SOURCE: H & R Block

H & R Block

March 04, 2015 16:05 ET

H&R Block Announces Fiscal 2015 Third Quarter Results

KANSAS CITY, MO--(Marketwired - March 04, 2015) - H&R Block, Inc. (NYSE: HRB), the world's largest consumer tax services provider, today released its financial results for the fiscal 2015 third quarter ended January 31, 2015 and U.S. tax volume through February 28.

As a result of an earlier opening of the Internal Revenue Service's (IRS) e-file system this tax season, the company reported a $309 million1 increase in revenues, to $509 million for the fiscal third quarter. This resulted in an improvement in its fiscal third quarter seasonal net loss from continuing operations to $0.13 per share.2 A majority of the company's revenues and all of its fiscal 2015 earnings will occur during its fiscal fourth quarter, and thus fiscal third quarter results are not indicative of expected performance for the full year.

The company continued its focus on driving revenue growth through improved monetization and product attach rates and believes it is on pace to achieve these goals in fiscal 2015. As of February 28, 2015, total U.S. tax returns prepared by and through H&R Block declined 4.2% as compared to the prior fiscal year. Changing tax filer timing, Affordable Care Act (ACA) form delays and errors, the carryover impact of eliminating certain promotions last tax season, competitor pricing actions and continued industry-wide fraud issues have resulted in a decline in lower-value returns.

"Despite being disappointed by the decline in early season volume, we are pleased with our monetization, overall return mix, and Tax Plus product attach rates through both our assisted channel and digital do-it-yourself products," said Bill Cobb, H&R Block's president and chief executive officer. "I'm also proud of how our organization has handled the implementation of the Affordable Care Act, which is the most significant change to the tax code in decades. Though it's too early to determine the impact of the ACA on this tax season, we are well positioned to deliver exceptional value to our clients as this plays out over the next several years."

Tax Industry Fraud

As the industry leader, H&R Block remains focused on addressing the growing industry-wide issue of tax fraud. Tax fraud is not new to the tax preparation industry and recent media coverage of fraud related to do-it-yourself tax software shows how aggressive those perpetrating fraud are becoming. The problem is growing rapidly, with the IRS estimating the total impact of tax identity fraud at greater than $5 billion in 2013. Similarly, the U.S. Treasury Department has estimated that improper payments related to the Earned Income Tax Credit (EITC) amount to $16 to $19 billion annually, up from estimates of $13 to $15 billion last year.

H&R Block will continue to advocate for change that benefits consumers by strengthening anti-fraud measures. The company's efforts are having an impact, as evidenced by Congress's direction last year to the U.S. Treasury Department to implement consistent requirements across all tax preparation methods for those applying for the EITC. H&R Block continues to advocate for a clear implementation plan from the Treasury Department that puts these new standards in place in time for the 2016 tax season. The company is also continuing to advocate for minimum federal standards for all paid tax preparers. Without minimum standards, taxpayers will continue to be victimized by individuals who are insufficiently trained or worse, knowingly commit fraud.

"We have led the conversation regarding tax return fraud and the need for reform for years, while our competitors in the tax preparation industry have just recently joined the discussion," said Cobb. "We urge the Treasury Department to implement Congress's direction in time for tax season 2016. We need all players in the industry -- the IRS, Treasury, Congress, professional tax preparers, tax preparation software makers, and taxpayers -- to join together to help create solutions. These issues are taking tens of billions of dollars out of taxpayers' pockets."

Fiscal 2015 Third Quarter Highlights

  • Total revenues increased $309 million to $509 million primarily due to an earlier opening of the IRS's e-file system
  • Seasonal net loss from continuing operations improved to $35 million, or $0.13 per share
  • Non-GAAP adjusted loss per share3 from continuing operations is $0.13

Fiscal 2015 Third Quarter Results From Continuing Operations

       
   Actual   Adjusted  
(in millions, except EPS)  Fiscal Year 2015   Fiscal Year 2014   Fiscal Year 2015   Fiscal Year 2014  
Revenue  $509   $200   $509   $200  
EBITDA  $(38 ) $(302 ) $(37 ) $(301 )
Pretax Loss  $(91 ) $(348 ) $(89 ) $(347 )
Net Loss  $(35 ) $(213 ) $(34 ) $(212 )
Weighted-Avg. Shares - Diluted   275.2    274.1    275.2    274.1  
EPS  $(0.13 ) $(0.78 ) $(0.13 ) $(0.78 )
                      

Business Segment Financial Results and Highlights

Tax Services

  • Revenues increased 159.3% to $503 million, driven mainly by the earlier opening of the IRS's e-file system. In fiscal 2014, the IRS opened e-file on January 30, which resulted in a significant shift of revenue from the fiscal third quarter to the fiscal fourth quarter of that year.
  • Total operating expenses increased 12.3% to $571 million, driven by the variable costs associated with tax return preparation and increased training costs.
  • Adjusted non-GAAP pretax loss decreased 77.1% to $74 million, primarily due to the timing shift in revenues mentioned above.

Corporate

  • Pretax loss decreased by $10 million to $15 million, primarily as a result of lower interest expense due to the repayment of a $400 million note in October 2014 and reduced legal and consulting fees.

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 and are expected to assert a significant majority of previously denied and possible future representation and warranty claims.
  • During the third quarter, SCC entered into a settlement agreement to resolve certain of these claims. The settlement amount was fully covered by prior accruals and was paid in the fiscal third quarter.
  • SCC's accrual for contingent losses related to representation and warranty claims was $144 million at January 31.

Dividends
As just announced, a quarterly cash dividend of 20 cents per share is payable on April 1, 2015 to shareholders of record as of March 16, 2015. The April 1 dividend payment will be H&R Block's 210th consecutive quarterly dividend since the company went public in 1962.

Fiscal Third Quarter Conference Call
In conjunction with the fiscal third quarter results, the company will host a conference call at 4:30 p.m. Eastern time on March 4, 2015 for analysts, institutional investors, and shareholders to discuss the fiscal 2015 third quarter results, future outlook and a general business update. To access the call, please dial the number below approximately 10 minutes prior to the scheduled starting time:

 U.S./Canada (866) 872-0323 or International (443) 842-7595
 Conference ID: 72336180

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 time on March 4, 2015, and continuing until April 4, 2015, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 72336180. The webcast will be available for replay March 5, 2015 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 650 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2014, H&R Block had annual revenues over $3.0 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 Bank provides affordable banking 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 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, 2014 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.

   
(1) All amounts in this release are unaudited. Unless otherwise noted, all comparisons refer to the current period compared to the corresponding prior year period.
(2) All per share amounts are based on fully diluted shares.
(3) 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).
    
    
KEY OPERATING RESULTS  (unaudited, in 000s - except per share data)  
   Three months ended January 31,  
   Revenues  Income (loss)  
   2015  2014  2015   2014  
                    
Tax Services  $503,008  $193,996  $(75,428 ) $(322,099 )
Corporate and Eliminations   6,066   5,774   (15,437 )  (25,726 )
   $509,074  $199,770   (90,865 )  (347,825 )
Income tax benefit           (55,554 )  (135,074 )
Net loss from continuing operations           (35,311 )  (212,751 )
Net loss from discontinued operations           (1,637 )  (1,960 )
Net loss          $(36,948 ) $(214,711 )
                    
Basic and diluted loss per share:                   
 Continuing operations          $(0.13 ) $(0.78 )
 Discontinued operations           -    -  
 Consolidated          $(0.13 ) $(0.78 )
                    
Basic and diluted shares           275,190    274,110  
                    
   Nine months ended January 31,  
   Revenues  Income (loss)  
   2015  2014  2015   2014  
                    
Tax Services  $760,771  $443,727  $(402,630 ) $(625,807 )
Corporate and Eliminations   16,517   17,578   (64,624 )  (85,874 )
   $777,288  $461,305   (467,254 )  (711,681 )
Income tax benefit           (209,865 )  (282,645 )
Net loss from continuing operations           (257,389 )  (429,036 )
Net loss from discontinued operations           (7,789 )  (5,805 )
Net loss          $(265,178 ) $(434,841 )
                    
Basic and diluted loss per share:                   
 Continuing operations          $(0.94 ) $(1.57 )
 Discontinued operations           (0.03 )  (0.02 )
 Consolidated          $(0.97 ) $(1.59 )
                    
Basic and diluted shares           274,957    273,699  
               
               
CONSOLIDATED BALANCE SHEETS  (unaudited, in 000s - except per share data)  
As of  January
31, 2015
  January
31, 2014
  April
30, 2014
 
                 
ASSETS                
Cash and cash equivalents  $1,321,134   $437,404   $2,185,307  
Cash and cash equivalents - restricted   51,085    44,855    115,319  
Receivables, net   777,453    677,221    191,618  
Prepaid expenses and other current assets   260,802    345,231    198,267  
Investments in available-for-sale securities   367,845    -    423,495  
 Total current assets   2,778,319    1,504,711    3,114,006  
Mortgage loans held for investment, net   245,663    282,149    268,428  
Investments in available-for-sale securities   7,883    443,770    4,329  
Property and equipment, net   308,805    314,565    304,911  
Intangible assets, net   443,329    318,719    355,622  
Goodwill   442,961    437,386    436,117  
Other assets   151,981    213,987    210,116  
 Total assets  $4,378,941   $3,515,287   $4,693,529  
LIABILITIES AND STOCKHOLDERS' EQUITY                
LIABILITIES:                
 Commercial paper borrowings  $591,486   $194,984   $-  
 Customer banking deposits   1,286,216    806,887    769,785  
 Accounts payable, accrued expenses and other current liabilities   472,490    520,121    569,007  
 Accrued salaries, wages and payroll taxes   118,512    108,583    167,032  
 Accrued income taxes   1,619    23,375    406,655  
 Current portion of long-term debt   781    400,570    400,637  
  Total current liabilities   2,471,104    2,054,520    2,313,116  
 Long-term debt   505,460    505,959    505,837  
 Other noncurrent liabilities   255,992    268,049    318,027  
  Total liabilities   3,232,556    2,828,528    3,136,980  
COMMITMENTS AND CONTINGENCIES                
STOCKHOLDERS' EQUITY:                
 Common stock, no par, stated value $.01 per share   3,166    3,166    3,166  
 Convertible preferred stock, no par, stated value $0.01 per share   -    -    -  
 Additional paid-in capital   778,845    762,102    766,654  
 Accumulated other comprehensive income (loss)   (1,263 )  (4,776 )  5,177  
 Retained earnings   1,158,376    734,233    1,589,297  
 Less treasury shares, at cost   (792,739 )  (807,966 )  (807,745 )
  Total stockholders' equity   1,146,385    686,759    1,556,549  
   Total liabilities and stockholders' equity  $4,378,941   $3,515,287   $4,693,529  
                 
             
CONSOLIDATED STATEMENTS OF OPERATIONS  (unaudited, in 000s - except per share amounts)  
   Three months ended January 31,   Nine months ended January 31,  
   2015   2014   2015   2014  
                      
REVENUES:                     
 Service revenues  $406,441   $138,613   $637,356   $358,845  
 Royalty, product and other revenues   63,335    23,788    81,905    43,268  
 Interest income   39,298    37,369    58,027    59,192  
    509,074    199,770    777,288    461,305  
OPERATING EXPENSES:                     
 Cost of revenues:                     
  Compensation and benefits   186,656    160,830    307,892    267,668  
  Occupancy and equipment   92,303    88,387    263,235    249,481  
  Provision for bad debt and loan losses   39,283    31,420    44,032    45,760  
  Depreciation and amortization   29,181    25,267    82,695    65,982  
  Other   47,255    43,761    116,247    124,087  
    394,678    349,665    814,101    752,978  
Selling, general and administrative:                     
 Marketing and advertising   87,569    77,943    108,227    98,667  
 Compensation and benefits   60,380    60,211    175,697    168,076  
 Depreciation and amortization   14,110    6,544    33,211    15,371  
 Other selling, general and administrative   27,488    29,750    66,991    83,123  
    189,547    174,448    384,126    365,237  
  Total operating expenses   584,225    524,113    1,198,227    1,118,215  
Other expense, net   6,666    9,610    9,629    13,295  
Interest expense on borrowings (1)   9,048    13,872    36,686    41,476  
Loss from continuing operations before income tax benefit   (90,865 )  (347,825 )  (467,254 )  (711,681 )
Income tax benefit   (55,554 )  (135,074 )  (209,865 )  (282,645 )
Net loss from continuing operations   (35,311 )  (212,751 )  (257,389 )  (429,036 )
Net loss from discontinued operations   (1,637 )  (1,960 )  (7,789 )  (5,805 )
NET LOSS  $(36,948 ) $(214,711 ) $(265,178 ) $(434,841 )
                      
BASIC AND DILUTED LOSS PER SHARE:                     
 Continuing operations  $(0.13 ) $(0.78 ) $(0.94 ) $(1.57 )
 Discontinued operations   -    -    (0.03 )  (0.02 )
 Consolidated  $(0.13 ) $(0.78 ) $(0.97 ) $(1.59 )
                  
(1) 
 The presentation of interest expense from borrowings has been restated to correct errors in presentation, whereby we reclassified such interest expense from cost of revenues to a separate caption.
    
    
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited, in 000s)  
Nine months ended January 31,  2015   2014  
            
NET CASH USED IN OPERATING ACTIVITIES  $(1,247,200 ) $(1,120,322 )
            
CASH FLOWS FROM INVESTING ACTIVITIES:           
 Purchases of available-for-sale securities   (100 )  (45,158 )
 Maturities of and payments received on available-for-sale securities   68,013    72,502  
 Principal payments on mortgage loans held for investment, net   18,098    35,320  
 Capital expenditures   (98,876 )  (125,654 )
 Payments made for business acquisitions, net of cash acquired   (112,163 )  (37,865 )
 Proceeds received on notes receivable   -    64,865  
 Franchise loans:           
  Loans funded   (48,013 )  (62,039 )
  Payments received   34,164    17,893  
 Other, net   6,179    12,227  
   Net cash used in investing activities   (132,698 )  (67,909 )
            
CASH FLOWS FROM FINANCING ACTIVITIES:           
 Repayments of commercial paper   (457,576 )  (80,930 )
 Proceeds from issuance of commercial paper   1,049,062    275,914  
 Repayments of long-term debt   (400,000 )  -  
 Customer banking deposits, net   515,015    (124,947 )
 Dividends paid   (164,905 )  (164,134 )
 Proceeds from exercise of stock options   16,026    28,083  
 Other, net   (26,348 )  (35,919 )
  Net cash provided by (used in) financing activities   531,274    (101,933 )
            
Effects of exchange rate changes on cash   (15,549 )  (20,016 )
            
Net decrease in cash and cash equivalents   (864,173 )  (1,310,180 )
Cash and cash equivalents at beginning of the period   2,185,307    1,747,584  
Cash and cash equivalents at end of the period  $1,321,134   $437,404  
            
SUPPLEMENTARY CASH FLOW DATA:           
 Income taxes paid, net of refunds received  $201,374   $87,672  
 Interest paid on borrowings   43,561    43,297  
 Interest paid on deposits   523    1,696  
 Transfers of foreclosed loans to other assets   3,240    6,389  
 Accrued additions to property and equipment   1,986    4,113  
 Conversion of investment in preferred stock to available-for-sale common stock   5,000    -  
 Transfer of mortgage loans held for investment to held for sale   -    7,608  
          
          
TAX SERVICES - FINANCIAL RESULTS (unaudited, amounts in 000s)  
   Three months ended January 31,   Nine months ended January 31,  
   2015   2014   2015   2014  
Tax preparation fees:                     
 U.S. assisted  $283,692   $72,108   $341,107   $123,145  
 International   10,021    9,253    94,308    82,915  
 U.S. digital   36,720    17,339    42,545    23,211  
    330,433    98,700    477,960    229,271  
Royalties   52,284    15,061    68,508    31,150  
Revenues from Refund Transfers   50,899    15,542    56,472    21,282  
Revenues from Emerald Card(R)   13,910    12,689    39,479    37,299  
Revenues from Peace of Mind(R) guarantees   13,492    12,684    54,308    59,661  
Interest and fee income on Emerald Advance   30,288    27,656    31,439    28,602  
Other   11,702    11,664    32,605    36,462  
 Total revenues   503,008    193,996    760,771    443,727  
Compensation and benefits:                     
Field wages   161,921    136,885    264,822    226,320  
 Other wages   41,157    41,629    117,598    112,029  
 Benefits and other compensation   35,625    34,696    74,349    72,811  
    238,703    213,210    456,769    411,160  
Occupancy and equipment   92,700    88,148    260,016    250,332  
Marketing and advertising   87,569    77,852    106,477    97,435  
Depreciation and amortization   43,287    31,808    115,896    81,242  
Bad debt   38,928    31,420    42,942    38,535  
Supplies   6,963    7,387    17,534    14,355  
Other   63,012    58,982    152,204    160,505  
  Total operating expenses   571,162    508,807    1,151,838    1,053,564  
Other expense, net   6,751    6,756    9,986    14,366  
Interest expense on borrowings   523    532    1,577    1,604  
Pretax loss  $(75,428 ) $(322,099 ) $(402,630 ) $(625,807 )
                 
                 
U.S. TAX OPERATING DATA(in 000s)  
   Nine months ended      Ten months ended     
   January 31,      February 28,     
   2015  2014  % Change   2015  2014  % Change  
Tax Returns Prepared: (1,2)                     
 H&R Block Company-Owned Operations  1,532  1,595  (3.9 )% 4,464  4,926  (9.4 )%
 H&R Block Franchise Operations  947  958  (1.1 )% 2,679  2,894  (7.4 )%
  Total H&R Block Assisted  2,479  2,553  (2.9 )% 7,143  7,820  (8.7 )%
                       
 H&R Block Desktop  180  137  31.4 % 875  833  5.0 %
 H&R Block Online  1,027  654  57.0 % 2,876  2,683  7.2 %
  Total H&R Block Tax Software  1,207  791  52.6 % 3,751  3,516  6.7 %
                       
 H&R Block Free File Alliance  129  64  101.6 % 383  436  (12.2 )%
  Total H&R Block U.S. Returns  3,815  3,408  11.9 % 11,277  11,772  (4.2 )%
                      
(1) Prior year numbers have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company during either year.
(2) Assisted returns for at January 31, 2014 include 1.8 million returns which were completed as of that date but not yet electronically filed. Revenue for these returns was recognized in the fourth quarter of fiscal year 2014.
    
NON-GAAP FINANCIAL MEASURES     
   Three months ended January 31, 2015  
   EBITDA   Pretax loss   Net loss   EPS  
                      
As reported - from continuing operations  $(38,302 ) $(90,865 ) $(35,311 ) $(0.13 )
                      
Adjustments:                     
 Loss contingencies - litigation   337    337    207    -  
 Professional fees related to HRB Bank transaction   6    6    3    -  
 Loss on sales of tax offices/businesses   1,451    1,451    901    -  
    1,794    1,794    1,111    -  
                      
As adjusted - from continuing operations  $(36,508 ) $(89,071 ) $(34,200 ) $(0.13 )
                      
   Three months ended January 31, 2014  
   EBITDA   Pretax loss   Net loss   EPS  
                      
As reported - from continuing operations  $(301,571 ) $(347,825 ) $(212,751 ) $(0.78 )
                      
Adjustments:                     
 Loss contingencies - litigation   346    346    207    -  
 Severance   1,092    1,092    648    -  
 Professional fees related to HRB Bank transaction   171    171    95    -  
 Gain on sales of tax offices/businesses   (616 )  (616 )  (372 )  -  
    993    993    578    -  
                      
As adjusted - from continuing operations  $(300,578 ) $(346,832 ) $(212,173 ) $(0.78 )
                      
   Nine months ended January 31, 2015  
   EBITDA   Pretax loss   Net loss   EPS  
                      
As reported - from continuing operations  $(314,153 ) $(467,254 ) $(257,389 ) $(0.94 )
                      
Adjustments:                     
 Loss contingencies - litigation   609    609    376    -  
 Severance   1,051    1,051    654    -  
 Professional fees related to HRB Bank transaction   120    120    74    -  
 Gain on sales of AFS securities   (24 )  (24 )  (15 )  -  
 Loss on sales of tax offices/businesses   552    552    342    -  
    2,308    2,308    1,431    -  
                      
As adjusted - from continuing operations  $(311,845 ) $(464,946 ) $(255,958 ) $(0.94 )
                      
                 
   Nine months ended January 31, 2014  
   EBITDA   Pretax loss   Net loss   EPS  
                      
As reported - from continuing operations  $(587,125 ) $(711,681 ) $(429,036 ) $(1.57 )
                      
Adjustments:                     
 Loss contingencies - litigation   1,069    1,069    650    -  
 Severance   4,025    4,025    2,447    0.01  
 Professional fees related to HRB Bank transaction   1,978    1,978    1,203    -  
 Gain on sales of tax offices/businesses   (1,215 )  (1,215 )  (739 )  -  
    5,857    5,857    3,561    0.01  
                      
As adjusted - from continuing operations  $(581,268 ) $(705,824 ) $(425,475 ) $(1.56 )
                      
                 
   Three months ended January 31,   Nine months ended January 31,  
EBITDA  2015   2014   2015   2014  
                      
Net loss - as reported  $(36,948 ) $(214,711 ) $(265,178 ) $(434,841 )
                      
Add back :                     
 Discontinued operations   1,637    1,960    7,789    5,805  
 Income taxes   (55,554 )  (135,074 )  (209,865 )  (282,645 )
 Interest expense   9,272    14,443    37,195    43,203  
 Depreciation and amortization   43,291    31,811    115,906    81,353  
    (1,354 )  (86,860 )  (48,975 )  (152,284 )
                      
EBITDA from continuing operations  $(38,302 ) $(301,571 ) $(314,153 ) $(587,125 )
                      
   Three months ended January 31,   Nine months ended January 31,  
Supplemental Information  2015   2014   2015   2014  
                      
Stock-based compensation expense:                     
 Pretax  $6,090   $4,715   $20,689   $15,477  
 After-tax   3,678    2,809    12,763    9,410  
Amortization of intangible assets:                     
 Pretax  $16,743   $8,757   $41,206   $21,351  
 After-tax   10,197    5,256    25,420    12,981  
                  

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.

Contact Information

  • For Further Information
    Investor Relations: 
    Colby Brown
    (816) 854-4559
    Email contact

    Media Relations: 
    Gene King
    (816) 854-4672
    Email contact