Tax consulting service provider H&R Block, Inc. (HRB), Monday reported a 6.9% increase in third quarter profit, helped by a narrower loss from its discontinued operations, notwithstanding a 5.9% decline in revenue for the quarter. Earnings results for the third quarter surpassed analysts' view, but revenue fell short of estimate.
The Kansas City, Missouri-based company reported consolidated net income for the third quarter of $50.64 million or $0.15 per share, compared to $47.36 million or $0.14 per share in the year-ago quarter.
Income from continuing operations for the quarter was $53.60 million or $0.16 per share, down from $66.83 million or $0.20 per share in the prior year period. Loss from discontinued operations narrowed to $2.97 million or $0.01 per share from $47.36 million or $0.06 per share in the third quarter of 2009.
On average, nine analysts polled by Thomson Reuters expected the company to earn $0.15 per share for the quarter. Analysts estimates typically exclude special items.
The company, founded by brothers Henry W. and Richard Bloch in 1955, claims more than 22 million customers worldwide. The company operates 12,500 retail tax offices in the U.S. and another 1,400 abroad. The company also offers banking, personal finance and business consulting services.
Revenues for the quarter decreased 5.9% to $934.85 million from $993.45 billion in the prior-year quarter. Five analysts had a revenue consensus of $949.55 million for the third quarter.
In the immediately preceding second quarter, the company's loss narrowed driven by cost control efforts and narrower loss in the Tax Services segment. For the second-quarter, net loss narrowed to $128.59 million or $0.38 per share on revenues that declined 7.2% to $326.08 million over last year.
Among others in the sector, business and financial management solutions provider Intuit Inc. (INTU) reported that its profit for the second quarter increased by 34% over last year, helped by strong sales of TurboTax federal units. For the second quarter, the company reported net income of $114 million or $0.35 per share, and non-GAAP net income of $122 million or $0.38 per share, on revenues of $837 million.
Segment wise, H&R Block's Tax Services business generated revenues of $747.69 million in the third quarter, down 6.2% from last year, reflecting a 7.1% decline in total retail tax returns prepared. Total tax preparation revenues through February 28 fell 7.1% over the comparable period in 2009, reflecting a 9.4% decline in total retail returns prepared, partially offset by the impact of an increase of 2.4% in net average fees per retail return. The segment's pretax income was $131.2 million, essentially flat with a year ago, despite the decline in revenues.
H&R Block's Business Services segment, RSM McGladrey, reported revenues of $178.48 million, down 3.6% from last year's $185.18 million, due to the impact of the overall weaker economic environment, , which continues to pressure billable rates and hours within the industry. The segment reported a third quarter pretax loss of $11.2 million compared to pretax income of $10.7 million a year ago, mainly due to a $15.0 million goodwill impairment related to RSM's capital markets business.
During the third quarter, the company repurchased and retired 6.8 million shares during the third quarter at an aggregate price of $150.0 million.
On March 4, the company closed a new $1.7 billion committed line of credit or CLOC with a consortium of banks led by Bank of America, N.A., Wells Fargo Bank, N.A. and BNP Paribas. The facility replaces the company's prior aggregate $2 billion CLOCs and will mature in July, 2013. The $650 million quarter-end net worth covenant remains unchanged.
For the nine-month period, the company's net loss was $211.59 million or $0.63 per share, compared to a loss of $221.23 million or $0.67 per share last year. Net loss from continuing operations for the period widened to $203.49 million or $0.61 per share from $194.75 million or $0.59 per share a year ago.
Total revenues for the nine-month period declined to $1.54 billion from $1.62 billion in the same period prior year.
Russ Smyth, president and chief executive officer of H&R Block commented, "While we are disappointed with our early results this tax season, we remain committed to improving our performance as the remainder of the season unfolds. We expect to outperform our competitors regardless of the external factors like unemployment rates, but we have not done so to-date."
HRB closed Monday's regular trading at $16.74, up $0.05 or 0.30%, on a volume of 4.74 million shares. However, the stock lost $0.49 or 2.93%, and traded at $16.41 in after hours. The stock traded between $13.73 and $23.23 in the past 52 weeks, with a three-month average volume of 3.89 shares.
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