Investor Relations


Press Release Details

H&R Block Reports Record Annual Revenues and Earnings

June 12, 2002
KANSAS CITY, Mo., Jun 12, 2002 /PRNewswire-FirstCall via COMTEX/ --

Company Announces 12.5 Percent Dividend Increase

H&R Block Inc. (NYSE: HRB) today reported record revenues and net earnings for the fiscal year ended April 30. Revenues totaled $3.3 billion, an increase of 11.3 percent over the prior year. Net earnings increased 55 percent to $434.4 million, up from $281.2 million. Net earnings per diluted share increased 52 percent to $2.31, an increase of 79 cents per share from the prior year's $1.52 per diluted share.

Financial results reflect the company's previously announced early adoption of Statement of Financial Accounting Standards (SFAS) No. 141 and 142. This change eliminated the amortization of goodwill and certain other intangible assets. In accordance with SFAS 142, the comparative prior year results include amortization of these intangible assets. The effect of this change improved net earnings for fiscal year 2002 by $47.9 million or 26 cents per diluted share.

"Continuing strength in our tax and mortgage businesses helped us achieve record results for 2002," said Mark A. Ernst, president and chief executive officer of H&R Block. "Our mix of businesses allowed us to perform very well despite a difficult economic environment in the United States.

"We're also making progress in building multi-service relationships with our clients," Ernst said. "At the end of the year we had more than 265,000 clients with both tax and financial service relationships."

For the company's fourth quarter, revenues totaled $1.9 billion, an 11.7 percent increase over the prior year's fourth quarter. Net earnings totaled $463.6 million, up 22.6 percent from a year ago. Earnings per diluted share rose 21.8 percent for the quarter to $2.46.

Cash earnings for the year improved by $107.7 million, a 29.4 percent increase, to $474.3 million, up from $366.6 million the prior year. Cash earnings per diluted share increased 27.3 percent to $2.52 per share, compared with $1.98 per diluted share last year. The company defines cash earnings as net earnings excluding the after-tax effect of amortization expense of acquired intangible assets.

Reflecting the company's strong financial condition and continuing performance, H&R Block's Board of Directors approved a 12.5 percent increase in the quarterly cash dividend, raising the dividend from 16 to 18 cents per share, payable Oct. 1, 2002, to shareholders of record on Sept. 10, 2002.

"Based upon the fundamental strength in our businesses, their underlying growth rates and our spending plans, we currently expect earnings per diluted share for fiscal year 2003 to increase to a range of $2.60 to $2.75," Ernst said. "Revenue growth is expected to be within our long-term guidance range of 10 to 15 percent."

The company also announced that during its fiscal year it repurchased 12.2 million shares under its existing share repurchase authorization at a total cost of $462.5 million, or $37.76 per share. During the fourth quarter, the company repurchased 2.6 million shares at a total cost of $110.7 million, or $43.24 per share.

U.S Tax Operations

H&R Block's U.S. tax operations reported fiscal 2002 revenues of $1.83 billion, a 12.8 percent increase over $1.62 billion in fiscal 2001. Pretax earnings improved 22.9 percent to $533.5 million, compared with $434.1 million for fiscal 2001. The early adoption of SFAS 141 and 142 contributed $11 million to the year-over-year earnings improvement. Operating margins improved from 26.8 percent to 29.1 percent.

Tax preparation and related fees for the year in company- and franchise- owned offices totaled $2.1 billion, or 10.8 percent above the prior year. The average fee for tax preparation and related services rose 9.1 percent to $121.83. The total number of clients served by company-owned offices, franchise operations and e-commerce increased 2.7 percent to 18.6 million.

"We saw a very solid performance from our U.S. tax operations this year," Ernst said. "Strategically we succeeded in attracting a somewhat higher income client base while increasing our share of the overall tax services market."

During the year, H&R Block filed 15.6 million returns electronically, an increase of 7.7 percent; 84 percent of all returns processed by the company were filed electronically.

The company's software business achieved 6.6 percent unit growth due primarily to the popularity of TaxCut State, TaxCut Home & Business, and legal software. The number of online paid tax clients increased 70 percent.

International Tax Operations

International tax operations, which includes Canada, Australia, the United Kingdom and overseas franchise operations, reported a 17.7 percent increase in pretax earnings to $7.1 million, compared with $6 million for fiscal 2001. Revenues grew slightly to $78.7 million.

Canada's pretax earnings rose 39.1 percent to $7.7 million for fiscal 2002, up from $5.6 million last year. Canada's revenue declined slightly to $55.8 million.

In Australia, pretax earnings declined 16.1 percent to $2.9 million on a 1.3 percent decline in revenues. Tax operations in the United Kingdom reported a $2.5 million loss for the fiscal year on a 36.9 percent decline in revenues.

"Our International management team is taking the steps necessary to position us for improved results in the future," said Ernst.

Mortgage Operations

Mortgage operations, which primarily includes Option One Mortgage Corp. and H&R Block Mortgage Corp., reported pretax earnings that increased 145.9 percent to $339.4 million for fiscal year 2002, up from $138 million the prior year. The early adoption of SFAS 141 and 142 contributed $13.6 million to the year-over-year improvement. Revenues grew 76.7 percent to $734.9 million, up from $415.8 million the prior year.

During the fourth quarter, the company recorded a $106 million pretax write-up of its interests in residuals through other comprehensive income. The write-up reflects the stronger than previously expected cash flows from the company's retained residual interests from past securitizations. Along with a write-up taken in the company's second quarter, total pretax residual write-ups through other comprehensive income totaled $151.1 million during the year.

"We had absolutely outstanding performance in our mortgage operations this year. While we clearly benefited from the declining rate environment during the year, we have also taken important steps to improve the infrastructure of all our operations for the future," Ernst said.

Option One and H&R Block Mortgage originated $11.5 billion in loans during fiscal 2002, an increase of 75.5 percent compared with last year's $6.5 billion. Option One's servicing portfolio ended the year at $23.8 billion, a 30.6 percent increase over last year's $18.2 billion.

H&R Block Mortgage, H&R Block's retail mortgage subsidiary, generated revenues of $85.9 million, a 100.7 percent increase over last year. H&R Block Mortgage reported pretax earnings of $16.6 million, compared with an $8.1 million loss last year.

"H&R Block Mortgage reached profitability each quarter this year, which is an indicator that shows our financial partner strategy is beginning to succeed," Ernst said. "Nearly 55 percent of all our retail loan originations in the fourth quarter were for H&R Block tax clients."

Investment Services

As anticipated, the weak market environment negatively affected results in H&R Block's investment services segment, which operates under the name H&R Block Financial Advisors (HRBFA).

HRBFA reported revenues of $250.7 million for fiscal 2002, down 46.9 percent from $472.4 million in fiscal 2001. HRBFA reported a $54.9 million pretax loss for fiscal 2002, compared to $9.3 million in pretax earnings the prior year. The early adoption of SFAS 141 and 142 decreased the pretax loss for the year by $17.9 million. The full-year loss includes one-time, pretax charges of $3.1 million taken in the fourth quarter for the discontinuation of certain operations.

The business suffered from significant declines in margin balances and equity trading, both reflective of broader market shifts. The company ended the year with 695,000 active accounts and margin balances of $0.8 billion.

While results were disappointing, the business made progress in serving the saving and investing needs of H&R Block clients. More than 160,000 new accounts were opened for H&R Block tax clients, including more than 130,000 IRA accounts.

Business Services

Business services, which includes RSM McGladrey Inc. and related services businesses, reported pretax earnings of $22.7 million, up 42.4 percent from pretax earnings of $16 million reported in fiscal 2001. The early adoption of SFAS 141 and 142 improved the year-over-year comparison by $19.3 million. Business services reported revenues of $416.9 million, an increase of 8 percent over fiscal 2001 revenues of $386.2 million.

During the year, the company made important investments in a variety of long-term growth initiatives within this segment. Among them were the acquisitions of a controlling interest in a payroll processing company and a business valuation and investment banking firm. The reported results are net of pretax losses of $6.7 million from these two new businesses. The broader range of services is designed to enable the company to meet more of its clients' needs in the future.

Other

At 5 p.m. EDT June 12, the company will host a conference call to brief analysts and investors on its results. Company executives will discuss year- end results, future expectations and also respond to questions. The call will be Webcast in a listen-only format for the media and public. The link to the Webcast is available at www.hrblock.com .

A replay of the call will be available beginning at 8 p.m. EDT June 12 and continuing until 8 p.m. EDT June 19, by dialing 800-642-1687 (U.S./Canada) or 706-645-9291 (International). The replay access code is 4034649. A replay of the Webcast will also be available at www.hrblock.com through June 19.

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 2003; changes in economic, political or regulatory environments; 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 services and financial advice, investment and mortgage products and services, and business accounting and consulting services. The world's largest tax preparation company, H&R Block in fiscal year 2002 served nearly 21 million clients in approximately 10,400 retail offices worldwide and with award-winning software and online services. It is the only major tax preparation and financial services company that focuses primarily on helping middle-income Americans achieve their financial objectives. Investment services and securities products are offered through H&R Block Financial Advisors Inc., member NYSE, SIPC. H&R Block Inc is not a registered broker-dealer. H&R Block Mortgage Corp. offers retail mortgage products. Option One Mortgage Corp offers wholesale mortgage products and a range of mortgage services. RSM McGladrey Inc. serves mid-sized businesses with accounting, tax and consulting services.

                                  H&R BLOCK, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
              Unaudited, amounts in thousands, except per share data

                                               Three months ended April 30,
                                               2002        2001        2000

     Revenues                              $1,881,327  $1,683,851  $1,587,230

     Earnings before income taxes             765,881     641,635     557,743

     Net earnings before change in
      accounting                              463,584     373,689     340,781

     Cumulative effect of change in
      accounting principle for derivative
      & hedging activities (less applicable
      income taxes of $2,717)                     -         4,414         -

     Net earnings                            $463,584    $378,103    $340,781

     Basic net earnings per share:

       Net earnings before change in
        accounting                              $2.54       $2.04       $1.73

       Net earnings                             $2.54       $2.06       $1.73

       Basic shares outstanding               182,530     183,307     196,498

     Diluted net earnings per share:

       Net earnings before change in
        accounting                              $2.46       $2.00       $1.72

       Net earnings                             $2.46       $2.02       $1.72

       Diluted shares outstanding             188,084     186,815     197,611


                                                    Year ended April 30,
                                               2002        2001        2000

     Revenues                              $3,317,736  $2,981,337  $2,425,685

     Earnings before income taxes             716,840     473,078     412,266

     Net earnings before change in
      accounting                              434,405     276,748     251,895

     Cumulative effect of change in
      accounting principle for derivative
      & hedging activities (less applicable
      income taxes of $2,717)                     -         4,414         -

     Net earnings                            $434,405    $281,162    $251,895

     Basic net earnings per share:

       Net earnings before change in
        accounting                              $2.38       $1.50       $1.28

       Net earnings                             $2.38       $1.53       $1.28

       Basic shares outstanding               182,903     183,893     196,067

     Diluted net earnings per share:

       Net earnings before change in
        accounting                              $2.31       $1.49       $1.27

       Net earnings                             $2.31       $1.52       $1.27

       Diluted shares outstanding             188,327     185,135     197,858


    Notes to Consolidated Statements of Operations

    On June 20, 2001, the Company's Board of Directors declared a two-for-one
    stock split of its Common Stock in the form of a 100% stock distribution
    effective August 1, 2001, to shareholders of record as of the close of
    business on July 10, 2001.  Basic net earnings per share is based on the
    weighted average number of shares outstanding during each period.  The
    dilutive effect of potential common shares is included in diluted net
    earnings per share.  All periods presented have been adjusted to reflect
    the stock split.

    Reclassifications have been made to prior years to conform with current
    period presentation.

    Results for the three months and the year ended April 30, 2001 and 2000
    have been adjusted to reflect the implementation of Emerging Issues Task
    Force Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a
    Customer (Including a Reseller of the Vendor's Products)."  The effect of
    this change was to reduce revenues and expenses by $27.6 million and
    $25.2 million for the three months ended April 30, 2001 and 2000 and by
    $32.6 million and $35.3 million for the year ended April 30, 2001 and
    2000.  There was no impact on net earnings.

    Results for the three months and the year ended April 30, 2001 and 2000
    have been adjusted to reflect the implementation of Emerging Issues Task
    Force Issue No. 01-14, "Income Statement Characterization of
    Reimbursements Received for 'Out-of-Pocket' Expenses Incurred."  The
    effect of this change was to increase revenues and expenses by
    $7.4 million and $4.5 million for the three months ended April 30, 2001
    and 2000 and by $12.3 million and $9.1 million for the year ended April
    30, 2001 and 2000.  There was no impact on net earnings.

    Effective May 1, 2001, the Company adopted a new methodology for
    allocation of corporate services and support costs to business units.
    This change was made in an effort to more accurately reflect each business
    line's performance.  Prior year segment results have been restated to
    reflect the new methodology.

    In July 2001, the Financial Accounting Standards Board issued Statement of
    Financial Accounting Standards No. 141, "Business Combinations," and No.
    142, "Goodwill and Other Intangible Assets" (SFAS 141 & 142).  SFAS 141
    addresses financial accounting and reporting for business combinations and
    replaces APB Opinion No. 16, "Business Combinations" (APB 16).  SFAS 141
    no longer allows the pooling of interests method of accounting for
    acquisitions, provides new recognition criteria for intangible assets and
    carries forward without reconsideration the guidance in APB 16 related to
    the application of the purchase method of accounting.  SFAS 142 addresses
    financial accounting and reporting for acquired goodwill and other
    intangible assets and replaces APB Opinion No. 17, "Intangible Assets."
    SFAS 142 addresses how intangible assets should be accounted for upon
    their acquisition and after they have been initially recognized in the
    financial statements.  As of May 1, 2001, the Company elected early
    adoption of both SFAS 141 & 142.  The implementation of these
    standards has the effect of reducing amortization expense of acquired
    intangible assets.

    In the fourth quarter of fiscal 2001, the Company elected the early
    adoption of Statement of Financial Accounting Standards No. 133,
    "Accounting for Derivative Instruments and Hedging Activities," as amended
    in June 1999 (SFAS 133) and Statement of Financial Accounting Standards
    No. 138, "Accounting for Derivative Instruments and Hedging Activities,
    an Amendment of FASB Statement No. 133" (SFAS 138).  SFAS 133 and SFAS 138
    establish accounting and reporting standards for derivatives and hedging
    activities, and requires companies to record derivative instruments as
    assets or liabilities, measured at fair value.  The Company has identified
    derivative instruments related to certain of its commitments
    to originate residential mortgage loans.  The net transition adjustment
    for adoption of SFAS 133 and SFAS 138 of $4.4 million is shown as the
    cumulative effective of a change in accounting principle in the
    consolidated statement of earnings for the year ended April 30, 2001.

    On December 1, 1999, the Company completed the acquisition of the
    outstanding capital stock of Olde Financial Corporation and Financial
    Marketing Services, Inc. (collectively, OLDE).  The purchase price was
    $850 million in cash plus net tangible book value payments of $48.5
    million.  The acquisition was accounted for as a purchase and,
    accordingly, OLDE's results are included since the date of the
    acquisition.  The acquisition was funded with short-term borrowings and
    the issuance of $500 million in Senior Notes in the fourth quarter of
    fiscal 2000.

    On August 2, 1999, the Company, through a subsidiary, RSM McGladrey, Inc.,
    completed the purchase of substantially all of the non-attest assets of
    McGladrey & Pullen, LLP.  The purchase price was $240 million in cash
    payments over four years and the assumption of certain pension liabilities
    with a present value of $52.7 million.  The acquisition was accounted for
    as a purchase, and accordingly, results are included since the date of
    acquisition.

    During the fiscal years ended April 30, 2002, 2001 and 2000, the Company
    issued shares of its common stock pursuant to provisions for exercise of
    the Company's stock option plans as follows:  2002 - 9,647,182 shares;
    2001 - 983,542 shares; 2000 - 2,047,164 shares.  During the same periods,
    the Company reacquired shares of its common stock as follows:  2002 -
    12,259,158 shares at an aggregate cost of $462,938,000; 2001 - 13,632,196
    shares at an aggregate cost of $222,894,000; 2000 - 2,272,600 shares at an
    aggregate cost of $50,654,000.


     H&R BLOCK, INC.
     SELECTED OPERATIONAL INFORMATION
     Unaudited, amounts in thousands

                                          Three months ended April 30,
                                          Revenues          Earnings (loss)
                                      2002        2001       2002      2001

      U.S. tax operations          $1,411,838  $1,267,844  $693,581  $603,855
      International tax operations     52,259      50,896    18,979    19,716
      Mortgage operations             225,993     136,343   101,991    57,978
      Investment services              55,848      92,021   (27,329)  (21,542)
      Business services               137,060     134,174    20,553    19,448
      Corporate operations             (1,671)      2,573   (24,216)  (11,633)
      Interest expense on
       acquisition debt                   -           -     (19,001)  (22,999)
                                   $1,881,327  $1,683,851   764,558   644,823
      Investment income, net                                    419      (377)
      Intercompany interest*                                    904    (2,811)
                                                            765,881   641,635
      Taxes on earnings                                     302,297   267,946
      Net earnings before change
       in accounting principle                              463,584   373,689
      Cumulative effect of change
       in accounting principle                                  -       4,414
      Net earnings                                         $463,584  $378,103


                                                 Year ended April 30,
                                             Revenues         Earnings (loss)
                                         2002        2001      2002      2001

      U.S. tax operations          $1,830,752  $1,622,636  $533,468  $434,067
      International tax operations     78,710      78,469     7,093     6,024
      Mortgage operations             734,890     415,802   339,388   137,992
      Investment services             250,685     472,425   (54,862)    9,298
      Business services               416,926     386,168    22,716    15,953
      Corporate operations              5,773       5,837   (56,133)  (30,899)
      Interest expense on
       acquisition debt                   -           -     (79,002)  (98,759)
                                   $3,317,736  $2,981,337   712,668   473,676
      Investment income, net                                  3,097     5,977
      Intercompany interest*                                  1,075    (6,575)
                                                            716,840   473,078
      Taxes on earnings                                     282,435   196,330
      Net earnings before change
       in accounting principle                              434,405   276,748
      Cumulative effect of change
       in accounting principle                                  -       4,414
      Net earnings                                         $434,405  $281,162

     * Intercompany interest represents net interest expense charged to
       financial related businesses for corporate cash that was borrowed to
       fund their operating activities and net unallocated interest expense
       attributable to commitment fees on the Company's credit facility.


      H&R BLOCK, INC.
      SELECTED OPERATIONAL INFORMATION
      WITH FISCAL 2001 ADJUSTED FOR SFAS 142 **
      Unaudited, amounts in thousands, except per share amounts

                                          Year ended April 30,
                                Revenues               Earnings (loss)
                                                                       2001
                                        2001                 2001   (adjusted)
                            2002     (reported)    2002   (reported)    **

      U.S. tax
       operations        $1,830,752  $1,622,636  $533,468  $434,067  $445,031
      International tax
       operations            78,710      78,469     7,093     6,024     6,651
      Mortgage
       operations           734,890     415,802   339,388   137,992   151,569
      Investment
       services             250,685     472,425   (54,862)    9,298    27,237
      Business services     416,926     386,168    22,716    15,953    35,247
      Corporate
       operations             5,773       5,837   (56,133)  (30,899)  (30,899)
      Interest expense
       on acquisition
       debt                     -           -     (79,002)  (98,759)  (98,759)
                         $3,317,736  $2,981,337   712,668   473,676   536,077
      Investment income,
       net                                          3,097     5,977     5,977
      Intercompany
       interest*                                    1,075    (6,575)   (6,575)
                                                  716,840   473,078   535,479
      Taxes on earnings                           282,435   196,330   210,865
      Net earnings
       before change in
       accounting
       principle                                  434,405   276,748   324,614
      Cumulative effect
       of change in
       accounting
       principle                                      -       4,414     4,414
      Net earnings                               $434,405  $281,162  $329,028

      Diluted earnings
       per share                                    $2.31     $1.52     $1.78


                                                     Year ended April 30,
                                                    % Change Better (Worse)
                                                      2001              2001
                                                  (reported)     (adjusted)**

       U.S. tax operations                            22.9%             19.9%
       International tax operations                   17.7%              6.6%
       Mortgage operations                           145.9%            123.9%
       Investment services                               -                 -
       Business services                              42.4%            -35.6%
       Corporate operations                          -81.7%            -81.7%
       Interest expense on acquisition
        debt                                          20.0%             20.0%
                                                      50.5%             32.9%
       Investment income, net                        -48.2%            -48.2%
       Intercompany interest*                            -                 -
                                                      51.5%             33.9%
       Taxes on earnings                              43.9%             33.9%
       Net earnings before change in
        accounting principle                          57.0%             33.8%
       Cumulative effect of change in
        accounting principle                        -100.0%           -100.0%
       Net earnings                                   54.5%             32.0%

       Diluted earnings per share                     52.0%             29.8%

      *  Intercompany interest represents net interest expense charged to
         financial related businesses for corporate cash that was borrowed to
         fund their operating activities and net unallocated interest expense
         attributable to commitment fees on the Company's credit facility.

      ** Fiscal year 2001 results adjusted to remove the effects of
         amortization of goodwill and certain intangible assets consistent
         with the accounting treatment applied for fiscal year 2002 in
         accordance with the adoption of SFAS 142.


    H&R Block, Inc.
    Consolidated Balance Sheets
    Unaudited, amounts in thousands, except share data


                                                           April 30,
                                                     2002              2001
                                     ASSETS
    CURRENT ASSETS:
         Cash and cash equivalents                $436,145          $187,616
         Cash and cash equivalents -
          restricted                               152,173            84,197
         Marketable securities --
          available-for-sale                           -               8,266
         Marketable securities -- trading           28,370            46,158
         Receivables from customers,
          brokers, dealers and clearing
          organizations, less allowance for
          doubtful accounts of $1,785 and $1,692   844,538         1,310,804
         Receivables, less allowance for doubtful
          accounts of $64,057 and $47,125          368,345           365,304
         Prepaid expenses and other
          current assets                           415,572           260,942
            Total current assets                 2,245,143         2,263,287

    OTHER ASSETS:
         Investments in available-for-
          sale marketable securities                15,260            31,559
         Residual interests in securitizations     365,371           238,600
         Intangible assets                         380,657           402,209
         Goodwill                                  726,284           649,617
         Property and equipment, at cost
          less accumulated depreciation and
          amortization                             286,500           288,847
         Other                                     211,576           239,586
                                                $4,230,791        $4,113,705

                  LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
         Accounts payable to customers,
          brokers and dealers                     $903,201        $1,058,000
         Accounts payable, accrued
          expenses and deposits                    410,622           353,291
         Accrued salaries, wages and
          payroll taxes                            253,401           221,830
         Accrued taxes on earnings                 252,822           295,599
         Current portion of long-term
          debt                                      59,656            51,763
             Total current liabilities           1,879,702         1,980,483

    LONG-TERM DEBT                                 868,387           870,974

    OTHER NONCURRENT LIABILITIES                   113,282            88,507

    STOCKHOLDERS' EQUITY:
         Common stock, no par, stated
          value $.01 per share                       2,179             2,179
         Additional paid-in capital                468,052           419,957
         Accumulated other comprehensive
          income (loss)                             44,128           (42,767)
         Retained earnings                       1,767,702         1,449,022
                                                 2,282,061         1,828,391
         Less cost of 36,819,739 and
          34,336,910 shares of common
          stock in treasury                       912,641           654,650
             Total stockholders' equity          1,369,420         1,173,741
                                                $4,230,791        $4,113,705


    H&R Block, Inc.
    Consolidated Statements of Cash Flows
    Unaudited, amounts in thousands

                                                     Year ended April 30,
                                                    2002               2001
    Cash flows from operating
     activities:
     Net earnings                                 $434,405           $281,162
     Adjustments to reconcile net
      earnings to net cash
      provided by operating activities:
       Depreciation and amortization               155,386            205,608
       Provision for bad debt                       76,804             84,422
       Accretion of acquisition liabilities         11,700             11,863
       Provision for deferred taxes on earnings     35,869            (38,870)
       Net (gain) loss on sale of operating unit     1,666             (2,040)
       Effect of change in accounting principle        -               (4,414)
       Tax benefit from stock option exercises      57,809              2,235
       Accretion of residual interests
        in securitizations, net                    (19,596)           (12,357)
       Net gain on sales of available-
        for-sale securities                           (423)           (17,744)
       Changes in:
        Cash and cash equivalents - restricted     (67,976)           (51,014)
        Receivables from customers, brokers,
         dealers and clearing organizations        465,926          1,544,640
        Receivables                               (112,588)          (480,032)
        Mortgage loans held for sale:
         Originations and purchases            (11,771,688)        (7,254,552)
         Sales and principal repayments         11,780,758          7,336,659
        Marketable securities - trading             17,788               (755)
        Prepaid expenses and other
         current assets                           (179,694)           (88,515)
        Accounts payable to customers,
         brokers and dealers                      (154,799)        (1,512,200)
        Accounts payable, accrued
         expenses and deposits                      57,608            133,695
        Accrued salaries, wages and payroll taxes   31,751             48,901
        Accrued taxes on earnings                  (42,777)            66,465
       Other, net                                  (16,543)            (4,806)
       Net cash provided by operating activities   761,386            248,351

    Cash flows from investing activities:
     Purchases of available-for-sale securities     (7,241)           (10,636)
     Maturities of available-for-sale securities    75,320             21,524
     Sales of available-for-sale securities         23,173            356,192
     Purchases of property and equipment, net     (108,063)           (90,033)
     Payments made for business acquisitions,
      net of cash acquired                         (46,030)           (21,143)
     Proceeds from sale of operating units             121             23,200
     Other, net                                    (16,253)           (24,347)
       Net cash provided by (used in)
        investing activities                       (78,973)           254,757

    Cash flows from financing activities:
     Repayments of notes payable               (10,622,011)       (18,219,741)
     Proceeds from issuance of notes payable    10,622,011         17,935,944
     Payments on acquisition debt                  (50,594)           (68,743)
     Dividends paid                               (115,725)          (108,374)
     Payments to acquire treasury shares          (462,938)          (222,895)
     Proceeds from stock options exercised         195,233             19,550
     Other, net                                        140              2,049
       Net cash used in financing activities      (433,884)          (662,210)

    Net increase(decrease) in cash and
     cash equivalents                              248,529           (159,102)
    Cash and cash equivalents at
     beginning of the period                       187,616            346,718
    Cash and cash equivalents at end of
     the period                                   $436,145           $187,616

    Supplementary cash flow data:
     Income taxes paid                            $236,784           $150,784
     Interest paid                                 105,072            230,448


    H&R Block, Inc.
    Consolidated Statements of Operations
    Unaudited, amounts in thousands, except per share data

                                  Three Months Ended     Twelve Months Ended
                                        April 30,               April 30,
                                    2002        2001        2002        2001
    Revenues:
      Service revenues         $1,494,740  $1,360,924  $2,333,064  $2,179,896
      Interest income              58,311      60,814     206,433     279,833
      Gain on sale of mortgage
       loans                      134,656      81,982     456,958     244,789
      Product sales                63,508      52,832     127,226     101,489
      Royalties                   126,843     115,854     164,615     149,683
      Other income                  3,269      11,445      29,440      25,647
                                1,881,327   1,683,851   3,317,736   2,981,337

    Operating expenses:
      Employee compensation
       and benefits               610,636     567,450   1,308,705   1,192,294
      Occupancy and equipment     111,281     103,006     305,387     283,181
      Interest                     25,818      47,332     116,141     242,551
      Depreciation and
       amortization                48,291      56,618     155,386     205,608
      Marketing and
       advertising                 80,763      55,022     155,729     110,973
      Supplies, freight and
       postage                     37,659      33,317      75,710      70,440
      Bad debt                     26,610      40,974      76,804      84,422
      Other                       172,607     138,098     408,446     326,802
                                1,113,665   1,041,817   2,602,308   2,516,271

    Operating earnings            767,662     642,034     715,428     465,066

    Other income:
      Investment income, net          419        (377)      3,097       5,977
      Other, net                   (2,200)        (22)     (1,685)      2,035
                                   (1,781)       (399)      1,412       8,012

    Earnings before income
     taxes                        765,881     641,635     716,840     473,078
    Taxes on earnings             302,297     267,946     282,435     196,330

    Net earnings before change
      in accounting principle     463,584     373,689     434,405     276,748

    Cumulative effect of
     change in accounting
     principle                        -         4,414         -         4,414

    Net earnings                 $463,584    $378,103    $434,405    $281,162

    Basic net earnings per share    $2.54       $2.06       $2.38       $1.53

    Basic shares outstanding      182,530     183,307     182,903     183,893


    Diluted net earnings per share  $2.46       $2.02       $2.31       $1.52

    Diluted shares outstanding    188,084     186,815     188,327     185,135


    H&R BLOCK, INC.
    FINANCIAL SERVICES OPERATING DATA
    Unaudited

    H&R Block Financial Advisors, Inc.

                  For the
                year ended            For the three months ended
                04/26/2002     04/26/2002   04/27/2001   % Change  01/25/2002


    Customer
     trades
     (000's)        1,448          279          489       -42.9%         402
    Customer
     daily
     average
     trades         5,767        5,849        7,760       -24.6%       6,241
    Average
     commission
     per trade     $62.03       $60.70       $67.21        -9.7%      $64.61

    Number of
     active
     accounts
     (000's)          695          701          620        13.2%         603
    Average trades
     per active
     account per
     quarter          n/a         0.40         0.79       -49.6%        0.67
    Average trades
     per active
     account per year
     (annualized)    2.08         1.59         3.15       -49.6%        2.67

    Ending balance
     of assets
     under
     administration
     ($ bn's)       $25.5        $25.5        $31.5       -19.0%       $27.2
    Average assets
     per active
     account      $36,672      $36,672      $50,817       -27.8%     $45,191

    Ending debit
     balances
     ($ bn's)        $0.8         $0.8         $1.3       -38.4%        $0.9
    Ending credit
     balances
     ($ bn's)        $0.8         $0.8         $0.8         3.1%        $0.9



    Option One Mortgage Corporation

                 For the
               year ended              For the three months ended
               04/30/2002    04/30/2002    04/30/2001    % Change  01/31/2002


    Number of loans
     originated
     Wholesale     74,208       20,693       14,160        46.1%      17,344
     Retail        15,125        4,022        3,520        14.3%       4,056
       Total       89,333       24,715       17,680        39.8%      21,400

    Volume of loans
     originated
     (000's)
     Wholesale $9,457,331   $2,784,076   $1,579,171        76.3%  $2,346,687
     Retail     1,995,842      505,154      467,579         8.0%     549,112
       Total  $11,453,173   $3,289,230   $2,046,750        60.7%  $2,895,799

    Loan
     sales    $11,440,190   $3,334,989   $2,127,493        56.8%  $2,868,690

    Servicing
     portfolio
      Number of
       loans
       serviced
       (000's)      209.6        209.6        173.9        20.5%       202.4
    Servicing
     portfolio
     ($ bn's)       $23.8        $23.8        $18.2        30.6%       $22.7

                    
SOURCE H&R Block Inc.

CONTACT: Bob Schneider, Media Relations, +1-816-932-4835, or Mark Barnett, Investor Relations, +1-816-701-4443, both of H&R Block Inc. URL: http://www.hrblock.com

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