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 7, 2010
H&R BLOCK, INC.
(Exact name of registrant as specified in charter)
|
Missouri
(State of Incorporation)
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1-6089
(Commission File Number)
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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 7, 2010, the Company issued a press release regarding the Company’s results of operations for the fiscal quarter ended October 31, 2010. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits
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(d)
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Exhibits
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Exhibit Number
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Description
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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.
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H&R BLOCK, INC.
|
|
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Date: December 7, 2010
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By:/s/ Andrew J. Somora
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Andrew J. Somora
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|
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Secretary
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EXHIBIT INDEX
Exhibit 99.1
News Release
H&R Block Reports Fiscal 2011 Second Quarter Results
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·
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Net loss from continuing operations of $0.35 per share, compared to prior-year loss of $0.38 per share*
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|
·
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Consolidated net loss of $0.36 per share, compared to a loss of $0.38 per share in prior year
|
|
·
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Total revenues down 1.0 percent to prior year
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For Immediate Release: Dec. 7, 2010
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, 2010, of $106.8 million, or $0.35 per share compared to a loss of $126.5 million, or $0.38 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. The consolidated net loss was $109.0 million, or $0.36 per share, compared to a loss of $128.6 million, or $0.38 per share, in the prior year period. Total revenues were down 1.0 percent from the prior year to $322.9 million.
“Our second quarter results met our expectations and we are aggressively preparing for the key second half of our fiscal year,” said Alan Bennett, president and chief executive officer of H&R Block. “Reversing our early-season client losses is our top priority and we will take strong actions to drive more traffic into our offices,” added Bennett.
For the six months ended Oct. 31, 2010, H&R Block reported a net loss from continuing operations of $234.5 million, or $0.75 per share, compared with a loss of $257.1 million, or $0.77 cents per share, for the same period of fiscal 2010. Six-month revenues were $597.4 million in fiscal 2011 versus $601.6 million in the prior year. Discontinued operations in the first half of fiscal 2011 recorded a loss of $5.3 million, or $0.02 per share, essentially flat to the prior year.
Tax Services
Second quarter Tax Services revenues grew 1.5 percent year-over-year to $110.9 million. The segment reported a pretax loss of $154.4 million compared to a loss of $172.2 million a year ago. Total expenses fell by $16.2 million, or 5.8 percent, primarily as a result of staff reductions and the closing of certain underperforming retail office locations.
1
For the first six months of fiscal 2011, Tax Services revenues of $202.6 million were up 2.7 percent from $197.3 million last year. The pretax loss of $329.0 million compares with a loss of $344.2 million in the year-ago period.
RSM McGladrey
Second quarter revenues fell 1.5 percent year-over-year to $203.4 million. The segment reported pretax income of $8.4 million compared to pretax income of $0.2 million a year ago. Total expenses fell $11.4 million, or 5.5 percent, primarily due to reduced compensation in the current year period and litigation costs incurred in the prior year period.
Six-month segment revenues were $378.1 million, down 1.6 percent from $384.2 million in last year’s period. Pretax income for the first six months of fiscal 2011 was $8.0 million, compared to income of $1.5 million in the prior-year period.
Corporate
Corporate includes 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 mortgage portfolio. Corporate reported a pretax loss of $29.2 million for the second quarter ended Oct. 31, 2010, compared to a loss of $40.8 million in the prior year. Lower losses were due to reduced loss provisions on mortgage loans held for investment and corporate expense reductions.
For the first six months of fiscal 2011, a pretax loss of $61.4 million compares with a loss of $81.1 million in the year-ago period.
Net mortgage loans held for investment declined 20 percent from $671.0 million at Oct.. 31, 2009 to $537.2 million at Oct. 31, 2010. Loss provisions on mortgage loans totaled $8.3 million during the quarter ended Oct. 31, 2010, a decline of $5.1 million compared with the prior year quarter. Losses were lower due to a combination of declining delinquency rates and stabilizing home prices. The loan loss allowance was $87.6 million, or 14.1 percent of outstanding principal at Oct. 31, 2010 compared to $96.0 million or 12.6 percent at Oct. 31, 2009.
Discontinued Operations
Sand Canyon Corporation (“SCC”, previously known as Option One Mortgage Corporation) ceased originating mortgage loans in December 2007 and, in April 2008, sold its servicing assets and discontinued its remaining operations.
During the second quarter ended Oct. 31, 2010, SCC received new claims for alleged breaches of representations and warranties in the total principal amount of $21 million, compared with $83 million in the prior year quarter. Actual losses on representation and warranty claims totaled $3.4 million during the quarter ended Oct.31, 2010.
2
From May 1, 2008 through October 31, 2010, SCC has received cumulative repurchase claims totaling $707 million in unpaid principal and incurred net losses of approximately $58 million. At Oct. 31, 2010, SCC’s reserve for estimated losses on contingent mortgage loan repurchase obligations totaled $184.7 million. Claim activity and associated losses remain within SCC’s reserved expectations.
Share Repurchases & Dividends
The company repurchased and retired 3.5 million shares in the fiscal second quarter at a cost of $44.3 million. A previously announced quarterly cash dividend of 15 cents per share is payable Jan. 3, 2011, to shareholders of record Dec. 13, 2010.
Conference Call
At 4:30 p.m. Eastern time today, the company will host a conference call for analysts, institutional investors and shareholders. To access the call, please dial the number below approximately 5 to 10 minutes prior to the scheduled starting time:
U.S./Canada (877) 809-6980 or International (706) 758-0071
Conference ID: 26450535
The call will also be webcast in a listen-only format for the media and public. The link to the webcast can be accessed directly at http://investor-relations.hrblock.com.
A replay of the call will be available beginning at 5:30 p.m. Eastern time on Dec. 7, and continuing until Jan. 1, 2011, by dialing (800) 642-1687 (U.S./Canada) or (706) 645-9291 (International). The conference ID is 26450535. The webcast will be available for replay beginning on Dec. 8 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, 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 th
e residential mortgage market and its impact on loan loss provisions; uncertainties pertaining to the commercial debt market; competitive factors; the Company’s effective income tax rate; litigation defense expenses and costs of judgments or settlements; 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 2010 annual report on Form 10-K and in other filings by the Company with the Securities and Exchange Commission. The Company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
3
About H&R Block
H&R Block Inc. (NYSE: HRB) is one of the world’s largest tax services providers, having prepared more than 550 million tax returns worldwide since 1955. In fiscal 2010, H&R Block had annual revenues of $3.9 billion and prepared more than 23 million tax returns worldwide, utilizing more than 100,000 highly trained tax professionals. The Company provides tax return preparation services in person, through H&R Block At Home™ online and desktop software products, 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
Investor Relations: Derek Drysdale, (816) 854-4513, derek.drysdale@hrblock.com
Media Relations: Jennifer Love, (816) 854-4448, jennifer.love@hrblock.com
# # #
4
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KEY OPERATING RESULTS
|
|
Unaudited, amounts in thousands, except per share data
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|
Three months ended October 31,
|
||||||||
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Revenues
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Income (loss)
|
|||||||
|
2010
|
2009
|
2010
|
2009
|
|||||
|
Tax Services
|
$ 110,921
|
$ 109,305
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$ (154,355)
|
$ (172,188)
|
||||
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Business Services
|
203,426
|
206,602
|
8,397
|
174
|
||||
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Corporate and Eliminations
|
8,542
|
10,174
|
(29,161)
|
(40,839)
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||||
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$ 322,889
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$ 326,081
|
(175,119)
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(212,853)
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|||||
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Income tax benefit
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(68,307)
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(86,381)
|
||||||
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Net loss from continuing operations
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(106,812)
|
(126,472)
|
||||||
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Net loss from discontinued operations
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(2,237)
|
(2,115)
|
||||||
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Net loss
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$ (109,049)
|
$ (128,587)
|
||||||
|
Basic and diluted earnings (loss) per share:
|
||||||||
|
Net loss from continuing operations
|
$ (0.35)
|
$ (0.38)
|
||||||
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Net loss from discontinued operations
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(0.01)
|
-
|
||||||
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Net loss
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$ (0.36)
|
$ (0.38)
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||||||
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Basic and diluted shares outstanding
|
306,804
|
335,346
|
||||||
|
Six months ended October 31,
|
||||||||
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Revenues
|
Income (loss)
|
|||||||
|
2010
|
2009
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2010
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2009
|
|||||
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Tax Services
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$ 202,566
|
$ 197,268
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$ (328,979)
|
$ (344,162)
|
||||
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Business Services
|
378,136
|
384,220
|
7,964
|
1,495
|
||||
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Corporate and Eliminations
|
16,661
|
20,098
|
(61,421)
|
(81,059)
|
||||
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$ 597,363
|
$ 601,586
|
(382,436)
|
(423,726)
|
|||||
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Income tax benefit
|
(147,986)
|
(166,637)
|
||||||
|
Net loss from continuing operations
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(234,450)
|
(257,089)
|
||||||
|
Net loss from discontinued operations
|
(5,280)
|
(5,132)
|
||||||
|
Net loss
|
$ (239,730)
|
$ (262,221)
|
||||||
|
Basic and diluted earnings (loss) per share:
|
||||||||
|
Net loss from continuing operations
|
$ (0.75)
|
$ (0.77)
|
||||||
|
Net loss from discontinued operations
|
(0.02)
|
(0.01)
|
||||||
|
Net loss
|
$ (0.77)
|
$ (0.78)
|
||||||
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Basic and diluted shares outstanding
|
313,247
|
334,939
|
||||||
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.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
Amounts in thousands, except per share data
|
|
October 31,
|
October 31,
|
April 30,
|
||||
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2010
|
2009
|
2010
|
||||
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ASSETS
|
||||||
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Current assets:
|
||||||
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Cash and cash equivalents
|
$ 959,746
|
$ 1,432,243
|
$ 1,804,045
|
|||
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Cash and cash equivalents - restricted
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35,473
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46,072
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34,350
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|||
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Receivables, net
|
416,333
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461,485
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517,986
|
|||
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Prepaid expenses and other current assets
|
324,014
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361,186
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292,655
|
|||
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Total current assets
|
1,735,566
|
2,300,986
|
2,649,036
|
|||
|
Mortgage loans held for investment, net
|
537,226
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671,049
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595,405
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|||
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Property and equipment, net
|
327,881
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351,288
|
345,470
|
|||
|
Intangible assets, net
|
373,324
|
378,112
|
367,432
|
|||
|
Goodwill
|
867,417
|
856,880
|
840,447
|
|||
|
Other assets
|
466,368
|
409,044
|
436,528
|
|||
|
Total assets
|
$ 4,307,782
|
$ 4,967,359
|
$ 5,234,318
|
|||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||
|
Current liabilities:
|
||||||
|
Customer banking deposits
|
$ 929,898
|
$ 1,493,726
|
$ 852,555
|
|||
|
Accounts payable, accrued expenses and other current liabilities
|
660,999
|
608,149
|
756,577
|
|||
|
Accrued salaries, wages and payroll taxes
|
81,163
|
83,321
|
199,496
|
|||
|
Accrued income taxes
|
151,708
|
169,004
|
459,175
|
|||
|
Current portion of long-term debt
|
3,407
|
3,667
|
3,688
|
|||
|
Commercial paper borrowings
|
39,517
|
-
|
-
|
|||
|
Current Federal Home Loan Bank borrowings
|
50,000
|
25,000
|
50,000
|
|||
|
Total current liabilities
|
1,916,692
|
2,382,867
|
2,321,491
|
|||
|
Long-term debt
|
1,041,103
|
1,032,562
|
1,035,144
|
|||
|
Long-term Federal Home Loan Bank borrowings
|
25,000
|
75,000
|
25,000
|
|||
|
Other noncurrent liabilities
|
445,182
|
405,833
|
412,053
|
|||
|
Total liabilities
|
3,427,977
|
3,896,262
|
3,793,688
|
|||
|
Stockholders' equity:
|
||||||
|
Common stock, no par, stated value $.01 per share
|
4,124
|
4,442
|
4,314
|
|||
|
Additional paid-in capital
|
810,403
|
827,423
|
832,604
|
|||
|
Accumulated other comprehensive income (loss)
|
2,757
|
66
|
1,678
|
|||
|
Retained earnings
|
2,104,050
|
2,308,153
|
2,658,586
|
|||
|
Less treasury shares, at cost
|
(2,041,529)
|
(2,068,987)
|
(2,056,552)
|
|||
|
Total stockholders' equity
|
879,805
|
1,071,097
|
1,440,630
|
|||
|
Total liabilities and stockholders' equity
|
$ 4,307,782
|
$ 4,967,359
|
$ 5,234,318
|
|||
|
CONDENSED CONSOLIDATED INCOME STATEMENTS
|
|
Unaudited, amounts in thousands, except per share data
|
|
Three months ended October 31,
|
Six months ended October 31,
|
||||||||
|
2010
|
2009
|
2010
|
2009
|
||||||
|
Revenues:
|
|||||||||
|
Service revenues
|
$ 296,139
|
$ 294,958
|
$ 543,558
|
$ 542,943
|
|||||
|
Interest income
|
10,635
|
12,113
|
20,937
|
24,400
|
|||||
|
Product and other revenues
|
16,115
|
19,010
|
32,868
|
34,243
|
|||||
|
322,889
|
326,081
|
597,363
|
601,586
|
||||||
|
Operating expenses:
|
|||||||||
|
Cost of revenues
|
392,950
|
410,949
|
760,966
|
797,399
|
|||||
|
Selling, general and administrative
|
108,943
|
129,685
|
225,972
|
232,902
|
|||||
|
501,893
|
540,634
|
986,938
|
1,030,301
|
||||||
|
Operating loss
|
(179,004)
|
(214,553)
|
(389,575)
|
(428,715)
|
|||||
|
Other income, net
|
3,885
|
1,700
|
7,139
|
4,989
|
|||||
|
Loss from continuing operations before tax benefit
|
(175,119)
|
(212,853)
|
(382,436)
|
(423,726)
|
|||||
|
Income tax benefit
|
(68,307)
|
(86,381)
|
(147,986)
|
(166,637)
|
|||||
|
Net loss from continuing operations
|
(106,812)
|
(126,472)
|
(234,450)
|
(257,089)
|
|||||
|
Net loss from discontinued operations
|
(2,237)
|
(2,115)
|
(5,280)
|
(5,132)
|
|||||
|
Net loss
|
$ (109,049)
|
$ (128,587)
|
$ (239,730)
|
$ (262,221)
|
|||||
|
Basic and diluted earnings (loss) per share:
|
|||||||||
|
Net loss from continuing operations
|
$ (0.35)
|
$ (0.38)
|
$ (0.75)
|
$ (0.77)
|
|||||
|
Net loss from discontinued operations
|
(0.01)
|
-
|
(0.02)
|
(0.01)
|
|||||
|
Net loss
|
$ (0.36)
|
$ (0.38)
|
$ (0.77)
|
$ (0.78)
|
|||||
|
Basic and diluted shares outstanding
|
306,804
|
335,346
|
313,247
|
334,939
|
|||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Unaudited, amounts in thousands
|
|
Six months ended October 31,
|
|||||||||
|
2010
|
2009
|
||||||||
|
Net cash used in operating activities
|
$ (548,001)
|
$ (786,152)
|
|||||||
|
Cash flows from investing activities:
|
|||||||||
|
Principal payments on mortgage loans held for investment, net
|
30,829
|
38,693
|
|||||||
|
Purchases of property and equipment, net
|
(35,005)
|
(7,280)
|
|||||||
|
Payments made for business acquisitions, net
|
(43,310)
|
(6,606)
|
|||||||
|
Other, net
|
30,851
|
18,473
|
|||||||
|
Net cash provided by (used in) investing activities
|
(16,635)
|
43,280
|
|||||||
|
Cash flows from financing activities:
|
|||||||||
|
Repayments of short-term borrowings
|
(75,000)
|
-
|
|||||||
|
Proceeds from short-term borrowings
|
114,490
|
-
|
|||||||
|
Customer banking deposits
|
77,023
|
638,466
|
|||||||
|
Dividends paid
|
(95,068)
|
(100,784)
|
|||||||
|
Repurchase of common stock, including shares surrendered
|
(283,470)
|
(3,785)
|
|||||||
|
Proceeds from exercise of stock options
|
1,493
|
8,218
|
|||||||
|
Other, net
|
(21,352)
|
(30,884)
|
|||||||
|
Net cash provided by (used in) financing activities
|
(281,884)
|
511,231
|
|||||||
|
Effects of exchange rates on cash
|
2,221
|
9,221
|
|||||||
|
Net decrease in cash and cash equivalents
|
(844,299)
|
(222,420)
|
|||||||
|
Cash and cash equivalents at beginning of the period
|
1,804,045
|
1,654,663
|
|||||||
|
Cash and cash equivalents at end of the period
|
$ 959,746
|
$ 1,432,243
|
|||||||
|
Supplementary cash flow data:
|
|||||||||
|
Income taxes paid
|
$ 103,803
|
$ 196,427
|
|||||||
|
Interest paid on borrowings
|
30,933
|
37,304
|
|||||||
|
Interest paid on deposits
|
3,828
|
4,134
|
|||||||
|
Transfers of loans to foreclosed assets
|
11,185
|
9,212
|
|||||||