H&R Block Reports 55 Cents Per Share Third Quarter Profit; Increases in Tax Clients and Mortgage Originations Highlight Strong Quarter
KANSAS CITY, Mo.--(BUSINESS WIRE)--Feb. 24, 2005--H&R Block Inc. (NYSE:HRB) today reported net income of $91.7 million, or 55 cents per diluted share, for the third quarter ended Jan. 31, 2005. Revenues in the third quarter were a record $1.03 billion, a 7.2 percent increase over the prior year's quarter.
"A strong start to the tax season combined with solid performances from our mortgage and business services segments were highlights of a good quarter," said Mark A. Ernst, chairman and chief executive officer. "I'm particularly pleased that the strategic actions taken in our tax and mortgage businesses are generating success in their respective markets."
Early tax season results through Feb. 15 included a 10.6 percent increase in total tax preparation and related fees over the comparable period last year, paced by 4 percent retail client growth and a 6.3 percent increase in average fees per retail client.
"The performance thus far is consistent with our expectations for a good tax filing season, supported by strong, new client acquisition, solid retention and increased client satisfaction with our services," Ernst said.
Mortgage results included a 56.8 percent increase in loan originations to $8.4 billion over the comparable quarter last year, and a 28.9 percent increase from the previous quarter's origination levels. Continued aggressive pricing in the mortgage market limited gain-on-sale margins. At the same time, progress was made in the company's effort to lower overall cost of origination, offsetting a significant share of the gain-on-sale margin reduction.
"We're very pleased with the performance of our mortgage business, where our strategy to expand service capacity is leading to strong origination volume growth despite the slowing industry," Ernst said. "In addition, we made considerable progress in lowering the cost of origination, reducing it by 37 basis points in the third quarter alone. This is consistent with our objective to realize a sustained 50 to 75 basis point reduction over the next 12 to 18 months."
Third quarter results include $12.5 million, or 5 cents per share, in stock-based compensation expense. The expense was $6.8 million in the previous year. In addition, the results reflect a $16.7 million litigation payment made to H&R Block.
For the nine months ended Jan. 31, H&R Block reported a net loss of $4.6 million, or 3 cents per diluted share, compared with net income of $122.3 million, or 67 cents per diluted share, in the prior year. The reduction was due primarily to declining income from the mortgage segment as competitive pricing has reduced margins across the industry.
Tax Services
A 3.7 percent increase in retail tax clients, combined with higher average fees per client, helped drive revenue and income increases in the tax segment for the third quarter. Tax services revenues climbed 11.9 percent to $531.1 million compared with last year, while pretax income improved 4.1 percent to $64.3 million.
Early tax season results from Jan. 1 through Feb. 15 show that tax preparation and related fees from retail tax offices increased 10.6 percent to $1.2 billion. The average fee per client rose 6.3 percent to $143.90. Retail tax offices served 8.3 million clients through Feb. 15, while total clients served, including digital tax clients, increased 1.4 percent.
"More than any other factor, the success we're experiencing can be attributed to the quality of service our tax professionals are providing to our clients," Ernst said. "Expansion of our office network, operational improvements and successful marketing mean that more consumers are benefiting from that service."
H&R Block's digital tax business, including its award-winning TaxCut(R) software and online tax services, reported a 9.1 percent decrease in paid clients served through Feb. 15. Modest growth in online clients was offset by a decline in software units sold.
"Both consumer and competitive changes in the digital tax market have restricted the client growth that we expected this season. However, we will continue to follow a disciplined approach to pricing and marketing our digital services, although it may limit our ability to achieve this year's client growth objectives," Ernst said.
For the nine-month period, tax services revenues rose 11.7 percent to $655.6 million, while the pretax loss of $182.6 million was 8.6 percent higher than a year ago.
Mortgage Services
Mortgage services, which includes Option One Mortgage Corp. and H&R Block Mortgage Corp, recorded third-quarter loan originations of $8.4 billion, a 56.8 percent increase over the prior year. An increase in the number of account executives serving clients was the primary driver of the quarter's improved performance.
Despite this increase in sales capacity, as well as continued expansion made in the retail mortgage business in preparation for the seasonally high tax client referral opportunity, the business achieved a 37 basis point reduction in cost of origination.
Mortgage services revenues declined 4.1 percent to $304.6 million for the third quarter, while pretax earnings were $111.7 million, a 27.7 percent decrease from the previous year. Sequentially from the second quarter, revenues increased 8.2 percent while pretax earnings increased 5.2 percent. For the nine-month period, revenues decreased 10.1 percent to $854.4 million, while pretax earnings declined 38 percent to $311.4 million.
"Our mortgage operations experienced improved productivity and performed well despite competitive pressures this quarter," Ernst said. "We plan to continue to focus on aggressively controlling origination costs while maintaining our preferred provider status with the brokers we serve.
"We are beginning our strongest period seasonally for H&R Block Mortgage with more capacity to serve our tax clients' needs."
Mortgage servicing revenues increased 32.4 percent to $72.9 million for the quarter, compared to last year. The number of loans serviced rose 25.7 percent to 387,619 compared with the previous year.
Business Services
Business services had another strong quarter, with an 18.3 percent increase in revenues to $132.9 million. Pretax income rose to nearly $6 million from $2 million the previous year. Growth occurred across many of the segment's activities.
For the nine-month period, revenues increased 16 percent to $371 million. The pretax loss for the period was $9 million, an increase of 21.4 percent over the prior year.
"We're seeing our past initiatives pay off in very strong growth," Ernst said. "RSM McGladrey's tax and accounting services, business consulting, risk management and payroll services all experienced solid growth."
Investment Services
Investment services reported third quarter revenues of $62.1 million, a 7.5 percent increase over the prior year. The pretax loss increased $5.5 million to $18.3 million. For the nine-month period, revenues improved 1.2 percent to $169.4 million, while the pretax loss increased nearly 46 percent to $61.1 million.
"While we are not satisfied with the performance of this business, the results are consistent with the view discussed during last month's annual investor conference," Ernst said. "We're developing a plan to better align this segment's cost structure, revenue stream, and strategy for the future."
"We are seeing strong results from our expanded tax professional/financial advisor teams designed to increase the delivery of financial services to our tax clients," Ernst said.
Dividend Declared
H&R Block's board of directors declared a quarterly cash dividend of 22 cents per share, payable April 1, 2005, to shareholders of record March 11, 2005. This payment will be the company's 170th consecutive quarterly dividend.
Conference Call
The company will host a conference call for analysts, institutional investors and shareholders at 5:00 p.m. EST Feb. 24. Mark Ernst, Jeff Yabuki, executive vice president and chief operating officer, and William Trubeck, executive vice president and chief financial officer, will discuss the quarter and future expectations, as well as respond to analysts' questions. To access the call, please dial the number approximately five to 10 minutes prior to the scheduled starting time:
U.S./Canada 888-425-2715 - Access Code: 2751105 International 706-679-8257 - Access Code: 2751105
The call will be webcast in a listen-only format for the media and public. The link to the webcast can be found at www.hrblock.com. Supplemental financial and statistical information will be available in connection with the webcast or can be accessed directly on H&R Block's Investor Relations web site at www.hrblock.com/about/investor following market close.
A replay of the call will be available beginning at 6:00 p.m. EST Feb. 24 and continuing until 12:00 a.m. EST March 5 by dialing 800-642-1687 (U.S./Canada) or 706-645-9291 (International). The replay access code is 2751105. A replay of the webcast will also be available at www.hrblock.com through March 31, 2005.
About H&R Block
Celebrating its 50th anniversary in 2005, H&R Block is the world's largest tax services provider, having served more than 400 million clients since 1955. The sixth largest retailer in the world, H&R Block has more than 12,000 locations serving taxpayers primarily in the United States, Canada and Australia.
H&R Block's subsidiaries deliver tax services and financial advice, investment and mortgage services, and business accounting and consulting services. H&R Block Financial Advisors Inc. offers investment services and securities products. With approximately 1,000 financial advisors serving clients at approximately 270 locations, H&R Block Financial Advisors is a member NYSE, SIPC, a registered broker-dealer and investment advisor. H&R Block Inc. is not a registered broker-dealer and is not a registered investment advisor. H&R Block Mortgage Corp. offers a full range of retail mortgage services. Option One Mortgage Corp. provides mortgage services and offers wholesale mortgages through large financial institutions and a network of 32,000 independent mortgage brokers. RSM McGladrey Business Services Inc. and its subsidiaries serve mid-sized businesses and their owners with tax, accounting and business consulting services, as well as personal wealth management services. H&R Block Small Business Resources is a new business currently operating in 14 U.S. cities that serves the tax, financial and business needs of small business owners. H&R Block Small Business Resources is not a licensed CPA firm. For more information about the company, visit our Online Press Center at www.hrblock.com.
H&R BLOCK, INC.
KEY OPERATING RESULTS
Unaudited, amounts in thousands, except per share data
Three months ended January 31,
2005 2004
--------------------------------
Revenues $1,032,007 $962,830
------------------------
Income before taxes 151,683 176,120
Net income $91,692 $106,726
========================
Basic earnings per share $0.56 $0.60
========================
Basic shares outstanding 164,520 176,732
Diluted earnings per share $0.55 $0.59
========================
Diluted shares outstanding 167,438 180,984
Nine months ended January 31,
2005 2004
-------------------------------------
Revenues $2,053,973 $2,027,086
------------------------
Income (loss) before taxes (6,805) 212,083
Net income (loss) before change in
accounting principle (4,590) 128,621
Cumulative effect of change in
accounting principle, net of taxes - (6,359)
Net income (loss) $(4,590) $122,262
========================
Basic earnings (loss) per share:
Before change in accounting principle $(0.03) $0.72
Net income (loss) $(0.03) $0.69
========================
Basic shares outstanding 165,948 177,964
Diluted earnings (loss) per share:
Before change in accounting principle $(0.03) $0.71
Net income (loss) $(0.03) $0.67
========================
Diluted shares outstanding 165,948 181,481
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On October 26, 2004, we issued $400.0 million in 5.125% Senior Notes,
due in 2014. The proceeds from the notes were used to repay our $250.0
million in 6 3/4% Senior Notes, which were due on November 1, 2004.
The remaining proceeds were used for working capital, capital
expenditures, repayment of other debt and other general corporate
purposes.
We adopted Emerging Issues Task Force Issue No. 00-21, "Revenue
Arrangements with Multiple Deliverables" (EITF 00-21) as of May 1,
2003. As a result of the adoption of EITF 00-21, we recorded a
cumulative effect of a change in accounting principle of $6.4 million,
net of tax benefit of $4.0 million.
Basic earnings per share is based on the weighted average number of
shares outstanding. The dilutive effect of potential common shares is
included in diluted earnings per share except in those periods with a
loss.
Certain reclassifications have been made to prior year amounts to
conform to the current period presentation. These reclassifications
had no effect on the results of operations or stockholders' equity as
previously reported.
In the first quarter of fiscal year 2005, we redefined our
reportable segments. The previously reported International Tax
Operations and U.S. Tax Operations segments will now be reported as
the Tax Services segment.
H&R BLOCK, INC.
SEGMENT FINANCIAL RESULTS
Unaudited, amounts in thousands
Three months ended January 31,
Revenues Income (loss)
----------------------- ---------------------
2005 2004 2005 2004
---------------------------------------------
Tax Services $531,086 $474,495 $64,337 $61,827
Mortgage Services 304,643 317,599 111,681 154,476
Business Services 132,872 112,293 5,936 1,955
Investment Services 62,104 57,753 (18,312) (12,811)
Corporate 1,302 690 (11,959) (29,327)
----------------------- ---------------------
$1,032,007 $962,830 151,683 176,120
=======================
Income taxes 59,991 69,394
---------------------
Net income $91,692 $106,726
=====================
Nine months ended January 31,
Revenues Income (loss)
----------------------- ---------------------
2005 2004 2005 2004
---------------------------------------------
Tax Services $655,639 $586,760 $(182,624) $(168,136)
Mortgage Services 854,410 950,361 311,421 502,331
Business Services 371,021 319,816 (9,048) (7,456)
Investment Services 169,446 167,443 (61,149) (41,904)
Corporate 3,457 2,706 (65,405) (72,752)
----------------------- ---------------------
$2,053,973 $2,027,086 (6,805) 212,083
=======================
Income taxes (benefit) (2,215) 83,462
---------------------
Net income (loss) before
change in accounting
principle (4,590) 128,621
Cumulative effect of
change in accounting
principle, net of taxes - (6,359)
---------------------
Net income (loss) $(4,590) $122,262
=====================
H&R BLOCK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts in thousands, except share data
January 31, April 30,
2005 2004
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $576,146 $1,071,676
Cash and cash equivalents - restricted 535,318 545,428
Receivables from customers, brokers, dealers
and clearing
organizations, net 623,225 625,076
Receivables, net 1,461,097 347,910
Prepaid expenses and other current assets 425,400 371,209
----------- -----------
Total current assets 3,621,186 2,961,299
----------- -----------
Residual interests in securitizations -
available-for-sale 253,531 210,973
Beneficial interest in Trusts - trading 131,885 137,757
Mortgage servicing rights 147,511 113,821
Property and equipment, net 327,385 279,220
Intangible assets, net 295,260 325,829
Goodwill, net 975,850 959,418
Other assets 388,513 391,709
----------- -----------
Total assets $6,141,121 $5,380,026
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Commercial paper $1,528,882 $-
Current portion of long-term debt 25,575 275,669
Accounts payable to customers, brokers and
dealers 1,035,228 1,065,793
Accounts payable, accrued expenses and other 503,623 456,167
Accrued salaries, wages and payroll taxes 230,251 268,747
Accrued income taxes 78,796 405,667
----------- -----------
Total current liabilities 3,402,355 2,472,043
----------- -----------
Long-term debt 928,529 545,811
Other noncurrent liabilities 361,587 465,163
----------- -----------
Total liabilities 4,692,471 3,483,017
----------- -----------
Stockholders' equity:
Common stock, no par, stated value $.01 per
share 2,179 2,179
Additional paid-in capital 581,748 545,065
Accumulated other comprehensive income 97,625 57,953
Retained earnings 2,670,356 2,781,368
Less cost of 52,864,620 and 44,849,128
shares of
common stock in treasury (1,903,258) (1,489,556)
----------- -----------
Total stockholders' equity 1,448,650 1,897,009
----------- -----------
Total liabilities and stockholders' equity $6,141,121 $5,380,026
=========== ===========
H&R BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited, amounts in thousands
Nine months ended
January 31,
-----------------------
2005 2004
----------- -----------
Cash flows from operating activities:
Net income (loss) $(4,590) $122,262
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 122,305 122,497
Accretion of residual interests in
securitizations (86,618) (118,389)
Impairment of residual interests in
securitizations 8,304 26,048
Additions to trading securities -
residual interests in
securitizations (115,213) (251,585)
Proceeds from net interest margin
transactions 98,743 197,417
Additions to mortgage servicing
rights (94,569) (64,265)
Amortization of mortgage servicing
rights 60,879 57,334
Net change in beneficial interest in
Trusts 5,872 (5,406)
Other net changes in working capital,
net of acquisitions (1,580,364) (1,087,553)
----------- -----------
Net cash used in operating activities (1,585,251) (1,001,640)
----------- -----------
Cash flows from investing activities:
Cash received from residual interests in
securitizations 100,344 127,997
Purchases of property and equipment, net (137,483) (81,178)
Payments made for business acquisitions, net
of cash acquired (26,348) (280,280)
Other, net 15,207 36,052
----------- -----------
Net cash used in investing activities (48,280) (197,409)
----------- -----------
Cash flows from financing activities:
Repayments of commercial paper (2,348,966) (1,022,716)
Proceeds from issuance of commercial paper 3,877,848 2,433,893
Repayments of Senior Notes (250,000) -
Proceeds from issuance of long-term debt 395,221 -
Payments on acquisition debt (19,462) (50,820)
Dividends paid (106,422) (103,538)
Acquisition of treasury shares (529,852) (371,242)
Proceeds from issuance of common stock 119,892 111,155
Other, net (258) (1,947)
----------- -----------
Net cash provided by financing
activities 1,138,001 994,785
----------- -----------
Net decrease in cash and cash equivalents (495,530) (204,264)
Cash and cash equivalents at beginning of the
period 1,071,676 875,353
----------- -----------
Cash and cash equivalents at end of the period $576,146 $671,089
=========== ===========
Supplementary cash flow data:
Income taxes paid $406,576 $245,355
Interest paid 53,587 57,458
H&R BLOCK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
Unaudited, amounts in thousands, except per share data
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------- -----------------------
2005 2004 2005 2004
---------- --------- ----------- -----------
Revenues:
Service revenues $656,871 $572,862 $1,195,353 $1,053,056
Gains on sales of
mortgage assets, net 198,302 212,249 564,950 672,204
Interest income 46,599 59,328 129,192 149,831
Other 130,235 118,391 164,478 151,995
---------- --------- ----------- -----------
1,032,007 962,830 2,053,973 2,027,086
---------- --------- ----------- -----------
Operating expenses:
Cost of services 509,104 454,342 1,124,894 991,587
Interest 24,927 21,361 65,080 64,457
Selling, general and
administrative 366,025 312,623 894,054 763,434
---------- --------- ----------- -----------
900,056 788,326 2,084,028 1,819,478
---------- --------- ----------- -----------
Operating income (loss) 131,951 174,504 (30,055) 207,608
Other income, net 19,732 1,616 23,250 4,475
---------- --------- ----------- -----------
Income (loss) before
taxes 151,683 176,120 (6,805) 212,083
Income taxes (benefit) 59,991 69,394 (2,215) 83,462
---------- --------- ----------- -----------
Net income (loss) before
cumulative effect of
change in accounting
principle 91,692 106,726 (4,590) 128,621
Cumulative effect of
change in accounting
principle for multiple
deliverable revenue
arrangements, less income
tax benefit of $4,031 - - - (6,359)
---------- --------- ----------- -----------
Net income (loss) $91,692 $106,726 $(4,590) $122,262
========== ========= =========== ===========
Basic earnings (loss) per
share:
Before change in
accounting principle $0.56 $0.60 $(0.03) $0.72
Cumulative effect of
change in accounting - - - (0.03)
---------- --------- ----------- -----------
Net income (loss) $0.56 $0.60 $(0.03) $0.69
========== ========= =========== ===========
Basic shares
outstanding 164,520 176,732 165,948 177,964
Diluted earnings (loss)
per share:
Before change
in accounting
principle $0.55 $0.59 $(0.03) $0.71
Cumulative effect of
change in accounting - - - (0.04)
---------- --------- ----------- -----------
Net income (loss) $0.55 $0.59 $(0.03) $0.67
========== ========= =========== ===========
Diluted shares
outstanding 167,438 180,984 165,948 181,481
H&R BLOCK, INC.
SELECTED OPERATING DATA
Unaudited
Mortgage Services Three months ended
------------------------------------------------------
1/31/2005 1/31/2004 % change 10/31/2004 % change
----------------------------------------------------------------------
Volume of loans
originated (000s):
Wholesale (non-
prime) $7,378,071 $4,732,182 55.9% $5,528,361 33.5%
Retail:
Prime 238,867 157,438 51.7% 183,647 30.1%
Non-prime 776,797 464,926 67.1% 800,975 -3.0%
----------- ----------- ------ ----------- ------
1,015,664 622,364 63.2% 984,622 3.2%
----------- ----------- ------ ----------- ------
Total $8,393,735 $5,354,546 56.8% $6,512,983 28.9%
=========== =========== ====== =========== ======
Loan
characteristics:
Average loan
size (000s) $164 $150 9.3% $157 4.5%
Weighted average
interest rate
(WAC)(1) 7.30% 7.47% -0.17% 7.46% -0.16%
Weighted average
FICO score(1) 615 607 609
Loan sales
(000s) $8,348,537 $5,308,800 57.3% $6,560,780 27.2%
=========== =========== ====== =========== ======
Servicing
portfolio:
Number of loans
serviced 387,619 308,305 25.7% 362,430 7.0%
Servicing
portfolio ($
bn's) $59.0 $42.2 39.8% $53.6 10.1%
(1) Represents non-prime production only.
Investment Services Three months ended
------------------------------------------------------
1/31/2005 1/31/2004 % change 10/31/2004 % change
----------------------------------------------------------------------
Customer
trades(2) 245,612 272,003 -9.7% 192,909 27.3%
Customer daily
average trades 3,899 4,459 -12.6% 3,014 29.4%
Average revenue
per trade $120.62 $113.61 6.2% $125.13 -3.6%
Number of active
accounts:
Traditional
brokerage 431,902 467,710 -7.7% 444,770 -2.9%
Express IRAs 295,676 241,116 22.6% 334,928 -11.7%
----------- ----------- -----------
727,578 708,826 2.6% 779,698 -6.7%
=========== =========== ===========
Ending balance of
assets under
administration ($
bn's) $28.4 $27.5 3.3% $27.2 4.4%
Average assets
per active
account $39,068 $38,797 0.7% $34,924 11.9%
Average customer
margin balances
($ millions) $596 $568 4.9% $590 1.0%
Average payables
to customers ($
millions) $989 $1,028 -3.8% $962 2.8%
Advisors 1,013 960 5.5% 982 3.2%
(2) Includes only trades on which commissions are earned
("commissionable trades").
H&R BLOCK
Preliminary U.S. Tax Operating Data
(in thousands, except average fee and number of offices)
Period
-------------------------------
1/1-1/31 2/1-2/15 YTD 2/15
--------- --------- -----------
Tax preparation & related fees:(1)
Fiscal year 2005
Company-owned offices $366,912 $436,168 $803,080
Franchise offices 183,938 203,196 387,134
--------- --------- -----------
$550,850 $639,364 $1,190,214
========= ========= ===========
Fiscal year 2004(2)
Company-owned offices $331,913 $393,539 $725,452
Franchise offices 169,183 181,782 350,965
--------- --------- -----------
$501,096 $575,321 $1,076,417
========= ========= ===========
Percent change
Company-owned offices 10.5% 10.8% 10.7%
Franchise offices 8.7% 11.8% 10.3%
------------------------------------------
Total retail offices 9.9% 11.1% 10.6%
------------------------------------------
Total clients served:
Fiscal year 2005
Company-owned offices 2,447 2,870 5,317
Franchise offices 1,406 1,548 2,954
Digital tax solutions(3) 1,129 694 1,823
--------- --------- -----------
4,982 5,112 10,094
========= ========= ===========
Fiscal year 2004(2)
Company-owned offices 2,368 2,780 5,148
Franchise offices 1,346 1,456 2,802
Digital tax solutions(3) 1,268 737 2,005
--------- --------- -----------
4,982 4,973 9,955
========= ========= ===========
Percent change
Company-owned offices 3.3% 3.2% 3.3%
Franchise offices 4.5% 6.3% 5.4%
------------------------------------------
Total retail offices 3.7% 4.3% 4.0%
------------------------------------------
Digital tax solutions(3) -11.0% -5.8% -9.1%
------------------------------------------
Total 0.0% 2.8% 1.4%
------------------------------------------
Average fee per client served:(4)
--------------------------------------
Fiscal year 2005
Company-owned offices $149.94 $151.97 $151.04
Franchise offices 130.82 131.26 131.05
--------- --------- -----------
$142.97 $144.72 $143.90
========= ========= ===========
Fiscal year 2004(2)
Company-owned offices $140.17 $141.56 $140.92
Franchise offices 125.69 124.85 125.26
--------- --------- -----------
$134.92 $135.82 $135.40
========= ========= ===========
Percent change
Company-owned offices 7.0% 7.4% 7.2%
------------------------------------------
Franchise offices 4.1% 5.1% 4.6%
------------------------------------------
Total retail offices 6.0% 6.6% 6.3%
------------------------------------------
Refund anticipation loans:
Fiscal year 2005
Company-owned offices 1,197 1,057 2,254
Franchise offices 714 593 1,307
Digital tax solutions 12 14 26
--------- --------- -----------
1,923 1,664 3,587
========= ========= ===========
Fiscal year 2004(2)
Company-owned offices 1,184 1,092 2,276
Franchise offices 709 597 1,306
Digital tax solutions 20 24 44
--------- --------- -----------
1,913 1,713 3,626
========= ========= ===========
Percent change
Company-owned offices 1.1% -3.2% -1.0%
Franchise offices 0.7% -0.7% 0.1%
------------------------------------------
Total retail offices 1.0% -2.3% -0.6%
------------------------------------------
Digital tax solutions -40.0% -41.7% -40.9%
------------------------------------------
Total 0.5% -2.9% -1.1%
------------------------------------------
Offices: FY 2005 FY 2004
--------- ---------
Company-owned offices 5,811 5,172
Company-owned shared office
locations(5) 1,296 996
--------- ---------
Total company-owned offices 7,107 6,168
--------- ---------
Franchise offices 3,528 3,418
Franchise shared office locations(5) 526 323
--------- ---------
Total franchise offices 4,054 3,741
--------- ---------
11,161 9,909
========= =========
(1) Includes fees received for tax return preparation services and
system administration fees in fiscal year 2004.
(2) Prior year numbers have been reclassified between company-owned
and franchise offices for offices which commenced company-owned
operations during fiscal year 2005.
(3) Includes federal TaxCut software units sold, online completed and
paid federal returns and online state returns only when no payment was
made for a federal return.
(4) Calculated as gross tax preparation and related fees divided by
clients served.
(5) Shared office locations include offices located within Wal-Mart,
Sears and other third-party businesses.
CONTACT: H&R Block Inc.
Media Relations:
Linda McDougall, 816-932-7542
lmcdougall@hrblock.com
or
Investor Relations:
Pam Kearney, 816-932-1967
pkearney@hrblock.com
SOURCE: H&R Block Inc.