H&R Block Reports Record Full-Year Revenues and Earnings; Earnings Per Share Increase 19 Percent

Jun 20, 2001

KANSAS CITY, Mo., June 20 /PRNewswire/ -- H&R Block Inc. (NYSE: HRB) today reported record earnings for the fiscal year ended April 30, 2001. Diluted net earnings per share rose 19.2 percent to $3.04 compared to $2.55 reported for the prior year. Net earnings for fiscal 2001 totaled $281.2 million, an 11.6 percent increase from $251.9 reported last year. Excluding the effects of two, one-time items -- 5 cents per share income related to the fourth quarter adoption of SFAS 133 and an 11-cent per share charge related to settlement of litigation -- earnings per share from continuing operations were $3.10.

Cash earnings improved 19 percent over the prior year to $362.2 million, or $3.91 per diluted share, compared with earnings of $304.4 million, or $3.08 per diluted share. The company defines cash earnings as earnings net of the after-tax effect of amortization expense of acquired intangible assets (and excluding the effect of the adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities").

"In a year where there were few external factors, such as tax law changes, to help drive our income tax business, we achieved outstanding growth in financial results," said Mark A. Ernst, president and chief executive officer. "Much of the credit goes to disciplined expense management by our associates and strategic targeting of our marketing campaigns to attract tax clients with more complex returns.

"Our mortgage operations turned in another strong performance while also expanding its retail business, which is an important component of our growth strategy," Ernst said.

Reflecting the strong financial performance of the company, the Board of Directors of H&R Block today announced a two-for-one split of its common stock. The stock split will be effective Aug. 1, 2001, in the form of a 100 percent stock distribution payable to stockholders of record as of the close of business July 10, 2001. The Board also approved a 7 percent increase in the quarterly cash dividend, declaring a dividend of 16 cents per share (split adjusted), payable Oct. 1, 2001, to shareholders of record Sept. 10, 2001.

The company reported revenue growth of 22.4 percent to $3 billion, compared with $2.5 billion last year, driven by double-digit growth within all domestic lines of business.

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 $189.2 million to $787.2 million, a gain of 31.6 percent over the prior year. The pretax amortization expense of acquired intangible assets increased to $104.3 million from $66.3 million last year.

U.S. Tax Operations

H&R Block's U.S. tax operations reported fiscal 2001 revenues of $1.7 billion, an increase of $223 million, or 15.6 percent, compared with $1.4 billion a year ago. Pretax earnings for the segment improved $113.5 million, or 35.5 percent, to $433.5 million, compared to $320 million last year. Strict cost control helped drive a 385 basis point year-over-year improvement in the pretax operating margin of the tax segment to 26.2 percent, compared with 22.4 percent last year. EBITDA increased $120.6 million to $507.1 million, or 31.2 percent over the prior year.

"Associates in our tax businesses delivered great results in a challenging business environment," Ernst said. "The segment's strong results can be attributed to a variety of factors, including an increase in the average fee per client, effective expense management, and year-over-year improvements in both e-commerce and refund anticipation loan participations.

"We're pleased with the integration of our online and office professional tax services this year. The information gained will enable us to more aggressively execute our integrated service strategy in the coming year," Ernst added. "Software results were encouraging, with revenues climbing almost 50 percent combined with strong gains in unit market share."

For the entire fiscal year, tax preparation and related fees from company- owned and franchised offices increased 9.8 percent, compared with the same period last year, while the number of clients served by company-owned and franchised operations increased 2.5 percent. During the period, H&R Block filed 14.6 million federal returns electronically, representing an 8.8 percent increase over the prior year. During the tax season, 80.2 percent of returns processed by the company were filed electronically.

International Tax Operations

International tax operations, which includes Canada, Australia and the United Kingdom, generated revenues of $79.6 million, down 2.4 percent from last year primarily due to the strength of the U.S. dollar. Pretax earnings improved $2.8 million, or 57.7 percent, to $7.7 million, compared with $4.9 million a year ago. Led by Canada, all three countries significantly improved operating results, offset by a strengthening U.S. dollar. International tax operations reported a 22.4 percent improvement in EBITDA to $12.7 million, compared with $10.4 million last year.

"Calculated in local currency, we saw double-digit earnings growth in both Canada and Australia, but those results were negatively impacted by currency translation," Ernst said. "After focusing the past year on increasing operational efficiencies, we're now prepared to pursue growth opportunities in our international markets."

Mortgage Operations

Mortgage operations, which primarily includes Option One Mortgage Corporation and H&R Block Mortgage Corporation, reported that pretax earnings rose $50.5 million, or 57 percent, to $139 million, compared to $88.6 million last year. Revenues rose 17 percent to $415.8 million. The exceptionally strong results are attributable to higher loan origination and servicing volume, improved pricing on loans generated, and continued cost control. These items, as well as third-party off-balance sheet arrangements, contributed to the 850 basis point year-over-year pretax operating margin improvement. EBITDA increased $52.9 million to $161.8 million, or 48.6 percent over the prior year.

"Option One continues to distinguish itself as one of the most successful companies in its industry," Ernst said. "On the retail side, H&R Block Mortgage significantly expanded its business and is demonstrating the strength of our cross-sell strategy."

Option One and H&R Block Mortgage originated $6.5 billion in loans during fiscal 2001, an increase of 14.7 percent over last year. As of April 30, 2001, Option One's servicing portfolio was $18.2 billion, an increase of $6.9 billion, or 61 percent, over last year.

Investment Services

As anticipated, the poor market environment negatively affected operational metrics and fiscal year results in H&R Block's investment services operations, which consists primarily of H&R Block Financial Advisors Inc. Fiscal 2001 revenues totaled $472.4 million, compared with $268.4 million last year. Revenues were higher due to the inclusion of H&R Block Financial Advisors for a full 12 months this year, compared with only five months last year. Pretax earnings declined 69.2 percent year-over-year to $12.7 million. Investment services reported a 16.7 percent increase in EBITDA to $78.1 million from $66.9 million in the prior year.

In the fourth quarter, $17 million was accrued related to previously announced litigation brought against Olde Discount Corporation related to activities occurring prior to Block's acquisition of Olde. Also in the fourth quarter, the company recorded $1.6 million in one-time charges associated with recently announced staff reductions as a result of the industry-wide market slow down.

"This was a difficult year for the brokerage industry overall," Ernst said. "But despite the difficult environment, we continued to make progress in integrating our financial and tax businesses, expanded our product line and online capabilities, and successfully tested a new IRA product in nearly 1,500 tax offices in 14 states.

"In addition, we trained and licensed more than 400 tax preparers as financial advisors, who then opened more than 3,000 accounts during tax season," Ernst added.

Business Services

Business services, which primarily includes RSM McGladrey Inc., reported pretax earnings of $17 million, compared with $17.1 million last year. The decrease over last year primarily reflects first quarter losses this year of $3.5 million, which were not included in fiscal 2000 results, due to the August 1999 acquisition of RSM McGladrey. Revenues rose 20.3 percent to $373.8 million, compared with $310.9 million last year. Revenue growth was driven by a combination of factors including the inclusion of RSM McGladrey for a full 12 months, growth in underlying operations, the introduction of new services, and the impact of new mergers. Business services reported a 20.9 percent improvement in EBITDA to $55.8 million, compared with $46.2 million last year.

"This segment's year was even better than the numbers suggest," Ernst said. "By integrating our six accounting firms with RSM McGladrey, we have created a single brand for the business and consolidated the management structure, which now has a common focus to drive growth.

"We also expanded our client service offerings, entering into an insurance alliance and introducing wealth management services," he said. "To strengthen our position in key markets, we acquired three firms in New York, Boston and Washington, D.C. We will continue to enhance this business by selectively adding firms in strategic markets."

Other

Interest expense on acquisition debt increased $42.6 million to $98.8 million versus a year ago, due to the full-year inclusion of the financing costs associated with the acquisition of H&R Block Financial Advisors on Dec. 1, 1999.

Fiscal 2002 Performance Expectations

In announcing its performance outlook for fiscal 2002, H&R Block indicated that proposed FASB rules on goodwill amortization related to acquisitions would positively impact its earnings. Current indications are that the company will be permitted to elect early adoption of the rules and discontinue amortization of goodwill and certain intangible assets effective as of the beginning of its fiscal 2002 year. It is the company's intention to make this early election. The reduction in amortization expense will positively impact earnings per share by approximately 50 cents to 87 cents, depending upon provisions in the final standards, based on the expected level of outstanding shares.

"We expect to be within our previous guidance range of 13 to 18 percent for earnings per share growth for fiscal year 2002, excluding the impact of accounting changes," Ernst said. "Because we do not yet see change in the market environment for H&R Block Financial Advisors, we expect overall company revenue growth to be slightly below our 10 to 15 percent growth target for fiscal year 2002."

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 for fiscal year 2002; the uncertainties that the company will be permitted to elect early adoption of FASB rules on goodwill amortization related to acquisitions and the extent to which such rules will positively impact the company's earnings; the uncertainties that the company will successfully pursue growth opportunities in international markets and execute its integrated service strategy; 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 2001, H&R Block served 19.2 million taxpayers -- more than any tax or accounting firm -- through its more than 10,400 offices located in the United States, Canada, Australia and the United Kingdom. H&R Block served another 2.2 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 more than 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 April 30,
                                              2001        2000        1999

     Revenues                              $1,703,991  $1,607,930  $1,196,997

     Earnings from continuing operations
      before income taxes                     641,635     557,743     481,153

     Net earnings from continuing
      operations before change in acctg.      373,689     340,781     298,335

     Net loss on sale of discontinued
      operations (less applicable
       income tax benefit of $614)                -           -          (961)

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

     Net earnings                            $378,103    $340,781    $297,374

Basic net earnings per share:

       Net earnings from continuing
        operations before change in acctg.      $4.08       $3.47       $3.06

       Net earnings                             $4.13       $3.47       $3.05

       Basic shares outstanding                91,654      98,249      97,463

Diluted net earnings per share:

       Net earnings from continuing
        operations before change in acctg.      $4.00       $3.45       $3.03

       Net earnings                             $4.05       $3.45       $3.02

       Diluted shares outstanding              93,407      98,805      98,593


                                                  Year ended April 30,
                                              2001        2000        1999

     Revenues                              $3,001,575  $2,451,943  $1,644,665

     Earnings from continuing operations
      before income taxes                     473,078     412,266     383,541

     Net earnings from continuing
      operations before change in acctg.      276,748     251,895     237,795

     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 $13,387)             -           -       (20,939)

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

     Net earnings                            $281,162    $251,895    $215,366

Basic net earnings per share:

       Net earnings from continuing
        operations before change in acctg.      $3.01       $2.57       $2.38

       Net earnings                             $3.06       $2.57       $2.16

       Basic shares outstanding                91,947      98,033      99,761

Diluted net earnings per share:

       Net earnings from continuing
        operations before change in acctg.      $2.99       $2.55       $2.36

       Net earnings                             $3.04       $2.55       $2.14

       Diluted shares outstanding              92,568      98,929     100,821

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.

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 2000 (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 $4,414 is show as the cumulative effective of a change in accounting principle in the consolidated statement of earnings for the year ended April 30, 2001.

In the fourth quarter of fiscal 2001, the Company implemented SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101). SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles. The implementation of SAB 101 has no impact on the annual revenues and earnings, however, due to the seasonal influences of the business, the implementation results in a shift of revenues and earnings between the Company's third and fourth quarter. As a result, the Company has restated its third and fourth quarter of fiscal year 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.

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 year and three months ended April 30, 1999 reflect the Company's Credit Card Operations segment as discontinued operations. Revenues from discontinued operations for the year ended April 30, 1999 were $24.1 million.

During the year ended April 30, 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 - 491,771 shares; 2000 - 1,023,582 shares; 1999 - 2,185,610 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 - 1,136,300 shares at an aggregate cost of $50,654,000; 1999 - 11,842,500 shares at an aggregate cost of $492,945,000.

H&R BLOCK, INC.

SELECTED OPERATIONAL INFORMATION

Unaudited, amounts in thousands

                                          Three months ended April 30,
                                          Revenues           Earnings (loss)
                                      2001        2000       2001      2000

      U.S. tax operations          $1,294,414  $1,160,436  $603,173  $504,152
      International tax operations     51,913      54,259    20,209    20,168
      Mortgage operations             136,343     105,512    58,193    19,123
      Investment services              92,021     164,917   (18,760)   26,944
      Business services               126,727     120,702    19,776    15,316
      Unallocated corporate             2,573       2,104   (14,769)   (9,028)
      Interest expense on
       acquisition debt                   -           -     (22,999)  (24,202)
                                   $1,703,991  $1,607,930   644,823   552,473
      Investment income, net                                   (377)    3,270
      Intercompany interest*                                 (2,811)    2,000
                                                            641,635   557,743
      Taxes on earnings                                     267,946   216,962
      Net earnings before change
       in accounting principle                              373,689   340,781
      Cumulative effect of change
       in accounting principle                                4,414       -
      Net earnings                                         $378,103  $340,781



                                                Year ended April 30,
                                          Revenues          Earnings (loss)
                                      2001        2000       2001      2000

      U.S. tax operations          $1,654,123  $1,431,085  $433,514  $319,992
      International tax operations     79,568      81,518     7,678     4,869
      Mortgage operations             415,802     355,429   139,036    88,574
      Investment services             472,425     268,376    12,689    41,226
      Business services               373,820     310,867    17,045    17,111
      Unallocated corporate             5,837       4,668   (37,527)  (22,476)
      Interest expense on
       acquisition debt                   -           -     (98,759)  (56,118)
                                   $3,001,575  $2,451,943   473,676   393,178
      Investment income, net                                  5,977     9,840
      Intercompany interest*                                 (6,575)    9,248
                                                            473,078   412,266
      Taxes on earnings                                     196,330   160,371
      Net earnings before change
       in accounting principle                              276,748   251,895
      Cumulative effect of change
       in accounting principle                                4,414       -
      Net earnings                                         $281,162  $251,895

  • 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 $1.86 billion credit facility.

H&R Block, Inc.

Consolidated Balance Sheets

Unaudited, amounts in thousands, except share data

                                                          April 30,
                                                    2001              2000
                                     ASSETS
    CURRENT ASSETS:
      Cash and cash equivalents                  $271,813          $379,901
      Marketable securities --
         available-for-sale                         8,266            16,966
      Marketable securities -- trading             46,158            45,403
      Receivables from customers,
        brokers, dealers and clearing
        organizations, less allowance for
        doubtful accounts of $1,692
        and $759                                1,310,804         2,857,379
      Receivables, less allowance for
        doubtful accounts of $47,124
       and $49,602                                373,223           434,722
      Prepaid expenses and other
        current assets                            260,942           145,741
         TOTAL CURRENT ASSETS                   2,271,206         3,880,112

    INVESTMENTS AND OTHER ASSETS:
      Investments in available-for-
        sale marketable securities                270,159           243,499
      Excess of cost over fair value
        of net tangible assets acquired,
        net of amortization                     1,051,826         1,095,074
      Other                                       239,586           198,887
                                                1,561,571         1,537,460
    PROPERTY AND EQUIPMENT, at cost less
     accumulated depreciation and amortization    288,847           299,499
                                               $4,121,624        $5,717,071

                 LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
      Notes payable                                  $-            $283,797
      Accounts payable to customers,
        brokers and dealers                     1,058,000         2,570,200
      Accounts payable, accrued
        expenses and deposits                     361,210           222,362
      Accrued salaries, wages and
        payroll taxes                             221,830           173,333
      Accrued taxes on earnings                   295,599           216,298
      Current portion of long-term
        debt                                       51,763            67,978
           TOTAL CURRENT LIABILITIES            1,988,402         3,533,968

    LONG-TERM DEBT                                870,974           872,396

    OTHER NONCURRENT LIABILITIES                   88,507            87,916

    STOCKHOLDERS' EQUITY:
      Common stock, no par, stated value
        $.01 per share                              1,089             1,089
      Additional paid-in capital                  419,957           420,594
      Accumulated other comprehensive
        income (loss)                             (42,767)          (22,039)
      Retained earnings                         1,450,112         1,277,324
                                                1,828,391         1,676,968
      Less cost of 17,168,455 and
        10,937,683 shares of common
        stock in treasury                         654,650           454,177
                                                1,173,741         1,222,791
                                               $4,121,624        $5,717,071

H&R Block, Inc.

Consolidated Statements of Cash Flows

Unaudited, amounts in thousands

                                                     Year ended April 30,
                                                   2001               2000
    Cash flows from operating
     activities:
     Net earnings                                 $281,162           $251,895
     Adjustments to reconcile net
      earnings to net cash provided by
      operating activities:
       Depreciation and amortization               205,608            147,218
       Net gain on sale of subsidiary               (2,040)            14,501
       Effect of change in accounting
        principle                                   (4,414)               -
       Provision for bad debt                       84,422             51,719
       Provision for deferred taxes on
        earnings                                   (38,871)           (29,286)
       Accretion of acquisition liabilities         11,863             10,641
       Changes in:
        Receivables from customers,
         brokers, dealers and
          clearing organizations                 1,544,640           (893,435)
        Receivables                               (100,170)           178,589
        Marketable securities - trading                240              6,899
        Prepaid expenses and other
         current assets                            (88,514)           (52,551)
        Accounts payable to customers,
         brokers and dealers                    (1,512,200)           868,012
        Accounts payable, accrued
         expenses and deposits                     138,499              3,732
        Accrued salaries, wages and
         payroll taxes                              48,901             13,683
        Accrued taxes on earnings                   66,465             68,316
        Other, net                                 (18,778)           (23,578)
       Net cash provided by operating
        activities                                 616,813            616,355

    Cash flows from investing activities:
     Purchases of available-for-sale securities    (10,636)           (14,281)
     Maturities of available-for-sale securities    41,389             76,371
     Purchases of property and equipment, net      (90,033)          (141,856)
     Payments made for business acquisitions,
      net of cash acquired                         (21,143)          (971,802)
     Proceeds from sale of subsidiary               23,200                -
     Other, net                                     (5,468)            71,444
       Net cash used in investing activities       (62,691)          (980,124)

    Cash flows from financing activities:
     Repayments of notes payable               (18,219,741)       (50,800,661)
     Proceeds from issuance of notes payable    17,935,944         51,012,519
     Proceeds from issuance of long-term debt          -              495,800
     Payments on acquisition debt                  (68,743)            (4,730)
     Dividends paid                               (108,374)          (105,480)
     Payments to acquire treasury shares          (222,895)           (50,654)
     Proceeds from stock options exercised          19,550             33,222
     Other, net                                      2,049            (29,586)
       Net cash provided by (used in)
        financing activities                      (662,210)           550,430

    Net increase (decrease) in cash and
     cash equivalents                             (108,088)           186,661
    Cash and cash equivalents at beginning
     of the period                                 379,901            193,240
    Cash and cash equivalents at end of
     the period                                   $271,813           $379,901

    Supplementary cash flow data:
     Income taxes paid                            $152,033           $122,447
     Interest paid                                 230,448            141,577

H&R Block, Inc.

Consolidated Statements of Operations

Unaudited, amounts in thousands, except per share data

                                                     Year ended April 30,
                                                    2001              2000
    Revenues:
       Service revenues                         $2,441,448        $2,021,162
       Product sales                               368,844           267,336
       Royalties                                   149,683           138,903
       Other income                                 41,600            24,542
                                                 3,001,575         2,451,943

    Operating expenses:
       Employee compensation and benefits        1,192,294           963,536
       Occupancy and equipment                     283,181           253,171
       Interest                                    242,551           155,027
       Depreciation and amortization               205,608           147,218
       Marketing and advertising                   143,559           140,683
       Supplies, freight and postage                70,440            64,599
       Bad debt                                     84,422            51,719
       Other                                       314,454           273,902
                                                 2,536,509         2,049,855

    Operating earnings                             465,066           402,088

    Other income:
       Investment income, net                        5,977             9,840
       Other, net                                    2,035               338
                                                     8,012            10,178

    Earnings before income taxes                   473,078           412,266
    Taxes on earnings                              196,330           160,371

    Net earnings before change in
     accounting principle                          276,748           251,895

    Effect of change in accounting
     principle for derivative and
       hedging activities                            4,414               -

    Net earnings                                  $281,162          $251,895

    Basic net earnings per share:
       Net earnings before change in
        accounting principle                         $3.01             $2.57
       Effect of change in accounting
        principle                                    $0.05              $-
       Net earnings                                  $3.06             $2.57

       Basic shares outstanding                     91,947            98,033

    Diluted net earnings per share:
       Net earnings before change in
        accounting principle                         $2.99             $2.55
       Effect of change in accounting
        principle                                    $0.05              $-
       Net earnings                                  $3.04             $2.55

       Diluted shares outstanding                   92,568            98,929


                                    H&R Block, Inc.
                            Financial Services Operating Data

    H&R Block Financial Advisors, Inc.
                                                    For the          For the
                                                     year         three months
                                                     ended             ended
                                                  04/27/2001        04/27/2001

      Customer trades (000's)                        2,361               489
      Customer daily average trades                 12,148             7,760
      Average commission per trade                  $67.38            $67.21

      Number of active accounts (000's)                620               620
      Average trades per active account per quarter    n/a              0.79
      Average trades per active account
       per year (annualized)                          3.81              3.15

      Ending balance of assets under
       administration ($ bn's)                       $31.5             $31.5
      Average assets per active account            $50,817           $50,817

      Ending debit balances ($ bn's)                  $1.3              $1.3
      Ending credit balances ($ bn's)                 $0.8              $0.8

      Ending balance of assets under
       management ($ bn's)                            $3.7              $3.7

(principally money market funds)

                                                   For the three months ended
                                                    04/30/00  %Change 01/26/01

      Customer trades (000's)                          1,110  -55.9%      599
      Customer daily average trades                   17,615  -55.9%    9,816
      Average commission per trade                    $63.34    6.1%   $68.61

      Number of active accounts (000's)                  658   -5.8%      605
      Average trades per active account per quarter     1.69  -53.2%     0.99
      Average trades per active account
       per year (annualized)                            6.74  -53.2%     3.96

      Ending balance of assets under
       administration ($ bn's)                         $44.0  -28.3%    $36.3
      Average assets per active account              $66,765  -23.9%  $60,028

      Ending debit balances ($ bn's)                    $2.8  -54.5%     $1.9
      Ending credit balances ($ bn's)                   $1.0  -16.8%     $0.9

      Ending balance of assets under
       management ($ bn's)                              $3.3   10.5%     $3.6

(principally money market funds)

    Option One Mortgage Corporation
                                                  For the            For the
                                                    year          three months
                                                    ended             ended
                                                  04/30/2001        04/30/2001
    Number of loans originated
      Wholesale                                     49,805            14,160
      Retail                                        10,254             3,520
        Total                                       60,059            17,680

    Volume of loans originated (000's)
      Wholesale                                 $5,289,715        $1,579,171
      Retail                                     1,235,186           467,579
        Total                                   $6,524,901        $2,046,750


      Loan sales                                $6,009,544        $2,127,493

    Servicing portfolio
      Number of loans serviced (000's)               173.9             173.9
      Servicing portfolio ($ bn's)                   $18.2             $18.2



                                                For the three months ended
                                              04/30/00  % Change    01/31/01
    Number of loans originated
      Wholesale                                12,625    12.2%       12,443
      Retail                                    1,406   150.4%        2,424
        Total                                  14,031    26.0%       14,867

    Volume of loans originated (000's)
      Wholesale                            $1,286,633    22.7%   $1,297,435
      Retail                                  162,949   186.9%      294,241
        Total                              $1,449,582    41.2%   $1,591,676


      Loan sales                           $1,851,688    14.9%   $1,547,169

    Servicing portfolio
      Number of loans serviced (000's)          114.4    52.1%        172.6
      Servicing portfolio ($ bn's)              $11.3    61.0%        $17.5


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SOURCE H&R Block, Inc.

CONTACT: Media Relations, Linda McDougall, 816-932-7542, or Investor Relations, Mark Barnett, 816-701-4443, both of H&R Block/