
505,460

 
505,298

Deferred tax liabilities and reserves for uncertain tax positions
 
88,377

 
144,036

 
142,586

Deferred revenue and other noncurrent liabilities
 
106,438

 
111,956

 
156,298

Total liabilities
 
3,410,780

 
3,232,556

 
2,682,471

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
Common stock, no par, stated value $.01 per share
 
2,641

 
3,166

 
3,166

Additional paid-in capital
 
758,491

 
778,845

 
783,793

Accumulated other comprehensive income (loss)
 
(20,849
)
 
(1,263
)
 
1,740

Retained earnings (deficit)
 
(510,000
)
 
1,158,376

 
1,836,442

Less treasury shares, at cost
 
(767,017
)
 
(792,739
)
 
(792,192
)
Total stockholders’ equity (deficiency)
 
(536,734
)
 
1,146,385

 
1,832,949

Total liabilities and stockholders’ equity
 
$
2,874,046

 
$
4,378,941

 
$
4,515,420

 
 
 
 
 
 
 





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Nine months ended January 31,
 
2016
 
2015
 
 
 
 
 
NET CASH USED IN OPERATING ACTIVITIES
 
$
(1,426,949
)
 
$
(1,247,200
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Sales, maturities of and payments received on available-for-sale securities
 
436,380

 
68,013

Principal payments on mortgage loans held for investment, net
 
24,664

 
18,098

Capital expenditures
 
(66,418
)
 
(98,876
)
Payments made for business acquisitions, net of cash acquired
 
(85,329
)
 
(112,163
)
Franchise loans:
 
 
 
 
Loans funded
 
(21,377
)
 
(48,013
)
Payments received
 
22,234

 
34,164

Other, net
 
3,887

 
6,079

Net cash provided by (used in) investing activities
 
314,041

 
(132,698
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Repayments of commercial paper
 

 
(457,576
)
Proceeds from issuance of commercial paper
 

 
1,049,062

Repayments of long-term debt
 
(225,000
)
 
(400,000
)
Proceeds from issuance of long-term debt
 
2,346,831

 

Customer banking deposits, net
 
(326,705
)
 
515,015

Transfer of HRB Bank deposits
 
(419,028
)
 

Dividends paid
 
(157,530
)
 
(164,905
)
Repurchase of common stock, including shares surrendered
 
(1,888,595
)
 
(10,355
)
Proceeds from exercise of stock options
 
25,803

 
16,026

Other, net
 
(43,972
)
 
(15,993
)
Net cash provided by (used in) financing activities
 
(688,196
)
 
531,274

 
 
 
 
 
Effects of exchange rate changes on cash
 
(16,575
)
 
(15,549
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(1,817,679
)
 
(864,173
)
Cash and cash equivalents at beginning of the period
 
2,007,190

 
2,185,307

Cash and cash equivalents at end of the period
 
$
189,511

 
$
1,321,134

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
157,691

 
$
201,374

Interest paid on borrowings
 
32,772

 
43,561

Transfers of foreclosed loans to other assets
 
2,515

 
3,240

Accrued additions to property and equipment
 
4,385

 
1,986

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

 
5,000

Accrued purchase of common stock
 
21,167

 

 
 
 
 
 





FINANCIAL RESULTS
 
 
 
(unaudited, in 000s - except per share amounts)
 
 
 
Three months ended January 31,
 
Nine months ended January 31,
 
 
2016
 
2015
 
2016
 
2015
Tax preparation fees:
 
 
 
 
 
 
 
 
U.S. assisted
 
$
268,775

 
$
283,692

 
$
332,463

 
$
341,107

International
 
8,575

 
10,021

 
79,633

 
94,308

U.S. digital
 
39,251

 
36,720

 
45,899

 
42,545

 
 
316,601

 
330,433

 
457,995

 
477,960

Royalties
 
40,387

 
52,284

 
59,245

 
68,508

Revenues from Refund Transfers
 
49,419

 
50,899

 
54,782

 
56,472

Revenues from Emerald Card®
 
13,356

 
13,910

 
38,853

 
39,479

Revenues from Peace of Mind® Extended Service Plan
 
15,736

 
13,492

 
62,764

 
54,308

Interest and fee income on Emerald Advance
 
31,603

 
30,288

 
32,334

 
31,439

Other
 
7,441

 
17,768

 
34,703

 
49,122

Total revenues
 
474,543

 
509,074

 
740,676

 
777,288

Compensation and benefits:
 
 
 
 
 
 
 
 
Field wages
 
154,098

 
161,921

 
253,561

 
264,822

Other wages
 
48,786

 
45,983

 
136,782

 
131,544

Benefits and other compensation
 
42,684

 
39,132

 
89,970

 
87,223

 
 
245,568

 
247,036

 
480,313

 
483,589

Occupancy and equipment
 
96,157

 
92,855

 
280,953

 
260,231

Marketing and advertising
 
93,708

 
87,569

 
115,204

 
108,227

Depreciation and amortization
 
45,303

 
43,291

 
127,746

 
115,906

Bad debt
 
35,734

 
39,283

 
38,921

 
44,032

Supplies
 
6,219

 
6,981

 
13,346

 
17,582

Other
 
71,696

 
67,210

 
211,850

 
168,660

Total operating expenses
 
594,385

 
584,225

 
1,268,333

 
1,198,227

Other income, net
 
3,055

 
304

 
13,993

 
827

Interest expense on borrowings
 
(23,573
)
 
(9,048
)
 
(46,329
)
 
(36,686
)
Other expenses, net
 
(6,140
)
 
(6,970
)
 
(11,335
)
 
(10,456
)
Pretax loss
 
(146,500
)
 
(90,865
)
 
(571,328
)
 
(467,254
)
Income tax benefit
 
(67,851
)
 
(55,554
)
 
(253,656
)
 
(209,865
)
Net loss from continuing operations
 
(78,649
)
 
(35,311
)
 
(317,672
)
 
(257,389
)
Net loss from discontinued operations
 
(3,080
)
 
(1,637
)
 
(8,723
)
 
(7,789
)
Net loss
 
$
(81,729
)
 
$
(36,948
)
 
$
(326,395
)
 
$
(265,178
)
 
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.34
)
 
$
(0.13
)
 
$
(1.23
)
 
$
(0.94
)
Discontinued operations
 
(0.01
)
 

 
(0.04
)
 
(0.03
)
Consolidated
 
$
(0.35
)
 
$
(0.13
)
 
$
(1.27
)
 
$
(0.97
)
 
 
 
 
 
 
 
 
 
Weighted average basic and diluted shares
 
231,904

 
275,190

 
257,979

 
274,957

 
 
 
 
 
 
 
 
 






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

 
 
Fiscal Year-to-Date
 
 
 
Fiscal Year-to-Date
 
 
 
 
January 31,
 
 
 
February 28,
 
 
 
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Tax Returns Prepared: (1)
 
 
 
 
 
 
 
 
 
 
 
 
Company-Owned Operations
 
1,413

 
1,600

 
(11.7
)%
 
4,266

 
4,643

 
(8.1
)%
Franchise Operations
 
766

 
879

 
(12.9
)%
 
2,316

 
2,500

 
(7.4
)%
   Total H&R Block Assisted
 
2,179

 
2,479

 
(12.1
)%
 
6,582

 
7,143

 
(7.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Desktop
 
189

 
180

 
5.0
 %
 
825

 
875

 
(5.7
)%
Online
 
1,075

 
1,027

 
4.7
 %
 
2,801

 
2,876

 
(2.6
)%
Total H&R Block Tax Software
 
1,264

 
1,207

 
4.7
 %
 
3,626

 
3,751

 
(3.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Free File Alliance
 
127

 
129

 
(1.6
)%
 
377

 
383

 
(1.6
)%
Total H&R Block U.S. Returns
 
3,570

 
3,815

 
(6.4
)%
 
10,585

 
11,277

 
(6.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  
Amounts have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company during either year.





NON-GAAP FINANCIAL MEASURES
 
 
Three months ended January 31,
 
2016
 
2015
 
 
EBITDA
 
Loss
 
EBITDA
 
Loss
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(77,626
)
 
$
(78,649
)
 
$
(38,302
)
 
$
(35,311
)
 
 
 
 
 
 
 
 
 
Adjustments (pretax):
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
328

 
328

 
337

 
337

Professional fees related to HRB Bank and recapitalization transactions
 
(96
)
 
(96
)
 
6

 
6

Gain on sales of tax offices/businesses
 
(101
)
 
(101
)
 
1,451

 
1,451

Tax effect of adjustments
 

 
(129
)
 

 
(683
)
 
 
131

 
2

 
1,794

 
1,111

 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(77,495
)
 
$
(78,647
)
 
$
(36,508
)
 
$
(34,200
)
 
 
 
 
 
 
 
Adjusted EPS
 
 
 
$
(0.34
)
 
 
 
$
(0.13
)
 
 
 
 
 
 
 
 
 
Nine months ended January 31,
 
2016
 
2015
 
 
EBITDA
 
Loss
 
EBITDA
 
Loss
 
 
 
 
 
 
 
 
 
As reported - from continuing operations
 
$
(397,075
)
 
$
(317,672
)
 
$
(314,153
)
 
$
(257,389
)
 
 
 
 
 
 
 
 
 
Adjustments (pretax):
 
 
 
 
 
 
 
 
Loss contingencies - litigation
 
1,017

 
1,017

 
609

 
609

Severance
 

 

 
1,051

 
1,051

Professional fees related to HRB Bank and recapitalization transactions
 
20,722

 
20,722

 
120

 
120

Gains on AFS securities, net
 
(8,138
)
 
(8,138
)
 
(24
)
 
(24
)
Gain on sales of tax offices/businesses
 
(127
)
 
(127
)
 
552

 
552

Tax effect of adjustments
 

 
(5,129
)
 

 
(877
)
 
 
13,474

 
8,345

 
2,308

 
1,431

 
 
 
 
 
 
 
 
 
As adjusted - from continuing operations
 
$
(383,601
)
 
$
(309,327
)
 
$
(311,845
)
 
$
(255,958
)
 
 
 
 
 
 
 
Adjusted EPS
 
 
 
$
(1.20
)
 
 
 
$
(0.94
)
 
 
 
 
 
 
 
 
 
 
 
Three months ended January 31,
 
Nine months ended January 31,
EBITDA
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Net loss - as reported
$
(81,729
)
 
$
(36,948
)
 
$
(326,395
)
 
$
(265,178
)
 
 
 
 
 
 
 
 
 
Add back :
 
 
 
 
 
 
 
 
Discontinued operations
 
3,080

 
1,637

 
8,723

 
7,789

Income taxes
 
(67,851
)
 
(55,554
)
 
(253,656
)
 
(209,865
)
Interest expense
 
23,571

 
9,272

 
46,507

 
37,195

Depreciation and amortization
 
45,303

 
43,291

 
127,746

 
115,906

 
 
4,103

 
(1,354
)
 
(70,680
)
 
(48,975
)
 
 
 
 
 
 
 
 
 
EBITDA from continuing operations
 
$
(77,626
)
 
$
(38,302
)
 
$
(397,075
)
 
$
(314,153
)
 
 
 
 
 
 
 
 
 




NON-GAAP FINANCIAL MEASURES
 
 
 
 
Three months ended January 31,
 
Nine months ended January 31,
Supplemental Information
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
 
 
 
Pretax
 
$
7,230

 
$
6,090

 
$
21,106

 
$
20,689

After-tax
 
4,396

 
3,678

 
13,073

 
12,763

Amortization of intangible assets:
 
 
 
 
 
 
 
 
Pretax
 
$
20,153

 
$
16,743

 
$
54,632

 
$
41,206

After-tax
 
12,279

 
10,197

 
33,839

 
25,420

 
 
 
 
 
 
 
 
 




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.