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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended
October 31, 2019
 
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from             to             
Commission file number 1-06089

H&R Block, Inc.
(Exact name of registrant as specified in its charter)
Missouri
 
44-0607856
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
One H&R Block Way, Kansas City, Missouri 64105
(Address of principal executive offices, including zip code)
(816) 854-3000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, without par value
HRB
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes     No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer            Accelerated filer         Non-accelerated filer           Smaller reporting company      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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
The number of shares outstanding of the registrant's Common Stock, without par value, at the close of business on November 29, 2019: 195,246,026 shares.
 




Form 10-Q for the Period Ended October 31, 2019
Table of Contents
 
 
 
 
 
Consolidated Statements of Operations and Comprehensive Loss
 
 
Three and six months ended October 31, 2019 and 2018
 
 
 
 
Consolidated Balance Sheets
 
 
As of October 31, 2019, October 31, 2018 and April 30, 2019
 
 
 
 
Consolidated Statements of Cash Flows
 
 
Six months ended October 31, 2019 and 2018
 
 
 
 
Consolidated Statements of Stockholders' Equity
 
 
Three and six months ended October 31, 2019 and the fiscal year ended April 30, 2019
 
 
 
 
Notes to Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal Proceedings
 
 
 
Risk Factors
 
 
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
 
 
 
Exhibits
 
 
 
 





PART I    FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(unaudited, in 000s, except 
per share amounts)
 
 
 
Three months ended October 31,
 
Six months ended October 31,
 
 
2019

 
2018

 
2019

 
2018

 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
Service revenues
 
$
139,648

 
$
127,267

 
$
271,807

 
$
254,127

Royalty, product and other revenues
 
21,153

 
21,604

 
39,356

 
39,927

 
 
160,801

 
148,871

 
311,163

 
294,054

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Costs of revenues
 
253,206

 
250,815

 
482,598

 
472,375

Selling, general and administrative
 
150,334

 
113,319

 
266,470

 
219,059

Total operating expenses
 
403,540

 
364,134

 
749,068

 
691,434

 
 
 
 
 
 
 
 
 
Other income (expense), net
 
2,739

 
4,464

 
11,862

 
9,006

Interest expense on borrowings
 
(21,306
)
 
(21,191
)
 
(42,377
)
 
(42,381
)
Loss from continuing operations before income tax benefit
 
(261,306
)
 
(231,990
)
 
(468,420
)
 
(430,755
)
Income tax benefit
 
(77,752
)
 
(61,053
)
 
(139,142
)
 
(111,021
)
Net loss from continuing operations
 
(183,554
)
 
(170,937
)
 
(329,278
)
 
(319,734
)
Net loss from discontinued operations, net of tax benefits of $1,327 and $1,607, $2,685 and $2,769
 
(4,445
)
 
(5,339
)
 
(8,968
)
 
(9,212
)
NET LOSS
 
$
(187,999
)
 
$
(176,276
)
 
$
(338,246
)
 
$
(328,946
)
 
 
 
 
 
 
 
 
 
BASIC AND DILUTED LOSS PER SHARE:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.93
)
 
$
(0.83
)
 
$
(1.65
)
 
$
(1.55
)
Discontinued operations
 
(0.02
)
 
(0.03
)
 
(0.04
)
 
(0.04
)
Consolidated
 
$
(0.95
)
 
$
(0.86
)
 
$
(1.69
)
 
$
(1.59
)
 
 
 
 
 
 
 
 
 
DIVIDENDS DECLARED PER SHARE
 
$
0.26

 
$
0.25

 
$
0.52

 
$
0.50

 
 
 
 
 
 
 
 
 
COMPREHENSIVE LOSS:
 
 
 
 
 
 
 
 
Net loss
 
$
(187,999
)
 
$
(176,276
)
 
$
(338,246
)
 
$
(328,946
)
Unrealized losses on securities, net of taxes
 

 
(3
)
 

 

Change in foreign currency translation adjustments
 
919

 
(2,843
)
 
(1,401
)
 
(4,577
)
Other comprehensive income (loss)
 
919

 
(2,846
)
 
(1,401
)
 
(4,577
)
Comprehensive loss
 
$
(187,080
)
 
$
(179,122
)
 
$
(339,647
)
 
$
(333,523
)
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.

H&R Block, Inc. | Q2 FY2020 Form 10-Q
1


CONSOLIDATED BALANCE SHEETS
 
(unaudited, in 000s, except 
share and per share amounts)
 
As of
 
October 31, 2019

 
October 31, 2018

 
April 30, 2019

 
 


 


 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 
$
245,312

 
$
600,799

 
$
1,572,150

Cash and cash equivalents - restricted
 
176,332

 
122,507

 
135,577

Receivables, less allowance for doubtful accounts of $65,815, $65,409 and $67,228
 
74,710

 
61,286

 
138,965

Prepaid expenses and other current assets
 
105,058

 
106,410

 
146,667

Total current assets
 
601,412

 
891,002

 
1,993,359

Property and equipment, at cost, less accumulated depreciation and amortization of $784,535, $787,978 and $745,761
 
206,216

 
241,772

 
212,092

Operating lease right of use asset
 
475,969

 

 

Intangible assets, net
 
425,377

 
364,524

 
342,493

Goodwill
 
815,331

 
507,191

 
519,937

Deferred tax assets and income taxes receivable
 
145,807

 
130,987

 
141,979

Other noncurrent assets
 
86,629

 
97,820

 
90,085

Total assets
 
$
2,756,741

 
$
2,233,296

 
$
3,299,945

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
LIABILITIES:
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
111,439

 
$
114,393

 
$
249,525

Accrued salaries, wages and payroll taxes
 
57,602

 
43,396

 
196,527

Accrued income taxes and reserves for uncertain tax positions
 
106,125

 
94,257

 
271,973

Current portion of long-term debt
 
648,651

 

 

Operating lease liabilities
 
162,897

 

 

Deferred revenue and other current liabilities
 
177,243

 
183,675

 
204,976

Total current liabilities
 
1,263,957

 
435,721

 
923,001

Long-term debt and line of credit borrowings
 
980,299

 
1,491,328

 
1,492,629

Deferred tax liabilities and reserves for uncertain tax positions
 
180,362

 
235,799

 
197,906

Operating lease liabilities
 
326,691

 

 

Deferred revenue and other noncurrent liabilities
 
81,179

 
101,773

 
144,882

Total liabilities
 
2,832,488

 
2,264,621

 
2,758,418

COMMITMENTS AND CONTINGENCIES
 


 


 


STOCKHOLDERS' EQUITY:
 
 
 
 
 
 
Common stock, no par, stated value $.01 per share, 800,000,000 shares authorized, shares issued of 231,024,069, 242,026,278 and 238,336,760
 
2,310

 
2,420

 
2,383

Additional paid-in capital
 
765,220

 
759,235

 
767,636

Accumulated other comprehensive loss
 
(21,817
)
 
(18,880
)
 
(20,416
)
Retained earnings (deficit)
 
(122,535
)
 
(64,291
)
 
499,386

Less treasury shares, at cost, of 35,778,404, 36,499,002 and 36,377,441
 
(698,925
)
 
(709,809
)
 
(707,462
)
Total stockholders' equity (deficiency)
 
(75,747
)
 
(31,325
)
 
541,527

Total liabilities and stockholders' equity
 
$
2,756,741

 
$
2,233,296

 
$
3,299,945

 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.

2
Q2 FY2020 Form 10-Q | H&R Block, Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited, in 000s)
 
Six months ended October 31,
 
2019

 
2018

CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net loss
 
$
(338,246
)
 
$
(328,946
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
81,262

 
81,925

Provision for bad debt
 
1,890

 
2,350

Deferred taxes
 
12,595

 
17,913

Stock-based compensation
 
16,094

 
11,839

Changes in assets and liabilities, net of acquisitions:
 
 
 
 
Receivables
 
71,859

 
74,672

Prepaid expenses, other current and noncurrent assets
 
13,889

 
(9,134
)
Accounts payable, accrued expenses, salaries, wages and payroll taxes
 
(267,257
)
 
(218,692
)
Deferred revenue, other current and noncurrent liabilities
 
(74,996
)
 
(81,014
)
Income tax receivables, accrued income taxes and income tax reserves
 
(206,278
)
 
(179,660
)
Other, net
 
(4,128
)
 
1,056

Net cash used in operating activities
 
(693,316
)
 
(627,691
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures
 
(42,854
)
 
(66,422
)
Payments made for business acquisitions, net of cash acquired
 
(416,925
)
 
(24,549
)
Franchise loans funded
 
(16,021
)
 
(8,915
)
Payments from franchisees
 
7,902

 
11,689

Other, net
 
50,839

 
4,993

Net cash used in investing activities
 
(417,059
)
 
(83,204
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Proceeds from line of credit borrowings
 
135,000

 

Dividends paid
 
(104,063
)
 
(103,484
)
Repurchase of common stock, including shares surrendered
 
(190,369
)
 
(102,096
)
Proceeds from exercise of stock options
 
1,215

 
1,746

Other, net
 
(18,544
)
 
(22,434
)
Net cash used in financing activities
 
(176,761
)
 
(226,268
)
 
 
 
 
 
Effects of exchange rate changes on cash
 
1,053

 
(3,209
)
 
 
 
 
 
Net decrease in cash and cash equivalents, including restricted balances
 
(1,286,083
)
 
(940,372
)
Cash, cash equivalents and restricted cash, beginning of period
 
1,707,727

 
1,663,678

Cash, cash equivalents and restricted cash, end of period
 
$
421,644

 
$
723,306

 
 
 
 
 
SUPPLEMENTARY CASH FLOW DATA:
 
 
 
 
Income taxes paid, net of refunds received
 
$
54,109

 
$
50,197

Interest paid on borrowings
 
39,952

 
39,902

Accrued additions to property and equipment
 
3,409

 
4,765

 
 
 
 
 
See accompanying notes to consolidated financial statements.

H&R Block, Inc. | Q2 FY2020 Form 10-Q
3


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
(amounts in 000s, except per share amounts)
 
 
 
Common Stock
 
Additional
Paid-in
Capital

 
Accumulated Other
Comprehensive
Income (Loss)

 
Retained
Earnings (Deficit)

 
Treasury Stock
 
Total
Stockholders’
Equity (Deficiency)

 
 
Shares

 
Amount

 
 
 
 
Shares

 
Amount

 
Balances as of May 1, 2019
 
238,337

 
$
2,383

 
$
767,636

 
$
(20,416
)
 
$
499,386

 
(36,377
)
 
$
(707,462
)
 
$
541,527

Net loss
 

 

 

 

 
(150,247
)
 

 

 
(150,247
)
Other comprehensive loss
 

 

 

 
(2,320
)
 

 

 

 
(2,320
)
Stock-based compensation
 

 

 
6,557

 

 

 

 

 
6,557

Stock-based awards exercised or vested
 

 

 
(13,789
)
 

 
(2,786
)
 
906

 
17,631

 
1,056

Acquisition of treasury shares
 

 

 

 

 

 
(314
)
 
(9,185
)
 
(9,185
)
Repurchase and retirement of common shares
 
(1,593
)
 
(16
)
 
(955
)
 

 
(43,101
)
 

 

 
(44,072
)
Cash dividends declared - $0.26 per share
 

 

 

 

 
(52,512
)
 

 

 
(52,512
)
Balances as of July 31, 2019
 
236,744

 
$
2,367

 
$
759,449

 
$
(22,736
)
 
$
250,740

 
(35,785
)
 
$
(699,016
)
 
$
290,804

Net loss
 

 

 

 

 
(187,999
)
 

 

 
(187,999
)
Other comprehensive income
 

 

 

 
919

 

 

 

 
919

Stock-based compensation
 

 

 
9,331

 

 

 

 

 
9,331

Stock-based awards exercised or vested
 

 

 
(127
)
 

 
(276
)
 
13

 
264

 
(139
)
Acquisition of treasury shares
 

 

 

 

 

 
(6
)
 
(173
)
 
(173
)
Repurchase and retirement of common shares
 
(5,720
)
 
(57
)
 
(3,433
)
 

 
(133,449
)
 

 

 
(136,939
)
Cash dividends declared - $0.26 per share
 

 

 

 

 
(51,551
)
 

 

 
(51,551
)
Balances as of October 31, 2019
 
231,024

 
$
2,310

 
$
765,220

 
$
(21,817
)
 
$
(122,535
)
 
(35,778
)
 
$
(698,925
)
 
$
(75,747
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.










4
Q2 FY2020 Form 10-Q | H&R Block, Inc.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
(amounts in 000s, except per share amounts)
 
 
 
Common Stock
 
Additional
Paid-in
Capital

 
Accumulated
Other
Comprehensive
Income (Loss)

 
Retained
Earnings (Deficit)

 
Treasury Stock
 
Total
Stockholders’
Equity (Deficiency)

 
 
Shares

 
Amount

 
 
 
 
Shares

 
Amount

 
Balances as of May 1, 2018
 
246,199

 
$
2,462

 
$
760,250

 
$
(14,303
)
 
$
362,980

 
(36,945
)
 
$
(717,678
)
 
$
393,711

Net loss
 

 

 

 

 
(152,670
)
 

 

 
(152,670
)
Cumulative effect of ASU 2016-16 (1)
 

 

 

 

 
100,950

 

 

 
100,950

Other comprehensive loss
 

 

 

 
(1,731
)
 

 

 

 
(1,731
)
Stock-based compensation
 

 

 
4,307

 

 

 

 

 
4,307

Stock-based awards exercised or vested
 

 

 
(9,945
)
 

 
(1,029
)
 
627

 
12,185

 
1,211

Acquisition of treasury shares
 

 

 

 

 

 
(200
)
 
(4,560
)
 
(4,560
)
Repurchase and retirement of common shares
 
(4,173
)
 
(42
)
 
(2,503
)
 

 
(94,560
)
 

 

 
(97,105
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(52,104
)
 

 

 
(52,104
)
Balances as of July 31, 2018
 
242,026

 
$
2,420

 
$
752,109

 
$
(16,034
)
 
$
163,567

 
(36,518
)
 
$
(710,053
)
 
$
192,009

Net loss
 

 

 

 

 
(176,276
)
 

 

 
(176,276
)
Other comprehensive loss
 

 

 

 
(2,846
)
 

 

 

 
(2,846
)
Stock-based compensation
 

 

 
7,352

 

 

 

 

 
7,352

Stock-based awards exercised or vested
 

 

 
(226
)
 

 
(202
)
 
35

 
675

 
247

Acquisition of treasury shares
 

 

 

 

 

 
(16
)
 
(431
)
 
(431
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(51,380
)
 

 

 
(51,380
)
Balances as of October 31, 2018
 
242,026

 
$
2,420

 
$
759,235

 
$
(18,880
)
 
$
(64,291
)
 
(36,499
)
 
$
(709,809
)
 
$
(31,325
)
Net loss
 

 

 

 

 
(126,454
)
 

 

 
(126,454
)
Other comprehensive income
 

 

 

 
1,238

 

 

 

 
1,238

Stock-based compensation
 

 

 
6,067

 

 

 

 

 
6,067

Stock-based awards exercised or vested
 

 

 
(5
)
 

 
(169
)
 
41

 
796

 
622

Acquisition of treasury shares
 

 

 

 

 

 
(2
)
 
(56
)
 
(56
)
Repurchase and retirement of common shares
 
(525
)
 
(5
)
 
(315
)
 

 
(11,981
)
 

 

 
(12,301
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(51,382
)
 

 

 
(51,382
)
Balances as of January 31, 2019
 
241,501

 
$
2,415

 
$
764,982

 
$
(17,642
)
 
$
(254,277
)
 
(36,460
)
 
$
(709,069
)
 
$
(213,591
)
Net income
 

 

 

 

 
877,909

 

 

 
877,909

Other comprehensive loss
 

 

 

 
(2,774
)
 

 

 

 
(2,774
)
Stock-based compensation
 

 

 
5,784

 

 

 

 

 
5,784

Stock-based awards exercised or vested
 

 

 
(1,231
)
 

 
(150
)
 
84

 
1,634

 
253

Acquisition of treasury shares
 

 

 

 

 

 
(1
)
 
(27
)
 
(27
)
Repurchase and retirement of common shares
 
(3,164
)
 
(32
)
 
(1,899
)
 

 
(73,501
)
 

 

 
(75,432
)
Cash dividends declared - $0.25 per share
 

 

 

 

 
(50,595
)
 

 

 
(50,595
)
Balances as of April 30, 2019
 
238,337

 
$
2,383

 
$
767,636

 
$
(20,416
)
 
$
499,386

 
(36,377
)
 
$
(707,462
)
 
$
541,527

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
ASU 2016-16 was effective on May 1, 2018 and we adopted using the modified retrospective transition method. We recognized a $101.0 million cumulative effect adjustment to increase the opening balance of retained earnings and increase deferred tax assets resulting from intra-entity transfers of intellectual property in fiscal year 2018.

H&R Block, Inc. | Q2 FY2020 Form 10-Q
5


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                  (unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATIONThe consolidated balance sheets as of October 31, 2019 and 2018, the consolidated statements of operations and comprehensive loss for the three and six months ended October 31, 2019 and 2018, the consolidated statements of cash flows for the six months ended October 31, 2019 and 2018, and the consolidated statements of stockholders' equity for the three and six months ended October 31, 2019 and the quarterly periods within the fiscal year ended April 30, 2019 have been prepared by the Company, without audit. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows as of October 31, 2019 and 2018 and for all periods presented, have been made.
"H&R Block," "the Company," "we," "our," and "us" are used interchangeably to refer to H&R Block, Inc. or to H&R Block, Inc. and its subsidiaries, as appropriate to the context.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our April 30, 2019 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of April 30, 2019 or for the year then ended are derived from our Annual Report on Form 10-K.
MANAGEMENT ESTIMATESThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, assumptions and judgments are applied in the evaluation of contingent losses arising from our discontinued mortgage business, contingent losses associated with pending claims and litigation, reserves for uncertain tax positions, and related matters. Estimates have been prepared based on the best information available as of each balance sheet date. As such, actual results could differ materially from those estimates.
SEASONALITY OF BUSINESSOur operating revenues are seasonal in nature with peak revenues typically occurring in the months of February through April. Therefore, results for interim periods are not indicative of results to be expected for the full year.
DISCONTINUED OPERATIONS – Our discontinued operations include the results of operations of Sand Canyon Corporation, previously known as Option One Mortgage Corporation (including its subsidiaries, collectively, SCC), which exited its mortgage business in fiscal year 2008. See notes 9 and 11 for additional information on litigation, claims, and other loss contingencies related to our discontinued operations.
WAVE ACQUISITION On June 28, 2019, we acquired Wave HQ Inc. (formerly known as Wave Financial Inc.) and its subsidiaries (collectively, Wave) and during the quarter ended October 31, 2019 we finalized the post-closing working capital adjustment and made an additional payment of $1.4 million, resulting in a total payment of $408.4 million. The acquisition was funded with available cash. Wave is a provider of software solutions and related services specifically designed to help small business owners manage their finances. Major revenue sources include fees earned by providing payment processing, payroll services, and bookkeeping services. We believe the acquisition of Wave enhances our position in the small business market.
Included in the transaction price is $8.2 million which will be treated as compensation expense over the next two years as certain key employees are required to remain employees to receive payment. Additionally, key employees are participating in a management incentive program consisting of cash performance incentives and stock-based compensation which will be earned over the next three years and is not considered part of the purchase price.
As of October 31, 2019 we have identified the acquired intangible assets and are still evaluating the income tax impacts of the transaction.

6
Q2 FY2020 Form 10-Q | H&R Block, Inc.


The assets acquired, net of liabilities assumed on the acquisition date, and the identified intangible assets and goodwill, are as follows:
($ in 000s)
 
 
Amount Acquired

 
Weighted-Average Life (in years)
Assets acquired and liabilities assumed, net
 
$
6,870

 
 
Purchased technology
 
68,000

 
10
Customer relationships
 
23,000

 
5
Noncompete agreements
 
7,070

 
5
Trade name
 
5,800

 
10
Total identifiable net assets
 
110,740

 
 
Goodwill
 
289,492

 
 
Total identifiable assets and goodwill
 
$
400,232

 
 
 
 
 
 
 

Revenues of $14.5 million and pretax losses of $21.3 million were recognized by Wave from the period of June 28, 2019 through October 31, 2019, which are included in our consolidated statement of operations for the six months ended October 31, 2019. Had we acquired Wave as of May 1, 2018, we would have reported, on a pro-forma basis, consolidated revenues of $317.7 million and $308.6 million for the six months ended October 31, 2019 and 2018, respectively, and consolidated pretax losses from continuing operations of $478.4 million and $453.4 million for the six months ended October 31, 2019 and 2018, respectively. Pro-forma adjustments primarily include amortization of intangible assets and certain compensation expenses.
NEW ACCOUNTING PRONOUNCEMENTS – 
Leases. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases” (ASU 2016-02), which requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for leases previously classified as operating leases. We adopted this guidance and related amendments as of May 1, 2019 using the alternative transition method, which allows companies the option of using the effective date of the new standard as the initial application date (at the beginning of the period in which it adopted, rather than at the beginning of the earliest comparative period).
We have recognized operating lease right-of-use (ROU) assets and operating lease liabilities on our balance sheet as part of adopting the standard and pre-existing liabilities for deferred rent, and various lease incentives were reclassified as a component of the lease assets. We elected the package of practical expedients which allows us to not reassess historical lease classification, initial direct costs or contracts related to leases. For leases with an initial term of twelve months or less we have elected to only recognize retail office leases on our balance sheet. We elected the practical expedient to account for lease and non-lease components (such as common area maintenance, utilities, insurance and taxes) as a single lease component for all classes of underlying assets. We also elected the practical expedient to not reassess whether land easement contracts meet the definition of a lease. We did not elect the practical expedient of hindsight when determining the lease term of existing contracts at the effective date.
The adoption of the new standard did not materially affect our consolidated statement of operations or cash flows. See note 10, Leases, for additional information.
NOTE 2: REVENUE RECOGNITION
The majority of our revenues are from our U.S. Tax Services business. The following table disaggregates our U.S. Tax Services revenues by major service line, with revenues from our international Tax Services businesses and from Wave included as separate lines:

H&R Block, Inc. | Q2 FY2020 Form 10-Q
7


 
 
 
 
 
 
 
 
(in 000s)

 
 
Three months ended October 31,
 
Six months ended October 31,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
U.S. assisted tax preparation
 
$
41,226

 
$
41,652

 
$
74,218

 
$
72,756

U.S. royalties
 
7,820

 
8,062

 
14,679

 
15,633

U.S. DIY tax preparation
 
4,541

 
2,994

 
7,951

 
5,775

International
 
44,926

 
45,497

 
85,507

 
84,676

Refund Transfers
 
791

 
560