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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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January 31, 2008 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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o Definitive Proxy Statement |
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þ Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
H&R BLOCK, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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| SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
| Forward-Looking Statements |
| This presentation may contain forward-looking statements, which are any statements that are
not historical facts. These forward-looking statements are based upon the current expectations of
the company and there can be no assurance that such expectations will prove to be correct. Because
forward-looking statements involve risks and uncertainties and speak only as of the date on which
they are made, the companyÊs actual results could differ materially from these statements. These
risks and uncertainties relate to, among other things, the companyÊs pending sale of Option One
Mortgage Corp.; competitive factors; regulatory capital requirements; the companyÊs effective
income tax rate; litigation; and changes in market, economic, political or regulatory conditions.
Information concerning these risks and uncertainties is contained in Item 1A of the companyÊs 2007
annual report on Form 10-K and in other filings by the company with the Securities and Exchange
Commission. |
| Building Shareholder Value |
| We have the right strategy to build shareholder value
We are taking the necessary steps to focus on our core tax, accounting and related financial
services businesses
HRB Bank creates a competitive advantage for our core tax business, particularly in the early filer
segment
Breeden PartnersÊ campaign is disruptive: |
Offers no new ideas
Creates risk to auditor independence |
| Background
Core Business Strategy
On Track to Enhance Shareholder Value HRBÊs Board and Corporate Governance Breeden PartnersÊ Proxy
Fight |
| H&R Block is a financial services company providing tax, investment, mortgage and accounting
and business consulting services and products Tax Services segment provides income tax return
preparation and related services and products in the United States, Canada and Australia Business
Services segment offers middle-market companies accounting, tax and business consulting services
under the RSM McGladrey brand Consumer Financial Services segment offers financial advice and
related brokerage and investment planning. H&R Block Bank offers tax-related transaction accounts
to H&R Block tax clients who need a source for direct deposit of their tax refunds. |
| Background
Core Business Strategy
On Track to Enhance Shareholder Value HRBÊs Board and
Corporate Governance Breeden PartnersÊ Proxy Fight |
| • 45% of H&R BlockÊs retail office
clients are early filers |
| ·
A mix of company-owned and franchised
retail offices, each with low capital
requirements |
| Digital — Tax RSM McGladrey |
| · New offices reach steady state in 5 years |
| · Consists of both software and |
| · Leading provider to the middle-online offeringsmarket |
| · These products are key for |
| · Offering core tax, accounting, and addressing DIY filers, who are business consulting services – all rapidly migrating away from pen these segments are growing and paper strongly |
| · Making inroads against Intuit and • With acquisition of AMEX TBS, has other competitors
through Tax, Accounting scale to drive margins product simplification, intense
marketing and smart pricing and Related |
| Financial Services
Financial Advisors Bank |
| · Focus on upper-end tax clients with |
| · Key tool to meet tax client needs goal of increasing client loyalty and while enhancing client loyalty, retention especially in the early filer segment |
| · Focused on building scale, increasing |
| · Creates incremental economics to advisor productivity and enhancing be able to offer refund loans at profitability attractive rates relative to competitors 7 |
| Tax Segments and H&R Block Share |
| 133 million total U.S. tax filers* |
| Dispersed across Later season retail, CPAs, Hybrid Expertise clients who have |
| 27% of U.S. Tax Filers 32% of U.S. Tax Filers |
| digital and other more complex service platforms tax situations |
| 22% of U.S. Tax Filers Early Filer 19% of U.S.
Tax Filers |
| from late 1% Early season November 11% clients who throughout the
6% 29% demand their tax season money fast |
| 5%
H&R Block digital share
H&R Block retail share *TS05 Market Share 8 |
| Early filer clients are inherently the least loyal and hardest to retain |
| Product innovation driving
segment dynamics Early Filer
Segment dominated by tax prep
firms and independent providers |
| In TS07, H&R Block
retained 67.7% of Filers early filers vs.
71.5% of all retail filers |
| 1%
Early
filers represent 45% of H&R
Block retail office clients |
| 29% Tend to
be un/underbanked Users
of alternative financial services
Lower income |
| Performance in early filer segment drives Tax Services success |
| H&R Block digital share
H&R Block retail share |
| Late Season Client We have made consistent progress in
addressing the |
| (6.5%) (2.4%) (3.8%) 0.3% (0.1%) second-half filer (expertise- |
| oriented client)
category |
| The
early filer segment is a
critical driver of overall
H&R |
| Driver of performance much more (0.9%) (3.6%) 2.9% (3.8%) 1.8% dependent
on product superiority and distribution FY05 and FY07 demonstrate impact of success against
these drivers |
| HRB
Bank allows us to develop |
| products for
this segment that are |
| superior to those
offered by our
competitor |
| How HRB Bank Supports Tax Services |
| Enabled creation of Emerald Card – a competitively priced transaction account
— that appeals to our clients: |
| Magnitude of client retention potential (growth in tax preparation revenues)
will be more apparent in TS08 |
| Clients with other points of contact (i.e., through Financial Advisors or
savings accounts) are more loyal HRB Bank enhances our ability to attract and
retain early filers, giving us a strong competitive advantage |
| Brought over 2 million clients into a deeper relationship with H&R Block |
| Significantly lowered APRs on refund loan products |
| Created a competitive advantage in our core tax business due to strength of HRB
Bank product offerings relative to our competitors |
| Cultivating Client Loyalty |
| HRB Bank enabled a product (the Emerald Card) to be manufactured to our
specifications Developed 36% APR RAL product delivered on prepaid debit card Next
version leverages unique features to extend loyalty and enhance brand Platform can
open door to new tax refund distribution options |
| HRB Bank had a very successful first year |
| Low cost deposit strategy leveraged capital |
| Earned $23 million (pretax), including Emerald Card economics (ATM and merchant fees,
float) |
| Launched high-yielding IRA and savings accounts, strengthening relationships with
core HRB tax clients |
| Background
Core Business Strategy
On Track to Enhance Shareholder Value HRBÊs Board and Corporate Governance Breeden PartnersÊ Proxy
Fight |
| Initiatives to Enhance Shareholder Value |
| Initiatives to Enhance Shareholder Value |
| We expect continued success in TS08, building on a strong TS07
HRB Bank is the foundation for increasing loyalty and market share in critical early filer segment
With expected strong profits, we will rebuild capital and be positioned for continued share
repurchases and dividend increases
Focus on core tax, accounting and financial services businesses, along with continued disciplined
capital allocation, will produce superior financial performance |
Background
Core Business Strategy |
| On Track to Enhance Shareholder Value HRBÊs Board and Corporate Governance Breeden PartnersÊ Proxy
Fight |
| 9 of HRBÊs 11 Directors are Independent
Independent Lead Director
Independent Audit, Compensation, and Governance and Nominating Committees
4 of HRBÊs 5 Audit Committee members are ,,financial experts‰
Directors are subject to stock ownership guidelines |
| HRBÊs Board Members Up for Re-election: Proven Leadership |
| Donna R. Ecton Ms. Ecton is currently the Chairman and Chief Executive Officer of EEI Inc., a management consulting |
| firm that she founded in 1998. Ms. Ecton is Chairman of the Finance Committee of the Board of |
| Directors and is a member of the Executive and Governance and Nominating Committees. She |
| previously served as Chairman of the Audit Committee, overseeing the implementation of processes and |
| procedures required by Sarbanes-Oxley legislation. She also has previously served as Chairman of the |
| Louis W. Smith Mr. Smith served as President and Chief Executive Officer of the Ewing Marion Kauffman Foundation, |
| the 26th largest charitable foundation in the United States, from July 1997 until April 2002. Prior to |
| joining the Kauffman Foundation, Mr. Smith had a 29-year career with AlliedSignal, Inc. (now Honeywell |
| International), a diversified technology and manufacturing company, retiring as President of the Kansas |
| City Division in 1995. Mr. Smith is currently Chairman of the Audit Committee of the Board of Directors |
| and is a member of the Executive and Governance and Nominating Committees of the Board of |
| Directors. He previously served as Chairman of the Compensation Committee. |
| Ray Wilkins, Jr. Mr. Wilkins has served as Group President, AT&T Inc. (formerly SBC Communications, Inc.) since May |
| 2002. On September 7, 2006, the Board appointed Mr. Wilkins to serve as the Presiding Director of the |
| Board of Directors. In this capacity, he acts as a liason between the full Board and the CEO and leads |
| executive sessions of the non-employee directors at board meetings. He is currently Chairman of the |
| Executive Committee of the Board of Directors and is a member of the Compensation and Governance |
| and Nominating Committees. |
| HRBÊs Other Board Members: Proven Leadership |
| Mark A. Ernst Chairman, President and CEO; member of the Executive and Finance Committees |
| Vice Chairman of the University Academy, a college preparatory charter school; member of the |
| Retired Chairman and CEO of The Allstate Corporation; member of the Audit and Compensation |
| Vice Chairman of the Board of CARSTAR, Inc.; member of the Compensation and Executive |
| Committees and Chairman of the Governance and Nominating Committee |
| Retired Chairman and CEO of LG&E Energy Corporation; member of the Compensation, Executive |
| and Governance and Nominating Committees |
| Executive Vice President and Group President of Qualcomm Inc.; member of the Audit and Finance |
| Chairman and CEO of Lewis & Munday, a Detroit-based law firm; member of the Audit and Finance |
| Managing Partner of Seip Investments LP; member of the Audit and Executive Committees and |
| Chairman of the Compensation Committee |
| Background
Core Business Strategy
On Track to Enhance Shareholder Value HRBÊs Board and Corporate Governance Breeden PartnersÊ Proxy
Fight |
| Breeden Partners: A Disruption |
| Breeden PartnersÊ campaign disruptive to H&R BlockÊs strategic initiatives |
| Has not advanced new ideas or plan to improve value |
Breeden Partners owns less than 2% and has been a shareholder for less than a year and now
seeks to replace more than 25% of H&R BlockÊs Board members
Grave risk that KPMG, H&R BlockÊs independent auditor, would no longer be independent and therefore
could not audit or review H&R BlockÊs financial statements |
| Breeden Partners Has No New Ideas |
| Breeden Says HRB Board Action Already Taken:
Focus on core tax services Launched HRB Bank to attract and
retain customers in the Early Filer
segment
Selling unprofitable units in the RSM
McGladrey business
End use of shareholder capital to Announced sale of Option One,
pursue subprime mortgage lending targeting close on or before December
31
Closed H&R Block Mortgage Corp. |
| Risk To Auditor Independence |
| Auditor must be independent both in fact and appearance, and auditor independence is destroyed
if a partner (or even a professional employee) sits on the audit clientÊs board Richard BreedenÊs
role as the Monitor for KPMG gives him far greater influence over KPMG than any one partner could
exert |
| Mr. Breeden describes himself as the DOJÊs representative ,,in policing
KPMG‰ under the deferred prosecution agreement in KPMGÊs criminal tax case (,,DPA‰)
DPA gives Mr. Breeden broad jurisdiction, powers and oversight authority over KPMG
and all personnel, including ethics and compliance Compensated and indemnified by
KPMG |
| Term extends until, at the earliest, September 2008 |
| Mr. BreedenÊs every-4-month report to the US Attorney of KPMGÊs compliance with the DPA is of
critical importance to KPMG |
| KPMG Partners could be removed, Monitorship extended or criminal charges
reinstated |
| Breeden PartnersÊ other nominees create the same issues because they work for his companies
Independence turns on reality of relationship, not how it is characterized on paper The DPA states
that it binds only the Department of Justice (U.S. Attorney); the SEC and the PCAOB – not the DOJ –
are responsible for auditor independence matters |
| Disruption from Change of Auditors |
| A mid-year change of auditors would be disruptive, costly and divert |
| management and Board attention Limited number of audit firms that are capable of auditing H&R Block |
| Some audit firms already provide HRB significant services that may render such
firms non-independent or unwilling to accept an audit engagement |
| The new auditor must perform extensive procedures with significant ,,first-time through‰ costs
Potential to delay a 10-Q filing, which could lead to a breach of certain HRB reporting covenants |
| We have the right strategy to build shareholder value
We are taking the necessary steps to focus on our core tax, accounting and related financial
services businesses
HRB Bank creates a competitive advantage for our core tax business, particularly in the early filer
segment |
| The Breeden PartnersÊ campaign is disruptive: |
Offers no new ideas
Creates risk to auditor independence |
| Important Additional Information |
| On July 31, 2007, H&R Block began the process of mailing its definitive proxy statement (the
,,Proxy Statement‰), together with a WHITE proxy card, in connection with H&R BlockÊs 2007 Annual
Meeting of Shareholders. The Proxy Statement contains important information about H&R Block and the
2007 Annual Meeting. H&R Block urges its shareholders to read the Proxy Statement carefully.
Shareholders may obtain additional free copies of the Proxy Statement and other documents filed
with the Securities Exchange Commission (SEC) by H&R Block through the website maintained by the
SEC at www.sec.gov. In addition, copies of the Proxy Statement and other documents may be obtained
free of charge by directing a request to: H&R Block, Inc., Attn: Corporate Secretary, 1 H&R Block
Way, Kansas City, MO 64105, (816) 854-3000 or from our website (www.hrblock.com). Copies of the
Proxy Statement also may be requested by contacting our proxy solicitor, Innisfree M&A
Incorporated, at 877-456-3463 toll-free. |
