H&R Block Announces Fiscal 2016 Results and Dividend Increase
KANSAS CITY, MO -- (Marketwired) -- 06/09/16 --
- 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 Adjusted(2)
--------------------- ---------------------
Fiscal Fiscal Fiscal Fiscal
Year Year Year Year
(in millions, except EPS) 2016 2015 2016 2015
------------------------------------------------------ ---------------------
Revenue $ 3,038 $ 3,079 N/A N/A
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Pretax Income $ 569 $ 743 $ 596 $ 745
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Net Income $ 384 $ 487 $ 400 $ 488
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Weighted-Avg. Shares - Diluted 250.8 277.1 N/A N/A
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EPS $ 1.53 $ 1.75 $ 1.59 $ 1.75
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EBITDA(2) $ 812 $ 949 $ 839 $ 951
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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.
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(unaudited, in 000s - except per
CONSOLIDATED STATEMENTS OF OPERATIONS share amounts)
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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
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----------------------------------------------------------------------------
(unaudited, in 000s - except
CONSOLIDATED BALANCE SHEETS 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
-------------- --------------
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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
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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
------------ ------------ ------------ ------------
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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)%
---------- ----------
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(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.
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NON-GAAP FINANCIAL MEASURES (unaudited, in 000s - except per share amounts)
----------------------------------------------------------------------------
Reconciliation of EBITDA Three months ended
from Continuing Operations 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
----------- ----------- ----------- -----------
----------------------------------------------------------------------------
---------------------------------------------------------------------------
(unaudited,
in 000s -
except per
share
NON-GAAP FINANCIAL MEASURES amounts)
---------------------------------------------------------------------------
Reconciliation of Other Non- Three months ended April 30,
--------------------------------------
GAAP Financial Measures 2016
------------------------------------ --------------------------------------
Pretax
income Net income EBITDA
------------ ------------ ------------
From continuing operations $ 1,140,807 $ 701,225 $ 1,209,293
Adjustments (pretax):
Loss contingencies - litigation 961 961 961
Severance 12,001 12,001 12,001
Costs related to HRB Bank and
recapitalization transactions - - -
Losses (gains) on AFS securities - - -
Gain on sales of tax
offices/businesses - - -
Tax effect of adjustments (2) - (5,047) -
------------ ------------ ------------
12,962 7,915 12,962
------------ ------------ ------------
As adjusted - from continuing
operations $ 1,153,769 $ 709,140 $ 1,222,255
------------ ------------ ------------
Adjusted EBITDA margin (1) 53%
Adjusted EPS $ 3.16
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(unaudited, in 000s - except per share
NON-GAAP FINANCIAL MEASURES amounts)
---------------------------------------------------------------------------
Reconciliation of Other Non- Three months ended April 30,
---------------------------------------
GAAP Financial Measures 2015
------------------------------------ --------------------------------------
Pretax
income Net income EBITDA
------------ ------------ ------------
From continuing operations $ 1,210,059 $ 744,133 $ 1,262,690
Adjustments (pretax):
Loss contingencies - litigation (4,545) (4,545) (4,545)
Severance 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) - (86) -
------------ ------------ ------------
161 75 161
------------ ------------ ------------
As adjusted - from continuing
operations $ 1,210,220 $ 744,208 $ 1,262,851
------------ ------------ ------------
Adjusted EBITDA margin (1) 55%
Adjusted EPS $ 2.68
-------------------------------------------------------------- ------------
------------------------------------- --------------------------------------
Reconciliation of Other Non- Year ended April 30,
--------------------------------------
GAAP Financial Measures 2016
------------------------------------- --------------------------------------
Pretax
income Net income EBITDA
------------ ------------ ------------
From continuing operations $ 569,479 $ 383,553 $ 812,218
Adjustments (pretax):
Loss contingencies - litigation 1,978 1,978 1,978
Severance 12,001 12,001 12,001
Costs related to HRB Bank and
recapitalization transactions 20,722 20,722 20,722
Losses (gains) on AFS securities (8,138) (8,138) (8,138)
Gain on sales of tax
offices/businesses (127) (127) (127)
Tax effect of adjustments (2) - (10,176) -
------------ ------------ ------------
26,436 16,260 26,436
------------ ------------ ------------
As adjusted - from continuing
operations $ 595,915 $ 399,813 $ 838,654
------------ ------------ ------------
Adjusted EBITDA margin (1) 28%
Adjusted EPS $ 1.59
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----------------------------------------------------------------------------
Reconciliation of Other Non- Year ended April 30,
---------------------------------------
GAAP Financial Measures 2015
------------------------------------- --------------------------------------
Pretax
income Net income EBITDA
------------ ------------ ------------
From continuing operations $ 742,805 $ 486,744 $ 948,537
Adjustments (pretax):
Loss contingencies - litigation (3,936) (3,936) (3,936)
Severance 6,699 6,699 6,699
Costs related to HRB Bank and
recapitalization transactions 238 238 238
Losses (gains) on AFS securities 124 124 124
Gain on sales of tax
offices/businesses (656) (656) (656)
Tax effect of adjustments (2) - (963) -
------------ ------------ ------------
2,469 1,506 2,469
------------ ------------ ------------
As adjusted - from continuing
operations $ 745,274 $ 488,250 $ 951,006
------------ ------------ ------------
Adjusted EBITDA margin (1) 31%
Adjusted EPS $ 1.75
--------------------------------------------------------------- ------------
(1) Adjusted EBITDA margin from continuing operations is computed as
adjusted EBITDA from continuing operations divided by revenues from
continuing operations.
(2) Tax effect of adjustments is computed as the pretax effect of the
adjustments multiplied by our effective tax rate before discrete items.
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NON-GAAP FINANCIAL MEASURES (unaudited, in 000s - except per share amounts)
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Three months ended
April 30, Year ended April 30,
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Supplemental Information 2016 2015 2016 2015
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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
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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.
For Further InformationInvestor Relations:Colby Brown(816) 854-4559Email contactMedia Relations:Gene King(816) 854-4672Email contact
Source: H & R Block