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): March 5, 2008

H&R BLOCK, INC.
(Exact name of registrant as specified in charter)

Missouri		1-6089		44-0607856
(State of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification Number)

One H&R Block Way, Kansas City, MO 64105

(Address of Principal Executive Offices) (Zip Code)

(816) 854-3000

(Registrant’s telephone number, including area code)

Not Applicable

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02.		Results of Operations and Financial Condition

On March 5, 2008, the Company issued a press release regarding the Company’s results of operations for the fiscal quarter ended January 31, 2008. 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

(d)		Exhibits

Exhibit Number		Description
99.1		Press Release Issued March 5, 2008.

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.

EXHIBIT INDEX

Exhibit 99.1		Press Release Issued March 5, 2008.

Exhibit 99.1

News Release

For Further Information
Investor Relations:	Scott Dudley, 816-854-4505, scott.dudley@hrblock.com
Media Relations:	Nancy Mays, 816-854-4537, nmays@hrblock.com

H&R BLOCK REPORTS FISCAL 2008 THIRD QUARTER RESULTS

Earnings From Continuing Operations of $0.08 Per Share Prior to Severance Charges of $0.05 Per Share*

Company Reports Net Loss for the Quarter of $0.14 Per Share; Losses from Discontinued Operations of $0.17 Per Share

Retail Tax Clients Served Through February 29 up 2.6%

FOR IMMEDIATE RELEASE March 5, 2008

          KANSAS CITY, Mo. – H&R Block Inc. (NYSE: HRB) today reported earnings from continuing operations for the quarter ended Jan. 31, 2008, of $25 million, or $0.08 per share prior to severance charges, compared with $21.9 million, or $0.07 per share, in the prior year period. The Company took a pretax charge in the current period of $26.3 million, or $0.05 per share, for expenses in connection with corporate staff reductions and executive severance. Current period earnings from continuing operations after the severance charge were $9.3 million, or $0.03 per share.

          For the quarter, total revenues from continuing operations rose 4.4% to $972.6 million, compared with $931.2 million in the year-ago period. This reflects top-line growth in the Tax Services segment of $33.9 million and at H&R Block Bank of $16.8 million.

*all per share amounts are based on fully diluted shares.

H&R Block Reports Fiscal 2008 Third Quarter Results/page 2

          “This quarter marks the first full quarter of our new management team, and of our renewed focus on H&R Block’s preeminent tax services practice. In every possible area of the tax market we are trying to sharpen focus and competitive intensity,” said Richard C. Breeden, Chairman of H&R Block. “We are only halfway through tax season, but we believe we have good marketplace traction and excellent opportunities based on our market share, the quality of our tax professionals and the strength of our brand. To date, we are seeing a healthy increase in both the number of retail tax clients served and average revenue per retail tax client,” added Mr. Breeden. “At the same time in every sector of our business, we are adding discipline to the capital allocation process and seeking to eliminate costs to improve our competitive strength.”

          During the quarter, the net loss from discontinued operations was $56.6 million, or $0.17 per share, compared with a loss of $82.2 million, or $0.25 per share in the prior year. The Company reported a net loss from discontinued operations of $366.2 million, or $1.13 per share, during the second quarter of fiscal 2008. This loss in the current period reflects loan loss provisions and repurchase reserves, impairments of residual interests and expenses related to the previously announced closing of origination activities. Total remaining loans held both on and off balance sheet by the company for sale at Option One are now $21.9 million, net of reserves.

          Net loss for the quarter was $47.4 million, or $0.14 per share, compared to a net loss of $60.3 million, or $0.18 per share, in the prior year.

          For the nine months ended January 31, 2008, the Company reported a net loss from continuing operations of $236.6 million, or $0.73 per share, an increase of 9.1% from a net loss of $216.9 million, or $0.67 per share, in the prior-year period. For the nine months, discontinued operations posted a net loss of $615.6 million, or $1.90 per share, compared to a prior-period net loss of $131.2 million, or $0.41 per share. For the nine month period consolidated net loss was $852.2 million, or $2.63 per share, compared with a net loss of $348.1 million, or $1.08 per share, in the comparable period during fiscal year 2007.

Tax Services

          For the quarter ended January 31, revenue in the Tax Services segment grew 5.4% year-over-year. Net tax preparation and related fees increased 3.3%, reflecting a 7.0% increase in net average fee per U. S. retail client served to $172.58. This was partially offset by a 3.5% decline in retail clients served through January 31. The company believes the decline in clients reflects a slow start to the tax season due to various factors, including uncertainty surrounding legislation regarding the Alternate Minimum Tax.

          Pretax income from the tax segment for the period ended January 31 was $45.9 million, down from $60.0 million in the prior year. The reduction in pretax income notwithstanding the increase in revenue results primarily from an adjustment in bad debt reserves due to the elimination during the quarter of certain cooperative collections arrangements related to settlement products.

H&R Block Reports Fiscal 2008 Third Quarter Results/page 3

          During the month of February 2008, the number of retail tax clients served increased 6.8% compared to February 2007, which had one less day. Also during February, net retail tax preparation and related fees increased approximately12.6% compared with the prior year. As of February 29, year-to-date client growth in retail tax preparation has been 2.6%. The Company believes that after adjustments for differences in the number of days in the respective periods, the total number of retail tax clients year-to-date is up by approximately 1.3% compared with the prior year, while the average retail fee year to date is up by approximately 6.1%.

          The company’s digital tax business, consisting of TaxCut^® software and online products, showed a decline in the number of clients for the quarter ended January 31 of 10.8%. Digital revenues were down only 1.9% in the quarter, reflecting the mitigating impact of price increases.

          “Our tax business is tracking toward a solid season despite a slower start than in prior years. Volume increased nicely in February, and we are now putting our time and effort into ensuring that we have a strong close to our season,” said Alan M. Bennett, interim CEO. “We are targeting growth in late season filers who value the expertise of our highly trained tax professionals. At the same time, we’re hoping to see clients who aren’t typically required to file come to Block to complete a 2007 tax return so they can receive the Economic Stimulus Package rebates,” added Bennett.

Consumer Financial Services

          The Consumer Financial Services segment includes H&R Block Financial Advisors and H&R Block Bank. For the quarter ended January 31, segment revenues were $117.1 million, up 8.9% from $107.5 million in the prior period. Pretax income during the quarter grew nearly 19% to $13.0 million, all of which was attributable to income growth at H&R Block Bank. Nine month segment revenues were $332.7 million, up 24.2% from $267.9 million a year earlier. Pretax income rose 81.5% to $10.1 million from $5.6 million.

          The Company has continued to experience strong customer acceptance of its Emerald Card. By the end of the season, the company projects aggregate growth of more than 25% in the number of clients with an Emerald Card. Through January 31, we extended an Emerald Advance line of credit to nearly 900,000 clients, providing more than $400 million in aggregate credit. This new program increased aggregate bank revenues and also helped maintain tax client retention rates. Overall, revenues at H&R Block Bank were $39.3 million, up 75.0% from $22.5 million in the prior year period, while pretax income was $12.3 million, up 90.9% from $6.5 million in the prior year period.

          “Our Emerald Card is proving quite popular with clients who can use it to avoid expensive third-party check cashing services,” said Tim Gokey, President of H&R Block’s Retail Tax Services. “We believe that the Emerald Card is assisting with client retention, and we see growing use of the Emerald Card by customers for direct deposit of paychecks. The Emerald Advance line of credit that was a new product for existing tax customers this year gives us an alternative to traditional tax-related financial products that we believe will prove important in the future,” said Gokey.

H&R Block Reports Fiscal 2008 Third Quarter Results/page 4

          Fiscal 2008 third quarter revenues at H&R Block Financial Advisors declined 8.5% to $77.8 million, reflecting challenging market conditions including declining interest rates. Pretax income declined 85.1% to $0.7 million from $4.5 million in the prior period.

Business Services

          For the quarter ended January 31, Business Services had revenues of $191.9 million, which were essentially flat compared with the same quarter last year. Pretax income for the quarter was $6.6 million, compared with pretax income of $1.2 million last year. This increase in income in part reflects improved operating efficiencies as previously acquired businesses were integrated into the Company’s McGladrey unit.

          For the nine months, revenues rose to $623.8 million from $616.3 million, while pretax income was $16.5 million compared to a loss in the prior period of $4.7 million.

          During the quarter McGladrey established an expense reduction program parallel to that previously announced by H&R Block as a whole for overhead costs. McGladrey has identified initial cost reductions of $15 million annually starting in fiscal 2009, and these cost reductions were not previously included in the Company’s overall cost saving projections.

Conference Call

          At 8 a.m. EST on Thursday, March 6, 2008, the company will host a conference call for analysts, institutional investors and shareholders. Richard C. Breeden, chairman of the board, Alan Bennett, interim chief executive officer, Tim Gokey, president of retail tax services, and Becky Shulman, senior vice president, treasurer and interim chief financial officer, will discuss the results and future expectations and will be joined by other members of senior management to respond to questions.

          To access the call, please dial the number below approximately five to 10 minutes prior to the scheduled starting time:

          U.S./Canada (888) 680-0890– Participant Passcode: 73960248

          International (617) 213-4857– Participant Passcode: 73960248

          Pre-registration is available for the conference call on H&R Block’s Investor Relations Web site at http://investor-relations.hrblock.com. Those who pre-register will receive a PIN to minimize connection time when accessing the live call.

          The call also will be webcast in a listen-only format for the media and public. The link to the webcast and a supporting slide presentation can be accessed directly at http://investor-relations.hrblock.com.

H&R Block Reports Fiscal 2008 Third Quarter Results/page 5

          A replay of the call will be available beginning at 10 a.m. EST March 6, 2008, and continuing until March 13, 2008, by dialing (888) 286-8010 (U.S./Canada) or (617) 801-6888 (international). The replay passcode is 64622338. The webcast will be available for replay on the company’s Investor Relations Web site at http://investor-relations.hrblock.com.

Forward Looking Statements
This announcement 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 company’s actual results could differ materially from these statements. These risks and uncertainties relate to, among other things, any disposition of the servicing business of Option One Mortgage Corporation, in whole or in part; uncertainties in the subprime mortgage industry and its impact on any operations of Option One Mortgage Corporation that continue to be operated by H&R Block; the liquidity demands associated with funding servicing advances to loan pools serviced by the company; potential litigation and other contingent liabilities arising from Option One Mortgage Corporation’s historical and ongoing operations; uncertainties pertaining to the commercial debt market; competitive factors; regulatory capital requirements; the company’s effective income tax rate; litigation; uncertainties associated with engaging a new auditor; and changes in market, economic, political or regulatory conditions. Information concerning these risks and uncertainties is contained in Item 1A of the company’s 2007 annual report on Form 10-K and in other filings by the company with the Securities and Exchange Commission.

About H&R Block
H&R Block Inc. (NYSE: HRB) is the world’s preeminent tax services provider, having served more than 400 million clients since 1955 and generating annual revenues of $4 billion in fiscal year 2007. H&R Block provides income tax return preparation and related services and products via a nationwide network of approximately 13,000 company-owned and franchised offices and through TaxCut^® online and software solutions. The company also provides business services through RSM McGladrey and certain consumer financial services. For more information visit our Online Press Center at www.hrblock.com.

Tables follow

H&R BLOCK

KEY OPERATING RESULTS

Unaudited, amounts in thousands, except per share data

			Three months ended January 31,
			Revenues								Income (loss)
			2008				2007				2008				2007
	Tax Services		$	661,787			$	627,846			$	45,879			$	59,973
	Business Services			191,884				192,163				6,614				1,207
	Consumer Financial Services			117,112				107,511				12,988				10,959
	Corporate and Eliminations			1,828				3,659				(61,362	)			(50,014	)
			$	972,611			$	931,179				4,119				22,125
	Income taxes (benefit)											(5,165	)			181
	Net income from continuing operations											9,284				21,944
	Loss from discontinued operations, net of tax											(56,642	)			(82,196	)
	Net loss										$	(47,358	)		$	(60,252	)
	Basic earnings (loss) per share:
	Net income from continuing operations										$	0.03			$	0.07
	Net loss from discontinued operations											(0.18	)			(0.26	)
	Net loss										$	(0.15	)		$	(0.19	)
	Basic shares outstanding											325,074				322,350
	Diluted earnings (loss) per share:
	Net income from continuing operations										$	0.03			$	0.07
	Net loss from discontinued operations											(0.17	)			(0.25	)
	Net loss										$	(0.14	)		$	(0.18	)
	Diluted shares outstanding											327,202				326,048

			Nine months ended January 31,
			Revenues								Income (loss)
			2008				2007				2008				2007
	Tax Services		$	822,454			$	775,488			$	(325,559	)		$	(259,974	)
	Business Services			623,755				616,334				16,489				(4,736	)
	Consumer Financial Services			332,738				267,888				10,113				5,572
	Corporate and Eliminations			9,697				10,322				(104,240	)			(111,330	)
			$	1,788,644			$	1,670,032				(403,197	)			(370,468	)
	Income tax benefit											(166,553	)			(153,576	)
	Net loss from continuing operations											(236,644	)			(216,892	)
	Loss from discontinued operations, net of tax											(615,565	)			(131,197	)
	Net loss										$	(852,209	)		$	(348,089	)
	Basic and diluted loss per share:
	Net loss from continuing operations										$	(0.73	)		$	(0.67	)
	Net loss from discontinued operations											(1.90	)			(0.41	)
	Net loss										$	(2.63	)		$	(1.08	)
	Basic and diluted shares outstanding											324,544				322,588

  H&R BLOCK

		Three months ended January 31,								Nine months ended January 31,
		2008				2007				2008				2007
Revenues:
Service revenues		$	776,411			$	749,000			$	1,471,891			$	1,399,738
Other revenues:
Interest income			58,655				35,961				140,092				91,646
Product and other revenues			137,545				146,218				176,661				178,648
			972,611				931,179				1,788,644				1,670,032
Operating expenses:
Cost of services			604,153				576,935				1,416,286				1,339,714
Cost of other revenues			97,293				69,324				199,628				113,104
Selling, general and administrative			269,019				253,968				595,719				566,011
			970,465				900,227				2,211,633				2,018,829
Operating income (loss)			2,146				30,952				(422,989	)			(348,797	)
Non-operating interest expense			(624	)			(12,066	)			(1,871	)			(36,292	)
Other income, net			2,597				3,239				21,663				14,621
Income (loss) from continuing operations before taxes (benefit)			4,119				22,125				(403,197	)			(370,468	)
Income taxes (benefit)			(5,165	)			181				(166,553	)			(153,576	)
Net income (loss) from continuing operations			9,284				21,944				(236,644	)			(216,892	)
Loss from discontinued operations, net of tax			(56,642	)			(82,196	)			(615,565	)			(131,197	)
Net loss		$	(47,358	)		$	(60,252	)		$	(852,209	)		$	(348,089	)
Basic earnings (loss) per share:
Net income (loss) from continuing operations		$	0.03			$	0.07			$	(0.73	)		$	(0.67	)
Net loss from discontinued operations			(0.18	)			(0.26	)			(1.90	)			(0.41	)
Net loss		$	(0.15	)		$	(0.19	)		$	(2.63	)		$	(1.08	)
Basic shares outstanding			325,074				322,350				324,544				322,588
Diluted earnings (loss) per share:
Net income (loss) from continuing operations		$	0.03			$	0.07			$	(0.73	)		$	(0.67	)
Net loss from discontinued operations			(0.17	)			(0.25	)			(1.90	)			(0.41	)
Net loss		$	(0.14	)		$	(0.18	)		$	(2.63	)		$	(1.08	)
Diluted shares outstanding			327,202				326,048				324,544				322,588

  H&R BLOCK

Preliminary U.S. Tax Operating Data

(in thousands, except average fee)

						Period
						11/1-1/31				2/1-2/15				2/16-2/29(5)				February(5)				YTD 2/29(5)
Net tax preparation & related fees: (1)
Fiscal year 2008
		Company-owned operations				$	439,757			$	474,321			$	216,490			$	690,811			$	1,130,568
		Franchise operations					225,035				231,977				103,545				335,522				560,557
						$	664,792			$	706,298			$	320,035			$	1,026,333			$	1,691,125
Fiscal year 2007 (2)
		Company-owned operations				$	424,770			$	427,286			$	185,989			$	613,275			$	1,038,045
		Franchise operations					218,894				211,811				86,685				298,496				517,390
						$	643,664			$	639,097			$	272,674			$	911,771			$	1,555,435
Percent change
		Company-owned operations					3.5	%			11.0	%			16.4	%			12.6	%			8.9	%
		Franchise operations					2.8	%			9.5	%			19.4	%			12.4	%			8.3	%
		Total retail operations					3.3	%			10.5	%			17.4	%			12.6	%			8.7	%
Total clients served: (3)
Fiscal year 2008
		Company-owned operations					2,430				2,671				1,287				3,958				6,388
		Franchise operations					1,427				1,504				680				2,184				3,611
		Lending products only					245				(150	)			(7	)			(157	)			88
		Total retail offices					4,102				4,025				1,960				5,985				10,087
		Digital tax solutions					1,136				1,051				505				1,556				2,692
							5,238				5,076				2,465				7,541				12,779
Fiscal year 2007 (2)
		Company-owned operations					2,512				2,566				1,135				3,701				6,213
		Franchise operations					1,485				1,453				596				2,049				3,534
		Lending products only					344				(244	)			(17	)			(261	)			83
		Total retail offices					4,341				3,775				1,714				5,489				9,830
		Digital tax solutions					1,274				1,141				473				1,614				2,888
							5,615				4,916				2,187				7,103				12,718
Percent change
		Company-owned operations					-3.3	%			4.1	%			13.4	%			6.9	%			2.8	%
		Franchise operations					-3.9	%			3.5	%			14.1	%			6.6	%			2.2	%
		Retail operations excluding lending products only					-3.5	%			3.9	%			13.6	%			6.8	%			2.6	%
		Total retail operations					-5.5	%			6.6	%			14.4	%			9.0	%			2.6	%
		Digital tax solutions					-10.8	%			-7.9	%			6.8	%			-3.6	%			-6.8	%
		Total					-6.7	%			3.3	%			12.7	%			6.2	%			0.5	%
Net average fee - retail: (4)
Fiscal year 2008
		Company-owned operations				$	181.19			$	177.99			$	168.86			$	175.02			$	177.37
		Franchise operations					157.91				154.72				152.77				154.12				155.62
						$	172.58			$	169.61			$	163.30			$	167.59			$	169.52
Fiscal year 2007 (2)
		Company-owned operations				$	169.47			$	166.58			$	164.22			$	165.86			$	167.32
		Franchise operations					147.42				146.16				145.88				146.08				146.65
						$	161.27			$	159.21			$	157.91			$	158.82			$	159.82
Percent change
		Company-owned operations					6.9	%			6.8	%			2.8	%			5.5	%			6.0	%
		Franchise operations					7.1	%			5.9	%			4.7	%			5.5	%			6.1	%
		Total retail operations					7.0	%			6.5	%			3.4	%			5.5	%			6.1	%

H&R BLOCK

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Unaudited, dollars in thousands

		Three Months Ended
H&R Block Bank:		January 31, 2008				January 31, 2007				October 31, 2007
Efficiency Ratio:
Total Consumer Financial Services expenses		$	104,124			$	96,552			$	110,335
Less: Interest and non-banking expenses			(81,516	)			(91,983	)			(106,664	)
Non-interest banking expenses		$	22,608			$	4,569			$	3,671
Total Consumer Financial Services revenues		$	117,112			$	107,511			$	101,254
Less: Non-banking revenues and interest expense			(81,355	)			(94,800	)			(91,617	)
Banking revenue net of interest expense		$	35,757			$	12,711			$	9,637
			63%				36%				38%
Annualized Net Interest Margin:
Net interest revenue - banking (1)		$	25,531			$	6,188			$	7,647
Net interest revenue - banking (annualized)		$	101,870			$	25,027			$	31,026
Divided by average bank earning assets		$	1,398,583			$	954,577			$	1,252,467
			7.28%				2.62%				2.48%
Annualized Return on Average Assets:
Total Consumer Financial Services pretax income (loss)		$	12,988			$	10,959			$	(9,081	)
Less: Non-banking pretax income (loss)			670				4,506				(4,672	)
Pretax banking income (loss)		$	12,318			$	6,453			$	(4,409	)
Pretax banking income (loss) - annualized		$	49,272			$	25,812			$	(17,636	)
Divided by average bank assets		$	1,420,599			$	982,633			$	1,274,284
			3.47%				2.63%				-1.38%
						Three Months Ended
Consolidated H&R Block:						January 31, 2008				January 31, 2007
Adjusted Net Income:
Net income from continuing operations as reported						$	9,284			$	21,944
Corporate staff reductions and executive severance, net of tax benefit							15,751				-
						$	25,035			$	21,944
Adjusted Net Earnings per Diluted Share:
Net income from continuing operations as reported						$	0.03			$	0.07
Corporate staff reductions and executive severance, net of tax benefit							0.05				-
						$	0.08			$	0.07