Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 24, 2004
H&R BLOCK, INC.
| Missouri | 1-6089 | 44-0607856 | ||
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| (State of Incorporation) | (Commission File Number) | (I.R.S. Employer | ||
| Identification Number) |
| 4400 Main Street, Kansas City, MO | 64111 | |
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| (Address of Principal Executive Offices) | (Zip Code) |
(816) 753-6900
Not Applicable
| Item 12. Results of Operations and Financial Condition | ||||||||
| SIGNATURES | ||||||||
| EXHIBIT INDEX | ||||||||
| Press Release | ||||||||
Table of Contents
Item 12. Results of Operations and Financial Condition.
On February 24, 2004, H&R Block, Inc. (the “Company”) issued a press release regarding the Company’s results of operations for the third fiscal quarter ended January 31, 2004. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| H&R BLOCK, INC. |
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| Date: February 25, 2004 | By: | /s/ Bret G. Wilson
Bret G. Wilson Vice President and Secretary |
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Table of Contents
EXHIBIT INDEX
Exhibit 99.1 Press Release issued February 24, 2004.
Ex 99.1
H&R Block Reports Third Quarter Profit/page 1
News Release
For Further Information
Media Relations:
Bob Schneider, 816.932.4835, bschneider@hrblock.com
Investor Relations:
Mark Barnett, 816.701.4443, marbarnett@hrblock.com
H&R BLOCK REPORTS 59 CENTS PER SHARE THIRD QUARTER PROFIT
Early Tax Season Results Consistent with Full Year Guidance
FOR RELEASE FEBRUARY 24, 2004, 4 P.M. EST
KANSAS CITY, Mo. — H&R Block Inc. (NYSE:HRB) today reported net income of $106.7 million, or 59 cents per diluted share, and record revenues of $977.2 million for the third quarter ended Jan. 31.
Third quarter revenues increased 2 percent from $958.4 million last year. Third quarter net income declined $25.6 million or 19.3 percent compared with last year when the company reported third quarter earnings of $132.3 million, or 73 cents per diluted share. Third quarter 2004 results include a $17 million gain on sale of certain mortgage assets. Third quarter 2003 results include a $130.9 million gain on a similar transaction. Excluding the effect of these gains, third quarter net income increased $42.9 million or 80.2 percent over the prior year.
The profitable third quarter marks the first time in the company’s history that it has reported a profit in each of the first three quarters of its fiscal year. H&R Block typically reports losses in its first and second quarters, and often in its third quarter as well, due to the seasonal nature of its tax and business services units.
“All of our business segments executed effectively and delivered improved performance. We saw double-digit revenue growth in each of our businesses, excluding the mortgage asset sales that we’ve noted,” said Chairman and Chief Executive Officer Mark A. Ernst.
“Performance in the tax filing season thus far is consistent with our overall expectations for a good, but not great, tax season,” Ernst said. “After a slow start, growth in retail tax filing has accelerated in the month of February and our digital tax services are growing very well.”
The quarter results included $6.8 million in stock-based compensation expense, an expense that was not included in the comparable quarter last year.
H&R Block Reports Third Quarter Profit/page 2
H&R Block began to expense the costs of stock-based compensation at the beginning of the current fiscal year.
For the nine-month period ending Jan. 31, the company reported net income of $122.3 million, a 43.1 percent increase compared with last year. Earnings per diluted share increased 45.7 percent to 67 cents. Revenues for the nine month period increased 10.8 percent to $2.1 billion.
On a consolidated basis, the company continues to expect fiscal 2004 GAAP earnings-per-share in the range of $3.65 to $3.85 and revenue growth at the high end of its target range of 10 to 15 percent. Included in these expectations is about $24 million or 8-cents per share, of non-cash stock-based compensation expenses.
U.S. Tax Operations
U.S. Tax operations reported pretax earnings of $68.2 million, compared with $34.1 million last year, an improvement of $34.1 million. U.S. tax operations reported a 14.9 percent increase in revenues for the quarter to $463.6 million, compared with $403.6 million last year.
Compared with last year, the improved performance is due to an increase in the number of clients served, increased revenue per client and better expense management. These improvements were partially off-set by expenses related to adding 873 tax locations to the company’s retail network, including 459 company-owned offices in former franchise territories. Company-owned offices in former major franchise territories contributed $24.3 million to the increase in revenues.
For the nine-month period, revenues increased 19.8 percent to $551.4 million, up $91.1 million from $460.3 million last year. The segment reported a $155.9 million pretax loss for the nine-month period, an improvement of $56.3 million or 26.5 percent compared with the $212.2 million pretax loss last year.
From Jan. 1 through Jan. 31, tax preparation and related fees from retail tax offices increased 8.6 percent to $500.3 million. The average fee per client served rose 8.9 percent to $134.99. Total clients served, including office and digital tax solutions clients, increased 4.6 percent to 5 million. Retail tax offices served 3.7 million clients, a 0.2 percent decline from last year. Clients served by H&R Block’s digital tax solutions increased 21.7 percent.
For the tax season through Feb. 15, tax preparation and related fees from retail tax offices increased 3.9 percent to $1.1 billion. In the period ending Feb. 15, the average fee per client increased 8 percent to $135.48. Total clients served, including office and digital tax solutions clients, increased 0.1 percent to 9.9 million. Retail tax offices served 7.9 million clients, a decline of 3.9 percent from last year. Clients served by H&R Block’s digital tax solutions increased 19.6 percent. However, year-over-year comparisons must be viewed cautiously due to the intra-week variability of tax filings and the difference in the days of the week included in the comparative periods.
“While we saw a slow start to the tax filing season in our retail offices, the growth that we are seeing in February and the mix of clients that are coming to
H&R Block Reports Third Quarter Profit/page 3
H&R Block indicate that we are likely to be at the lower end of our expected range for retail client growth and at the higher end of our expected range for revenue per client,” Ernst said. “Combined with superior performance in our digital businesses, we believe that we are on track to meet our overall targets for the year.”
Mortgage Operations
Mortgage operations, which include Option One Mortgage Corp. and H&R Block Mortgage Corp., reported pretax earnings of $154.5 million for the quarter, a $108 million decrease compared with pretax earnings of $262.5 million last year. For the nine-month period, pretax earnings decreased 10.8 percent to $502.3 million, compared with $563.1 million last year.
Third quarter revenues from mortgage operations decreased 16.4 percent to $331.9 million, compared with $397 million last year. For the nine-month period, revenues increased 7 percent to $986 million, compared with $921.9 million last year.
Third quarter 2004 results include a $17 million gain on sale of certain mortgage assets. Third quarter 2003 results include a $130.9 million gain on a similar transaction. Excluding the effect of these gains, third quarter pretax income from mortgage operations increased 4.5 percent.
“We’re pleased with the mortgage segment results, which continue to meet our expectations. These results support our long-held view that the interest rate environment would not have a significant effect on our mortgage performance. Overall origination activity continued to be strong in the quarter, while margins declined somewhat as we had expected.” Ernst said.
For the third quarter, the company originated $5.4 billion in mortgage loans, an 18.1 percent increase over last year’s $4.5 billion. The number of loan originations in the third quarter was 35,795, a 15.8 percent increase compared with last year.
Mortgage servicing revenues for the quarter were $55.1 million, an increase of $11.7 million, or 27 percent, compared with $43.4 million last year. On Jan. 31, 2004, the servicing portfolio was $42.2 billion, an increase of $13.3 billion, or 46 percent, compared with Jan. 31, 2003, and up 5.2 percent over the previous quarter.
Third quarter pretax income from H&R Block Mortgage increased 25.9 percent. Nearly 40 percent of the company’s retail loans were to clients of other H&R Block businesses.
The segment’s residual interests continued to perform better than expected, primarily due to better than modeled loss and interest rates. Consequently, the company realized a net write-up in residual balances of $36 million, which was recorded in other comprehensive income on the balance sheet, net of deferred taxes.
H&R Block Reports Third Quarter Profit/page 4
Business Services
RSM McGladrey Business Services Inc. reported third quarter revenues of $112.3 million, an 11.5 percent increase compared with $100.7 million last year. The segment reported pretax earnings of $2 million, a $6.2 million improvement, compared with a loss of $4.2 million in the third quarter last year.
For the nine-month period, revenues increased 8.8 percent to $319.8 million. The segment reported a pretax loss of $7.5 million compared with a pretax loss of $12.3 million last year.
“Our capital markets business enjoyed another strong quarter compared with last year. Higher fees in our core accounting and tax services also contributed to improved performance,” Ernst said.
Investment Services
H&R Block Financial Advisors Inc. reported third quarter revenues of $57.8 million, an increase of 20.2 percent compared with the same quarter last year. The segment reported a pretax loss of $12.8 million, a 59.7 percent improvement compared with last year’s pretax loss of $31.8 million.
“We saw strong improvement in all of the key drivers of the business this quarter,” Ernst said. “Overall, results of our Financial Advisors business reflect sustained changes that should allow us to have continuing performance improvement.”
For the nine-month period, revenues increased 6.8 percent to $167.4 million, compared with $156.7 million last year. The segment reported a pretax loss of $41.9 million compared with $92.5 million in the first nine months of last year, which included $24 million in goodwill impairment charges.
International Tax Operations
In the third quarter, revenues from international tax operations increased 23.6 percent to $10.8 million, compared with $8.8 million last year. The segment reported a pretax loss of $6.4 million, compared with a pretax loss of $5.7 million last year.
For the nine-month period, revenues increased 24.7 percent to $35.4 million. The segment reported a $12.3 million pretax loss, compared with last year’s pretax loss of $12.4 million.
“We enjoyed a successful conclusion to the tax season in Australia. However, unfavorable exchanges rates in Canada resulted in a higher loss for the quarter,” Ernst said.
H&R Block Reports Third Quarter Profit/page 5
Dividend declared
H&R Block’s board of directors declared a quarterly cash dividend of 20 cents per share, payable April 1, 2004, to shareholders of record March 11, 2004. This payment will be the company’s 166th consecutive quarterly dividend.
Share repurchases
During the third quarter, the company repurchased 3.7 million shares of its common stock at an aggregate cost of $192.3 million, or an average price of $52.61 per share. Year to date, the company has repurchased 7.8 million shares at an aggregate cost of $370 million, or an average price of $47.51 per share.
Conference call
The company will host a conference call for analysts and institutional investors at 5 p.m. EST, Feb. 24. Mark A. Ernst and Jeffery W. Yabuki, executive vice president and chief operating officer, will discuss the quarter’s results and future expectations, as well as respond to analysts’ questions. To access the call, dial the number approximately five to 10 minutes prior to the scheduled starting time:
U.S./Canada (888) 425-2715
International (706) 679-8257
No reservation or access code is needed.
The call will be Webcast in a listen-only format for the media and public. The link to the Webcast can be obtained at www.hrblock.com.
Supplemental financial information will be available in connection with the Webcast or can be accessed directly on H&R Block’s Investor Relations website at www.hrblock.com/about/investor following market close.
A replay of the call will be available beginning at 8 p.m. EST, Feb. 24 and continuing until 8 p.m. EST, March 9, by dialing 800-642-1687 (U.S./Canada) or 706-645-9291 (International). The replay access code is 5141529. A replay of the Webcast will also be available on the company’s Web site at www.hrblock.com through March 9.
###
Except for historical information contained herein, the matters set forth in this press release are forward-looking statements based upon current information and expectations. Such statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that could cause actual results to differ materially from what is expressed, implied or forecast in such forward-looking statements. Such differences could be caused by a number of factors, including, but not limited
H&R Block Reports Third Quarter Profit/page 6
to: the uncertainty that the company will achieve or exceed its revenue, earnings, and earnings per share growth goals or expectations for fiscal year 2004 and that actual financial results for fiscal year 2004 will fall within the guidance provided by the company; the uncertainty of the company’s ability to purchase shares of its common stock; the uncertainty of the effect of any share repurchases upon the company and its shareholders; the uncertainty as to the effect on financial results of the adoption of accounting pronouncements; changes in interest rates; changes in economic, political or regulatory environments; the uncertainty of assumptions utilized to estimate cash flows from residual interests in mortgage securitizations and mortgage servicing rights; risks associated with sources of liquidity for each of the lines of business of the company; changes in competition; litigation involving the company and its subsidiaries; and risks described from time to time in reports and registration statements filed by H&R Block Inc. and its subsidiaries with the Securities and Exchange Commission. Readers should take these factors into account in evaluating such forward-looking statements.
About H&R Block: H&R Block Inc. (www.hrblock.com) is a diversified company with subsidiaries that deliver tax, financial, mortgage and business products and services. It is the only major company with subsidiaries offering a full range of software, online and in-office tax solutions, combined with personalized financial advice about retirement savings, home ownership, and other opportunities to help clients build a better financial future. As the world’s largest tax services company, H&R Block served nearly 21 million clients in the U.S. and 11 countries in 2003. H&R Block Financial Advisors Inc. offers investment services and securities products. With more than 1,000 financial advisors serving clients at more than 400 offices, H&R Block Financial Advisors Inc. is a member NYSE, SIPC, a registered broker-dealer and a registered investment advisor. H&R Block Inc. is not a registered broker-dealer and is not a registered investment advisor. H&R Block Mortgage Corp. offers a full range of retail mortgage products. Option One Mortgage Corp. provides mortgage services and offers wholesale mortgage products through large financial institutions and a network of 24,000 independent mortgage brokers. RSM McGladrey Business Services Inc. and its subsidiaries serve mid-sized businesses and their owners with tax, accounting and business consulting services, as well as personal wealth management services.
- end -
H&R BLOCK, INC.
KEY OPERATING RESULTS
Unaudited, amounts in thousands, except per share data
| Three months ended January 31, | |||||||||
| 2004 | 2003 | ||||||||
Revenues |
$ | 977,157 | $ | 958,413 | |||||
Income before taxes |
176,120 | 222,934 | |||||||
Net income |
$ | 106,726 | $ | 132,313 | |||||
Basic earnings per share |
$ | 0.60 | $ | 0.74 | |||||
Basic shares outstanding |
176,732 | 178,770 | |||||||
Diluted earnings per share |
$ | 0.59 | $ | 0.73 | |||||
Diluted shares outstanding |
180,984 | 182,173 | |||||||
| Nine months ended January 31, | |||||||||
| 2004 | 2003 | ||||||||
Revenues |
$ | 2,062,702 | $ | 1,861,175 | |||||
Income before taxes |
212,083 | 144,783 | |||||||
Net income before change in accounting principle |
128,621 | 85,422 | |||||||
Cumulative effect of change in accounting principle,
net of taxes |
(6,359 | ) | — | ||||||
Net income |
$ | 122,262 | $ | 85,422 | |||||
Basic earnings per share: |
|||||||||
Before change in accounting principle |
$ | 0.72 | $ | 0.48 | |||||
Net income |
$ | 0.69 | $ | 0.48 | |||||
Basic shares outstanding |
177,964 | 179,620 | |||||||
Diluted earnings per share: |
|||||||||
Before change in
accounting principle |
$ | 0.71 | $ | 0.46 | |||||
Net income |
$ | 0.67 | $ | 0.46 | |||||
Diluted shares outstanding |
181,481 | 184,378 | |||||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the second quarter of fiscal year 2004, the Company adopted Emerging Issues Task Force Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21) as of May 1, 2003. As a result of the adoption of EITF 00-21, the Company recorded a cumulative effect of a change in accounting principle of $6.4 million, net of taxes of $4.0 million.
Basic earnings per share is based on the weighted average number of shares outstanding. The dilutive effect of potential common shares is included in diluted earnings per share.
Certain reclassifications have been made to prior year amounts to conform to the current period presentation. These reclassifications had no effect on the results of operations or stockholders’ equity as previously reported.
H&R BLOCK, INC.
SEGMENT FINANCIAL RESULTS
Unaudited, amounts in thousands
| Three months ended January 31, | ||||||||||||||||
| Revenues | Income (loss) | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
U.S. Tax Operations |
$ | 463,646 | $ | 403,571 | $ | 68,236 | $ | 34,137 | ||||||||
Mortgage Operations |
331,926 | 396,980 | 154,476 | 262,466 | ||||||||||||
Business Services |
112,293 | 100,741 | 1,955 | (4,197 | ) | |||||||||||
Investment Services |
57,753 | 48,047 | (12,811 | ) | (31,755 | ) | ||||||||||
International Tax Operations |
10,849 | 8,779 | (6,409 | ) | (5,735 | ) | ||||||||||
Corporate Operations |
690 | 295 | (29,327 | ) | (31,982 | ) | ||||||||||
| $ | 977,157 | $ | 958,413 | 176,120 | 222,934 | |||||||||||
Income taxes |
69,394 | 90,621 | ||||||||||||||
Net income |
$ | 106,726 | $ | 132,313 | ||||||||||||
| Nine months ended January 31, | ||||||||||||||||
| Revenues | Income (loss) | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
U.S. Tax Operations |
$ | 551,357 | $ | 460,286 | $ | (155,874 | ) | $ | (212,192 | ) | ||||||
Mortgage Operations |
985,977 | 921,874 | 502,331 | 563,071 | ||||||||||||
Business Services |
319,816 | 293,938 | (7,456 | ) | (12,255 | ) | ||||||||||
Investment Services |
167,443 | 156,737 | (41,904 | ) | (92,488 | ) | ||||||||||
International Tax Operations |
35,403 | 28,388 | (12,262 | ) | (12,436 | ) | ||||||||||
Corporate Operations |
2,706 | (48 | ) | (72,752 | ) | (88,917 | ) | |||||||||
| $ | 2,062,702 | $ | 1,861,175 | 212,083 | 144,783 | |||||||||||
Income taxes |
83,462 | 59,361 | ||||||||||||||
Net income before change in
accounting principle |
128,621 | 85,422 | ||||||||||||||
Cumulative effect of change in accounting
principle, net of taxes |
(6,359 | ) | — | |||||||||||||
Net income |
$ | 122,262 | $ | 85,422 | ||||||||||||
H&R BLOCK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts in thousands, except share data
| January 31, | April 30, | |||||||||||
| 2004 | 2003 | |||||||||||
| (unaudited) | (audited) | |||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 671,089 | $ | 875,353 | ||||||||
Cash and cash equivalents - restricted |
606,832 | 438,242 | ||||||||||
Marketable securities - trading |
70,280 | 23,859 | ||||||||||
Receivables from customers, brokers, dealers and clearing
organizations, net |
645,357 | 517,037 | ||||||||||
Receivables, net |
1,093,051 | 403,197 | ||||||||||
Prepaid expenses and other current assets |
611,561 | 489,673 | ||||||||||
Total current assets |
3,698,170 | 2,747,361 | ||||||||||
Other assets: |
||||||||||||
Residual interests in securitizations |
233,851 | 264,337 | ||||||||||
Mortgage servicing rights |
106,196 | 99,265 | ||||||||||
Property and equipment, net |
284,148 | 288,594 | ||||||||||
Intangible assets, net |
340,748 | 341,865 | ||||||||||
Goodwill, net |
948,530 | 714,215 | ||||||||||
Other |
176,544 | 148,268 | ||||||||||
Total assets |
$ | 5,788,187 | $ | 4,603,905 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
||||||||||||
Current portion of long-term debt |
$ | 277,599 | $ | 55,678 | ||||||||
Commercial paper |
1,411,177 | — | ||||||||||
Accounts payable to customers, brokers and dealers |
1,126,103 | 862,694 | ||||||||||
Accounts payable, accrued expenses and other |
398,250 | 468,933 | ||||||||||
Accrued salaries, wages and payroll taxes |
170,043 | 210,629 | ||||||||||
Accrued income taxes |
73,419 | 299,262 | ||||||||||
Total current liabilities |
3,456,591 | 1,897,196 | ||||||||||
Long-term debt |
551,406 | 822,302 | ||||||||||
Other non-current liabilities |
303,624 | 220,698 | ||||||||||
Total liabilities |
4,311,621 | 2,940,196 | ||||||||||
Stockholders’ equity: |
||||||||||||
Common stock, no par, stated value $.01 per share |
2,179 | 2,179 | ||||||||||
Additional paid-in capital |
530,282 | 496,393 | ||||||||||
Accumulated other comprehensive income |
56,591 | 36,862 | ||||||||||
Retained earnings |
2,240,592 | 2,221,868 | ||||||||||
Less cost of 42,409,777 and 38,343,944 shares of
common stock in treasury |
(1,353,078 | ) | (1,093,593 | ) | ||||||||
Total stockholders’ equity |
1,476,566 | 1,663,709 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 5,788,187 | $ | 4,603,905 | ||||||||
H&R BLOCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited, amounts in thousands
| Nine months ended January 31, | ||||||||||||
| 2004 | 2003 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 122,262 | $ | 85,422 | ||||||||
Adjustments to reconcile net income to net cash
used in operating activities: |
||||||||||||
Depreciation and amortization |
122,497 | 114,738 | ||||||||||
Accretion of residual interests in securitizations |
(118,389 | ) | (113,146 | ) | ||||||||
Impairment of residual interests in securitizations |
26,048 | 25,589 | ||||||||||
Additions to trading securities - residual interests in securitizations |
(251,585 | ) | (326,395 | ) | ||||||||
Proceeds from net interest margin transactions |
197,417 | 325,642 | ||||||||||
Realized gain on sale of NIM residuals |
(17,000 | ) | (130,881 | ) | ||||||||
Additions to mortgage servicing rights |
(64,265 | ) | (55,960 | ) | ||||||||
Amortization of mortgage servicing rights |
57,334 | 33,273 | ||||||||||
Net change in receivable from Trusts |
(12,565 | ) | (73,494 | ) | ||||||||
Cumulative effect of change in accounting principle |
6,359 | — | ||||||||||
Impairment of goodwill |
— | 24,000 | ||||||||||
Mortgage loans held for sale: |
||||||||||||
Originations and purchases |
(17,006,283 | ) | (12,640,440 | ) | ||||||||
Sales and principal repayments |
16,948,363 | 12,629,199 | ||||||||||
Other net changes in working capital, net of acquisitions |
(1,011,833 | ) | (264,296 | ) | ||||||||
Net cash used in operating activities |
(1,001,640 | ) | (366,749 | ) | ||||||||
Cash flows from investing activities: |
||||||||||||
Available-for-sale securities: |
||||||||||||
Purchases of available-for-sale securities |
(10,495 | ) | (10,577 | ) | ||||||||
Cash received from residual interests in securitizations |
127,997 | 117,522 | ||||||||||
Cash received from sale of NIM residuals |
17,000 | 142,486 | ||||||||||
Sales of other available-for-sale securities |
17,604 | 9,730 | ||||||||||
Purchases of property and equipment, net |
(81,178 | ) | (95,629 | ) | ||||||||
Payments made for business acquisitions, net of cash acquired |
(280,280 | ) | (24,239 | ) | ||||||||
Other, net |
11,943 | (6,004 | ) | |||||||||
Net cash provided by (used in) investing activities |
(197,409 | ) | 133,289 | |||||||||
Cash flows from financing activities: |
||||||||||||
Repayments of notes payable |
(1,022,716 | ) | (9,301,285 | ) | ||||||||
Proceeds from issuance of notes payable |
2,433,893 | 9,888,088 | ||||||||||
Proceeds from issuance of securitization financing |
50,100 | — | ||||||||||
Repayments of securitization financing |
(50,100 | ) | — | |||||||||
Payments on acquisition debt |
(50,820 | ) | (52,107 | ) | ||||||||
Dividends paid |
(103,538 | ) | (93,645 | ) | ||||||||
Payments to acquire treasury shares |
(371,242 | ) | (317,608 | ) | ||||||||
Proceeds from issuance of common stock |
111,155 | 112,813 | ||||||||||
Other, net |
(1,947 | ) | (2,023 | ) | ||||||||
Net cash provided by financing activities |
994,785 | 234,233 | ||||||||||
Net increase (decrease) in cash and cash equivalents |
(204,264 | ) | 773 | |||||||||
Cash and cash equivalents at beginning of the period |
875,353 | 436,145 | ||||||||||
Cash and cash equivalents at end of the period |
$ | 671,089 | $ | 436,918 | ||||||||
Supplementary cash flow data: |
||||||||||||
Income taxes paid |
$ | 245,355 | $ | 176,168 | ||||||||
Interest paid |
57,458 | 55,193 | ||||||||||
H&R BLOCK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
Unaudited, amounts in thousands, except per share data
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| January 31, | January 31, | ||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||||
Revenues: |
|||||||||||||||||
Service revenues |
$ | 591,050 | $ | 510,042 | $ | 1,037,312 | $ | 907,015 | |||||||||
Gain on sale of mortgage assets: |
168,965 | 306,364 | 581,893 | 602,749 | |||||||||||||
Interest income |
117,643 | 57,230 | 276,462 | 228,176 | |||||||||||||
Product sales |
51,324 | 43,312 | 107,839 | 74,234 | |||||||||||||
Royalties |
44,427 | 39,026 | 49,410 | 43,082 | |||||||||||||
Other income |
3,748 | 2,439 | 9,786 | 5,919 | |||||||||||||
| 977,157 | 958,413 | 2,062,702 | 1,861,175 | ||||||||||||||
Operating expenses: |
|||||||||||||||||
Employee compensation and benefits |
392,835 | 352,209 | 873,804 | 791,692 | |||||||||||||
Occupancy and equipment |
94,764 | 87,349 | 253,229 | 223,642 | |||||||||||||
Depreciation and amortization |
46,487 | 42,670 | 122,497 | 114,738 | |||||||||||||
Marketing and advertising |
67,975 | 55,331 | 99,766 | 85,335 | |||||||||||||
Interest |
21,361 | 24,817 | 64,457 | 69,789 | |||||||||||||
Supplies, freight and postage |
28,609 | 33,154 | 51,350 | 55,472 | |||||||||||||
Impairment of goodwill |
— | — | — | 24,000 | |||||||||||||
Other |
150,622 | 142,591 | 389,991 | 356,300 | |||||||||||||
| 802,653 | 738,121 | 1,855,094 | 1,720,968 | ||||||||||||||
Operating income |
174,504 | 220,292 | 207,608 | 140,207 | |||||||||||||
Other income, net |
1,616 | 2,642 | 4,475 | 4,576 | |||||||||||||
Income before taxes |
176,120 | 222,934 | 212,083 | 144,783 | |||||||||||||
Income taxes |
69,394 | 90,621 | 83,462 | 59,361 | |||||||||||||
Net income before cumulative effect of
change in accounting principle |
106,726 | 132,313 | 128,621 | 85,422 | |||||||||||||
Cumulative effect of change in accounting principle
for multiple deliverable revenue arrangements,
less income taxes of $4,031 |
— | — | (6,359 | ) | — | ||||||||||||
Net income |
$ | 106,726 | $ | 132,313 | $ | 122,262 | $ | 85,422 | |||||||||
Basic earnings per share: |
|||||||||||||||||
Before change in accounting principle |
$ | 0.60 | $ | 0.74 | $ | 0.72 | $ | 0.48 | |||||||||
Cumulative effect of change in accounting |
— | — | (0.03 | ) | — | ||||||||||||
Net income |
$ | 0.60 | $ | 0.74 | $ | 0.69 | $ | 0.48 | |||||||||
Basic shares outstanding |
176,732 | 178,770 | 177,964 | 179,620 | |||||||||||||
Diluted earnings per share: |
|||||||||||||||||
Before change in accounting principle |
$ | 0.59 | $ | 0.73 | $ | 0.71 | $ | 0.46 | |||||||||
Cumulative effect of change in accounting |
— | — | (0.04 | ) | — | ||||||||||||
Net income |
$ | 0.59 | $ | 0.73 | $ | 0.67 | $ | 0.46 | |||||||||
Diluted shares outstanding |
180,984 | 182,173 | 181,481 | 184,378 | |||||||||||||
H&R BLOCK, INC.
SELECTED OPERATING DATA
Unaudited
Option One Mortgage Corporation
| Three months ended | ||||||||||||||||||
| 01/31/2004 | 01/31/2003 | % change | 10/31/2003 | |||||||||||||||
Number of loans originated |
||||||||||||||||||
Wholesale (non-prime) |
30,678 | 25,061 | 22.4 | % | 36,233 | |||||||||||||
Retail: Prime |
1,291 | 3,560 | -63.7 | % | 1,944 | |||||||||||||
Non-prime |
3,826 | 2,284 | 67.5 | % | 4,110 | |||||||||||||
Total |
35,795 | 30,905 | 15.8 | % | 42,287 | |||||||||||||
Volume of loans originated (000’s) |
||||||||||||||||||
Wholesale (non-prime) |
$ | 4,732,182 | $ | 3,756,809 | 26.0 | % | $ | 5,603,118 | ||||||||||
Retail: Prime |
157,438 | 496,176 | -68.3 | % | 247,661 | |||||||||||||
Non-prime |
464,926 | 280,738 | 65.6 | % | 492,977 | |||||||||||||
Total |
$ | 5,354,546 | $ | 4,533,723 | 18.1 | % | $ | 6,343,756 | ||||||||||
Loan sales |
$ | 5,308,800 | $ | 4,599,255 | 15.4 | % | $ | 6,330,449 | ||||||||||
Servicing portfolio |
||||||||||||||||||
Number of loans serviced |
308,305 | 232,979 | 32.3 | % | 295,636 | |||||||||||||
Servicing portfolio ($ bn’s) |
$ | 42.2 | $ | 28.9 | 46.0 | % | $ | 40.1 | ||||||||||
H&R Block Financial Advisors, Inc.
| Three months ended | ||||||||||||||||
| 01/31/2004 | 01/31/2003 | % change | 10/31/2003 | |||||||||||||
Customer trades |
413,338 | 306,119 | 35.0 | % | 347,828 | |||||||||||
Customer daily average trades |
6,776 | 4,638 | 46.1 | % | 5,351 | |||||||||||
Average revenue per trade |
$ | 113.61 | $ | 115.57 | -1.7 | % | $ | 116.22 | ||||||||
Number of active accounts |
741,824 | 670,000 | 10.7 | % | 748,403 | |||||||||||
Ending balance of assets under administration ($ bn’s) |
$ | 27.5 | $ | 21.0 | 31.0 | % | $ | 25.7 | ||||||||
Average assets per active account |
$ | 37,122 | $ | 31,397 | 18.2 | % | $ | 34,340 | ||||||||
Ending customer margin balances ($ millions) |
$ | 594 | $ | 535 | 11.0 | % | $ | 538 | ||||||||
Ending payables to customers ($ millions) |
$ | 1,076 | $ | 802 | 34.2 | % | $ | 981 | ||||||||
H&R Block, Inc.
Preliminary U.S. Tax Operating Data
Amounts in thousands, except average fee and number of offices
| Period | ||||||||||||||
| 1/1-1/31 | 2/1-2/15 | YTD 2/15 | ||||||||||||
Tax preparation & related fees (1) |
||||||||||||||
Fiscal year 2004 |
||||||||||||||
Company-owned offices (2) |
$ | 309,034 | $ | 364,345 | $ | 673,379 | ||||||||
Former major franchise territories (3) |
21,889 | 27,146 | 49,035 | |||||||||||
Total company-owned offices |
330,923 | 391,491 | 722,414 | |||||||||||
Franchise offices (4) |
169,338 | 182,173 | 351,511 | |||||||||||
| $ | 500,261 | $ | 573,664 | $ | 1,073,925 | |||||||||
Fiscal year 2003 (5) |
||||||||||||||
Company-owned offices (2) |
$ | 288,175 | $ | 365,196 | $ | 653,371 | ||||||||
Former major franchise territories (3) |
18,714 | 28,246 | 46,960 | |||||||||||
Total company-owned offices |
306,889 | 393,442 | 700,331 | |||||||||||
Franchise offices (4) |
153,725 | 180,043 | 333,768 | |||||||||||
| $ | 460,614 | $ | 573,485 | $ | 1,034,099 | |||||||||
Percent change |
||||||||||||||
Company-owned offices |
7.2 | % | -0.2 | % | 3.1 | % | ||||||||
Former major franchise territories |
17.0 | % | -3.9 | % | 4.4 | % | ||||||||
Total company-owned offices |
7.8 | % | -0.5 | % | 3.2 | % | ||||||||
Franchise offices |
10.2 | % | 1.2 | % | 5.3 | % | ||||||||
Total |
8.6 | % | 0.0 | % | 3.9 | % | ||||||||
Total clients served |
||||||||||||||
Fiscal year 2004 |
||||||||||||||
Company-owned offices (2) |
2,191 | 2,553 | 4,744 | |||||||||||
Former major franchise territories (3) |
168 | 208 | 376 | |||||||||||
Total company-owned offices |
2,359 | 2,761 | 5,120 | |||||||||||
Franchise offices (4) |
1,347 | 1,460 | 2,807 | |||||||||||
Digital tax solutions (6) |
1,268 | 737 | 2,005 | |||||||||||
| 4,974 | 4,958 | 9,932 | ||||||||||||
Fiscal year 2003 (5) |
||||||||||||||
Company-owned offices (2) |
2,228 | 2,734 | 4,962 | |||||||||||
Former major franchise territories (3) |
157 | 233 | 390 | |||||||||||
Total company-owned offices |
2,385 | 2,967 | 5,352 | |||||||||||
Franchise offices (4) |
1,330 | 1,565 | 2,895 | |||||||||||
Digital tax solutions (6) |
1,042 | 634 | 1,676 | |||||||||||
| 4,757 | 5,166 | 9,923 | ||||||||||||
Percent change |
||||||||||||||
Company-owned offices |
-1.7 | % | -6.6 | % | -4.4 | % | ||||||||
Former major franchise territories |
7.0 | % | -10.7 | % | -3.6 | % | ||||||||
Total company-owned offices |
-1.1 | % | -6.9 | % | -4.3 | % | ||||||||
Franchise offices |
1.3 | % | -6.7 | % | -3.0 | % | ||||||||
Digital tax solutions |
21.7 | % | 16.3 | % | 19.6 | % | ||||||||
Total |
4.6 | % | -4.0 | % | 0.1 | % | ||||||||
Average fee per client served (7) |
||||||||||||||
Fiscal year 2004 |
||||||||||||||
Company-owned offices (2) |
$ | 141.05 | $ | 142.71 | $ | 141.94 | ||||||||
Former major franchise territories (3) |
130.29 | 130.51 | 130.41 | |||||||||||
Total company-owned offices |
140.28 | 141.79 | 141.10 | |||||||||||
Franchise offices (4) |
125.71 | 124.78 | 125.23 | |||||||||||
| $ | 134.99 | $ | 135.91 | $ | 135.48 | |||||||||
Fiscal year 2003 (5) |
||||||||||||||
Company-owned offices (2) |
$ | 129.34 | $ | 133.58 | $ | 131.67 | ||||||||
Former major franchise territories (3) |
119.20 | 121.23 | 120.41 | |||||||||||
Total company-owned offices |
128.67 | 132.61 | 130.85 | |||||||||||
Franchise offices (4) |
115.58 | 115.04 | 115.29 | |||||||||||
| $ | 123.99 | $ | 126.54 | $ | 125.39 | |||||||||
H&R Block, Inc.
Preliminary U.S. Tax Operating Data
Amounts in thousands, except average fee and number of offices
| Period | ||||||||||||||
| 1/1-1/31 | 2/1-2/15 | YTD 2/15 | ||||||||||||
Percent change |
||||||||||||||
Company-owned offices |
9.1 | % | 6.8 | % | 7.8 | % | ||||||||
Former major franchise territories |
9.3 | % | 7.7 | % | 8.3 | % | ||||||||
Total company-owned offices |
9.0 | % | 6.9 | % | 7.8 | % | ||||||||
Franchise offices |
8.8 | % | 8.5 | % | 8.6 | % | ||||||||
Total |
8.9 | % | 7.4 | % | 8.0 | % | ||||||||
Refund anticipation loans |
||||||||||||||
Fiscal year 2004 |
||||||||||||||
Company-owned offices (2) |
1,112 | 1,042 | 2,154 | |||||||||||
Former major franchise territories (3) |
81 | 77 | 158 | |||||||||||
Total company-owned offices |
1,193 | 1,119 | 2,312 | |||||||||||
Franchise offices (4) |
713 | 610 | 1,323 | |||||||||||
Digital tax solutions (6) |
20 | 25 | 45 | |||||||||||
| 1,926 | 1,754 | 3,680 | ||||||||||||
Fiscal year 2003 (5) |
||||||||||||||
Company-owned offices (2) |
1,146 | 1,148 | 2,294 | |||||||||||
Former major franchise territories (3) |
81 | 89 | 170 | |||||||||||
Total company-owned offices |
1,227 | 1,237 | 2,464 | |||||||||||
Franchise offices (4) |
703 | 653 | 1,356 | |||||||||||
Digital tax solutions (6) |
19 | 29 | 48 | |||||||||||
| 1,949 | 1,919 | 3,868 | ||||||||||||
Percent change |
||||||||||||||
Company-owned offices |
-3.0 | % | -9.2 | % | -6.1 | % | ||||||||
Former major franchise territories |
0.0 | % | -13.5 | % | -7.1 | % | ||||||||
Total company-owned offices |
-2.8 | % | -9.5 | % | -6.2 | % | ||||||||
Franchise offices |
1.4 | % | -6.6 | % | -2.4 | % | ||||||||
Digital tax solutions |
5.3 | % | -13.8 | % | -6.3 | % | ||||||||
Total |
-1.2 | % | -8.6 | % | -4.9 | % | ||||||||
| FY 2004 | FY 2003 | |||||||||
Offices |
||||||||||
Company-owned offices (2) |
4,746 | 4,672 | ||||||||
Former major franchise territories (3) |
459 | ** | ||||||||
Company-owned shared office locations (8) |
947 | 607 | ||||||||
Total company-owned offices |
6,152 | 5,279 | ||||||||
Franchise offices (4) |
3,374 | 3,398 | ||||||||
Former major franchise territories (3) |
** | 529 | ||||||||
Franchise shared office locations (8) |
325 | 95 | ||||||||
Total franchise offices |
3,699 | 4,022 | ||||||||
| 9,851 | 9,301 | |||||||||
| (1) | Includes fees received for tax return preparation services and system administration fees. | |
| (2) | Excludes company-owned offices in former major franchise territories which commenced operations during fiscal year 2004. | |
| (3) | Impact of company-owned offices in former major franchise territories which commenced operations during fiscal year 2004. | |
| (4) | Represents remaining major franchise territories and other franchises. | |
| (5) | Prior year numbers have been reclassified between company-owned and franchise offices for offices in former franchise territories which commenced company-owned operations during fiscal year 2004. | |
| (6) | Includes on-line completed and paid returns and federal software units sold. | |
| (7) | Calculated as tax preparation and related fees divided by clients served. | |
| (8) | Shared locations include offices located within Wal-Mart, Sears and other third-party businesses. |