H&R Block Reports 59 Cents Per Share Third Quarter Profit; Early Tax Season Results Consistent with Full Year Guidance
KANSAS CITY, Mo.--(BUSINESS WIRE)--Feb. 24, 2004--H&R Block Inc. (NYSE:HRB) today reported net income of $106.7 million, or 59 cents per diluted share, and record revenues of $977.2 million for the third quarter ended Jan. 31.
Third quarter revenues increased 2 percent from $958.4 million last year. Third quarter net income declined $25.6 million or 19.3 percent compared with last year when the company reported third quarter earnings of $132.3 million, or 73 cents per diluted share. Third quarter 2004 results include a $17 million gain on sale of certain mortgage assets. Third quarter 2003 results include a $130.9 million gain on a similar transaction. Excluding the effect of these gains, third quarter net income increased $42.9 million or 80.2 percent over the prior year.
The profitable third quarter marks the first time in the company's history that it has reported a profit in each of the first three quarters of its fiscal year. H&R Block typically reports losses in its first and second quarters, and often in its third quarter as well, due to the seasonal nature of its tax and business services units.
"All of our business segments executed effectively and delivered improved performance. We saw double-digit revenue growth in each of our businesses, excluding the mortgage asset sales that we've noted," said Chairman and Chief Executive Officer Mark A. Ernst.
"Performance in the tax filing season thus far is consistent with our overall expectations for a good, but not great, tax season," Ernst said. "After a slow start, growth in retail tax filing has accelerated in the month of February and our digital tax services are growing very well."
The quarter results included $6.8 million in stock-based compensation expense, an expense that was not included in the comparable quarter last year. H&R Block began to expense the costs of stock-based compensation at the beginning of the current fiscal year.
For the nine-month period ending Jan. 31, the company reported net income of $122.3 million, a 43.1 percent increase compared with last year. Earnings per diluted share increased 45.7 percent to 67 cents. Revenues for the nine month period increased 10.8 percent to $2.1 billion.
On a consolidated basis, the company continues to expect fiscal 2004 GAAP earnings-per-share in the range of $3.65 to $3.85 and revenue growth at the high end of its target range of 10 to 15 percent. Included in these expectations is about $24 million or 8-cents per share, of non-cash stock-based compensation expenses.
U.S. Tax Operations
U.S. Tax operations reported pretax earnings of $68.2 million, compared with $34.1 million last year, an improvement of $34.1 million. U.S. tax operations reported a 14.9 percent increase in revenues for the quarter to $463.6 million, compared with $403.6 million last year.
Compared with last year, the improved performance is due to an increase in the number of clients served, increased revenue per client and better expense management. These improvements were partially off-set by expenses related to adding 873 tax locations to the company's retail network, including 459 company-owned offices in former franchise territories. Company-owned offices in former major franchise territories contributed $24.3 million to the increase in revenues.
For the nine-month period, revenues increased 19.8 percent to $551.4 million, up $91.1 million from $460.3 million last year. The segment reported a $155.9 million pretax loss for the nine-month period, an improvement of $56.3 million or 26.5 percent compared with the $212.2 million pretax loss last year.
From Jan. 1 through Jan. 31, tax preparation and related fees from retail tax offices increased 8.6 percent to $500.3 million. The average fee per client served rose 8.9 percent to $134.99. Total clients served, including office and digital tax solutions clients, increased 4.6 percent to 5 million. Retail tax offices served 3.7 million clients, a 0.2 percent decline from last year. Clients served by H&R Block's digital tax solutions increased 21.7 percent.
For the tax season through Feb. 15, tax preparation and related fees from retail tax offices increased 3.9 percent to $1.1 billion. In the period ending Feb. 15, the average fee per client increased 8 percent to $135.48. Total clients served, including office and digital tax solutions clients, increased 0.1 percent to 9.9 million. Retail tax offices served 7.9 million clients, a decline of 3.9 percent from last year. Clients served by H&R Block's digital tax solutions increased 19.6 percent. However, year-over-year comparisons must be viewed cautiously due to the intra-week variability of tax filings and the difference in the days of the week included in the comparative periods.
"While we saw a slow start to the tax filing season in our retail offices, the growth that we are seeing in February and the mix of clients that are coming to H&R Block indicate that we are likely to be at the lower end of our expected range for retail client growth and at the higher end of our expected range for revenue per client," Ernst said. "Combined with superior performance in our digital businesses, we believe that we are on track to meet our overall targets for the year."
Mortgage Operations
Mortgage operations, which include Option One Mortgage Corp. and H&R Block Mortgage Corp., reported pretax earnings of $154.5 million for the quarter, a $108 million decrease compared with pretax earnings of $262.5 million last year. For the nine-month period, pretax earnings decreased 10.8 percent to $502.3 million, compared with $563.1 million last year.
Third quarter revenues from mortgage operations decreased 16.4 percent to $331.9 million, compared with $397 million last year. For the nine-month period, revenues increased 7 percent to $986 million, compared with $921.9 million last year.
Third quarter 2004 results include a $17 million gain on sale of certain mortgage assets. Third quarter 2003 results include a $130.9 million gain on a similar transaction. Excluding the effect of these gains, third quarter pretax income from mortgage operations increased 4.5 percent.
"We're pleased with the mortgage segment results, which continue to meet our expectations. These results support our long-held view that the interest rate environment would not have a significant effect on our mortgage performance. Overall origination activity continued to be strong in the quarter, while margins declined somewhat as we had expected," Ernst said.
For the third quarter, the company originated $5.4 billion in mortgage loans, an 18.1 percent increase over last year's $4.5 billion. The number of loan originations in the third quarter was 35,795, a 15.8 percent increase compared with last year.
Mortgage servicing revenues for the quarter were $55.1 million, an increase of $11.7 million, or 27 percent, compared with $43.4 million last year. On Jan. 31, 2004, the servicing portfolio was $42.2 billion, an increase of $13.3 billion, or 46 percent, compared with Jan. 31, 2003, and up 5.2 percent over the previous quarter.
Third quarter pretax income from H&R Block Mortgage increased 25.9 percent. Nearly 40 percent of the company's retail loans were to clients of other H&R Block businesses.
The segment's residual interests continued to perform better than expected, primarily due to better than modeled loss and interest rates. Consequently, the company realized a net write-up in residual balances of $36 million, which was recorded in other comprehensive income on the balance sheet, net of deferred taxes.
Business Services
RSM McGladrey Business Services Inc. reported third quarter revenues of $112.3 million, an 11.5 percent increase compared with $100.7 million last year. The segment reported pretax earnings of $2 million, a $6.2 million improvement, compared with a loss of $4.2 million in the third quarter last year.
For the nine-month period, revenues increased 8.8 percent to $319.8 million. The segment reported a pretax loss of $7.5 million compared with a pretax loss of $12.3 million last year.
"Our capital markets business enjoyed another strong quarter compared with last year. Higher fees in our core accounting and tax services also contributed to improved performance," Ernst said.
Investment Services
H&R Block Financial Advisors Inc. reported third quarter revenues of $57.8 million, an increase of 20.2 percent compared with the same quarter last year. The segment reported a pretax loss of $12.8 million, a 59.7 percent improvement compared with last year's pretax loss of $31.8 million.
"We saw strong improvement in all of the key drivers of the business this quarter," Ernst said. "Overall, results of our Financial Advisors business reflect sustained changes that should allow us to have continuing performance improvement."
For the nine-month period, revenues increased 6.8 percent to $167.4 million, compared with $156.7 million last year. The segment reported a pretax loss of $41.9 million compared with $92.5 million in the first nine months of last year, which included $24 million in goodwill impairment charges.
International Tax Operations
In the third quarter, revenues from international tax operations increased 23.6 percent to $10.8 million, compared with $8.8 million last year. The segment reported a pretax loss of $6.4 million, compared with a pretax loss of $5.7 million last year.
For the nine-month period, revenues increased 24.7 percent to $35.4 million. The segment reported a $12.3 million pretax loss, compared with last year's pretax loss of $12.4 million.
"We enjoyed a successful conclusion to the tax season in Australia. However, unfavorable exchanges rates in Canada resulted in a higher loss for the quarter," Ernst said.
Dividend declared
H&R Block's board of directors declared a quarterly cash dividend of 20 cents per share, payable April 1, 2004, to shareholders of record March 11, 2004. This payment will be the company's 166th consecutive quarterly dividend.
Share repurchases
During the third quarter, the company repurchased 3.7 million shares of its common stock at an aggregate cost of $192.3 million, or an average price of $52.61 per share. Year to date, the company has repurchased 7.8 million shares at an aggregate cost of $370 million, or an average price of $47.51 per share.
Conference call
The company will host a conference call for analysts and institutional investors at 5 p.m. EST, Feb. 24. Mark A. Ernst and Jeffery W. Yabuki, executive vice president and chief operating officer, will discuss the quarter's results and future expectations, as well as respond to analysts' questions. To access the call, dial the number approximately five to 10 minutes prior to the scheduled starting time:
U.S./Canada (888) 425-2715
International (706) 679-8257
No reservation or access code is needed.
The call will be Webcast in a listen-only format for the media and public. The link to the Webcast can be obtained at www.hrblock.com.
Supplemental financial information will be available in connection with the Webcast or can be accessed directly on H&R Block's Investor Relations website at www.hrblock.com/about/investor following market close.
A replay of the call will be available beginning at 8 p.m. EST, Feb. 24 and continuing until 8 p.m. EST, March 9, by dialing 800-642-1687 (U.S./Canada) or 706-645-9291 (International). The replay access code is 5141529. A replay of the Webcast will also be available on the company's Web site at www.hrblock.com through March 9.
Except for historical information contained herein, the matters set forth in this press release are forward-looking statements based upon current information and expectations. Such statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that could cause actual results to differ materially from what is expressed, implied or forecast in such forward-looking statements. Such differences could be caused by a number of factors, including, but not limited to: the uncertainty that the company will achieve or exceed its revenue, earnings, and earnings per share growth goals or expectations for fiscal year 2004 and that actual financial results for fiscal year 2004 will fall within the guidance provided by the company; the uncertainty of the company's ability to purchase shares of its common stock; the uncertainty of the effect of any share repurchases upon the company and its shareholders; the uncertainty as to the effect on financial results of the adoption of accounting pronouncements; changes in interest rates; changes in economic, political or regulatory environments; the uncertainty of assumptions utilized to estimate cash flows from residual interests in mortgage securitizations and mortgage servicing rights; risks associated with sources of liquidity for each of the lines of business of the company; changes in competition; litigation involving the company and its subsidiaries; and risks described from time to time in reports and registration statements filed by H&R Block Inc. and its subsidiaries with the Securities and Exchange Commission. Readers should take these factors into account in evaluating such forward-looking statements.
About H&R Block
H&R Block Inc. (www.hrblock.com) is a diversified company with subsidiaries that deliver tax, financial, mortgage and business products and services. It is the only major company with subsidiaries offering a full range of software, online and in-office tax solutions, combined with personalized financial advice about retirement savings, home ownership, and other opportunities to help clients build a better financial future. As the world's largest tax services company, H&R Block served nearly 21 million clients in the U.S. and 11 countries in 2003. H&R Block Financial Advisors Inc. offers investment services and securities products. With more than 1,000 financial advisors serving clients at more than 400 offices, H&R Block Financial Advisors Inc. is a member NYSE, SIPC, a registered broker-dealer and a registered 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 products. Option One Mortgage Corp. provides mortgage services and offers wholesale mortgage products through large financial institutions and a network of 24,000 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, INC.
KEY OPERATING RESULTS
Unaudited, amounts in thousands, except per share data
Three months ended
January 31,
2004 2003
---- ----
Revenues $977,157 $958,413
--------- ---------
Income before taxes 176,120 222,934
Net income $106,726 $132,313
========= =========
Basic earnings per share $0.60 $0.74
========= =========
Basic shares outstanding 176,732 178,770
Diluted earnings per share $0.59 $0.73
========= =========
Diluted shares outstanding 180,984 182,173
Nine months ended
January 31,
2004 2003
---- ----
Revenues $2,062,702 $1,861,175
---------- -----------
Income before taxes 212,083 144,783
Net income before change in accounting
principle 128,621 85,422
Cumulative effect of change in accounting
principle, net of taxes (6,359) -
Net income $122,262 $85,422
========== =========
Basic earnings per share:
Before change in accounting principle $0.72 $0.48
Net income $0.69 $0.48
========== =========
Basic shares outstanding 177,964 179,620
Diluted earnings per share:
Before change in accounting principle $0.71 $0.46
Net income $0.67 $0.46
========== =========
Diluted shares outstanding 181,481 184,378
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
In the second quarter of fiscal year 2004, the Company 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, the Company recorded a cumulative effect
of a change in accounting principle of $6.4 million, net of taxes 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.
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.
H&R BLOCK, INC.
SEGMENT FINANCIAL RESULTS
Unaudited, amounts in thousands
Three months ended January 31,
Revenues Income (loss)
--------------- --------------
2004 2003 2004 2003
---- ---- ---- ----
U.S. Tax Operations $463,646 $403,571 $68,236 $34,137
Mortgage Operations 331,926 396,980 154,476 262,466
Business Services 112,293 100,741 1,955 (4,197)
Investment Services 57,753 48,047 (12,811) (31,755)
International Tax Operations 10,849 8,779 (6,409) (5,735)
Corporate Operations 690 295 (29,327) (31,982)
-------- -------- -------- --------
$977,157 $958,413 176,120 222,934
======== =========
Income taxes 69,394 90,621
------- --------
Net income $106,726 $132,313
======== =========
Nine months ended January 31,
Revenues Income (loss)
-------- -------------
2004 2003 2004 2003
---- ---- ---- ----
U.S. Tax Operations $551,357 $460,286 $(155,874)$(212,192)
Mortgage Operations 985,977 921,874 502,331 563,071
Business Services 319,816 293,938 (7,456) (12,255)
Investment Services 167,443 156,737 (41,904) (92,488)
International Tax Operations 35,403 28,388 (12,262) (12,436)
Corporate Operations 2,706 (48) (72,752) (88,917)
-------- -------- -------- --------
$2,062,702 $1,861,175 212,083 144,783
========== ===========
Income taxes 83,462 59,361
------- --------
Net income before change in accounting
principle 128,621 85,422
Cumulative effect of change in accounting
principle, net of taxes (6,359) -
------- --------
Net income $122,262 $85,422
======== ========
H&R BLOCK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts in thousands, except share data
January 31, April 30,
2004 2003
----------- ---------
ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents $671,089 $875,353
Cash and cash equivalents - restricted 606,832 438,242
Marketable securities - trading 70,280 23,859
Receivables from customers, brokers,
dealers and clearing
organizations, net 645,357 517,037
Receivables, net 1,093,051 403,197
Prepaid expenses and other current assets 611,561 489,673
----------- -----------
Total current assets 3,698,170 2,747,361
----------- -----------
Other assets:
Residual interests in securitizations 233,851 264,337
Mortgage servicing rights 106,196 99,265
Property and equipment, net 284,148 288,594
Intangible assets, net 340,748 341,865
Goodwill, net 948,530 714,215
Other 176,544 148,268
----------- -----------
Total assets $5,788,187 $4,603,905
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $277,599 $55,678
Commercial paper 1,411,177 -
Accounts payable to customers, brokers
and dealers 1,126,103 862,694
Accounts payable, accrued expenses and
other 398,250 468,933
Accrued salaries, wages and payroll taxes 170,043 210,629
Accrued income taxes 73,419 299,262
----------- -----------
Total current liabilities 3,456,591 1,897,196
----------- -----------
Long-term debt 551,406 822,302
Other non-current liabilities 303,624 220,698
----------- -----------
Total liabilities 4,311,621 2,940,196
----------- -----------
Stockholders' equity:
Common stock, no par, stated value $.01
per share 2,179 2,179
Additional paid-in capital 530,282 496,393
Accumulated other comprehensive income 56,591 36,862
Retained earnings 2,240,592 2,221,868
Less cost of 42,409,777 and 38,343,944
shares of common stock in treasury (1,353,078) (1,093,593)
----------- -----------
Total stockholders' equity 1,476,566 1,663,709
----------- -----------
Total liabilities and stockholders' equity $5,788,187 $4,603,905
=========== ===========
H&R BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited, amounts in thousands
Nine months ended
January 31,
2004 2003
---- ----
Cash flows from operating activities:
Net income $122,262 $85,422
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 122,497 114,738
Accretion of residual interests in
securitizations (118,389) (113,146)
Impairment of residual interests in
securitizations 26,048 25,589
Additions to trading securities - residual
interests in securitizations (251,585) (326,395)
Proceeds from net interest margin
transactions 197,417 325,642
Realized gain on sale of NIM residuals (17,000) (130,881)
Additions to mortgage servicing rights (64,265) (55,960)
Amortization of mortgage servicing rights 57,334 33,273
Net change in receivable from Trusts (12,565) (73,494)
Cumulative effect of change in accounting
principle 6,359 -
Impairment of goodwill - 24,000
Mortgage loans held for sale:
Originations and purchases (17,006,283) (12,640,440)
Sales and principal repayments 16,948,363 12,629,199
Other net changes in working capital, net
of acquisitions (1,011,833) (264,296)
------------ ------------
Net cash used in operating activities (1,001,640) (366,749)
------------ ------------
Cash flows from investing activities:
Available-for-sale securities:
Purchases of available-for-sale securities (10,495) (10,577)
Cash received from residual interests in
securitizations 127,997 117,522
Cash received from sale of NIM residuals 17,000 142,486
Sales of other available-for-sale
securities 17,604 9,730
Purchases of property and equipment, net (81,178) (95,629)
Payments made for business acquisitions, net
of cash acquired (280,280) (24,239)
Other, net 11,943 (6,004)
------------ ------------
Net cash provided by (used in) investing
activities (197,409) 133,289
------------ ------------
Cash flows from financing activities:
Repayments of notes payable (1,022,716) (9,301,285)
Proceeds from issuance of notes payable 2,433,893 9,888,088
Proceeds from issuance of securitization
financing 50,100 -
Repayments of securitization financing (50,100) -
Payments on acquisition debt (50,820) (52,107)
Dividends paid (103,538) (93,645)
Payments to acquire treasury shares (371,242) (317,608)
Proceeds from issuance of common stock 111,155 112,813
Other, net (1,947) (2,023)
------------ ------------
Net cash provided by financing activities 994,785 234,233
------------ ------------
Net increase (decrease) in cash and cash
equivalents (204,264) 773
Cash and cash equivalents at beginning of
the period 875,353 436,145
------------ ------------
Cash and cash equivalents at end of the
period $671,089 $436,918
============ ============
Supplementary cash flow data:
Income taxes paid $245,355 $176,168
Interest paid 57,458 55,193
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,
2004 2003 2004 2003
---- ---- ---- ----
Revenues:
Service revenues $591,050 $510,042 $1,037,312 $907,015
Gain on sale of mortgage
assets: 168,965 306,364 581,893 602,749
Interest income 117,643 57,230 276,462 228,176
Product sales 51,324 43,312 107,839 74,234
Royalties 44,427 39,026 49,410 43,082
Other income 3,748 2,439 9,786 5,919
--------- --------- ----------- ----------
977,157 958,413 2,062,702 1,861,175
--------- --------- ----------- ----------
Operating expenses:
Employee compensation and
benefits 392,835 352,209 873,804 791,692
Occupancy and equipment 94,764 87,349 253,229 223,642
Depreciation and
amortization 46,487 42,670 122,497 114,738
Marketing and advertising 67,975 55,331 99,766 85,335
Interest 21,361 24,817 64,457 69,789
Supplies, freight and
postage 28,609 33,154 51,350 55,472
Impairment of goodwill - - - 24,000
Other 150,622 142,591 389,991 356,300
--------- --------- ----------- ----------
802,653 738,121 1,855,094 1,720,968
--------- --------- ----------- ----------
Operating income 174,504 220,292 207,608 140,207
Other income, net 1,616 2,642 4,475 4,576
--------- --------- ----------- ----------
Income before taxes 176,120 222,934 212,083 144,783
Income taxes 69,394 90,621 83,462 59,361
--------- --------- ----------- ----------
Net income before cumulative
effect of change in
accounting principle 106,726 132,313 128,621 85,422
Cumulative effect of change
in accounting principle
for multiple deliverable
revenue arrangements, less
income taxes of $4,031 - - (6,359) -
--------- --------- ----------- ----------
Net income $106,726 $132,313 $122,262 $85,422
========= ========= =========== ==========
Basic earnings per share:
Before change in accounting
principle $0.60 $0.74 $0.72 $0.48
Cumulative effect of change
in accounting - - (0.03) -
--------- --------- ----------- ----------
Net income $0.60 $0.74 $0.69 $0.48
========= ========= =========== ==========
Basic shares outstanding 176,732 178,770 177,964 179,620
Diluted earnings per share:
Before change in accounting
principle $0.59 $0.73 $0.71 $0.46
Cumulative effect of change
in accounting - - (0.04) -
--------- --------- ----------- ----------
Net income $0.59 $0.73 $0.67 $0.46
========= ========= =========== ==========
Diluted shares outstanding 180,984 182,173 181,481 184,378
H&R BLOCK, INC.
SELECTED OPERATING DATA
Unaudited
Option One Mortgage
Corporation Three months ended
------------------- ---------------------------------------------
1/31/2004 1/31/2003 % change 10/31/2003
--------- --------- -------- ----------
Number of loans originated
Wholesale (non-prime) 30,678 25,061 22.4% 36,233
Retail: Prime 1,291 3,560 -63.7% 1,944
Non-prime 3,826 2,284 67.5% 4,110
----------- ----------- --------- -----------
Total 35,795 30,905 15.8% 42,287
=========== =========== ========= ===========
Volume of loans
originated (000's)
Wholesale (non-prime) $4,732,182 $3,756,809 26.0% $5,603,118
Retail: Prime 157,438 496,176 -68.3% 247,661
Non-prime 464,926 280,738 65.6% 492,977
----------- ----------- --------- -----------
Total $5,354,546 $4,533,723 18.1% $6,343,756
=========== =========== ========= ===========
Loan sales $5,308,800 $4,599,255 15.4% $6,330,449
=========== =========== ========= ===========
Servicing portfolio
Number of loans
serviced 308,305 232,979 32.3% 295,636
Servicing portfolio
($ bn's) $42.2 $28.9 46.0% $40.1
H&R Block Financial
Advisors, Inc. Three months ended
------------------- ---------------------------------------------
1/31/2004 1/31/2003 % change 10/31/2003
---------- --------- -------- ----------
Customer trades 413,338 306,119 35.0% 347,828
Customer daily average
trades 6,776 4,638 46.1% 5,351
Average revenue per
trade $113.61 $115.57 -1.7% $116.22
Number of active
accounts 741,824 670,000 10.7% 748,403
Ending balance of
assets under
administration ($
bn's) $27.5 $21.0 31.0% $25.7
Average assets per
active account $37,122 $31,397 18.2% $34,340
Ending customer margin
balances ($ millions) $594 $535 11.0% $538
Ending payables to
customers ($ millions) $1,076 $802 34.2% $981
H&R Block, Inc.
Preliminary U.S. Tax Operating Data
Amounts 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 2004
Company-owned offices (2) $309,034 $364,345 $673,379
Former major franchise
territories (3) 21,889 27,146 49,035
--------- --------- -----------
Total company-owned offices 330,923 391,491 722,414
Franchise offices (4) 169,338 182,173 351,511
--------- --------- -----------
$500,261 $573,664 $1,073,925
========= ========= ===========
Fiscal year 2003 (5)
Company-owned offices (2) $288,175 $365,196 $653,371
Former major franchise
territories (3) 18,714 28,246 46,960
--------- --------- -----------
Total company-owned offices 306,889 393,442 700,331
Franchise offices (4) 153,725 180,043 333,768
--------- --------- -----------
$460,614 $573,485 $1,034,099
========= ========= ===========
Percent change
Company-owned offices 7.2% -0.2% 3.1%
Former major franchise
territories 17.0% -3.9% 4.4%
---------------------------------------------------------------
Total company-owned offices 7.8% -0.5% 3.2%
---------------------------------------------------------------
Franchise offices 10.2% 1.2% 5.3%
---------------------------------------------------------------
Total 8.6% 0.0% 3.9%
---------------------------------------------------------------
Total clients served
--------------------------------------
Fiscal year 2004
Company-owned offices (2) 2,191 2,553 4,744
Former major franchise
territories (3) 168 208 376
--------- --------- -----------
Total company-owned offices 2,359 2,761 5,120
Franchise offices (4) 1,347 1,460 2,807
Digital tax solutions (6) 1,268 737 2,005
--------- --------- -----------
4,974 4,958 9,932
========= ========= ===========
Fiscal year 2003 (5)
Company-owned offices (2) 2,228 2,734 4,962
Former major franchise
territories (3) 157 233 390
--------- --------- -----------
Total company-owned offices 2,385 2,967 5,352
Franchise offices (4) 1,330 1,565 2,895
Digital tax solutions (6) 1,042 634 1,676
--------- --------- -----------
4,757 5,166 9,923
========= ========= ===========
Percent change
Company-owned offices -1.7% -6.6% -4.4%
Former major franchise
territories 7.0% -10.7% -3.6%
---------------------------------------------------------------
Total company-owned offices -1.1% -6.9% -4.3%
---------------------------------------------------------------
Franchise offices 1.3% -6.7% -3.0%
Digital tax solutions 21.7% 16.3% 19.6%
---------------------------------------------------------------
Total 4.6% -4.0% 0.1%
---------------------------------------------------------------
Average fee per client served (7)
--------------------------------------
Fiscal year 2004
Company-owned offices (2) $141.05 $142.71 $141.94
Former major franchise
territories (3) 130.29 130.51 130.41
--------- --------- -----------
Total company-owned offices 140.28 141.79 141.10
Franchise offices (4) 125.71 124.78 125.23
--------- --------- -----------
$134.99 $135.91 $135.48
========= ========= ===========
Fiscal year 2003 (5)
Company-owned offices (2) $129.34 $133.58 $131.67
Former major franchise
territories (3) 119.20 121.23 120.41
--------- --------- -----------
Total company-owned offices 128.67 132.61 130.85
Franchise offices (4) 115.58 115.04 115.29
--------- --------- -----------
$123.99 $126.54 $125.39
========= ========= ===========
Percent change
Company-owned offices 9.1% 6.8% 7.8%
Former major franchise
territories 9.3% 7.7% 8.3%
---------------------------------------------------------------
Total company-owned offices 9.0% 6.9% 7.8%
---------------------------------------------------------------
Franchise offices 8.8% 8.5% 8.6%
---------------------------------------------------------------
Total 8.9% 7.4% 8.0%
---------------------------------------------------------------
Refund anticipation loans
--------------------------------------
Fiscal year 2004
Company-owned offices (2) 1,112 1,042 2,154
Former major franchise
territories (3) 81 77 158
--------- --------- -----------
Total company-owned offices 1,193 1,119 2,312
Franchise offices (4) 713 610 1,323
Digital tax solutions (6) 20 25 45
--------- --------- -----------
1,926 1,754 3,680
========= ========= ===========
Fiscal year 2003 (5)
Company-owned offices (2) 1,146 1,148 2,294
Former major franchise
territories (3) 81 89 170
--------- --------- -----------
Total company-owned offices 1,227 1,237 2,464
Franchise offices (4) 703 653 1,356
Digital tax solutions (6) 19 29 48
--------- --------- -----------
1,949 1,919 3,868
========= ========= ===========
Percent change
Company-owned offices -3.0% -9.2% -6.1%
Former major franchise
territories 0.0% -13.5% -7.1%
---------------------------------------------------------------
Total company-owned offices -2.8% -9.5% -6.2%
---------------------------------------------------------------
Franchise offices 1.4% -6.6% -2.4%
Digital tax solutions 5.3% -13.8% -6.3%
---------------------------------------------------------------
Total -1.2% -8.6% -4.9%
---------------------------------------------------------------
Offices FY 2004 FY 2003
--------------------------------- ------- -------
Company-owned offices (2) 4,746 4,672
Former major franchise
territories (3) 459 --
Company-owned shared office
locations (8) 947 607
--------- ---------
Total company-owned offices 6,152 5,279
--------- ---------
Franchise offices (4) 3,374 3,398
Former major franchise
territories (3) -- 529
Franchise shared office
locations (8) 325 95
--------- ---------
Total franchise offices 3,699 4,022
--------- ---------
9,851 9,301
========= =========
(1) Includes fees received for tax return preparation services and
system administration fees.
(2) Excludes company-owned offices in former major franchise
territories which commenced operations during fiscal year 2004.
(3) Impact of company-owned offices in former major franchise
territories which commenced operations during fiscal year 2004.
(4) Represents remaining major franchise territories and other
franchises.
(5) Prior year numbers have been reclassified between company-owned
and franchise offices for offices in former franchise territories
which commenced company-owned operations during fiscal year 2004.
(6) Includes on-line completed and paid returns and federal software
units sold.
(7) Calculated as tax preparation and related fees divided by clients
served.
(8) Shared locations include offices located within Wal-Mart, Sears
and other third-party businesses.
CONTACT: H&R Block Inc.
Media Relations:
Bob Schneider, 816-932-4835
bschneider@hrblock.com
or
Investor Relations:
Mark Barnett, 816-701-4443
marbarnett@hrblock.com
SOURCE: H&R Block Inc.