H&R Block 4Q income falls 11 pct as revenue dips
Tuesday, June 26, 2012
CHICAGO (AP) — H&R Block said Tuesday its fiscal fourth-quarter profit declined 11 percent from a year ago on slightly lower revenue and costs from restructuring.
Despite preparing a record number of tax returns, the nation’s largest tax preparer said sales of its financial products slipped, in part because it offered free refund advances to customers using its prepaid debit cards.
For the three months ended April 30, Block’s net income slipped to $586.1 million, or $1.99 per share, from $658.6 million, or $2.14 per share. Revenue fell 2 percent to $2 billion from $2.05 billion.
Analysts were expecting a quarterly profit of $2.05 per share, on revenue of $2 billion, according to FactSet.
Results included $31.2 million in severance costs and $5.5 million in impairment charges after the company eliminated 350 jobs and closed about 200 stores.
The reorganization was launched in April by then-first-year CEO Bill Cobb, who expects the moves to save up to $100 million per year by the end of fiscal 2013.
The shake-up included the departures of Chief Financial Officer Jeff Brown and Philip Mazzini, president of retail tax services. Brown was succeeded this month by former Ceridian Corp. CFO Greg Macfarlane.
Cobb said Tuesday that the reorganization has helped reduce costs, leading to higher profit margins and a company refocused on its core business of tax preparation. He also said Block boosted its U.S. market share by 0.3 percentage points with gains in both the do-it-yourself and assisted categories.
“Today, we believe we’re running a better, nimbler, and more client-centric company, which positions us well for long-term client and earnings growth,” Cobb said.
The company said it prepared 25.6 million tax returns worldwide in fiscal 2012, up 4 percent.
In the U.S., returns rose 4.2 percent and online tax prep jumped 19 percent.
Higher tax preparation revenue was offset by giving free refund anticipation checks to clients who agreed to deposit their refunds on the company’s Emerald prepaid MasterCard. That resulted in a 24 percent jump in cards issued but a $49.3 million decline in revenue from the program.
Cobb indicated he expects no further consequences for Block as a result of the agreement reached in April with the U.S. Securities and Exchange Commission. That deal settled charges that its former Option One Mortgage Corp. unit misled investors about subprime mortgage offerings. The unit, now called Sand Canyon Corp., agreed to pay $28.2 million.
“Sand Canyon is a separate legal entity from H&R Block and we believe our legal position is strong on any potential corporate veil-piercing arguments,” he said.
For the full fiscal year, Block reported net income of $265.9 million, or 89 cents per share, down 35 percent from $406.1 million, or $1.31 per share, a year earlier. Revenue declined 1.7 percent to $2.89 billion from $2.94 billion.
Shares in the company rose 21 cents, or 1.4 percent, to $15.30 in after-hours trading following the release of the earnings report. They had declined 12 cents to $15.09 during the regular session.
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