H&R Block Announces Fiscal 2015 Results
KANSAS CITY, MO -- (Marketwired) -- 06/08/15 -- H&R Block, Inc. (NYSE: HRB)
- Total revenues increased $54 million, or 1.8%, to $3.1 billion1
- Adjusted EBITDA margin of 30.8% consistent with prior year2
- Earnings per share from continuing operations of $1.75 3
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, 2015. Revenues increased for the third consecutive year to $3.1 billion, or 1.8%, driven by successful implementation of the company's pricing strategy and improved return mix in its retail locations, improved digital do-it-yourself (DIY) volume and monetization, and the impact of franchise acquisitions. This was partially offset by volume declines in its retail locations and negative impact of foreign exchange rate fluctuations. The company's EBITDA margin of 30.8% was consistent with prior year. Earnings per share from continuing operations decreased 3.3% to $1.75.
Returns prepared by and through H&R Block declined 0.1% to 24.2 million worldwide. This was primarily due to a 4.4% decrease in U.S. assisted tax returns prepared, mainly driven by the continued decline of returns containing the Earned Income Tax Credit (EITC) and, to a lesser extent, the second-year impact of the company's decision to discontinue the free federal 1040EZ promotion. The company believes the decline in volume was also exacerbated by the impact of industry-wide fraud. H&R Block's DIY returns, including desktop and online, improved 8% due to product enhancements and improved consumer awareness.
"We saw positive changes in our assisted return mix, our DIY business did very well, both from a volume and a revenue perspective, and our tax professionals delivered expert ACA advice to their clients," said Bill Cobb, H&R Block's president and chief executive officer. "I'm pleased that despite the decline in volume we delivered top line revenue growth for the third consecutive year and achieved strong margins."
The Affordable Care Act (ACA) brought increased complexity to the tax return preparation process for the first time during the 2015 tax season. Confusion, incorrect or delayed 1095-A information documents, and overall anxiety regarding refund impacts modified the timing of taxpayer filings and for some, materially impacted their refunds. Approximately 16% of H&R Block's clients were directly impacted by the ACA, with the majority of such clients being those without qualifying insurance coverage and either paying the required penalty or obtaining an exemption. Increasing Marketplace enrollment, higher penalties, and new documentation requirements will impact taxpayer behavior for several years to come. H&R Block made significant investments in training, systems and marketing to ensure it is well positioned to serve taxpayers impacted by the ACA going forward.
During this tax season, the industry saw the increasing trend of concern around fraud. While H&R Block has been advocating for actions to address fraud for several years, meaningful attention is now being paid within the tax preparation industry to issues such as tax identify theft and improper EITC payments that continue to cost taxpayers billions of dollars. H&R Block has led the fight against tax fraud and remains focused on advocating for change that benefits consumers by strengthening anti-fraud measures. Commonsense measures such as consistent standards for all tax filings and mandatory certification for paid tax preparers, among other actions, are necessary to address these issues.
"This has been a challenging tax season impacted by changes in the timing of tax filings, the first year implementation of the ACA and the continued and growing issue of fraud in our industry," added Cobb. "We're focused on the future, and by investing in our infrastructure through enhanced training, the implementation of new tax preparation software in our assisted channel, and an upgrade of our offices, H&R Block is well positioned for success."
Fiscal 2015 Results From Continuing Operations
"We increased revenues for the third consecutive year and continued to deliver strong bottom line results," said Greg Macfarlane, H&R Block's chief financial officer. "Additionally, our ongoing focus on productivity has allowed us to invest significantly back into the business while achieving targeted EBITDA margins and strong free cash flow."
Actual Adjusted
--------------------------------------------------
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
(in millions, except EPS) 2015 2014 2015 2014
----------------------------------------------------------------------------
Revenue $ 3,079 $ 3,024 $ 3,079 $ 3,024
----------------------------------------------------------------------------
EBITDA $ 949 $ 940 $ 951 $ 932
----------------------------------------------------------------------------
Pretax Income $ 743 $ 767 $ 745 $ 759
----------------------------------------------------------------------------
Net Income $ 487 $ 500 $ 488 $ 495
----------------------------------------------------------------------------
Weighted-Avg. Shares -
Diluted 277.1 276.0 277.1 276.0
----------------------------------------------------------------------------
EPS $ 1.75 $ 1.81 $ 1.75 $ 1.79
----------------------------------------------------------------------------
Business Segment Financial Results and Highlights
Tax Services
- Revenues increased 1.9% to $3.1 billion, driven by improvements in tax return mix in both the company's assisted channel and DIY products, pricing increases, the impact of the franchise acquisitions, and DIY unit growth. Lower assisted return volumes and the impact of foreign currency translation partially offset the revenue increase.
- U.S. assisted tax preparation fees and royalties increased 2.3% to $2.1 billion, primarily due to improved return mix, pricing increases, and the impact of franchise acquisitions, offset partially by lower return volumes.
- DIY tax preparation fees increased 12.1% to $228.4 million due to client growth and improved monetization.
- Revenues related to Tax Plus products (H&R Block Emerald Advance® Line of Credit, refund transfers (formerly known as refund anticipation checks), H&R Block Emerald Prepaid MasterCard®, Peace of Mind®, and Tax Identity Shield™) declined 4.3% to $413.1 million, as lower return volume negatively impacted product sales.
- International return volume increased 3.9% and revenues increased 7.8% on a local currency basis.
- On a U.S. dollar basis, international tax preparation revenues increased 3.8% due to the negative impact of foreign exchange totaling $17.9 million.
- Total operating expenses increased 5.1% to $2.2 billion, mainly due to increased depreciation and amortization, compensation, marketing, and training and other costs related to the implementation of assisted tax software.
- Adjusted non-GAAP pretax income declined 3.6% to $825.5 million.
Corporate
- Pretax loss improved by $18.8 million to $80.4 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.
- Effective tax rate from continuing operations was 34.5%.
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 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 $150 million at April 30.
Balance Sheet
- As of April 30, the company had unrestricted cash of $2.0 billion and total outstanding debt of $506.1 million.
- Shareholder equity at April 30 was $1.8 billion.
Dividends
A previously announced quarterly cash dividend of 20 cents per share is payable on July 1, 2015 to shareholders of record as of June 15, 2015. The July 1 dividend payment will be H&R Block's 211th consecutive quarterly dividend since the company went public in 1962.
Fiscal 2015 Conference Call
In conjunction with the release of the fiscal 2015 results, the company will host a conference call at 4:30 p.m. Eastern time on June 8, 2015 for analysts, institutional investors, and shareholders to discuss the fiscal 2015 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: 8986376
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 8, 2015, and continuing until July 8, 2015, by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International). The conference ID is 8986376. The webcast will be available for replay June 9, 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 680 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2015, H&R Block had annual revenues of nearly $3.1 billion with 24.2 million tax returns prepared worldwide. Tax return preparation services are provided by professional tax preparers in approximately 12,000 company-owned and franchise retail tax offices worldwide, and through H&R Block tax software products. H&R Block 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 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 Information" below for more information regarding financial measures not prepared in accordance with generally accepted accounts principles (GAAP).
3 All per share amounts are based on fully diluted shares.
----------------------------------------------------------------------------
KEY OPERATING RESULTS (unaudited, in 000s - except per share data)
----------------------------------------------------------------------------
Year ended April 30,
--------------------- -----------------------
Revenues Income (loss)
--------------------- -----------------------
2015 2014 2015 2014
---------- ---------- ----------- -----------
Tax Services $3,056,299 $2,999,460 $ 823,236 $ 866,367
Corporate and Eliminations 22,359 24,835 (80,431) (99,251)
---------- ---------- ----------- -----------
$3,078,658 $3,024,295 742,805 767,116
---------- ----------
Income taxes 256,061 267,019
----------- -----------
Net income from continuing
operations 486,744 500,097
Net loss from discontinued
operations (13,081) (24,940)
----------- -----------
Net income $ 473,663 $ 475,157
----------- -----------
Basic earnings (loss) per
share:
Continuing operations $ 1.77 $ 1.82
Discontinued operations (0.05) (0.09)
----------- -----------
Consolidated $ 1.72 $ 1.73
----------- -----------
Basic shares 275,033 273,830
Diluted earnings (loss) per
share:
Continuing operations $ 1.75 $ 1.81
Discontinued operations (0.04) (0.09)
----------- -----------
Consolidated $ 1.71 $ 1.72
----------- -----------
Diluted shares 277,136 276,027
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited, in 000s -
CONSOLIDATED BALANCE SHEETS except per share data)
----------------------------------------------------------------------------
As of April 30, 2015 2014
-------------------------------------------------- ------------ ------------
ASSETS
Cash and cash equivalents $ 2,007,190 $ 2,185,307
Cash and cash equivalents - restricted 91,972 115,319
Receivables, net 167,964 191,618
Deferred tax assets and income taxes receivable 174,267 135,327
Prepaid expenses and other current assets 70,283 62,940
Investments in available-for-sale securities 439,625 423,495
------------ ------------
Total current assets 2,951,301 3,114,006
Mortgage loans held for investment, net 239,338 268,428
Property and equipment, net 311,387 304,911
Intangible assets, net 432,142 355,622
Goodwill 441,831 436,117
Deferred tax assets and income taxes receivable 13,461 47,247
Other assets 125,960 167,198
------------ ------------
Total assets $ 4,515,420 $ 4,693,529
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Customer banking deposits $ 744,241 $ 769,785
Accounts payable and accrued expenses 231,322 222,489
Accrued salaries, wages and payroll taxes 144,744 167,032
Accrued income taxes 434,684 406,655
Current portion of long-term debt 790 400,637
Deferred revenue and other current liabilities 322,508 346,518
------------ ------------
Total current liabilities 1,878,289 2,313,116
Long-term debt 505,298 505,837
Deferred tax liabilities and reserves for
uncertain tax positions 142,586 157,465
Deferred revenue and other noncurrent
liabilities 156,298 160,562
------------ ------------
Total liabilities 2,682,471 3,136,980
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $.01 per
share 3,166 3,166
Additional paid-in capital 783,793 766,654
Accumulated other comprehensive income 1,740 5,177
Retained earnings 1,836,442 1,589,297
Less treasury shares, at cost (792,192) (807,745)
------------ ------------
Total stockholders' equity 1,832,949 1,556,549
------------ ------------
Total liabilities and stockholders' equity $ 4,515,420 $ 4,693,529
------------ ------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited, in 000s -
CONSOLIDATED STATEMENTS OF OPERATIONS except per share amounts)
----------------------------------------------------------------------------
Year ended April 30, 2015 2014
-------------------------------------------------- ------------ ------------
REVENUES:
Service revenues $ 2,651,057 $ 2,570,273
Royalty, product and other revenues 334,737 355,928
Interest income 92,864 98,094
------------ ------------
3,078,658 3,024,295
------------ ------------
OPERATING EXPENSES:
Cost of revenues: (1)
Compensation and benefits 852,480 816,623
Occupancy and equipment 378,624 362,782
Provision for bad debt and loan losses 74,993 80,007
Depreciation and amortization 111,861 93,259
Other 212,532 219,706
------------ ------------
1,630,490 1,572,377
Selling, general and administrative:
Marketing and advertising 273,682 238,763
Compensation and benefits 238,527 249,779
Depreciation and amortization 47,943 22,345
Other selling, general and administrative 93,350 122,541
------------ ------------
653,502 633,428
------------ ------------
Total operating expenses 2,283,992 2,205,805
------------ ------------
Other income 1,314 36,315
Interest expense on borrowings (1) (45,246) (55,279)
Other expenses (7,929) (32,410)
------------ ------------
Income from continuing operations before income
taxes 742,805 767,116
Income taxes 256,061 267,019
------------ ------------
Net income from continuing operations 486,744 500,097
Net loss from discontinued operations (13,081) (24,940)
------------ ------------
NET INCOME $ 473,663 $ 475,157
------------ ------------
BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations $ 1.77 $ 1.82
Discontinued operations (0.05) (0.09)
------------ ------------
Consolidated $ 1.72 $ 1.73
------------ ------------
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations $ 1.75 $ 1.81
Discontinued operations (0.04) (0.09)
------------ ------------
Consolidated $ 1.71 $ 1.72
------------ ------------
----------------------------------------------------------------------------
(1) The 2014 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)
----------------------------------------------------------------------------
Year ended April 30, 2015 2014
-------------------------------------------------- ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 626,608 $ 809,581
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (90,581) (45,158)
Maturities of and payments received on
available-for-sale securities 91,878 107,101
Principal payments on mortgage loans held for
investment, net 23,886 46,664
Capital expenditures (123,158) (147,011)
Payments made for business acquisitions, net of
cash acquired (113,252) (68,428)
Proceeds received on notes receivable - 64,865
Franchise loans:
Loans funded (49,695) (63,960)
Payments received 90,636 87,220
Other, net 21,354 29,397
------------ ------------
Net cash provided by (used in) investing
activities (148,932) 10,690
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of commercial paper (1,049,136) (316,000)
Proceeds from issuance of commercial paper 1,049,136 316,000
Repayments of long-term debt (400,000) -
Customer banking deposits, net (28,544) (163,952)
Dividends paid (219,960) (218,980)
Repurchase of common stock, including shares
surrendered (10,449) (6,106)
Proceeds from exercise of stock options 16,522 28,246
Other, net (3,376) (4,138)
------------ ------------
Net cash used in financing activities (645,807) (364,930)
------------ ------------
Effects of exchange rate changes on cash (9,986) (17,618)
Net increase (decrease) in cash and cash
equivalents (178,117) 437,723
Cash and cash equivalents at beginning of the year 2,185,307 1,747,584
------------ ------------
Cash and cash equivalents at end of the year $ 2,007,190 $ 2,185,307
------------ ------------
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received $ 236,624 $ 155,735
Interest paid on borrowings 44,847 55,221
Interest paid on deposits 736 2,162
Transfers of foreclosed loans to other assets 4,805 7,644
Accrued additions to property and equipment 14,282 5,257
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
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited, amounts in
TAX SERVICES - FINANCIAL RESULTS 000s)
----------------------------------------------------------------------------
Year ended April 30, 2015 2014
-------------------------------------------------- ------------ ------------
Tax preparation fees:
U.S. assisted $ 1,865,438 $ 1,794,043
International 207,772 200,152
U.S. digital 228,416 203,699
------------ ------------
2,301,626 2,197,894
Royalties 292,743 316,153
Revenues from Refund Transfers 171,094 181,394
Revenues from Emerald Card® 103,300 103,730
Revenues from Peace of Mind® guarantees 81,551 89,685
Interest and fee income on Emerald Advance 57,202 56,877
Other 48,783 53,727
------------ ------------
Total revenues 3,056,299 2,999,460
------------ ------------
Compensation and benefits:
Field wages 731,309 702,312
Other wages 158,463 169,583
Benefits and other compensation 167,178 158,203
------------ ------------
1,056,950 1,030,098
Occupancy and equipment 375,392 363,590
Marketing and advertising 271,866 237,214
Depreciation and amortization 159,787 115,488
Bad debt 75,003 71,733
Supplies 42,808 36,454
Other 242,054 260,676
------------ ------------
Total operating expenses 2,223,860 2,115,253
------------ ------------
Other income 799 10,664
Interest expense on borrowings (2,067) (2,137)
Other expenses (7,935) (26,367)
------------ ------------
Pretax income $ 823,236 $ 866,367
------------ ------------
-------------------------------------------------- ------------ ------------
----------------------------------------------------------------------------
WORLDWIDE TAX OPERATING DATA (in 000s)
----------------------------------------------------------------------------
Year ended April 30, 2015 2014 % Change
------------------------------------------------ -------- -------- ---------
U.S. Tax Returns Prepared: (1)
H&R Block Company-Owned Operations 8,327 8,744 (4.8)%
H&R Block Franchise Operations 4,688 4,866 (3.7)%
-------- --------
Total H&R Block Assisted (3) 13,015 13,610 (4.4)%
-------- --------
H&R Block Desktop (4) 2,168 2,026 7.0%
H&R Block Online (5) 4,765 4,389 8.6%
-------- --------
Total H&R Block DIY 6,933 6,415 8.1%
-------- --------
H&R Block Free File Alliance 676 767 (11.9)%
-------- --------
Total H&R Block U.S. Returns 20,624 20,792 (0.8)%
-------- --------
International Tax Returns Prepared:
Canada (2) 2,658 2,642 0.6%
Australia 768 746 2.9%
Other 115 21 447.6%
-------- --------
Total International Tax Returns 3,541 3,409 3.9%
-------- --------
Tax Returns Prepared Worldwide 24,165 24,201 (0.1)%
-------- --------
----------------------------------------------------------------------------
(1) Prior year numbers have been reclassified between company-owned and
franchise for offices which were refranchised or repurchased by the
company.
(2) In fiscal years 2015 and 2014, the end of the Canadian tax season was
extended from April 30 to May 5. Tax returns prepared in Canada in
fiscal years 2015 and 2014 includes approximately 131 thousand and 141
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 2016 and 2015,
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
----------------------------------------------------------------------------
Year ended April 30, 2015 2014
-------------------------------- --------------------- ---------------------
EBITDA Earnings EBITDA Earnings
---------- ---------- ---------- ----------
As reported - from continuing
operations $ 948,537 $ 486,744 $ 940,108 $ 500,097
Adjustments:
Loss contingencies -
litigation (3,936) (3,936) 1,844 1,844
Severance 6,699 6,699 5,204 5,204
Professional fees related to
HRB Bank transaction 238 238 2,747 2,747
Losses (gains) on AFS
securities 124 124 (5,836) (5,836)
Gain on sales of tax
offices/businesses (656) (656) (11,738) (11,738)
Tax effect on adjustments - (963) - 3,045
---------- ---------- ---------- ----------
2,469 1,506 (7,779) (4,734)
---------- ---------- ---------- ----------
As adjusted - from continuing
operations $ 951,006 $ 488,250 $ 932,329 $ 495,363
---------- ---------- ---------- ----------
Adjusted EPS $ 1.75 $ 1.79
---------------------
Year ended April 30,
-------------------------------- ---------------------
EBITDA 2015 2014
-------------------------------- ---------- ----------
Net income - as reported $ 473,663 $ 475,157
Add back :
Discontinued operations 13,081 24,940
Income taxes 256,061 267,019
Interest expense 45,928 57,388
Depreciation and amortization 159,804 115,604
---------- ----------
474,874 464,951
---------- ----------
EBITDA from continuing
operations $ 948,537 $ 940,108
---------- ----------
---------- ----------
Year ended April 30,
-------------------------------- ---------------------
Supplemental Information 2015 2014
-------------------------------- ---------- ----------
Stock-based compensation
expense:
Pretax $ 26,068 $ 20,058
After-tax 15,918 12,204
Amortization of intangible
assets:
Pretax $ 58,521 $ 30,895
After-tax 35,736 18,798
----------------------------------------------------------------------------
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 income of continuing operations. Adjusted EBITDA and adjusted 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 income of continuing operations, each subject to permitted adjustments, as performance metrics in incentive compensation calculations for our employees.
We no longer include adjustments for discrete tax items in reporting our non-GAAP measures. Non-GAAP measures previously reported in fiscal year 2014 have been restated to conform with our current reporting practice.
For Further InformationInvestor Relations:Colby Brown(816) 854-4559Email contact Media Relations:Gene King(816) 854-4672Email contact
Source: H & R Block