Bloomberg News

H&R Block Profit Beats Own Forecast as Tax Returns Climb

June 26, 2012

H&R Block Inc. (HRB:US), the biggest U.S. tax preparer, posted a fiscal fourth-quarter profit that exceeded the company’s reduced forecast as processed returns climbed.

Net income from continuing operations for the three months ended April 30 fell 7.9 percent to $591.7 million, or $2.01 a share, from $642.8 million, or $2.09, a year earlier, the Kansas City, Missouri-based company said today in a statement. Full- year earnings per share were $1.16, beating the company’s earlier forecast of $1.09 to $1.15.

Chief Executive Officer Bill Cobb, a former marketing executive at EBay Inc. and PepsiCo Inc., is cutting jobs and closing offices as H&R Block vies to recapture market share from TurboTax maker Intuit Inc. (INTU:US) The moves may save an annualized $85 million to $100 million by the end of the current fiscal year, the firm said in April.

“We achieved our top goal this fiscal year by growing clients and share in both the assisted and digital categories for the second consecutive year,” Cobb, 55, said in the statement. “We also rationalized our cost structure and shed non-core assets to drive higher margins and to refocus the business on what we do best -- tax preparation.”

H&R Block fell 12 cents to $15.09 at 4 p.m. in New York. The shares have dropped 7.6 percent this year, compared with a 5 percent gain for the Standard & Poor’s 500 Index. (SPX)

Total tax returns prepared worldwide climbed 4.3 percent to a record 25.6 million for the 2012 tax season. The company estimated that it gained 30 basis points of total U.S. market share, including 75 basis points in the do-it-yourself category, according to the statement.

Market Share

Intuit controls about 80 percent of the U.S. market at the retail level and 60 percent for returns prepared online, company Treasurer Marjorie Thomas said during a May 30 investor presentation by the Mountain View, California-based company.

“We were hoping to see that grow and we really held as far as our market share was concerned this year,” Thomas said. Even as TurboTax revenue climbed 11 percent in the three months ended April 30, “we were a little dissatisfied with our own performance,” she said.

Tax-filing firms typically post losses in the first half of the fiscal year, before collecting revenue from tax returns. The U.S. tax season ends in mid-April, pushing the bulk of their profit to the final quarter.

H&R Block said in April that it will eliminate 350 full- time jobs and shutter 200 retail tax offices. Earlier this month, Gregory J. Macfarlane joined the company as chief financial officer, its fourth since 2007.

Share Repurchases

Cobb, whose appointment last year marked the firm’s fifth CEO change in less than five years, has boosted spending on marketing and offered free services in a bid to recapture share. The firm also has grappled with the loss of revenue from refund- anticipation loans for a second year after U.S. regulators prompted HSBC Holdings Plc to stop offering them.

Fourth-quarter revenue fell 2.2 percent to $2 billion from a year earlier, the company said. The company repurchased 14.6 million shares for a total of $200 million, or $13.74 a share, during fiscal 2012 and repurchased an additional 21.3 million shares for a total of $315 million, or $14.82 a share, in the current quarter, according to the statement.

H&R Block agreed in April to pay more than $28 million to resolve Securities and Exchange Commission claims that its Option One Mortgage Corp. unit, now known as Sand Canyon Corp., didn’t tell investors it may be unable to make good on obligations to repurchase faulty mortgages without assistance. From Jan. 31 through April 24, Sand Canyon received new claims tied to home loans with principal of $543 million, H&R Block said in a regulatory filing.

To contact the reporter on this story: Laura J. Keller in New York at lkeller12@bloomberg.net

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net


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Companies Mentioned

  • HRB
    (H&R Block Inc)
    • $32.65 USD
    • -0.25
    • -0.77%
  • INTU
    (Intuit Inc)
    • $80.27 USD
    • -0.79
    • -0.98%
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