SOURCE: H & R Block

H & R Block

June 09, 2016 16:20 ET

H&R Block Announces Fiscal 2016 Results and Dividend Increase

KANSAS CITY, MO--(Marketwired - June 09, 2016) -

  • Company to focus on arresting client decline and reducing costs in fiscal 2017
  • Revenues declined $40.5 million, or 1.3%, in fiscal year 2016 to just over $3 billion primarily due to lower return volume, 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 mix1
  • GAAP earnings per share from continuing operations of $1.53; non-GAAP adjusted earnings per share from continuing operations of $1.59 2,3
  • Company announced 10% dividend increase and intent to review dividend on an annual basis
  • Repurchased approximately 3.9 million shares during the fourth quarter, bringing total fiscal year 2016 repurchases to 56.4 million shares, or 20.5% of outstanding shares

H&R Block, Inc. (NYSE: HRB), the world's largest consumer tax services provider, today released its financial results for the fiscal year ended April 30, 2016. Total revenues decreased $40.5 million, or 1.3%, to just over $3.0 billion, primarily due to lower worldwide client volumes of 4.1%, and the impacts of the divestiture of H&R Block Bank and foreign currency exchange rate fluctuations. This was partially offset by increased pricing and improved form mix in both the assisted and DIY channels as well as improved monetization in DIY. Excluding the impact of the bank divestiture and foreign exchange, total revenues would have increased 0.5%. The company's net income totaled $374.3 million and adjusted EBITDA from continuing operations was $838.7 million. The company's adjusted EBITDA margin from continuing operations was 28%. GAAP earnings per share from continuing operations declined $0.22 to $1.53.

"As I said in April, this season's results are not acceptable," said Bill Cobb, H&R Block's president and chief executive officer. "We are ready to move on. Going forward, we are committed to arresting the client decline and ultimately achieving client growth. We are developing aggressive plans for tax season 2017 that we believe will enable us to achieve this objective."

The company is making strategic changes which it believes will yield positive results in the short- and long-term. Specifically, the company is investing in initiatives aimed at driving client volumes for fiscal year 2017. Such initiatives will be funded through the Company's previously announced cost reduction efforts. Long term, the company is developing innovative solutions designed to enhance the client experience, regardless of how the client chooses to be served.

"I'm excited about the future for this company and the plans we are working on for next tax season," said Cobb. "These plans will challenge us to think differently about certain parts of our business, while building on those areas of the business in which we were successful, such as pricing, mix, improved product attach levels, and the successful launch of our new Block Advisors brand. And having divested H&R Block Bank, we'll execute against those plans with the right capital structure, which reflects the repurchase of 20.5% of our outstanding shares during fiscal 2016 and the 10% increase in our quarterly dividend."

 
Fiscal 2016 Results From Continuing Operations
       
   Actual  Non-GAAP Adjusted2
(in millions, except EPS)  Fiscal Year
2016
 Fiscal Year
2015
 Fiscal Year
2016
 Fiscal Year
2015
Revenue  $ 3,038  $ 3,079   N/A   N/A
Pretax Income  $ 569  $ 743  $ 596  $ 745
Net Income  $ 384  $ 487  $ 400  $ 488
Weighted-Avg. Shares - Diluted   250.8   277.1   N/A   N/A
EPS  $ 1.53  $ 1.75  $ 1.59  $ 1.75
EBITDA2  $ 812  $ 949  $ 839  $ 951
                 

CFO Commentary
"Strong cash flow, healthy margins and a history of returning capital to shareholders continue to be the foundation of our operating model and capital strategy," stated Tony Bowen, H&R Block's chief financial officer. "We are confident about the future of H&R Block, which is demonstrated through the repurchase of $2 billion of shares during fiscal year 2016, and our commitment to an annual dividend review announced today."

Income Statement

  • Revenues decreased 1.3% to just over $3.0 billion, due primarily to lower tax return 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 form mix in both the U.S. assisted and DIY categories, revenues from acquisitions of franchisees and independent tax preparation businesses, and improved monetization in DIY.
  • Total operating expenses increased $121.0 million, or 5.3%. The increase was mainly due to occupancy costs and amortization expense which increased as a result of acquisitions of franchisees and independent tax preparation businesses, increased marketing expenses, and fees related to the divestiture of H&R Block Bank and capital structure changes. These increases were partially offset by decreases in compensation and benefits, primarily related to the decrease in tax return volume.
  • Other income increased $16.4 million primarily as a result of financial reporting changes related to the divestiture of H&R Block Bank.
  • Interest expense increased $23.7 million from the prior year due to the issuance of $1 billion of long-term debt in September 2015 and increased borrowings under the company's line of credit.
  • Pretax income decreased 23.3% to $569.5 million.

Balance Sheet

  • Cash balances decreased $1.1 billion from the prior year 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.
  • 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 April 30, 2015 due to the issuance of $650 million of 4.125% Senior Notes due 2020 and $350 million of 5.250% Senior Notes due 2025. As of April 30, 2016, the company did not have an outstanding balance on its line of credit.
  • Stockholders' equity was reduced by repurchases and subsequent retirements of 56.4 million shares of common stock, representing 20.5% of outstanding shares, during the fiscal year for $2.0 billion.
  • Details regarding the bank divestiture and related agreements, capital structure transactions and share repurchase program can be found in previously issued press releases, as well as Forms 10-Q and 8-K filed with the Securities and Exchange Commission, during fiscal 2016.

Share Repurchases
During the fourth quarter of fiscal 2016, the company repurchased and retired approximately 3.9 million shares at an aggregate amount of $108.4 million, or $27.80 per share. As of April 30, 2016, 220.5 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 56.4 million shares of its common stock, or 20.5% of outstanding shares, for an aggregate purchase amount of $2.0 billion.

Dividends
The Company announced that the board of directors approved an increase in its quarterly dividend of 10%, to $0.22 per share. Going forward, the company is committed to an annual review of its dividend following the end of each fiscal year. Future actions regarding dividends will be dependent upon the board's approval following consideration of operating results, market conditions, and capital needs, among other factors.

A quarterly cash dividend of $0.22 per share is payable on July 1, 2016 to shareholders of record as of June 20, 2016. The July 1 dividend payment will be H&R Block's 215th consecutive quarterly dividend since the company went public in 1962.

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 was $65 million at April 30, 2016.

Conference Call
Discussion of the fiscal 2016 results, future outlook and a general business update will occur during the company's previously announced fiscal fourth quarter earnings conference call for analysts, institutional investors, and shareholders. The call is scheduled for 4:30 p.m. Eastern time on June 9, 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: 80848967

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 June 9, 2016, and continuing until July 9, 2016, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 80848967. The webcast will be available for replay June 10, 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 700 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2016, H&R Block had annual revenues of over $3.0 billion with 23.2 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," "goal," "could" or "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, 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.

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, and other non-GAAP financial measures, which it believes are a better indication of the company's core operations. 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.

       
CONSOLIDATED STATEMENTS OF OPERATIONS   (unaudited, in 000s - except per share amounts)  
   Three months ended April 30,   Year ended April 30,  
   2016   2015   2016   2015  
                      
REVENUES:                     
 Service revenues  $2,032,580   $2,013,701   $2,653,936   $2,651,057  
 Royalty, product and other revenues   264,897    287,669    384,217    427,601  
    2,297,477    2,301,370    3,038,153    3,078,658  
OPERATING EXPENSES:                     
 Cost of revenues:                     
  Compensation and benefits   544,799    544,588    845,197    852,480  
  Occupancy and equipment   124,016    115,389    405,123    378,624  
  Provision for bad debt and loan losses   36,474    30,961    75,395    74,993  
  Depreciation and amortization   31,670    29,166    115,907    111,861  
  Other   116,171    96,285    243,930    212,532  
    853,130    816,389    1,685,552    1,630,490  
 Selling, general and administrative:                     
  Marketing and advertising   182,558    165,455    297,762    273,682  
  Compensation and benefits   48,863    62,830    228,778    238,527  
  Depreciation and amortization   14,182    14,731    57,691    47,943  
  Other selling, general and administrative   37,895    26,360    135,178    93,350  
    283,498    269,376    719,409    653,502  
   Total operating expenses   1,136,628    1,085,765    2,404,961    2,283,992  
                      
Other income   3,708    487    17,701    1,314  
Interest expense on borrowings   (22,633 )  (8,560 )  (68,962 )  (45,246 )
Other expenses   (1,117 )  2,527    (12,452 )  (7,929 )
Income from continuing operations before income taxes   1,140,807    1,210,059    569,479    742,805  
Income taxes   439,582    465,926    185,926    256,061  
Net income from continuing operations   701,225    744,133    383,553    486,744  
Net loss from discontinued operations   (563 )  (5,292 )  (9,286 )  (13,081 )
NET INCOME  $700,662   $738,841   $374,267   $473,663  
                      
BASIC EARNINGS (LOSS) PER SHARE:                     
 Continuing operations  $3.15   $2.70   $1.54   $1.77  
 Discontinued operations   -    (0.02 )  (0.04 )  (0.05 )
 Consolidated  $3.15   $2.68   $1.50   $1.72  
                      
WEIGHTED AVERAGE BASIC SHARES   222,098    275,260    249,009    275,033  
                      
DILUTED EARNINGS (LOSS) PER SHARE:                     
 Continuing operations  $3.13   $2.68   $1.53   $1.75  
 Discontinued operations   -    (0.02 )  (0.04 )  (0.04 )
 Consolidated  $3.13   $2.66   $1.49   $1.71  
                      
WEIGHTED AVERAGE DILUTED SHARES   223,622    277,612    250,818    277,136  
                      
                 
                 
      
CONSOLIDATED BALANCE SHEETS  (unaudited, in 000s - except per share amounts)  
As of April 30,  2016   2015  
            
ASSETS           
 Cash and cash equivalents  $896,801   $2,007,190  
 Cash and cash equivalents - restricted   104,110    91,972  
 Receivables, net   153,116    167,964  
 Deferred tax assets and income taxes receivable   -    174,267  
 Prepaid expenses and other current assets   67,138    70,283  
 Investments in available-for-sale securities   1,133    439,625  
  Total current assets   1,222,298    2,951,301  
 Mortgage loans held for investment, net   202,385    239,338  
 Property and equipment, net   293,565    311,387  
 Intangible assets, net   433,885    432,142  
 Goodwill   470,757    441,831  
 Deferred tax assets and income taxes receivable   120,123    13,461  
 Other noncurrent assets   114,762    125,960  
  Total assets  $2,857,775   $4,515,420  
LIABILITIES AND STOCKHOLDERS' EQUITY           
LIABILITIES:           
 Customer banking deposits  $-   $744,241  
 Accounts payable and accrued expenses   259,586    231,322  
 Accrued salaries, wages and payroll taxes   161,786    144,744  
 Accrued income taxes   373,754    434,684  
 Current portion of long-term debt   826    790  
 Deferred revenue and other current liabilities   243,653    322,508  
  Total current liabilities   1,039,605    1,878,289  
 Long-term debt   1,501,925    505,298  
 Deferred tax liabilities and reserves for uncertain tax positions   132,960    142,586  
 Deferred revenue and other noncurrent liabilities   160,182    156,298  
  Total liabilities   2,834,672    2,682,471  
COMMITMENTS AND CONTINGENCIES           
STOCKHOLDERS' EQUITY:           
 Common stock, no par, stated value $.01 per share   2,602    3,166  
 Additional paid-in capital   758,230    783,793  
 Accumulated other comprehensive income (loss)   (11,233 )  1,740  
 Retained earnings   40,347    1,836,442  
 Less treasury shares, at cost   (766,843 )  (792,192 )
  Total stockholders' equity   23,103    1,832,949  
   Total liabilities and stockholders' equity  $2,857,775   $4,515,420  
            
         
         
      
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited, in 000s)  
Year ended April 30,  2016   2015  
            
NET CASH PROVIDED BY OPERATING ACTIVITIES  $532,394   $626,608  
            
CASH FLOWS FROM INVESTING ACTIVITIES:           
 Purchases of available-for-sale securities   -    (90,581 )
 Sales, maturities of and payments received on available-for-sale securities   436,471    91,878  
 Principal payments on mortgage loans held for investment, net   33,721    23,886  
 Capital expenditures   (99,923 )  (123,158 )
 Payments made for business acquisitions, net of cash acquired   (88,776 )  (113,252 )
 Franchise loans:           
  Loans funded   (22,820 )  (49,695 )
  Payments received   55,007    90,636  
 Other, net   15,835    21,354  
   Net cash provided by (used in) investing activities   329,515    (148,932 )
            
CASH FLOWS FROM FINANCING ACTIVITIES:           
 Repayments of commercial paper   -    (1,049,136 )
 Proceeds from issuance of commercial paper   -    1,049,136  
 Repayments of long-term debt   (1,465,000 )  (400,000 )
 Proceeds from issuance of long-term debt   2,461,831    -  
 Customer banking deposits, net   (326,705 )  (28,544 )
 Transfer of HRB Bank deposits   (419,028 )  -  
 Dividends paid   (201,688 )  (219,960 )
 Repurchase of common stock, including shares surrendered   (2,018,338 )  (10,449 )
 Proceeds from exercise of stock options   25,775    16,522  
 Other, net   (18,576 )  (3,376 )
  Net cash used in financing activities   (1,961,729 )  (645,807 )
            
Effects of exchange rate changes on cash   (10,569 )  (9,986 )
            
Net decrease in cash and cash equivalents   (1,110,389 )  (178,117 )
Cash and cash equivalents at beginning of the year   2,007,190    2,185,307  
Cash and cash equivalents at end of the year  $896,801   $2,007,190  
            
SUPPLEMENTARY CASH FLOW DATA:           
 Income taxes paid, net of refunds received  $165,154   $236,624  
 Interest paid on borrowings   59,058    44,847  
 Transfers of foreclosed loans to other assets   3,863    4,805  
 Accrued additions to property and equipment   2,822    14,282  
 Conversion of investment in preferred stock to available-for-sale common stock   -    5,000  
            
         
         
      
FINANCIAL RESULTS  (unaudited, in 000s - except per share amounts)  
   Three months ended April 30,   Year ended April 30,  
   2016   2015   2016   2015  
Tax preparation fees:                     
 U.S. assisted  $1,557,712   $1,524,331   $1,890,175   $1,865,438  
 International   110,894    113,464    190,527    207,772  
 U.S. digital   188,442    189,309    234,341    231,854  
    1,857,048    1,827,104    2,315,043    2,305,064  
Royalties   207,173    224,235    266,418    292,743  
Revenues from Refund Transfers   110,370    114,622    165,152    171,094  
Revenues from Emerald Card®   53,755    63,821    92,608    103,300  
Revenues from Peace of Mind® Extended Service Plan   24,066    27,243    86,830    81,551  
Interest and fee income on Emerald Advance   24,934    25,763    57,268    57,202  
Other   20,131    18,582    54,834    67,704  
  Total revenues   2,297,477    2,301,370    3,038,153    3,078,658  
Compensation and benefits:                     
 Field wages   470,458    466,487    724,019    731,309  
 Other wages   29,663    45,153    166,445    176,697  
 Benefits and other compensation   93,542    95,778    183,512    183,001  
    593,663    607,418    1,073,976    1,091,007  
Occupancy and equipment   124,540    115,512    405,493    375,743  
Marketing and advertising   182,558    165,455    297,762    273,682  
Depreciation and amortization   45,852    43,898    173,598    159,804  
Bad debt   36,474    30,961    75,395    74,993  
Supplies   22,994    25,290    36,340    42,872  
Other   130,547    97,231    342,397    265,891  
  Total operating expenses   1,136,628    1,085,765    2,404,961    2,283,992  
Other income, net   3,708    487    17,701    1,314  
Interest expense on borrowings   (22,633 )  (8,560 )  (68,962 )  (45,246 )
Other expenses, net   (1,117 )  2,527    (12,452 )  (7,929 )
Income from continuing operations before income taxes   1,140,807    1,210,059    569,479    742,805  
Income taxes   439,582    465,926    185,926    256,061  
Net income from continuing operations   701,225    744,133    383,553    486,744  
Net loss from discontinued operations   (563 )  (5,292 )  (9,286 )  (13,081 )
Net income  $700,662   $738,841   $374,267   $473,663  
                      
                 
                 
         
U.S. TAX OPERATING DATA     (unaudited, in 000s)  
Year ended April 30,  2016  2015  % Change  
U.S. Tax Returns Prepared: (1)           
 Company-Owned Operations  8,103  8,634  (6.2 )%
 Franchise Operations  4,159  4,381  (5.1 )%
  Total H&R Block Assisted (3)  12,262  13,015  (5.8 )%
            
 Desktop (4)  2,085  2,168  (3.8 )%
 Online (5)  4,670  4,765  (2.0 )%
  Total H&R Block Tax Software  6,755  6,933  (2.6 )%
            
 Free File Alliance  678  676  0.3 %
  Total H&R Block U.S. Returns  19,695  20,624  (4.5 )%
            
International Tax Returns Prepared:           
 Canada (2)  2,551  2,658  (4.0 )%
 Australia  769  768  0.1 %
 Other  153  115  33.0 %
  Total International Tax Returns  3,473  3,541  (1.9 )%
Tax Returns Prepared Worldwide  23,168  24,165  (4.1 )%
            
(1) Amounts have been reclassified between company-owned and franchise for offices which were refranchised or repurchased by the company during either year.
(2) In fiscal years 2016 and 2015, the end of the Canadian tax season was extended from April 30 into May. Tax returns prepared in Canada in fiscal years 2016 and 2015 includes approximately 93 thousand and 131 thousand returns, respectively, in both company-owned and franchise offices which were accepted by the client after April 30. The revenues related to these returns were recognized in fiscal years 2017 and 2016, respectively.
(3) An assisted return is defined as an individual tax return that has been accepted by the client who has either paid for tax preparation services or settled with a refund transfer. It also includes extensions and business returns.
(4) A desktop return is defined as an individual tax return that has been electronically filed and accepted by the IRS.
(5) An online return is defined as an individual tax return that has been electronically filed and accepted by the IRS or purchased with a credit card and printed for mailing.
  
  
    
NON-GAAP FINANCIAL MEASURES  (unaudited, in 000s - except per share amounts)
Reconciliation of EBITDA from Continuing Operations  Three months ended April 30,  Year ended April 30,
2016  2015  2016  2015
                 
Net income - as reported  $700,662  $738,841  $374,267  $473,663
                 
Add back :                
 Discontinued operations   563   5,292   9,286   13,081
 Income taxes   439,582   465,926   185,926   256,061
 Interest expense   22,634   8,733   69,141   45,928
 Depreciation and amortization   45,852   43,898   173,598   159,804
    508,631   523,849   437,951   474,874
                 
EBITDA from continuing operations   1,209,293   1,262,690   812,218   948,537
                 
             
             
           
NON-GAAP FINANCIAL MEASURES   (unaudited, in 000s - except per share amounts)  
Reconciliation of Other Non-  Three months ended April 30,  
GAAP Financial Measures  2016   2015  
   Pretax           Pretax          
   income   Net income   EBITDA   income   Net income   EBITDA  
From continuing operations  $1,140,807   $701,225   $1,209,293   $1,210,059   $744,133   $1,262,690  
                                
Adjustments (pretax):                               
 Loss contingencies - litigation   961    961    961    (4,545 )  (4,545 )  (4,545 )
 Severance   12,001    12,001    12,001    5,648    5,648    5,648  
 Costs related to HRB Bank and recapitalization transactions   -    -    -    118    118    118  
 Losses (gains) on AFS securities   -    -    -    148    148    148  
 Gain on sales of tax offices/businesses   -    -    -    (1,208 )  (1,208 )  (1,208 )
 Tax effect of adjustments (2)   -    (5,047 )  -    -    (86 )  -  
    12,962    7,915    12,962    161    75    161  
As adjusted - from continuing operations  $1,153,769   $709,140   $1,222,255   $1,210,220   $744,208   $1,262,851  
Adjusted EBITDA margin (1)             53 %            55 %
Adjusted EPS       $3.16             $2.68       
                     
                     
Reconciliation of Other Non-   Year ended April 30,  
GAAP Financial Measures   2016    2015  
   Pretax           Pretax          
   income   Net income   EBITDA   income   Net income   EBITDA  
From continuing operations  $569,479   $383,553   $812,218   $742,805   $486,744   $948,537  
                                
Adjustments (pretax):                               
 Loss contingencies - litigation   1,978    1,978    1,978    (3,936 )  (3,936 )  (3,936 )
 Severance   12,001    12,001    12,001    6,699    6,699    6,699  
 Costs related to HRB Bank and recapitalization transactions   20,722    20,722    20,722    238    238    238  
 Losses (gains) on AFS securities   (8,138 )  (8,138 )  (8,138 )  124    124    124  
 Gain on sales of tax offices/businesses   (127 )  (127 )  (127 )  (656 )  (656 )  (656 )
 Tax effect of adjustments (2)   -    (10,176 )  -    -    (963 )  -  
    26,436    16,260    26,436    2,469    1,506    2,469  
As adjusted - from continuing                               
operations  $595,915   $399,813   $838,654   $745,274   $488,250   $951,006  
Adjusted EBITDA margin (1)             28 %            31 %
Adjusted EPS       $1.59             $1.75       
1Adjusted EBITDA margin from continuing operations is computed as adjusted EBITDA from continuing operations divided by revenues from continuing operations.
2Tax effect of adjustments is computed as the pretax effect of the adjustments multiplied by our effective tax rate before discrete items.
  
  
       
NON-GAAP FINANCIAL MEASURES  (unaudited, in 000s - except per share amounts)
   Three months ended April 30,  Year ended April 30,
Supplemental Information  2016  2015  2016  2015
Stock-based compensation expense:                
 Pretax  $2,434  $5,379  $23,540  $26,068
 After-tax   1,405   3,155   14,478   15,918
Amortization of intangible assets:                
 Pretax  $18,130  $17,315  $72,762  $58,521
 After-tax   10,913   10,316   44,752   35,736
             
             

NON-GAAP FINANCIAL INFORMATION

The accompanying press release contains non-GAAP financial measures. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Because these measures are not measures of financial performance under GAAP and are susceptible to varying calculations, they may not be comparable to similarly titled measures for other companies.

We consider our non-GAAP financial measures to be performance measures and a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business 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 from continuing operations, adjusted EBITDA and EBITDA margin from continuing operations, adjusted pretax and net income of continuing operations, and adjusted diluted earnings per share from continuing operations. Adjusted EBITDA from continuing operations, adjusted pretax and net income from continuing operations, and adjusted diluted earnings per share from continuing operations 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 from continuing operations 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