H&R Block Inc.
) second quarter 2013, ending October 30, adjusted loss from
continuing operations came in at 37 cents per share ,narrower
than the Zacks Consensus Estimate loss of 40 cents. It was in
line with the loss reported in the year-ago period.
Adjusted net loss from continuing operations for the quarter was
$99.9 million, improving nearly 11% from $112 million incurred in
the year-ago quarter.
Including loss contingencies - litigation charges of $1.5
million, impairment of goodwill and intangibles of $0.9 million,
severance cost of $0.9 million, gain on sale of tax offices of
$0.4 million and discrete tax item of $1.5 million, and net loss
from discontinued operations of $4 million - the company reported
net loss of $105 million or 39 cents per share. The loss narrowed
from $142 million or 47 cents per share incurred in the year-ago
Revenue, in the quarter under review, stood at $137 million, up
6% year over year. The year-over-year rise was the result of
strong tax season in Australia. Revenue surpassed the Zacks
Consensus Estimate of $129 million.
Total expense in the quarter was $302.3 million, waning 10% over
the prior-year quarter, primarily aided by lower selling, general
and administrative expenses, lower compensation and benefits as
well as lower occupancy and equipment costs.
Operating loss in the quarter narrowed to $165.1 million from
$206.4 million in the second quarter of fiscal 2012.
revenue was $130 million in the reported quarter, reflecting an
improvement of 7%, primarily due to an increase in tax returns
prepared in Australia.
Pre-tax loss for the segment was $26 million, plummeting 17% year
over year on the back lower field wages and occupancy costs due
to cost reduction initiatives.
Corporate and Eliminations
posted revenue of $7.4 million, down 9.7% from the prior-year
quarter. The decline was attributable to lower interest income
from H&R Block Bank's shrinking mortgage loan portfolio.
The segment's pre-tax loss in the quarter was $32 million, wider
from the loss of $30 million in the year-ago quarter.
H&R Block ended fiscal second quarter 2013 with cash and cash
equivalents of $1.3 billion, increasing more than two fold from
$0.6 billion reported at the end of fiscal second quarter 2012.
Total outstanding long-term debt at the end of the reported
quarter was $0.9 billion, a 10% drop from the year-ago level.
Net cash used in operating activities in the first half of fiscal
2013 was $567 million, higher than $583 million used in the
On January 2, 2013, the company will pay a dividend of 20 cents
per share to the shareholders of record as of December 10, 2012.
H&R Block expects cost reduction initiatives to help it
deliver $85-$100 million of pretax earnings in fiscal 2013.
) reported first quarter 2013 adjusted loss per share of 14
cents, narrower than the Zacks Consensus Estimate of a loss of 17
cents per share.
Intuit reported revenues of $647.0 million in the first quarter,
up 12.5% from $575.0 million in the prior-year quarter. Reported
revenue was above the management's guidance range of
H&R Block's leading position in the tax preparer market along
with its strategic initiatives to grow its business by gaining
and retaining customers augur well for long-term growth. The
company's efforts to return more value to its shareholders will
also help retain investors' confidence in the stock. Also,
H&R Block is increasing its share in the digital and assisted
With cost reduction initiatives bearing fruit and a successful
first tax season in Brazil and India, we believe H&R Block
remains well positioned. It also entered into an agreement with
), where it intends to focus on 112 best performing Sear
locations while shutting down the rest. H&R Block expects
this move to be slightly accretive to fiscal 2013 earnings.
Nevertheless, H&R Block expects to retain its clients, as
it experienced 75% client retention despite shutting down 200
Sears locations since 2008. The agreement also entails it to
establish temporary offices in other Sears locations during the
peak tax season.
BLOCK H & R (HRB): Free Stock Analysis
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H&R Block is also exploring alternatives in order to stop
H&R Block Bank from being regulated by the Federal Reserve as
a savings and loan holding company, since the proposed rules of
Federal Reserve would require higher capital requirements on
savings and loan holding companies.
We retain our Neutral recommendation on H&R Block. The
quantitative Zacks #3 Rank (short-term Hold rating) for the
company indicates no clear directional pressure on the shares
over the near term.