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): December 8,
2009
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)
|
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):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
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
December 8, 2009, the Company issued a press release regarding the Company’s
results of operations for the fiscal quarter ended October 31,
2009. 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
|
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.
|
Date: December
8, 2009
|
H&R
BLOCK, INC.
By:/s/
Andrew J.
Somora
Andrew
J. Somora
Assistant
Secretary
|
EXHIBIT
INDEX
Exhibit
99.1
News
Release
H&R
Block Reports Continued Improvement in Financial Results for Fiscal 2010 Second
Quarter
|
·
|
Net
loss from continuing operations improves to $0.38 per share from $0.40 per
share a year ago
|
|
·
|
Better
results in Tax Services and lower mortgage loan loss provisions partially
offset by lower profits from Business
Services
|
|
·
|
Company
reiterates fiscal 2010 earnings guidance of $1.60 - $1.80 per share from
continuing operations
|
For Immediate Release: Dec.
8, 2009
KANSAS
CITY, Mo. – H&R Block, Inc. (NYSE: HRB) today reported a net loss from
continuing operations for the fiscal second quarter ended Oct. 31, 2009, of
$126.5 million, or 38 cents per share compared to a loss of $133.2 million, or
40 cents per share in the second quarter a year ago. H&R Block
typically reports a second quarter operating loss due to the seasonality of its
business. A $15.9 million improvement in pre-season results from Tax
Services and a $9.7 million reduction in mortgage loan loss provisions were
partially offset by a $12.9 million decline in pretax income from Business
Services.
“Overall,
we are pleased with our financial results, which continue to benefit from our
expense control efforts,” said Russ Smyth, president and chief executive officer
of H&R Block. “By targeting and taking out non-value added costs,
we have been able to reinvest in important initiatives that we expect will drive
better client attraction and retention. The combination of these
initiatives will result in growing market share and profitability, both in
fiscal 2010 and beyond,” added Smyth.
Fiscal
second quarter revenues declined $25.4 million, or 7.2%, to $326.1 million due
to lower revenues from Business Services. Consolidated net loss for
the quarter improved to $128.6 million, or 38 cents per share, compared to a
loss of $135.9 million, or 41 cents per share a year ago.
Tax
Services
Second
quarter Tax Services revenues rose $4.6 million, or 4.4%, year-over-year
reflecting an increase in tax preparation revenues and increased revenues from
H&R Block Bank’s Prepaid Emerald Mastercard products provided to tax
clients. Tax preparation revenues increased $2.4 million reflecting
increased return volume and the Company’s acquisition of its major Southwest
franchise operation last year.
The
segment reported a pretax loss of $172.2 million compared to $188.1 million a
year ago, an improvement of 8.5%. The better results are primarily
due to revenue growth and an $11.4 million, or 3.9% decrease in overall
expenses. The expense reduction was driven in part by more than $5
million of ongoing cost control initiatives. The remainder of the
reduction is related to tax and legal expenses in the previous year that did not
recur, partially offset by incremental expenses in the current quarter
associated with the acquisition of the Southwest franchise
operation.
For the
first six months of fiscal 2010, Tax Services revenues of $197.3 million were up
5.8% from $186.4 million last year. The fiscal year-to-date pretax
loss was $344.2 million, down from $351.8 million in the prior
period.
The
Company continues to expect that the Tax Services segment will deliver an
increase in pretax margin totaling 100 basis points by the end of fiscal
2011.
Business
Services
Second
quarter segment revenues for Business Services (RSM McGladrey) declined $26.4
million or 11.3% year-over-year to $206.6 million. The drop in
revenues mainly stems from the impact of the overall weaker economic
environment. Core revenues, primarily tax and consulting, fell $22.8
million, or 11.6%, over the prior-year period and demand for capital markets
activities was also reduced.
For the
fiscal 2010 second quarter, RSM McGladrey reported pretax income of $0.2 million
compared to $13.1 million a year ago. While revenues were down in the
core business, this decline was offset by lower compensation and other cost
control efforts. The decline in second quarter profit was a result of
losses in our capital markets business and increased costs related to
litigation.
Six-month
segment revenues were $384.2 million, down 5.8% from $407.7 million in the first
half of fiscal 2009. Pretax income for the first six months declined
to $1.5 million from $12.8 million in the year-ago period driven mainly by the
lower income in the second quarter.
RSM
McGladrey (RSM) and McGladrey & Pullen LLP (M&P), an independent
registered public accounting firm, collaborate to provide services to clients
under an alternative practice structure. On July 21, 2009, M&P
provided 210 days notice of its intent to terminate the administrative services
agreement. The effect of the notice will be to terminate the alternative
practice structure on February 16, 2010, unless revoked or modified prior to
that time. On September 15, 2009, RSM also provided notice of its
intent to terminate the administrative services agreement. The effect
of this notice, unless it is revoked or modified, will be to terminate the
alternative practice structure on April 13, 2010. RSM’s notice was
intended to make certain that mutual consent is required for any reconciliation
between M&P and RSM.
Since
July 23, 2009, RSM and M&P have engaged in arbitration to resolve disputes
regarding their contractual relationship, including the scope and enforceability
of restrictive covenants agreed to by M&P. A final, binding and confidential
arbitration ruling regarding the enforcement of the restrictive covenants was
issued on November 24, 2009. RSM and M&P are continuing their
negotiations on mutually agreeable changes to the current arrangements that
would allow the collaboration to continue.
|
Corporate
|
Corporate
operations includes a portion of corporate support department costs, such as
finance and legal, as well as net interest margin and other gains/losses
associated with H&R Block Bank’s static mortgage portfolio. For
the second quarter ended Oct. 31, 2009, Corporate operations reported a pretax
loss of $40.8 million, compared to a loss of $52.4 million in the prior year, an
improvement of 22.1%. The improvement was mainly due to a $9.7
million decline in the provision for losses on mortgage loans held for
investment at H&R Block Bank. The total allowance for loan loss
reserves was $96.0 million at Oct. 31, 2009, compared to $63.7 million in the
second quarter a year ago and $91.7 million at July 31, 2009.
Year-to-date
through the fiscal second quarter ended Oct. 31, 2009, Corporate operations
reported a pretax loss of $81.1 million, a 20.1% improvement from a loss of
$101.4 million for the first six months of fiscal 2009.
Financial
Position
The Company ended the second quarter of
fiscal 2010 in a strong financial position with $1.4 billion in cash, double the
level from a year ago, and $1.1 billion of stockholders’ equity, up from $832.7
million at the end of the year-earlier period. There were no share
repurchases during the fiscal 2010 second quarter. Long-term debt at
Oct. 31, 2009 was $1.0 billion, down from $1.7 billion at the end of the fiscal
2009 second quarter.
Guidance
The
Company continues to expect its fiscal 2010 earnings from continuing operations
will be in the range of $1.60 to $1.80 per share.
Forward
Looking Statements
This
announcement may contain forward-looking statements, which are any statements
that are not historical facts. These forward-looking statements, as well as the
Company’s guidance, are based upon the Company’s current expectations 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, uncertainties regarding the Company’s ability to attract and
retain clients; meet its prepared returns targets; uncertainties and potential
contingent liabilities arising from our former mortgage loan origination and
servicing business; uncertainties in the residential mortgage market and its
impact on loan loss provisions; uncertainties pertaining to the commercial debt
market; potential termination of the alternative practice structure relationship
between RSM McGladrey, Inc. and McGladrey & Pullen LLP; competitive factors;
the Company’s effective income tax rate; litigation; uncertainties regarding the
level of share repurchases; and changes in market, economic, political or
regulatory conditions. Information concerning these risks and uncertainties is
contained in Item 1A of the Company’s 2009 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
prepared more than 500 million tax returns since 1955. In fiscal 2009,
H&R Block had annual revenues of $4.1 billion and prepared more than 24
million tax returns worldwide, utilizing more than 100,000 highly trained tax
professionals. The Company provides tax return preparation services in
person, online through H&R Block Online, through its H&R Block At Home™
software and through other channels. The Company is also one of the
leading providers of business services through RSM McGladrey. For more
information visit our Online Press Center at www.hrblock.com.
For
Further Information
Media Relations Gene King,
816.854.4672, gene.king@hrblock.com
Investor
Relations Derek Drysdale,
816.854.4513, derek.drysdale@hrblock.com
|
KEY
OPERATING RESULTS
|
||||||||||||||||
|
Unaudited,
amounts in thousands, except per share data
|
||||||||||||||||
|
Three
months ended October 31,
|
||||||||||||||||
|
Revenues
|
Income
(loss)
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Tax
Services
|
$ | 109,305 | $ | 104,734 | $ | (172,188 | ) | $ | (188,125 | ) | ||||||
|
Business
Services
|
206,602 | 233,045 | 174 | 13,081 | ||||||||||||
|
Corporate
and Eliminations
|
10,174 | 13,690 | (40,839 | ) | (52,409 | ) | ||||||||||
| $ | 326,081 | $ | 351,469 | (212,853 | ) | (227,453 | ) | |||||||||
|
Income
tax benefit
|
(86,381 | ) | (94,292 | ) | ||||||||||||
|
Net
loss from continuing operations
|
(126,472 | ) | (133,161 | ) | ||||||||||||
|
Net
loss from discontinued operations
|
(2,115 | ) | (2,713 | ) | ||||||||||||
|
Net
loss
|
$ | (128,587 | ) | $ | (135,874 | ) | ||||||||||
|
Basic
and diluted loss per share:
|
||||||||||||||||
|
Net loss from continuing operations
|
$ | (0.38 | ) | $ | (0.40 | ) | ||||||||||
|
Net loss from discontinued operations
|
- | (0.01 | ) | |||||||||||||
|
Net
loss
|
$ | (0.38 | ) | $ | (0.41 | ) | ||||||||||
|
Basic
and diluted shares outstanding
|
335,346 | 329,810 | ||||||||||||||
|
Six
months ended October 31,
|
||||||||||||||||
|
Revenues
|
Income
(loss)
|
|||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
|
Tax
Services
|
$ | 197,268 | $ | 186,434 | $ | (344,162 | ) | $ | (351,782 | ) | ||||||
|
Business
Services
|
384,220 | 407,696 | 1,495 | 12,786 | ||||||||||||
|
Corporate
and Eliminations
|
20,098 | 29,248 | (81,059 | ) | (101,427 | ) | ||||||||||
| $ | 601,586 | $ | 623,378 | (423,726 | ) | (440,423 | ) | |||||||||
|
Income
tax benefit
|
(166,637 | ) | (178,839 | ) | ||||||||||||
|
Net
loss from continuing operations
|
(257,089 | ) | (261,584 | ) | ||||||||||||
|
Net
loss from discontinued operations
|
(5,132 | ) | (7,009 | ) | ||||||||||||
|
Net
loss
|
$ | (262,221 | ) | $ | (268,593 | ) | ||||||||||
|
Basic
and diluted loss per share:
|
||||||||||||||||
|
Net loss from continuing operations
|
$ | (0.77 | ) | $ | (0.80 | ) | ||||||||||
|
Net loss from discontinued operations
|
(0.01 | ) | (0.02 | ) | ||||||||||||
|
Net
loss
|
$ | (0.78 | ) | $ | (0.82 | ) | ||||||||||
|
Basic
and diluted shares outstanding
|
334,939 | 328,475 | ||||||||||||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basic
earnings per share is computed using the two-class method and is based on the
weighted average number of shares outstanding. The dilutive effect of
potential common shares is included in diluted earnings per share, except in
those periods with a loss from continuing operations.
Certain
reclassifications have been made to prior year amounts to conform to the current
year presentation. Effective May 1, 2009, we realigned certain segments of our
business to reflect a new management reporting structure. The operations of
H&R Block Bank, which were previously reported as the Consumer Financial
Services segment, have now been reclassified, with activities that support our
retail tax network included in the Tax Services segment, and income and expenses
of our static portfolio of mortgage loans held for investment and related assets
included in Corporate. These reclassifications had no effect on our total
operating expenses, results of operations or stockholders’ equity as previously
reported.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||||||
|
Amounts
in thousands, except share data
|
||||||||||||
|
October
31,
|
October
31,
|
April
30,
|
||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
ASSETS
|
||||||||||||
|
Current
assets:
|
||||||||||||
|
Cash
and cash equivalents
|
$ | 1,432,243 | $ | 693,626 | $ | 1,654,663 | ||||||
|
Cash
and cash equivalents - restricted
|
46,072 | 814 | 51,656 | |||||||||
|
Receivables,
net
|
461,485 | 537,751 | 512,814 | |||||||||
|
Prepaid
expenses and other current assets
|
361,186 | 387,675 | 351,947 | |||||||||
|
Assets
of discontinued operations, held for sale
|
- | 1,039,683 | - | |||||||||
|
Total
current assets
|
2,300,986 | 2,659,549 | 2,571,080 | |||||||||
|
Mortgage
loans held for investment, net
|
671,049 | 811,732 | 744,899 | |||||||||
|
Property
and equipment, net
|
351,288 | 377,687 | 368,289 | |||||||||
|
Intangible
assets, net
|
378,112 | 136,542 | 385,998 | |||||||||
|
Goodwill,
net
|
856,880 | 832,294 | 850,230 | |||||||||
|
Other
assets
|
409,044 | 606,943 | 439,226 | |||||||||
|
Total
assets
|
$ | 4,967,359 | $ | 5,424,747 | $ | 5,359,722 | ||||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||
|
Current
liabilities:
|
||||||||||||
|
Customer
banking deposits
|
$ | 1,493,726 | $ | 748,469 | $ | 854,888 | ||||||
|
Accounts
payable, accrued expenses and other current liabilities
|
608,149 | 636,050 | 705,945 | |||||||||
|
Accrued
salaries, wages and payroll taxes
|
83,321 | 100,027 | 259,698 | |||||||||
|
Accrued
income taxes
|
169,004 | 100,857 | 543,967 | |||||||||
|
Current
portion of long-term debt
|
3,667 | 6,257 | 8,782 | |||||||||
|
Federal
Home Loan Bank borrowings
|
25,000 | 104,000 | 25,000 | |||||||||
|
Liabilities
of discontinued operations, held for sale
|
- | 745,419 | - | |||||||||
|
Total
current liabilities
|
2,382,867 | 2,441,079 | 2,398,280 | |||||||||
|
Long-term
debt
|
1,032,562 | 1,727,510 | 1,032,122 | |||||||||
|
Federal
Home Loan Bank borrowings
|
75,000 | - | 75,000 | |||||||||
|
Other
noncurrent liabilities
|
405,833 | 423,496 | 448,461 | |||||||||
|
Total
liabilities
|
3,896,262 | 4,592,085 | 3,953,863 | |||||||||
|
Stockholders'
equity:
|
||||||||||||
|
Common
stock, no par, stated value $.01 per share
|
4,442 | 4,442 | 4,442 | |||||||||
|
Additional
paid-in capital
|
827,423 | 837,912 | 836,477 | |||||||||
|
Accumulated
other comprehensive income (loss)
|
66 | (11,236 | ) | (11,639 | ) | |||||||
|
Retained
earnings
|
2,308,153 | 2,019,301 | 2,671,437 | |||||||||
|
Less
treasury shares, at cost
|
(2,068,987 | ) | (2,017,757 | ) | (2,094,858 | ) | ||||||
|
Total
stockholders' equity
|
1,071,097 | 832,662 | 1,405,859 | |||||||||
|
Total
liabilities and stockholders' equity
|
$ | 4,967,359 | $ | 5,424,747 | $ | 5,359,722 | ||||||
|
CONDENSED
CONSOLIDATED INCOME STATEMENTS
|
||||||||||||||||
|
Unaudited,
amounts in thousands, except per share data
|
||||||||||||||||
|
Three
months ended October 31,
|
Six
months ended October 31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Revenues:
|
||||||||||||||||
|
Service
revenues
|
$ | 294,958 | $ | 316,337 | $ | 542,943 | $ | 557,057 | ||||||||
|
Interest
income
|
12,113 | 17,047 | 24,400 | 34,894 | ||||||||||||
|
Product
and other revenues
|
19,010 | 18,085 | 34,243 | 31,427 | ||||||||||||
| 326,081 | 351,469 | 601,586 | 623,378 | |||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Cost
of revenues
|
410,949 | 438,765 | 797,399 | 805,085 | ||||||||||||
|
Selling,
general and administrative
|
129,685 | 138,036 | 232,902 | 255,240 | ||||||||||||
| 540,634 | 576,801 | 1,030,301 | 1,060,325 | |||||||||||||
|
Operating
loss
|
(214,553 | ) | (225,332 | ) | (428,715 | ) | (436,947 | ) | ||||||||
|
Other
income (expense), net
|
1,700 | (2,121 | ) | 4,989 | (3,476 | ) | ||||||||||
|
Loss
from continuing operations before tax benefit
|
(212,853 | ) | (227,453 | ) | (423,726 | ) | (440,423 | ) | ||||||||
|
Income
tax benefit
|
(86,381 | ) | (94,292 | ) | (166,637 | ) | (178,839 | ) | ||||||||
|
Net
loss from continuing operations
|
(126,472 | ) | (133,161 | ) | (257,089 | ) | (261,584 | ) | ||||||||
|
Net
loss from discontinued operations
|
(2,115 | ) | (2,713 | ) | (5,132 | ) | (7,009 | ) | ||||||||
|
Net
loss
|
$ | (128,587 | ) | $ | (135,874 | ) | $ | (262,221 | ) | $ | (268,593 | ) | ||||
|
Basic
and diluted loss per share:
|
||||||||||||||||
|
Net
loss from continuing operations
|
$ | (0.38 | ) | $ | (0.40 | ) | $ | (0.77 | ) | $ | (0.80 | ) | ||||
|
Net
loss from discontinued operations
|
- | (0.01 | ) | (0.01 | ) | (0.02 | ) | |||||||||
|
Net
loss
|
$ | (0.38 | ) | $ | (0.41 | ) | $ | (0.78 | ) | $ | (0.82 | ) | ||||
|
Basic
and diluted shares outstanding
|
335,346 | 329,810 | 334,939 | 328,475 | ||||||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
|
Unaudited,
amounts in thousands
|
||||||||
|
Six
months ended October 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Net
cash used in operating activities
|
$ | (786,152 | ) | $ | (665,931 | ) | ||
|
Cash
flows from investing activities:
|
||||||||
|
Principal
payments on mortgage loans held for investment, net
|
38,693 | 54,501 | ||||||
|
Purchases
of property and equipment
|
(7,280 | ) | (58,586 | ) | ||||
|
Payments
made for business acquisitions, net of cash acquired
|
(6,606 | ) | (4,709 | ) | ||||
|
Net
cash used in investing activities of discontinued
operations
|
- | (48,917 | ) | |||||
|
Other,
net
|
18,473 | 8,910 | ||||||
|
Net
cash provided by (used in) investing activities
|
43,280 | (48,801 | ) | |||||
|
Cash
flows from financing activities:
|
||||||||
|
Repayments
of Federal Home Loan Bank borrowings
|
- | (40,000 | ) | |||||
|
Proceeds
from Federal Home Loan Bank borrowings
|
- | 15,000 | ||||||
|
Repayments
of other short-term borrowings
|
- | (60,000 | ) | |||||
|
Proceeds
from other short-term borrowings
|
- | 753,625 | ||||||
|
Customer
banking deposits
|
638,466 | (40,595 | ) | |||||
|
Dividends
paid
|
(100,784 | ) | (96,555 | ) | ||||
|
Acquisition
of treasury shares
|
(3,785 | ) | (4,467 | ) | ||||
|
Proceeds
from exercise of stock options
|
8,218 | 61,699 | ||||||
|
Proceeds
from issuance of common stock, net
|
- | 141,558 | ||||||
|
Net
cash provided by financing activities of discontinued
operations
|
- | 4,783 | ||||||
|
Other,
net
|
(30,884 | ) | 8,413 | |||||
|
Net
cash provided by financing activities
|
511,231 | 743,461 | ||||||
|
Effects
of exchange rates on cash
|
9,221 | - | ||||||
|
Net
increase (decrease) in cash and cash equivalents
|
(222,420 | ) | 28,729 | |||||
|
Cash
and cash equivalents at beginning of the period
|
1,654,663 | 664,897 | ||||||
|
Cash
and cash equivalents at end of the period
|
$ | 1,432,243 | $ | 693,626 | ||||
|
Supplementary
cash flow data:
|
||||||||
|
Income
taxes paid
|
$ | 196,427 | $ | 99,910 | ||||
|
Interest
paid on borrowings
|
37,304 | 38,713 | ||||||
|
Interest
paid on deposits
|
4,134 | 10,441 | ||||||
|
Transfers
of loans to foreclosed assets
|
9,212 | 62,578 | ||||||