HR Block 2015 Annual Report Download - page 44

H&R Block, Inc. | 2015 Form 10-K 37
REGULATORY ENVIRONMENT – H&R Block, Inc. became subject to the new SLHC regulatory capital requirements,
effective January 1, 2015. Until we divest HRB Bank and cease to be an SLHC, H&R Block, Inc. will remain subject to
the minimum regulatory capital requirements which will likely restrict the capital allocation strategies available to us.
See discussion in Item 1, "Regulation and Supervision - Bank and Holding Companies," Item 1A, "Risk Factors," and
Item 8, note 19 for additional information on regulatory capital requirements for SLHCs.
The federal government, various state, local, provincial and foreign governments, and some self-regulatory
organizations have enacted statutes and ordinances, or adopted rules and regulations, regulating aspects of our
business. These aspects include, but are not limited to, commercial income tax return preparers, income tax courses,
the electronic filing of income tax returns, the offering of RTs, loan originations and assistance in loan originations,
mortgage lending, privacy, consumer protection, franchising, sales methods and banking. We determine the
applicability of such statutes, ordinances, rules and regulations (collectively, Laws) and work to comply with those
Laws that are applicable to us or our services or products.
From time to time in the ordinary course of business, we receive inquiries from governmental and self-regulatory
agencies regarding the applicability of Laws to our services and products. In response to past inquiries, we have
demonstrated that we comply with such Laws, convinced the authorities that such Laws were not applicable or that
compliance already exists, or modified our activities in the applicable jurisdiction to avoid the application of all or
certain parts of such Laws. We believe the past resolution of such inquiries and our ongoing compliance with Laws
has not had a material effect on our consolidated financial statements. We cannot predict what effect future Laws,
changes in interpretations of existing Laws or the results of future regulatory inquiries with respect to the applicability
of Laws may have on our consolidated financial position, results of operations and cash flows. See additional discussion
of legal matters in Item 8, note 17 to the consolidated financial statements.
NON-GAAP FINANCIAL INFORMATION
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.