Investor Relations


Press Release Details

Strong Start to Tax Season Leads to Profitable Third Quarter

February 27, 2001

KANSAS CITY, Mo., Feb. 27 /PRNewswire/ -- H&R Block Inc. (NYSE: HRB) today reported earnings for the third quarter ended Jan. 31, 2001, of $5.6 million, or 6 cents per basic and diluted share, compared with a net loss of $7.1 million, or 7 cents per basic and diluted share, last year. Cash earnings improved $21.1 million over the prior year's quarter to $27.1 million, or 30 cents per basic share and 29 cents per diluted share, compared with earnings of $5.9 million, or 6 cents per basic and diluted share. The company defines cash earnings as net earnings from operations excluding the after-tax effect of amortization expense of acquired intangible assets.

"For the first time in our company's history, H&R Block's U.S. tax operations has reported a profit outside of the fourth quarter," said Mark A. Ernst, president and chief executive officer. "A surprising early start to the tax filing season, disciplined expense control, and strong improvements in our e-commerce business, along with strength in our mortgage business, contributed to these outstanding financial results.

"We effectively managed the early tax season surge, quickly mobilizing thousands of field staff and readily adapting to the increased business," Ernst added. "While this early tax filing growth has shifted some revenue from the fourth quarter to the third quarter, overall trends indicate that we are on track to deliver results for the full year that we believe will meet our previously announced revenue and earnings targets."

The company also experienced a strong start in its e-solutions business. Executing on its software and online tax strategy to profitably build unit sales, retail shipment of software grew 56 percent to 2.3 million units, while registered online tax users increased nearly three-fold during the quarter.

"We're pleased with our e-commerce results thus far," said Ernst. "Americans are finding that no matter how they wish to be served, H&R Block provides the most comprehensive array of tax products and services."

All domestic lines of business reported double-digit revenue growth for the quarter, led by U.S. tax operations' 37.6 percent increase over last year's third quarter. H&R Block's revenues for the quarter climbed 29 percent to $661.4 million, compared with $512.5 million for the same period last year.

The company's performance as measured by earnings before interest (including interest expense on acquisition debt, investment income and interest allocated to operating business units), taxes, depreciation and amortization (EBITDA), improved by $48.3 million to $88.7 million, a gain of 119 percent over the prior year's quarter. The pretax amortization expense of acquired intangible assets increased in the third quarter to $26.3 million from $17 million during the same period last year.

U.S. Tax Operations

H&R Block's U.S. tax operations reported revenues of $327.3 million, an increase of $89.5 million, or 37.6 percent, compared with $237.9 million in the same quarter a year ago. Pretax earnings for the segment improved $36.9 million to $7.4 million, compared to a pretax loss of $29.4 million last year. The segment's better than expected results were due to increases in both numbers of clients and average fees per client, strict cost management, and year-over-year improvements in e-commerce and participations in refund anticipation loans (RALs).

From Jan. 1 through Jan. 31, 2001, tax preparation and related fees from company-owned and franchised offices increased 36.8 percent compared with the same period last year, while the number of clients served by company-owned and franchised operations increased 25 percent. As of Jan. 31, 2001, H&R Block had filed 3.3 million federal returns electronically, representing a 27.5 percent increase over the prior year. Through the first month of tax season, 94.4 percent of returns processed by the company were filed electronically. The number of RALs processed by Block increased 18.9 percent to 1.7 million, compared with 1.4 million for the same period in 2000.

For the period Jan. 1 through Feb. 15, 2001, company-owned operations served 5.4 million clients, an increase of 7.5 percent over the same period ended Feb. 15, 2000. For the same period, tax preparation and related fees in company-owned tax offices increased 17.1 percent to $548.6 million.

Outlook for Remainder of Tax Season

"While we are very encouraged by our strong start this tax season, it's important to keep several points in mind when looking ahead to the fourth quarter," Ernst said. "Our analysis of early season data indicates the growth is attributable in part to a slight shift in the filing pattern from the first two weeks of February into late January. As a result, we do not expect to sustain the significant level of growth recorded in the third quarter during the remainder of the tax season. Our results for company-owned operations through Feb. 15 are more in line with our expectations for the start of the tax season and a better indicator of our overall tax season performance to date.

"Average fee increases will also level off in the fourth quarter, as our pricing increases were more heavily weighted toward the beginning of the tax season," Ernst explained. "However, we are benefiting from a mix of returns that includes slightly more complexity and a reduction in discounts. We expect some level of continuing benefit from fewer discounts.

"Finally, our strong start has not led us to lose sight of the fact that this year we have adopted a two-season marketing focus, which is directed at increasing the overall complexity of the clients we serve during the second half of the tax season," Ernst said. "While we are currently on track to realize our previously stated full year goals, our ultimate results from the tax season will depend heavily on the success of these marketing efforts."

International Tax Operations

International tax operations, which include Canada, Australia and the United Kingdom, generated revenues of $7.9 million, down 7.3 percent over last year partially due to the continued strength of the U.S. dollar. The pretax loss improved $1 million, or 13.9 percent, to $6.1 million, compared with $7.1 million a year ago. Careful cost control, particularly in Canadian operations, drove the improved results.

Financial Services

The financial services segment, comprised of mortgage and investment services operations, reported a 2.2 percent increase in pretax earnings over last year to $44.9 million, due primarily to strong results from mortgage operations, offset by lower earnings from investment services operations. Revenues rose 27.4 percent to $232.3 million, due in part to the inclusion of three months of operations from H&R Block Financial Advisors for the quarter, versus only two months last year.

Mortgage operations, which include Option One Mortgage Corporation and H&R Block Mortgage Corporation, reported pretax earnings of $38.3 million, a 53.3 percent increase over the prior year. Revenues rose $28.5 million, or 33.3 percent, to $114.2 million. The improved results are attributable to the volume and quality of loans originated and serviced by Option One, the pricing those loans generated, a positive interest rate environment, and continued cost control. These items as well as third-party off-balance sheet financing arrangements contributed to the 437 basis point year-over-year pretax operating margin improvement.

Option One and H&R Block Mortgage originated $1.6 billion in loans in the third quarter, an increase of 12.5 percent over the same period last year. At the end of the third quarter, Option One's servicing portfolio was approximately $17.5 billion, an increase of $7.1 billion, or 68 percent, over last year and an increase of $0.9 billion, or 5.4 percent over the second quarter of fiscal 2001.

Block's investment services operations, which consists primarily of H&R Block Financial Advisors Inc., contributed $118.1 million in revenues and $6.6 million in pretax earnings, a 22.1 percent increase and 65.2 percent decrease compared to the prior year, respectively. Pretax earnings include $1.1 million in one-time charges associated with staff reductions, as H&R Block Financial Advisors has actively managed its cost structure in the industry's slow trading environment.

The average commission rate per trade of $68.61 represents a 14.1 percent increase from $60.13 in the prior year's quarter and a 2.7 percent decrease compared with the last quarter's rate of $70.52. Total customer trades and customer daily average trades were consistent with the sequential second quarter results and declined approximately 40 percent over the prior year's very active levels.

The financial services segment reported solid cash flows. EBITDA increased $9.1 million to $65.8 million, or 16.1 percent over the prior year. Higher earnings primarily drove the increase.

Business Services

Business services, which primarily includes RSM McGladrey Inc., reported pretax earnings of $1.1 million compared to $3.1 million last year. Revenues rose 12 percent to $92.7 million, driven by increased consulting and financial service fees. Business services reported a 3.2 percent improvement in EBITDA to $11.1 million, compared with $10.7 million last year.

Other

Interest expense on acquisition debt increased $4.5 million to $24 million versus a year ago, due to higher interest rates and the full quarter inclusion of the financing costs associated with the acquisition of H&R Block Financial Advisors on Dec. 1, 1999.

For the nine months ended Jan. 31, 2001, H&R Block's revenues were $1.3 billion, up 54.4 percent from the same period a year ago. The net loss was $95.8 million, or $1.04 per share, compared with a net loss of $88.9 million, or 91 cents per share for the same nine-month period last year. Cash earnings improved 48.6 percent over the prior year's nine-month period with a loss of $32.7 million, or 35 cents per share, compared with a loss of $63.6 million, or 65 cents per share. EBITDA improved by $103.7 million to $55.6 million, compared with a loss of $48.1 million for the prior year's nine-month period.

The Board of Directors of H&R Block declared a quarterly dividend of 30 cents per share, payable April 2, 2001, to shareholders of record on March 12, 2001.

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 uncertainties that the company will achieve or exceed its revenue, earnings, client and pricing growth goals for fiscal year 2001, that the level of growth experienced in the third quarter and early tax season will continue throughout the remainder of the tax season and fiscal year, that average fees will continue at current levels or increase during the remainder of fiscal year 2001, of the success of the company's marketing efforts, of the continued strong performance of the company's mortgage operations, that the performance of the company's e-commerce initiatives will continue to improve, changes in economic, political or regulatory environments, 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. is a diversified company with subsidiaries providing a wide range of financial products and services. In 2000, H&R Block served 19.2 million taxpayers -- more than any tax or accounting firm -- through its more than 10,000 offices located in the United States, Canada, Australia and the United Kingdom. H&R Block served another 1.8 million tax clients through its award-winning software program, Kiplinger TaxCut(R), and through its new online tax preparation services. 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 Corporation and Option One Mortgage Corporation offer a full range of home mortgage products. RSM McGladrey Inc. is a national accounting, tax and consulting firm with 100 offices nationwide, as well as an affiliation with 550 offices in 75 countries as the U.S. member of RSM International. Quarterly results and other information are available on the company's Web site at www.hrblock.com .

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

                                               Three months ended January 31,
                                                 2001       2000       1999
    Revenues                                  $661,354   $512,507   $291,482

    Earnings (loss) from continuing
     operations before income
      taxes (benefit)                            9,816    (13,523)    (4,588)

    Net earnings (loss) from continuing
     operations                                  5,645     (7,075)    (2,845)

    Net loss from discontinued operations
     (less applicable income
      tax benefit of ($175))                       -          -         (273)

    Net loss on sale of discontinued
     operations (less applicable
      income tax benefit of ($12,773))             -          -      (19,978)

    Net earnings (loss)                         $5,645    $(7,075)  $(23,096)

    Basic net earnings (loss) per share:
      Net earnings (loss) from continuing
       operations                                $0.06     $(0.07)    $(0.03)

      Net earnings (loss)                        $0.06     $(0.07)    $(0.24)

      Basic shares outstanding                  91,299     98,358     97,481

    Diluted net earnings (loss) per share:
      Net earnings (loss) from continuing
       operations                                $0.06     $(0.07)    $(0.03)

      Net earnings (loss)                        $0.06     $(0.07)    $(0.24)

      Diluted shares outstanding                92,036     98,358     97,481

                                              Nine months ended January 31,
                                                2001       2000       1999
    Revenues                                $1,302,938   $844,013   $447,668

    Loss from continuing operations before
     income tax benefit                       (166,533)  (145,477)   (97,612)

    Net loss from continuing operations        (95,756)   (88,886)   (60,540)

    Net loss from discontinued operations
     (less applicable income
      tax benefit of ($953))                       -          -       (1,490)

    Net loss on sale of discontinued
     operations (less applicable
      income tax benefit of ($12,773))             -          -      (19,978)

    Net loss                                  $(95,756)  $(88,886)  $(82,008)

    Basic net loss per share:
      Net loss from continuing operations       $(1.04)    $(0.91)    $(0.60)

      Net loss                                  $(1.04)    $(0.91)    $(0.82)

      Basic shares outstanding                  91,988     97,962    100,526

Notes to Consolidated Statements of Operations

Basic and diluted net earnings per share is based on the weighted average

number of shares outstanding during each

period.

Reclassifications have been made to prior years to conform with current

period presentation.

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.

On January 29, 1999, the Company completed the sale of its WebCard Visa

portfolio. The Company ultimately recorded a $20.9 million loss, net of

taxes, on the transaction. The Consolidated Statements of Operations for

the three and nine months ended January 31, 1999 reflect the Company's

Credit Card Operations segment as discontinued operations. Revenues from

discontinued operations for the three and nine months ended

January 31, 1999 were $7.8 million and $24.1 million, respectively.

During the nine months ended January 31, 2001, 2000 and 1999, the Company

issued shares of its common stock pursuant to provisions for exercise of

the Company's stock option plans as follows: 2001-106,775 shares;

2000-953,865 shares; 1999-1,996,012 shares. During the same periods, the

Company reacquired shares of its common stock as follows:

2001-6,816,098 shares at an aggregate cost of $222,894,000; 2000-721,800

shares at an aggregate cost of $32,366,000; 1999-11,792,500 shares at an

aggregate cost of $490,868,000.

H&R BLOCK, INC.

SELECTED OPERATIONAL INFORMATION

Unaudited, amounts in thousands

                                        Three months ended January 31,
                                       Revenues          Earnings (loss)
                                     2001       2000      2001       2000

    U.S. tax operations            $327,310  $237,851     $7,438   $(29,427)
    International tax operations      7,857     8,478     (6,141)    (7,134)
    Financial services              232,333   182,419     44,926     43,976
    Business services                92,729    82,806      1,063      3,135
    Unallocated corporate             1,125       953    (11,418)    (6,671)
    Interest expense on
     acquisition debt                   -         -      (23,988)   (19,451)
                                   $661,354  $512,507     11,880    (15,572)
    Investment income, net                                 1,099      1,517
    Intercompany interest*                                (3,163)       532
                                                           9,816    (13,523)
    Income taxes (benefit)                                 4,171     (6,448)
    Net earnings (loss)                                   $5,645    $(7,075)


                                          Nine months ended January 31,
                                        Revenues          Earnings (loss)
                                     2001      2000       2001       2000

    U.S. tax operations            $365,063  $270,649  $(167,635) $(184,160)
    International tax operations     27,655    27,259    (12,531)   (15,299)
    Financial services              659,863   353,376    112,292     83,733
    Business services               247,093   190,165     (2,731)     1,795
    Unallocated corporate             3,264     2,564    (22,758)   (13,448)
    Interest expense on
     acquisition debt                   -         -      (75,760)   (31,916)
                                 $1,302,938  $844,013   (169,123)  (159,295)
    Investment income, net                                 6,354      6,570
    Intercompany interest*                                (3,764)     7,248
                                                        (166,533)  (145,477)
    Income tax benefit                                   (70,777)   (56,591)
    Net loss                                            $(95,756)  $(88,886)

  • Intercompany interest represents net interest expense charged to financial related businesses for corporate cash that was borrowed to fund their operating activities and, in fiscal 2001, it also includes net unallocated interest expense attributable to commitment fees on the unused portion of the Company's $1.9 billion credit facility.

H&R Block, Inc.

Consolidated Balance Sheets

Unaudited, amounts in thousands, except share data

                                                         January 31,
                                                    2001              2000
                                     ASSETS
    CURRENT ASSETS:
         Cash and cash equivalents                $380,918          $275,740
         Marketable securities --
          available-for-sale                         8,288            33,074
         Marketable securities -- trading           42,690            45,872
         Receivables from customers,
          brokers, dealers and clearing
          organizations, less allowance
          for doubtful accounts of
          $878 and $744                          1,913,319         2,385,785
         Receivables, less allowance for
          doubtful accounts of
          $37,042 and $37,474                    1,072,466         1,248,065
         Prepaid expenses and other
          current assets                           182,149           163,121
            TOTAL CURRENT ASSETS                 3,599,830         4,151,657

    INVESTMENTS AND OTHER ASSETS:
         Investments in available-for-
          sale marketable securities               273,385           221,670
         Excess of cost over fair value
          of net tangible assets
          acquired, net of amortization          1,069,302         1,149,546
         Other                                     354,947           178,903
                                                 1,697,634         1,550,119
    PROPERTY AND EQUIPMENT, at cost less
     accumulated depreciation and amortization     245,059           219,594
                                                $5,542,523        $5,921,370

                   LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES:
         Notes payable                          $1,626,806        $2,094,939
         Accounts payable to customers,
          brokers and dealers                    1,626,612         2,106,142
         Accounts payable, accrued
          expenses and deposits                    297,252           182,842
         Accrued salaries, wages and
          payroll taxes                            141,744            80,558
         Accrued taxes on earnings                   8,145             6,784
         Current portion of long-term
          debt                                      50,419            60,207
             TOTAL CURRENT LIABILITIES           3,750,978         4,531,472

    LONG-TERM DEBT                                 869,249           356,283

    OTHER NONCURRENT LIABILITIES                   100,328           108,342

    STOCKHOLDERS' EQUITY:
         Common stock, no par, stated
          value $.01 per share                       1,089             1,089
         Additional paid-in capital                419,517           417,311
         Accumulated other comprehensive
          income (loss)                            (26,798)          (17,229)
         Retained earnings                       1,101,135           963,212
                                                 1,494,943         1,364,383
         Less cost of 17,647,006 and
          10,600,900 shares of common
          stock in treasury                        672,975           439,110
                                                   821,968           925,273
                                                $5,542,523        $5,921,370

H&R Block, Inc.

Consolidated Statements of Cash Flows

Unaudited, amounts in thousands

                                                 Nine months ended January 31,
                                                     2001               2000
    Cash flows from operating activities:
     Net loss                                     $(95,756)          $(88,886)
     Adjustments to reconcile net loss
      to net cash used by operating activities:
       Depreciation and amortization               148,990             79,270
       Net gain on sale of subsidiary               (2,040)               -
       Provision for bad debt                       43,448             26,058
       Accretion of acquisition liabilities          8,766              7,266
       Changes in:
        Receivables from customers, brokers,
         dealers and clearing organizations        942,791           (423,288)
        Receivables                               (836,004)          (519,942)
        Marketable securities - trading              2,713              7,413
        Prepaid expenses and other
         current assets                            (53,877)           (54,171)
        Accounts payable to customers,
         brokers and dealers                      (943,588)           403,954
        Accounts payable, accrued
         expenses and deposits                      74,541            (56,815)
        Accrued salaries, wages and
         payroll taxes                             (31,185)           (81,032)
        Accrued taxes on earnings                 (204,753)          (144,933)
        Other, net                                  (2,396)            (7,771)
       Net cash used in operating
        activities                                (948,350)          (852,877)

    Cash flows from investing activities:
     Purchases of available-for-sale
      securities                                    (5,413)            (3,797)
     Maturities of available-for-sale
      securities                                    32,375             33,003
     Purchases of property and equipment, net      (44,669)           (68,855)
     Payments made for business acquisitions,
      net of cash acquired                         (13,285)          (960,518)
     Proceeds from sale of subsidiary               23,200                -
     Other, net                                    (19,007)            (9,837)
       Net cash used in investing activities       (26,799)        (1,010,004)

    Cash flows from financing activities:
     Repayments of notes payable               (11,864,855)       (31,187,422)
     Proceeds from issuance of notes
      payable                                   13,207,864         33,210,422
     Payments on acquisition debt                  (67,643)            (3,278)
     Dividends paid                                (80,433)           (78,811)
     Payments to acquire treasury shares          (222,894)           (32,366)
     Proceeds from stock options exercised           3,019             36,178
     Other, net                                      1,108                658
       Net cash provided by financing
        activities                                 976,166          1,945,381

    Net increase in cash and cash
     equivalents                                     1,017             82,500
    Cash and cash equivalents at
     beginning of the period                       379,901            193,240
    Cash and cash equivalents at end of
     the period                                   $380,918           $275,740

    Supplementary cash flow data:
     Income taxes paid                            $123,296            $87,168
     Interest paid                                 173,137             79,672

H&R Block, Inc.

Consolidated Statements of Operations

Unaudited, amounts in thousands, except per share data

                                                     Three Months Ended
                                                          January 31,
                                                    2001              2000
    Revenues:
       Service revenues                           $503,733          $406,564
       Product sales                               117,360            81,941
       Royalties                                    28,633            16,124
       Other income                                 11,628             7,878
                                                   661,354           512,507

    Operating expenses:
       Employee compensation and benefits          305,404           230,943
       Occupancy and equipment                      63,717            63,842
       Interest                                     68,048            50,271
       Depreciation and amortization                52,848            36,539
       Marketing and advertising                    37,598            39,221
       Supplies, freight and postage                19,539            26,755
       Bad debt                                     29,194            15,937
       Other                                        78,349            64,148
                                                   654,697           527,656

    Operating earnings (loss)                        6,657           (15,149)

    Other income:
       Investment income, net                        1,099             1,517
       Other, net                                    2,060               109
                                                     3,159             1,626

    Earnings (loss) before income taxes
     (benefit)                                       9,816           (13,523)

    Income taxes (benefit)                           4,171            (6,448)

    Net earnings (loss)                             $5,645           $(7,075)


    Basic net earnings (loss) per share:
       Net earnings (loss)                           $0.06            $(0.07)
       Basic shares outstanding                     91,299            98,358

    Diluted net earnings (loss) per share:
       Net earnings (loss)                           $0.06            $(0.07)
       Diluted shares outstanding                   92,036            98,358

H&R Block, Inc.

Consolidated Statements of Operations

Unaudited, amounts in thousands, except per share data

                                                      Nine Months Ended
                                                          January 31,
                                                    2001              2000
    Revenues:
       Service revenues                          $1,009,831         $632,766
       Product sales                                225,429          176,182
       Royalties                                     33,791           20,264
       Other income                                  33,887           14,801
                                                  1,302,938          844,013

    Operating expenses:
       Employee compensation and benefits           624,844          424,601
       Occupancy and equipment                      180,175          152,036
       Interest                                     195,219           85,089
       Depreciation and amortization                148,990           79,270
       Marketing and advertising                     62,100           59,076
       Supplies, freight and postage                 37,123           39,646
       Bad debt                                      43,448           26,058
       Other                                        185,983          130,643
                                                  1,477,882          996,419

    Operating loss                                 (174,944)        (152,406)

    Other income:
       Investment income, net                         6,354            6,570
       Other, net                                     2,057              359
                                                      8,411            6,929

    Loss before income tax benefit                 (166,533)        (145,477)

    Income tax benefit                              (70,777)         (56,591)

    Net loss                                       $(95,756)        $(88,886)

    Basic net loss per share:
       Net loss                                      $(1.04)          $(0.91)
       Basic shares outstanding                      91,988           97,962


                                 H&R Block, Inc.
                        Financial Services Operating Data

H&R Block Financial Advisors, Inc. (Formerly Olde) *

                                       For the three months ended
                              01/26/2001    01/28/2000   % Change   10/27/2000
     Customer trades
      (000's)                       599         1,013      -40.9%         626
     Customer daily average
      trades                      9,816        16,338      -39.9%       9,788
     Average commission per
      trade                      $68.61        $60.13       14.1%      $70.52

     Number of active
      accounts (000's)              605           632       -4.2%         623
     Average trades per
      active account per
      quarter                      0.99          1.60      -38.3%        1.01
     Average trades per
      active account per
      year (annualized)            3.96          6.41      -38.3%        4.02

     Ending balance of
      assets under
      administration
      ($ bn's)                    $36.3         $41.2      -11.8%       $39.0
     Average assets per
      active account            $60,028       $65,171       -7.9%     $62,545

     Ending debit balances
      ($ bn's)                     $1.9          $2.4      -19.4%        $2.6
     Ending credit balances
      ($ bn's)                     $0.9          $1.2      -19.8%        $0.8

     Ending balance of
      assets under
      management ($ bn's)          $3.6          $3.5        4.0%        $3.5

(principally money

market funds)

Option One Mortgage Corporation

                                    For the three months ended
                              01/31/2001    01/31/2000    % Change  10/31/2000
    Number of loans
     originated
      Wholesale                  12,443        12,310        1.1%      11,900
      Retail                      2,424         1,376       76.2%       2,155
       Total                     14,867        13,686        8.6%      14,055

    Volume of loans
     originated (000's)
      Wholesale              $1,297,435    $1,252,236        3.6%  $1,252,710
      Retail                    294,241       162,901       80.6%     247,424
       Total                 $1,591,676    $1,415,137       12.5%  $1,500,135


     Loan sales              $1,547,169    $1,416,999        9.2%  $1,487,601

    Servicing portfolio
     Number of loans
      serviced (000's)            172.6         104.2       65.6%       162.2
     Servicing portfolio
      ($ bn's)                    $17.5         $10.4       68.0%       $16.6

  • Data is provided for comparative purposes only; Olde was acquired on December 1, 1999.

H&R Block, Inc.

Preliminary U.S. Tax Operating Data

Period January 1 through January 31 and February 15

Amounts in thousands, except average charge and number of offices

                                                 For the period ended
                                          01/31/2001   01/31/2000   % change

    Tax preparation & related fees
       Company owned offices                $226,806     $169,088      34.1%
       Franchised offices                    124,140       87,385      42.1%
                                            $350,946     $256,473      36.8%

    Tax returns prepared
       Company owned offices                   2,029        1,704      19.2%
       Franchised offices                      1,214          917      32.4%
                                               3,243        2,621      23.7%

    Total clients served
       Company owned offices                   2,069        1,755      17.9%
       Franchised offices                      1,303        1,004      29.8%
       E-commerce *                              123           37     232.4%
                                               3,495        2,796      25.0%

    Tax returns filed electronically**
       Company owned offices                   1,977        1,654      19.5%
       Franchised offices                      1,204          896      34.4%
       E-commerce *                              117           37     216.2%
                                               3,298        2,587      27.5%

    Percent filed electronically
       Company owned offices                   95.6%        94.2%
       Franchised offices                      92.4%        89.2%
       E-commerce *                            95.1%       100.0%
                                               94.4%        92.5%

    Average fee per client served
       Company owned offices                 $109.62       $96.35      13.8%
       Franchised offices                      95.27        87.04       9.5%
                                             $104.08       $92.96      12.0%

    Refund anticipation loans
       Company owned offices                   1,020          861      18.5%
       Franchised offices                        647          542      19.6%
       E-commerce *                                5            3      66.9%
                                               1,672        1,406      18.9%

    Offices
       Company owned offices                   5,060        5,162      -2.0%
       Franchised offices                      4,012        4,048      -0.9%
                                               9,072        9,210      -1.5%


                                                  For the period ended
                                           02/15/2001   02/15/2000   % change

    Tax preparation & related fees
       Company owned offices                 $548,630     $468,391     17.1%
       Franchised offices

    Tax returns prepared
       Company owned offices                    4,824        4,594      5.1%
       Franchised offices

    Total clients served
       Company owned offices                    4,920        4,746      3.7%
       Franchised offices
       E-commerce *                               501          298     68.1%


    Tax returns filed electronically**
       Company owned offices                    4,591        4,335      5.9%
       Franchised offices
       E-commerce *                               492          298     65.1%


    Percent filed electronically
       Company owned offices                    93.3%        91.3%
       Franchised offices
       E-commerce *                             98.2%       100.0%


    Average fee per client served
       Company owned offices                  $111.51       $98.69     13.0%
       Franchised offices

    Refund anticipation loans
       Company owned offices                    2,197        2,212     -0.7%
       Franchised offices                       1,351        1,335      1.4%
       E-commerce *                                22           15     46.9%
                                                3,570        3,562      0.2%

    Offices
       Company owned offices                    5,060        5,162     -2.0%
       Franchised offices                       4,012        4,048     -0.9%
                                                9,072        9,210     -1.5%

  • Includes on-line completed and paid returns and e-filings for software clients

** Includes Federal only. State returns also electronically filed are not

included in this total. SOURCE H&R Block Inc.

CONTACT: Media, Linda McDougall, 816-932-7542, Investors, Mark Barnett, 816-701-4443, both of H&R Block Inc./