H&R Block’s (NYSE:HRB) fiscal fourth-quarter earnings from continuing operations came in at $2.11 per share, up 7 cents from the Zacks Consensus Estimate of $2.04. This also compares favorably with earnings of $2.08 per share in the year-ago period. Net income from continuing operations for the quarter was $692.4 million versus $707.8 million reported in fourth-quarter 2009.
The better-than-expected results were aided by lower operating expense and share buybacks. However, revenue suffered a decline from fewer tax filings.
Including net loss from discontinued operations of $1.6 million or 1 cent per share, H&R Block’s net income for the reported quarter came in at $690.8 million or $2.10 per share, compared with $706.9 million or $2.08 per share in the year-ago quarter.
Revenues for the reported quarter were $2.3 billion, down 5.2% from $2.5 billion recorded in the year-ago quarter.
Fiscal Year 2010
Earnings from continuing operations for the fiscal year 2010 came in at $1.46 per share, compared with $1.53 in the previous year. Fiscal 2010 earnings per share surpassed the Zacks Consensus Estimate of $1.40 by 6 cents. Net income from continuing operations for full-year 2010 was $488.9 million versus $513.1 million reported in full-year 2009.
Including net loss from discontinued operations of $9.7 million or 3 cents per share, H&R Block's reported net income of $479.2 million or $1.43 per share in fiscal year 2010 compared with $485.7 million or $1.45 per share a year ago. Reported net income in fiscal year 2009 includes net loss from discontinued operations of $27.4 million or 8 cents per share.
H&R Block’s revenues for the fiscal year 2010 came in at $3.9 billion, a decline of 5.1% from $4.1 billion recorded a year ago.
Revenues from Tax Services were $2.0 billion in the fourth quarter of 2010, versus $2.1 billion in the year-ago period. Fiscal year 2010 revenues were $2.9 billion, a 5% year-over-year decline from $3.1 billion in fiscal year 2009, due to a 6.1% decrease in total retail returns prepared, partially mitigated by a 1.1% increase in net average fees per retail return.
Business Service revenues totaled $297.6 million for the quarter, compared with $304.9 million in the year-ago quarter. Fiscal year 2010 revenues totaled $860.3 million, a decline of 4.2% from $897.8 million a year ago, primarily due to the sluggish economic environment weighing on billable rates and hours within the industry.
Corporate and Eliminations posted revenues of $9.9 million, compared with $13 million in the prior-year quarter. Fiscal year 2010 revenues totaled $38.7 million versus $53.7 million a year ago.
H&R Block ended the year with cash and cash equivalent of $1.8 billion, compared with $1.7 billion at the end of fiscal 2009. Total outstanding debt at the end of fiscal 2010 was $1.1 billion, flat with debt outstanding at the end of fiscal 2009.
Net cash provided by operating activities for 2010 was $587.5 million versus $1 billion in 2009.
Share Repurchase and Dividend
H&R Block bought back 6 million shares for $100 million during the fourth-quarter 2010. The company repurchased a total of 12.8 million shares for $250 million in fiscal 2010.
H&R Block will also pay a quarterly cash dividend of 15 cents per share on July 1, 2010 to shareholders of record on June 10, 2010.
H&R Block intends to lower operating expenses by $140 – $150 million per year by the end of fiscal year 2012. The realignment of field and support services announced by H&R Block in May will help in achieving this target. Also, 400 full-time positions were eliminated and 400 tax offices were closed down due to the realignment.
In the retail business, H&R Block expects to assertively market in the early season, focus on financial products and improve client service. In its digital business, H&R Block will focus on drawing more new clients to its online segment. At McGladrey, it expects to leverage the partnership agreement to further enhance its presence in the middle market segment.
H&R Block is under pressure due to the high level of unemployment that led to fewer number of returns being filed by its core retail tax client base. However, the company remains focused on increasing its client retention rate as well as optimizing its cost structure to post solid results going forward.