SOURCE: H & R Block

H & R Block

March 06, 2014 16:05 ET

H&R Block Reports U.S. Tax Volume Through Feb. 28; Fiscal 2014 Third Quarter Earnings

KANSAS CITY, MO--(Marketwired - Mar 6, 2014) -  H&R Block, Inc. (NYSE: HRB) the world's largest consumer tax services provider, today released U.S. tax volume through Feb. 28 and earnings for its fiscal 2014 third quarter ended January 31, 2014.

As a result of the delayed opening of the Internal Revenue Service's (IRS) e-file system to Jan. 31, revenue related to tax returns prepared but not yet filed totaling $277 million shifted to the company's fiscal fourth quarter ending April 30. A majority of the company's revenues and all of its fiscal 2014 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 recently outlined its strategy to grow revenues through a balance of improved client mix and increased product attachments and believes it remains on track to achieve these goals. Consistent with this strategy, the company discontinued its free federal 1040EZ promotion in virtually all markets and exited unprofitable retail partnerships. As a result, total U.S. tax returns prepared by and through H&R Block were lower by 6 percent through Feb. 28. 

CEO Perspective
"In line with the strategy outlined at our most recent investor day last December, we entered this tax season with a solid plan focused on growing Tax Plus revenue," said Bill Cobb, H&R Block's president and chief executive officer. "While there is still over a month left in this tax season, our early results indicate that we are on track to achieve our objectives this year," added Cobb.

Fiscal 2014 Third Quarter Highlights1

  • Revenues decreased 58 percent2, or $272 million, to $200 million primarily due to $277 million of revenue related to tax returns prepared but not yet filed which will be recorded during the company's fiscal fourth quarter
  • Adjusted net loss from continuing operations increased to $209 million, or $(0.77) per share, due almost entirely to the timing shift in revenues described above
  • Company declares 206th consecutive quarterly dividend

Fiscal 2014 Third Quarter Results From Continuing Operations3

         
    Actual   Adjusted
(in millions, except EPS)   Fiscal Year 2014   Fiscal Year 2013   Fiscal Year 2014   Fiscal Year 2013
Revenue   $ 200     $ 472     $ 200     $ 472  
EBITDA   $ (302 )   $ (52 )   $ (301 )   $ (47 )
Pretax Loss   $ (348 )   $ (96 )   $ (347 )   $ (91 )
Net Loss   $ (213 )   $ (17 )   $ (209 )   $ (57 )
Weighted-Avg. Shares - Diluted     274.1       271.5       274.1       271.5  
EPS   $ (0.78 )   $ (0.06 )   $ (0.77 )   $ (0.21 )
                                 

Business Segment Financial Results and Highlights

CFO Perspective
"For the second consecutive year we've seen a late start to the tax season, resulting in the majority of our business occurring in the fiscal fourth quarter. Given the seasonal nature of our business, the focus remains on our performance for the full year," said Greg Macfarlane, H&R Block's chief financial officer. "We're pleased with our early season financial results, and continue to expect our full year EBITDA margin to be consistent with last year."

Business Segment Results and Highlights

Tax Services

  • Revenues decreased $271 million to $194 million, primarily due to a $277 million shift of revenue from the fiscal third quarter to the fiscal fourth quarter related to completed tax returns that were not filed by Jan. 31
  • Operating expenses decreased $13 million to $516 million
  • Pretax loss increased to $322 million, primarily due to the timing shift in revenues mentioned above

Corporate

  • Total operating expenses decreased $8 million to $32 million, primarily due to lower interest expense and mortgage loan loss provisions
  • Pretax loss decreased $6 million to $26 million

Discontinued Operations

  • Net loss of $2 million improved by $1 million from the prior year
  • Sand Canyon Corporation (SCC), a separate legal entity of H&R Block, Inc., received new claims for alleged breaches of representations and warranties in the principal amount of $1 million
  • SCC's accrual for contingent losses relating to representations and warranties remained unchanged at $159 million

Dividend
A previously announced quarterly cash dividend of 20 cents per share is payable April 1, 2014, to shareholders of record as of March 17, 2014.

The April 1 dividend payment will mark H&R Block's 206th consecutive quarterly dividend since the company went public in 1962.

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 6, 2014 for analysts, institutional investors, and shareholders to discuss the fiscal 2014 third quarter results, fiscal year 2014 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 (888) 895-5260 or International (443) 842-7595
Conference ID: 51003273

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 6, 2014, and continuing until April 7, 2014, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 51003273. The webcast will be available for replay March 7, 2014 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 625 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2013, H&R Block had annual revenues of $2.9 billion with 24.8 million tax returns prepared worldwide. Tax return preparation services are provided in over 11,000 company-owned and franchise retail tax offices worldwide by professional tax preparers, and through H&R Block digital products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Newsroom.

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

Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "targets," "would," "will," "should," "could" or "may" or other similar expressions. Forward-looking statements provide management's current expectations or predictions of future conditions, events or results. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. They may include estimates of revenues, income, earnings per share, capital expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management's plans or objectives for future operations, products or services, or descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect the company's good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, the company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data or methods, future events or other changes, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive and regulatory factors, many of which are beyond the company's control and which are described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2013 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 per share amounts are based on fully diluted shares.
2 Unless otherwise noted, all comparisons, including those made to the "prior year," refer to the current period compared to the prior year period.
3 EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-GAAP financial measure, which the company finds relevant when measuring its performance. The company also reports adjusted financial performance, which it believes is a better indication of the company's recurring operations. See "About Non-GAAP Financial Measures" below for more information regarding financial measures not prepared in accordance with generally accepted accounting principles (GAAP).
   
   

TABLES FOLLOW

       
KEY OPERATING RESULTS   (unaudited, amounts in thousands, except per share data)  
    Three months ended January 31,  
    Revenues   Income (loss)  
    2014   2013   2014     2013  
                             
Tax Services   $ 193,996   $ 464,634   $ (322,099 )   $ (64,189 )
Corporate and Eliminations     5,774     7,345     (25,726 )     (32,079 )
    $ 199,770   $ 471,979     (347,825 )     (96,268 )
Income tax benefit                 (135,074 )     (79,353 )
Net loss from continuing operations                 (212,751 )     (16,915 )
Net loss from discontinued operations                 (1,960 )     (793 )
Net loss               $ (214,711 )   $ (17,708 )
                             
Basic and diluted loss per share:                            
  Continuing operations               $ (0.78 )   $ (0.06 )
  Discontinued operations                 --       (0.01 )
  Consolidated               $ (0.78 )   $ (0.07 )
                             
Basic and diluted shares                 274,110       271,542  
                             
    Nine months ended January 31,  
    Revenues   Income (loss)  
    2014   2013   2014     2013  
                             
Tax Services   $ 443,727   $ 684,706   $ (625,807 )   $ (335,203 )
Corporate and Eliminations     17,578     21,025     (85,874 )     (92,622 )
    $ 461,305   $ 705,731     (711,681 )     (427,825 )
Income tax benefit                 (282,645 )     (204,061 )
Net loss from continuing operations                 (429,036 )     (223,764 )
Net loss from discontinued operations                 (5,805 )     (6,628 )
Net loss               $ (434,841 )   $ (230,392 )
                             
Basic and diluted loss per share:                            
  Continuing operations               $ (1.57 )   $ (0.82 )
  Discontinued operations                 (0.02 )     (0.02 )
  Consolidated               $ (1.59 )   $ (0.84 )
                             
Basic and diluted shares                 273,699       273,281  
                             
                             
                             
CONSOLIDATED BALANCE SHEETS   (amounts in thousands, except per share data)  
As of   January 31, 2014     January 31, 2013     April 30, 2013  
    (unaudited)     (unaudited)        
ASSETS                        
  Cash and cash equivalents   $ 437,404     $ 418,385     $ 1,747,584  
  Cash and cash equivalents -- restricted     44,855       37,958       117,837  
  Receivables, net     677,221       949,160       206,835  
  Prepaid expenses and other current assets     345,231       331,046       390,087  
    Total current assets     1,504,711       1,736,549       2,462,343  
                             
  Mortgage loans held for investment, net     282,149       357,887       338,789  
  Investments in available-for-sale securities     443,770       396,312       486,876  
  Property and equipment, net     314,565       273,450       267,880  
  Intangible assets, net     318,719       288,238       284,439  
  Goodwill     437,386       435,256       434,782  
  Other assets     213,987       444,804       262,670  
    Total assets   $ 3,515,287     $ 3,932,496     $ 4,537,779  
LIABILITIES AND STOCKHOLDERS' EQUITY                        
LIABILITIES:                        
  Commercial paper borrowings   $ 194,984     $ 424,967     $ --  
  Customer banking deposits     806,887       1,036,968       936,464  
  Accounts payable, accrued expenses and other current liabilities     520,121       479,660       523,921  
  Accrued salaries, wages and payroll taxes     108,583       103,538       134,970  
  Accrued income taxes     23,375       17,348       416,128  
  Current portion of long-term debt     400,570       713       722  
    Total current liabilities     2,054,520       2,063,194       2,012,205  
  Long-term debt     505,959       906,012       905,958  
  Other noncurrent liabilities     268,049       328,402       356,069  
    Total liabilities     2,828,528       3,297,608       3,274,232  
COMMITMENTS AND CONTINGENCIES                        
STOCKHOLDERS' EQUITY:                        
  Common stock, no par, stated value $.01 per share     3,166       3,166       3,166  
  Additional paid-in capital     762,102       747,398       752,483  
  Accumulated other comprehensive income (loss)     (4,776 )     9,055       10,550  
  Retained earnings     734,233       723,676       1,333,445  
  Less treasury shares, at cost     (807,966 )     (848,407 )     (836,097 )
    Total stockholders' equity     686,759       634,888       1,263,547  
      Total liabilities and stockholders' equity   $ 3,515,287     $ 3,932,496     $ 4,537,779  
                         
                         
                         
CONSOLIDATED STATEMENTS OF OPERATIONS     (unaudited, in 000s, except per share amounts)  
    Three months ended     Nine months ended  
    January 31,     January 31,  
    2014     2013     2014     2013  
REVENUES:                                
  Service revenues   $ 138,613     $ 362,194     $ 358,845     $ 558,528  
  Product and other revenues     23,788       71,485       43,268       89,171  
  Interest income     37,369       38,300       59,192       58,032  
      199,770       471,979       461,305       705,731  
OPERATING EXPENSES:                                
  Cost of revenues:                                
    Compensation and benefits     160,830       160,081       267,668       254,430  
    Occupancy and equipment     88,387       84,710       249,481       247,059  
    Provision for bad debt and loan losses     31,420       43,028       45,760       51,398  
    Interest     14,443       19,428       43,203       64,895  
    Depreciation of property and equipment     23,054       18,381       60,002       49,111  
    Other     45,403       51,990       128,340       116,160  
      363,537       377,618       794,454       783,053  
  Selling, general and administrative     174,448       186,997       365,237       352,802  
      537,985       564,615       1,159,691       1,135,855  
Operating loss     (338,215 )     (92,636 )     (698,386 )     (430,124 )
Other income (expense), net     (9,610 )     (3,632 )     (13,295 )     2,299  
Loss from continuing operations before income tax benefit     (347,825 )     (96,268 )     (711,681 )     (427,825 )
Income tax benefit     (135,074 )     (79,353 )     (282,645 )     (204,061 )
Net loss from continuing operations     (212,751 )     (16,915 )     (429,036 )     (223,764 )
Net loss from discontinued operations     (1,960 )     (793 )     (5,805 )     (6,628 )
NET LOSS   $ (214,711 )   $ (17,708 )   $ (434,841 )   $ (230,392 )
                                 
BASIC AND DILUTED LOSS PER SHARE:                                
  Continuing operations   $ (0.78 )   $ (0.06 )   $ (1.57 )   $ (0.82 )
  Discontinued operations     --       (0.01 )     (0.02 )     (0.02 )
  Consolidated   $ (0.78 )   $ (0.07 )   $ (1.59 )   $ (0.84 )
                                 
       
       
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited, in 000s)  
Nine months ended January 31,   2014     2013  
                 
NET CASH USED IN OPERATING ACTIVITIES   $ (1,120,322 )   $ (1,311,926 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Purchases of available-for-sale securities     (45,158 )     (108,351 )
  Maturities of and payments received on available-for-sale securities     72,502       86,808  
  Principal payments on mortgage loans held for investment, net     35,320       31,205  
  Capital expenditures     (125,654 )     (96,063 )
  Payments made for business acquisitions, net of cash acquired     (37,865 )     (20,662 )
  Proceeds received on notes receivable     64,865       --  
  Franchise loans:                
    Loans funded     (62,039 )     (68,874 )
    Payments received     17,893       9,594  
  Other, net     12,227       (13,973 )
      Net cash used in investing activities     (67,909 )     (180,316 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Repayments of commercial paper and other short-term borrowings     (80,930 )     (789,271 )
  Proceeds from issuance of commercial paper and other short-term borrowings     275,914       1,214,238  
  Repayments of long-term debt     --       (636,621 )
  Proceeds from issuance of long-term debt     --       497,185  
  Customer banking deposits, net     (124,947 )     208,753  
  Dividends paid     (164,134 )     (162,692 )
  Repurchase of common stock, including shares surrendered     (6,047 )     (340,298 )
  Proceeds from exercise of stock options     28,083       11,529  
  Other, net     (29,872 )     (36,113 )
      Net cash used in financing activities     (101,933 )     (33,290 )
                 
Effects of exchange rate changes on cash     (20,016 )     (417 )
                 
Net decrease in cash and cash equivalents     (1,310,180 )     (1,525,949 )
Cash and cash equivalents at beginning of the period     1,747,584       1,944,334  
Cash and cash equivalents at end of the period   $ 437,404     $ 418,385  
                 
SUPPLEMENTARY CASH FLOW DATA:                
  Income taxes paid, net of refunds received   $ 87,672     $ 104,986  
  Interest paid on borrowings     43,297       62,160  
  Interest paid on deposits     1,696       4,377  
  Transfers of foreclosed loans to other assets     6,389       7,208  
  Accrued additions to property and equipment     4,113       1,001  
  Transfer of mortgage loans held for investment to held for sale     7,608       --  
                 
                 
                 
U.S. TAX OPERATING DATA                       (in 000s) 
    Nine months ended         Ten months ended      
    January 31,         February 28,      
    2014   2013   % Change     2014   2013   % Change  
Tax Returns Prepared: (1,2)                            
  H&R Block Company-Owned Operations   1,516   1,724   (12.1 )%   4,689   5,287   (11.3 )%
  H&R Block Franchise Operations   1,037   1,114   (6.9 )%   3,131   3,313   (5.5 )%
    Total H&R Block Assisted Returns   2,553   2,838   (10.0 )%   7,820   8,600   (9.1 )%
                               
  H&R Block Desktop (3)   137   143   (4.2 )%   833   824   1.1 %
  H&R Block Online (3)   654   865   (24.4 )%   2,683   2,714   (1.1 )%
    Sub-Total (3)   791   1,008   (21.5 )%   3,516   3,538   (0.6 )%
                               
  H&R Block Free File Alliance (3)   64   65   (1.5 )%   436   367   18.8 %
    Total H&R Block Tax Software (3)   855   1,073   (20.3 )%   3,952   3,905   1.2 %
      Total H&R Block U.S. Returns   3,408   3,911   (12.9 )%   11,772   12,505   (5.9 )%
                             
(1) Prior year numbers have been reclassified between company-owned and franchise operations for offices which were refranchised during either year.
(2) Amounts shown include 1.8 million and 0.2 million returns at January 31, 2014 and 2013, respectively, which were completed as of January 31, but not yet electronically filed.
(3) Previously reported tax software return counts for fiscal year 2013 has been restated to primarily reflect accepted e-files. No changes were made to previously reported assisted return counts.
   
   
   
HISTORICAL FULL YEAR U.S. TAX OPERATING DATA (REVISED)       (in 000s)
    Fiscal Year
    2013   2012   2011
Tax Returns Prepared:            
  H&R Block Company-Owned Operations   8,907   9,207   9,168
  H&R Block Franchise Operations   5,598   5,693   5,588
    Total H&R Block Assisted Returns   14,505   14,900   14,756
               
  H&R Block Desktop (1)   2,055   2,124   2,013
  H&R Block Online (1)   4,356   3,932   3,314
    Sub-Total (1)   6,411   6,056   5,327
               
  H&R Block Free File Alliance (1)   663   721   659
    Total H&R Block Tax Software (1)   7,074   6,777   5,986
      Total H&R Block U.S. Returns   21,579   21,677   20,742
             
(1) Previously reported tax software return counts for fiscal years 2013 and prior have been restated to primarily reflect accepted e-files. No changes were made to previously reported assisted return counts.
   
   
   
TAX SERVICES - FINANCIAL RESULTS   (unaudited, amounts in 000s)  
    Three months ended     Nine months ended  
    January 31,     January 31,  
    2014     2013     2014     2013  
Tax preparation fees:                                
  U.S.   $ 72,108     $ 254,225     $ 123,145     $ 296,865  
  International     9,253       19,960       82,915       85,543  
      81,361       274,185       206,060       382,408  
Royalties     15,061       56,211       31,150       71,692  
Fees from refund anticipation checks     15,542       44,706       21,282       49,176  
Fees from Emerald Card     12,689       11,379       37,299       31,716  
Fees from Peace of Mind® guarantees     12,684       11,950       59,661       57,505  
Interest and fee income on Emerald Advance     27,656       28,399       28,602       30,074  
Other     29,003       37,804       59,673       62,135  
    Total revenues     193,996       464,634       443,727       684,706  
                                 
Compensation and benefits:                                
  Field wages     136,885       136,532       226,320       214,230  
  Other wages     41,629       37,039       112,029       105,998  
  Benefits and other compensation     34,696       32,369       72,811       65,908  
      213,210       205,940       411,160       386,136  
Occupancy and equipment     88,148       84,631       250,332       246,749  
Marketing and advertising     77,852       99,262       97,435       118,100  
Depreciation and amortization     31,819       24,557       81,253       68,421  
Bad debt     31,420       39,528       38,535       41,148  
Supplies     7,387       8,724       14,355       15,155  
Other     66,259       66,181       176,464       144,200  
    Total expenses     516,095       528,823       1,069,534       1,019,909  
Pretax loss   $ (322,099 )   $ (64,189 )   $ (625,807 )   $ (335,203 )
                                 
                                 
                                 
NON-GAAP FINANCIAL MEASURES (unaudited, amounts in thousands, except per share amounts)  
  Three months ended January 31, 2014  
  Revenues   Expenses     EBITDA     Pretax income (loss)     Net income (loss)     EPS  
                                           
As reported - from continuing operations $199,770   $ 537,985     $ (301,571 )   $ (347,825 )   $ (212,751 )   $ (0.78 )
                                           
Adjustments:                                          
  Loss contingencies - litigation --     346       346       346       207       --  
  Impairment of goodwill and intangible assets --     11       11       11       7       --  
  Severance --     1,092       1,092       1,092       648       --  
  Professional fees related to HRB Bank transaction --     171       171       171       95       --  
  Gain on sales of tax offices --     (616 )     (616 )     (616 )     (372 )     --  
  Discrete tax items --     --       --       --       3,238       0.01  
  --     1,004       1,004       1,004       3,823       0.01  
                                           
As adjusted - from continuing operations $199,770   $ 536,981     $ (300,567 )   $ (346,821 )   $ (208,928 )   $ (0.77 )
                                           
  Three months ended January 31, 2013  
  Revenues   Expenses     EBITDA     Pretax income (loss)     Net income (loss)     EPS  
                                           
As reported - from continuing operations $471,979   $ 564,615     $ (52,202 )   $ (96,268 )   $ (16,915 )   $ (0.06 )
                                           
Adjustments:                                          
  Loss contingencies - litigation --     (190 )     (190 )     (190 )     (126 )     --  
  Impairment of goodwill and intangible assets --     --       --       --       3       --  
  Severance --     (582 )     (582 )     (582 )     (355 )     --  
  Professional fees related to HRB Bank transaction --     383       383       383       235       --  
  Loss on extinguishment of debt --     5,790       5,790       5,790       3,552       --  
  Gain on sales of tax offices --     (352 )     (352 )     (352 )     (217 )     0.01  
  Discrete tax items --     --       --       --       (42,852 )     (0.16 )
  --     5,049       5,049       5,049       (39,760 )     (0.15 )
                                           
As adjusted - from continuing operations $471,979   $ 559,566     $ (47,153 )   $ (91,219 )   $ (56,675 )   $ (0.21 )
                                           
                                           
  Nine months ended January 31, 2014  
  Revenues   Expenses     EBITDA     Pretax income (loss)     Net income (loss)     EPS  
                                           
As reported - from continuing operations $461,305   $ 1,159,691     $ (587,125 )   $ (711,681 )   $ (429,036 )   $ (1.57 )
                                           
Adjustments:                                          
  Loss contingencies - litigation --     1,069       1,069       1,069       650       --  
  Impairment of goodwill and intangible assets --     11       11       11       7       --  
  Severance --     4,025       4,025       4,025       2,447       0.01  
  Professional fees related to HRB Bank transaction --     1,978       1,978       1,978       1,203       --  
  Gain on sales of tax offices --     (1,215 )     (1,215 )     (1,215 )     (739 )     --  
  Discrete tax items --     --       --       --       (3,666 )     (0.01 )
  --     5,868       5,868       5,868       (98 )     --  
                                           
As adjusted - from continuing operations $461,305   $ 1,153,823     $ (581,257 )   $ (705,813 )   $ (429,134 )   $ (1.57 )
                                 
  Nine months ended January 31, 2013  
  Revenues   Expenses     EBITDA     Pretax income (loss)     Net income (loss)     EPS  
                                           
As reported - from continuing operations $705,731   $ 1,135,855     $ (295,688 )   $ (427,825 )   $ (223,764 )   $ (0.82 )
                                           
Adjustments:                                          
  Loss contingencies - litigation --     (4,943 )     (4,943 )     (4,943 )     (3,032 )     (0.01 )
  Impairment of goodwill and intangible assets --     1,421       1,421       1,421       872       --  
  Severance --     475       475       475       291       --  
  Professional fees related to HRB Bank transaction --     430       430       430       264       --  
  Loss on extinguishment of debt --     5,790       5,790       5,790       3,552       --  
  Gain on sales of tax offices --     (876 )     (876 )     (876 )     (537 )     0.01  
  Discrete tax items --     --       --       --       (38,679 )     (0.14 )
  --     2,297       2,297       2,297       (37,269 )     (0.14 )
                                           
As adjusted - from continuing operations $705,731   $ 1,133,558     $ (293,391 )   $ (425,528 )   $ (261,033 )   $ (0.96 )
                       
      Three months ended     Nine months ended        
      January 31,     January 31,        
EBITDA     2014     2013     2014     2013        
                                 
Net loss from continuing operations - as reported   $ (212,751 )   $ (16,915 )   $ (429,036 )   $ (223,764 )      
                                         
Add back :                                        
  Income taxes       (135,074 )     (79,353 )     (282,645 )     (204,061 )      
  Interest expense       14,443       19,428       43,203       64,895        
  Depreciation and amortization       31,811       24,638       81,353       67,242        
        (88,820 )     (35,287 )     (158,089 )     (71,924 )      
                                         
EBITDA from continuing operations     $ (301,571 )   $ (52,202 )   $ (587,125 )   $ (295,688 )      
                                         
      Three months ended     Nine months ended        
      January 31,     January 31,        
Supplemental Information     2014     2013     2014     2013        
                                         
Stock-based compensation expense:                                        
  Pretax     $ 4,715     $ 3,677     $ 15,477     $ 11,414        
  After-tax       2,809       2,271       9,410       7,001        
Amortization of intangible assets:                                        
  Pretax     $ 8,757     $ 6,256     $ 21,351     $ 18,130        
  After-tax       5,256       3,862       12,981       11,121        

ABOUT NON-GAAP FINANCIAL MEASURES

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

We consider non-GAAP financial measures to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of items that are not indicative of our core operating performance.

The following are descriptions of adjustments we make for our non-GAAP financial measures:

  •  We exclude from our non-GAAP financial measures litigation charges we incur and favorable reserve adjustments. This does not include legal defense costs.
  •  We exclude from our non-GAAP financial measures non-cash charges to adjust the carrying values of goodwill, intangible assets, other long-lived assets and investments to their estimated fair values.
  •  We exclude from our non-GAAP financial measures severance and other restructuring charges in connection with the termination of personnel, closure of offices and related costs.
  •  We exclude from our non-GAAP financial measures the gains and losses on business dispositions, including investment banking, legal and accounting fees.
  •  We exclude from our non-GAAP financial measures the gains and losses on extinguishment of debt.
  •  We exclude from our non-GAAP financial measures the effects of discrete income tax reserve and related adjustments recorded in a specific quarter.

We may consider whether other significant items that arise in the future should also be excluded from our non-GAAP financial measures.

We measure the performance of our business using a variety of metrics, including EBITDA, adjusted EBITDA, adjusted pretax and net income (loss) of continuing operations and adjusted EPS. We also use EBITDA and pretax income of continuing operations as performance metrics in incentive compensation calculations for our employees. These adjusted results eliminate the impact of items that we do not consider indicative of our core operating performance and, we believe, provide meaningful information to assist in understanding our financial results, analyzing trends in our underlying business, and assessing our prospects for future performance.

Contact Information

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

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