UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

______________

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): September 1, 2005

 

H&R BLOCK, INC.

(Exact name of registrant as specified in charter)

Missouri (State of Incorporation)

1-6089 (Commission File Number)

44-0607856 (I.R.S. Employer Identification Number)

 

4400 Main Street, Kansas City, MO        64111

(Address of Principal Executive Offices)      (Zip Code)

 

(816) 753-6900

(Registrant's telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

---

 

 

 

Item 2.02

Results of Operations and Financial Condition

On September 1, 2005, H&R Block, Inc. (the “Company”) issued a press release regarding the Company’s results of operations for the fiscal quarter ended July 31, 2005. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

 

Item 9.01

Financial Statements and Exhibits

 

(c)

Exhibits

 

Exhibit Number	Description
99.1	Press Release Issued September 1, 2005.

 

 

 

 

---

 

 

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.

 

Date:	September 1, 2005	By:/s/ Bret G. Wilson
			Bret G. Wilson
			Vice President and Secretary

 

 

---

 

 

EXHIBIT INDEX

 

Exhibit 99.1

Press Release issued September 1, 2005.

 

 

 

 

 

 

 

 

News Release

For Further Information

 

Media Relations: Nick Iammartino, 816-932-4835, nick.iammartino@hrblock.com
Investor Relations: Pam Kearney, 816-932-1967, pkearney@hrblock.com

 

 

H&R BLOCK REPORTS FISCAL FIRST QUARTER RESULTS

Revenues Grow 26 Percent; Earnings Improve 23 Percent

 

FOR RELEASE SEPT. 1, 2005

 

KANSAS CITY, Mo. – H&R Block Inc. (NYSE:HRB) today reported a 26 percent increase in first quarter revenue to $615 million, up from $486.6 million last year. A net loss of $28.3 million for the first quarter of fiscal 2006 was 23 percent better than the $36.7 million loss posted last year. The current year quarterly loss of 9 cents per diluted share compared favorably to a loss of 11 cents per share last year.

 

“We’ve started the year with a strong first quarter, highlighted by double-digit revenue increases in all business segments,” said Mark A. Ernst, chairman and chief executive officer. “Even with our continuing investment in new tax offices, we saw an improvement over the loss posted last year.”

 

Highlights in the quarter include:

 

•

Continuing expansion of H&R Block’s tax office network;

•

A 60 percent increase in mortgage loan origination;

•

A 16 percent growth in revenues for RSM McGladrey and its related businesses; and

•

A 27 percent increase in revenues and a 63 percent reduction in pretax loss within Investment Services.

 

Tax Services

 

First quarter revenues for Tax Services increased 13 percent to $57.2 million from $50.4 million. The business segment reported a pretax loss of $144.5 million, 28 percent greater than a $112.6 million loss posted last year, due primarily to the addition of tax offices during the past year and ongoing efforts to further expand the company’s tax office network.

 

-more-

 

 

---

 

 

H&R Block First Quarter Release – page 2 of 5

 

“We are aggressively expanding our retail office network for long-term growth,” Ernst explained. “We opened more than 1,200 new company-owned and franchise retail locations last year and are planning 500 to 700 more offices this tax season. Adding offices provides clients with even greater convenience and allows us to serve them more quickly and efficiently. While there are upfront costs to achieve these benefits, we carefully plan and control our spending and are meeting projections for both investment in offices and business growth.”

 

Mortgage Services

 

H&R Block’s mortgage business reported a 23 percent increase in first quarter pretax income to $134.5 million from $109 million last year. Revenues advanced 33 percent to $360.4 million from $272 million in last year’s first quarter.

 

Loan origination volume reached an all-time high of $10.9 billion in the first quarter. This was 60 percent greater than $6.8 billion a year ago and 17 percent ahead of the 2005 fiscal fourth quarter.

 

“In an aggressive competitive environment, our mortgage business is gaining market share through the superior quality of service our organization delivers,” Ernst said. “Lower cost of origination is somewhat mitigating what is a very competitive pricing environment.”

 

Loan origination costs declined 28 basis points to 1.94 percent versus 2.22 percent last year.

 

Total gain on sales for Mortgage Services was $236.4 million for the current year quarter, 29 percent higher than $183.4 million last year. The increase is due primarily to growth in loan originations and higher gains from interest rate hedging activities, partially offset by market pricing pressures.

 

Option One’s mortgage servicing business increased its servicing portfolio at the end of the quarter 43 percent to $70.5 billion versus $49.4 billion a year ago.

 

Overall, the segment’s residual interests performed as expected, as the effect of lower than previously modeled credit losses was mostly offset by higher interest rates. Consequently, the company realized a net write-up to residuals of $12.9 million in the first quarter, which was recorded in other comprehensive income, net of deferred taxes. Offsetting these write-ups, the company realized $12.4 million in write-downs, which was recorded as a reduction in gains on sales of mortgage assets on the income statement.

 

 

 

-more-

 

 

---

 

 

H&R Block First Quarter Release – page 3 of 5

 

Business Services

 

Business Services improved its first quarter revenues by 16 percent to $126.8 million, up from $109.1 million last year. The pretax loss in the segment improved by

33 percent to $6.8 million versus $10 million last year. The business is highly seasonal

and typically loses money outside the third and fourth quarters.

 

“This is the eighth straight quarter of double-digit revenue growth versus prior year for RSM McGladrey and its related businesses,” Ernst said. ”Such outstanding growth, both in the core and the non-traditional areas of our business, demonstrates the strength of our market position and execution on the opportunity that exists.

 

“The pending combination of the American Express Tax & Business Services division with RSM McGladrey offers a tremendous new opportunity for growth,” Ernst continued. “The acquisition will create the nation’s largest tax, accounting and business services firm dedicated to serving midsized companies. We’ll offer added value through the scale, depth and scope of resources focused on client needs.”

 

On Aug. 1 the company announced a definitive agreement to acquire the American Express Tax & Business Services division, and the acquisition is expected to close at the end of September.

 

Investment Services

 

Revenues for Investment Services in the first quarter increased 27 percent to $68 million from $53.6 million in the prior year period. The 2006 first quarter pretax loss of $7.6 million was 63 percent better than the loss of $20.3 million last year. Included in the pretax loss is $9.2 million of intangible amortization.

 

“The opportunity that we saw for significantly improved performance from Investment Services is beginning to become reality,” Ernst said. “While there’s still work ahead to achieve better business positioning and performance, we’re showing real progress in aligning costs with revenues, raising productivity and forging partnerships with our U.S. tax professionals. We are optimistic that significant performance improvement will continue this year.”

 

Fiscal 2006 Outlook

 

For fiscal year 2006, the company affirmed its prior expectation of earnings per share in the range of $2.12 to $2.32.

 

“First quarter results are consistent with the guidance we set in June for our financial performance this year,” Ernst said. “Where we ultimately fall within our $2.12 to $2.32 range will be a function of developments within the mortgage business, the broader competitive environment we face there and the outcome of actions we currently have under way.”

 

-more-

 

 

---

 

 

H&R Block First Quarter Release – page 4 of 5

 

Other

 

Reported results take into account a two-for-one split of the company’s stock,

which was paid in the form of a 100 percent stock distribution on Aug. 22, 2005, to shareholders of record at the close of business Aug. 1, 2005. During the first quarter, the company reacquired 5 million shares (split-adjusted) of its common stock at an average purchase price of $28.42 per share.

 

The company noted that its financial information also reflects a restatement (announced in June) of results for 2003 to 2005, which included adjusting last year’s first quarter loss to $36.7 million, or 11 cents per share, from the originally reported $44.1 million, or 13 cents a share. The restatement has been detailed previously in the company’s Form 8-K and 10-K filings.   

 

Conference Call

 

The company will host a conference call for analysts and institutional investors at 5 p.m. EDT (4 p.m. CDT) Sept. 1. Ernst and Jeff Yabuki, executive vice president and chief operating officer; Bill Trubeck, executive vice president and chief financial officer; and Bob Dubrish, president and chief executive officer of Option One Mortgage Corp., will discuss the quarter’s results and future expectations, as well as respond to analyst questions.  To access the call, please dial the number approximately five to 10 minutes prior to the scheduled starting time:

 

	U.S./Canada:	888-425-2715	Access Code: 7773652
	International:	706-679-8257	Access Code: 7773652

 

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 slides 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 7 p.m. EDT Sept. 1 until midnight EDT Sept. 8, by dialing 800-642-1687 (U.S./Canada) or 706-645-9291 (International).  The replay access code is 7773652.  A replay of the web cast will also be available on the company’s web site at www.hrblock.com through Sept. 30.

 

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. 

 

-more-

 

 

---

 

 

H&R Block First Quarter Release – page 5 of 5

 

Such differences could be caused by a number of factors, including, but not limited to: the uncertainty that the company will achieve or exceed its revenue, earnings, and earnings-per-share growth goals or expectations for fiscal year 2006; the uncertainty of the company’s ability to purchase shares of its common stock pursuant

to the board’s authorization; the uncertainty of the effect of any share repurchases upon the company and its shareholders; changes in interest rates; changes in economic, political or regulatory environments; changes in competition; litigation involving the company and its subsidiaries; and risks described from time to time in reports and registration statements filed by H&R Block Inc. and its subsidiaries with the Securities and Exchange Commission.  Readers should take these factors into account in evaluating such forward-looking statements.

 

About H&R Block

Celebrating its 50^th anniversary in 2005, H&R Block is the world’s largest tax services provider, having served more than 400 million clients since 1955. The sixth largest retailer in the world, H&R Block has more than 12,000 locations serving taxpayers primarily in the United States, Canada and Australia.

 

H&R Block’s subsidiaries deliver tax services and financial advice, investment and mortgage services, and business accounting and consulting services. H&R Block Financial Advisors Inc. offers investment services and securities products. With approximately 1,000 financial advisors serving clients at approximately 250 locations, H&R Block Financial Advisors is a member NYSE, SIPC, a registered broker-dealer and investment advisor. H&R Block Inc. is not a registered broker-dealer and is not an investment advisor. H&R Block Mortgage Corp. offers a full range of retail mortgage services. Option One Mortgage Corp. provides mortgage services and offers wholesale mortgages through large financial institutions and a network of 24,000 independent mortgage brokers. RSM McGladrey Business Services Inc. and its subsidiaries serve mid-sized businesses and their owners with tax, accounting and business consulting services, as well as personal wealth management services. H&R Block Small Business Resources is a new business currently operating in 14 U. S. cities that serves the tax, financial and business needs of small business owners. H&R Block Small Business Resources is not a licensed CPA firm. For more information about the company, visit our Online Press Center at www.hrblock.com/presscenter.

 

# # #

 

 

---