<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-6089
H&R BLOCK, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 44-0607856
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 MAIN STREET
KANSAS CITY, MISSOURI 64111
(Address of principal executive offices, including zip code)
(816) 753-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the registrant's Common Stock, without par
value, at August 31, 1996 was 103,997,246 shares.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
PART I Financial Information
Consolidated Balance Sheets
July 31, 1996 and April 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations
Three Months Ended July 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows
Three Months Ended July 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
H&R BLOCK, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited, amounts in thousands, except share amounts
<TABLE>
<CAPTION>
JULY 31, APRIL 30,
1996 1996
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash (including certificates of deposit of $66,915 and $22,093) $ 151,155 $ 339,055
Marketable securities 293,716 389,557
Receivables, less allowance for doubtful accounts 357,040 333,734
Prepaids and other current assets 62,804 59,912
------------- ------------
TOTAL CURRENT ASSETS 864,715 1,122,258
INVESTMENTS AND OTHER ASSETS
Investments in marketable securities 18,313 17,081
Excess of cost over fair value of net tangible assets acquired, net 77,485 61,141
Deferred subscriber acquisition costs, net 104,438 96,636
Other 61,803 59,201
------------- ------------
262,039 234,059
PROPERTY AND EQUIPMENT, at cost less accumulated
depreciation and amortization 435,076 399,574
------------- ------------
$ 1,561,830 $ 1,755,891
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 112,109 $ 72,651
Accounts payable, accrued expenses and deposits 166,645 201,320
Accrued salaries, wages and payroll taxes 22,214 109,870
Accrued taxes on earnings 43,438 94,406
------------- ------------
TOTAL CURRENT LIABILITIES 344,406 478,247
DEFERRED INCOME TAXES 52,024 46,700
OTHER NONCURRENT LIABILITIES 40,334 38,222
MINORITY INTEREST 147,245 153,129
CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par, stated value $.01 per share 1,089 1,089
Convertible preferred stock, no par, stated value $.01 per share 4 4
Additional paid-in capital 503,094 504,694
Retained earnings 664,372 747,212
------------- ------------
1,168,559 1,252,999
Less cost of 4,966,960 and 5,556,097 shares of common stock
in treasury 190,738 213,406
------------- ------------
977,821 1,039,593
------------- ------------
$ 1,561,830 $ 1,755,891
============= ============
</TABLE>
See Notes to Consolidated Financial Statements.
-1-
<PAGE> 4
H&R BLOCK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited, amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 31,
--------
1996 1995
---- ----
<S> <C> <C>
REVENUES
Service revenues $ 223,713 $ 199,347
Franchise royalties 1,817 1,395
Other revenues 1,728 620
------------ -----------
227,258 201,362
------------ -----------
OPERATING EXPENSES
Employee compensation and benefits 68,323 54,904
Occupancy and equipment 124,730 81,511
Marketing and advertising 31,601 3,577
Supplies, freight and postage 10,207 15,211
Other 93,428 54,428
------------ -----------
328,289 209,631
------------ -----------
Operating loss (101,031) (8,269)
OTHER INCOME
Investment income 7,074 4,307
Other - 12,445
------------ -----------
7,074 16,752
------------ -----------
Earnings (loss) before income taxes and minority interest (93,957) 8,483
Income tax expense (benefit) (35,846) 3,257
------------ -----------
Net earnings (loss) before minority interest (58,111) 5,226
Minority interest in consolidated subsidiary (5,885) -
------------ -----------
Net earnings (loss) $ (52,226) $ 5,226
============ ===========
Weighted average number of shares outstanding 103,823 107,103
============ ===========
Net earnings (loss) per share $ (.50) $ .05
============ ===========
Dividends per share $ .32 $ .3125
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 5
H&R BLOCK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited, amounts in thousands
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 31,
--------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (52,226) $ 5,226
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Depreciation and amortization 37,588 27,563
Amortization of deferred subscriber acquisition costs 19,013 -
Gain on sale of subsidiaries - (12,445)
Deferred subscriber acquisition costs (26,815) -
Provision for deferred taxes 5,256 2,734
Other noncurrent liabilities 2,112 2,090
Minority interest (5,885) -
Changes in:
Receivables (23,306) (3,888)
Prepaid expenses (2,825) (15,940)
Accounts payable, accrued expenses and deposits (35,719) (24,887)
Accrued salaries, wages and payroll taxes (87,656) (52,794)
Accrued taxes on earnings (53,420) (32,887)
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (223,883) (105,228)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities (641,688) (287,390)
Maturities of marketable securities 742,794 393,821
Purchases of property and equipment (66,108) (46,013)
Excess of cost over fair value of net tangible assets acquired, net
of cash acquired (2,226) (216)
Proceeds from sale of subsidiary - 35,000
Other, net (5,014) (6,563)
------------ -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 27,758 88,639
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable (1,298,813) (309,547)
Proceeds from issuance of notes payable 1,338,271 303,995
Dividends paid (33,095) (32,767)
Proceeds from stock options exercised 1,862 3,297
------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 8,225 (35,022)
------------ -----------
NET DECREASE IN CASH (187,900) (51,611)
CASH AT BEGINNING OF PERIOD 339,055 90,248
------------ -----------
CASH AT END OF PERIOD $ 151,155 $ 38,637
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid $ 12,319 $ 33,408
Interest paid 1,343 840
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 6
H&R BLOCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited, dollars in thousands, except share data
1. The Consolidated Balance Sheet as of July 31, 1996, the Consolidated
Statements of Operations for the three months ended July 31, 1996 and
1995 and the Consolidated Statements of Cash Flows for the three months
ended July 31, 1996 and 1995 have been prepared by the Company, without
audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at July 31, 1996 and for
all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's April 30, 1996
Annual Report to Shareholders.
Certain reclassifications have been made to prior period amounts to
conform to current period presentation and to reflect the
reclassification of CompuServe Corporation's operations as described in
Note 3.
Operating revenues are seasonal in nature with peak revenues occurring in
the months January through April. Thus, the three month results are not
indicative of results to be expected for the year.
2. Included in other expenses for the three months ended July 31, 1996 is a
charge totaling $17,713 recorded by the Computer Services segment. This
charge relates to the estimated loss on the potential sale or other
disposition of certain assets and business operations of a corporate
computer software group; the consolidation of certain U.S.-based staff
functions and office facilities; the renegotiation of certain third-party
customer service agreements; and the write-off of certain obsolete
software costs for billing and customer service systems.
3. On July 16, 1996, the Company's Board of Directors approved a plan to
spin-off the Company's remaining ownership interest of approximately
80.1% in CompuServe Corporation ("CompuServe") on or about November 1,
1996. The spin-off was subject to, among other things, shareholder
approval at the Company's annual meeting on September 11, 1996 and a
favorable ruling from the Internal Revenue Service as to the tax-free
nature of the distribution.
On August 28, 1996, the Company's Board of Directors decided not to
present the proposed spin-off to shareholders at the September 1996
annual meeting. This decision was based, in part, on CompuServe's
reported first quarter and projected second quarter losses, market
uncertainties related to the online industry and the planned September
introduction of new interfaces for CompuServe Information Service and
WOW! As a result of this action, the accompanying balance sheet as of
April 30, 1996 has been reclassified to include CompuServe's net assets
as continuing operations.
4. During the quarter ended July 31, 1996, the net unrealized holding gain
on available-for-sale securities decreased $323 to $846.
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<PAGE> 7
5. The Company files its Federal and state income tax returns on a
calendar year basis. The Consolidated Statements of Operations reflect
the effective tax rates expected to be applicable for the respective full
fiscal years.
6. Net earnings (loss) per common share is based on the weighted average
number of shares outstanding during each period, including, where
applicable, the dilutive effect of stock options and convertible
preferred stock outstanding. The weighted average shares outstanding for
the first quarter of fiscal 1997 decreased to 103,823,000 from
107,103,000 last year, due to common stock equivalents which were
dilutive in the first quarter of last year.
7. During the three months ended July 31, 1996 and 1995, the Company issued
27,406 and 48,905 shares, respectively, pursuant to provisions for
exercise of its stock option plans.
8. In June 1996, a purported shareholder class action complaint was filed
against CompuServe and the Company in the Court of Common Pleas, Franklin
County, Ohio, entitled Greenfield v. CompuServe Corporation et al. A
second purported shareholder class action suit was filed in July 1996
against CompuServe and the Company in federal district court for the
Southern District of Ohio, entitled Romine v. CompuServe Corporation, et
al. A third purported shareholder class action suit was filed in August
1996 against CompuServe, the Company and the lead underwriters in
CompuServe's initial public offering of its common stock in April 1996
(the "IPO") in federal district court for the District of Minnesota,
entitled Acker v. CompuServe Corporation, et al. These three complaints
also name certain officers and directors of CompuServe at the time of the
IPO as additional defendants. Each suit alleges similar violations of
the Securities Act of 1933 based on assertions of omissions and
misstatements of fact in connection with CompuServe's public filings
related to the IPO. The Greenfield suit also alleges similar violations
of the Ohio Securities Code and common law of negligent
misrepresentation. Relief sought is unspecified but includes pleas for
rescission and damages. In August 1996, an action for discovery was
filed solely against CompuServe on behalf of a shareholder in the Court
of Common Pleas, Franklin County, Ohio, entitled Schnipper v. CompuServe
Corporation, seeking factual support for a possible fourth claim relating
to disclosures in connection with the IPO. The Company and CompuServe
intend to vigorously defend these suits.
-5-
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
These comments should be read in conjunction with the Consolidated Balance
Sheets and Consolidated Statements of Cash Flows found on pages 1 and 3,
respectively.
Working capital decreased from $644.0 million at April 30, 1996 to $520.3
million at July 31, 1996. The working capital ratio at July 31, 1996 was 2.5
to 1 compared to 2.3 to 1 at April 30, 1996. The decrease in working capital
must be viewed in the context of the Company's business which is seasonal, with
peak activity in the fourth quarter, due to the nature of the Company's Tax
Services segment. Tax return preparation occurs almost entirely in the fourth
quarter and has the effect of increasing certain assets and liabilities during
this time.
The Company has no long-term debt. However, the Company maintains seasonal
lines of credit to support short-term borrowing facilities in the United States
and Canada. During the months of January through April, the Company's Canadian
Tax Services regularly incurs short-term borrowings to purchase refunds due its
clients. Additionally, Block Financial Corporation (BFC), a wholly-owned
subsidiary of the Company, incurs short-term borrowings throughout the year to
fund receivables associated with its credit card and other financial service
programs. At July 31, 1996, short-term borrowings used to fund credit card
receivables and other programs totaled $112.1 million, compared to $72.7
million at April 30, 1996. The Company maintains a year-round $150 million
line of credit to support various financial activities conducted by BFC, as
well as a $25 million line of credit to support liquidity needs of CompuServe
Corporation ("CompuServe").
During the upcoming tax season, the Company plans to use short-term borrowings
to purchase a participating interest of 40 to nearly 50 percent in certain
Refund Anticipation Loans ("RALs") offered through Beneficial National Bank.
RALs are loans that are expected to be retired by an income tax refund.
The Company's capital expenditures and dividend payments during the first three
months were funded through internally-generated funds and the proceeds from
CompuServe Corporation's initial public offering of its common stock in April
1996.
On July 16, 1996, the Company's Board of Directors approved a plan to spin-off
the Company's remaining interest of approximately 80.1% in CompuServe
Corporation ("CompuServe") on or about November 1, 1996. The spin-off was
subject to, among other things, shareholder approval at the Company's annual
meeting on September 11, 1996 and a favorable ruling from the Internal Revenue
Service as to the tax-free nature of the distribution.
On August 28, 1996, the Company's Board of Directors decided not to present the
proposed spin-off to shareholders at the September 1996 annual meeting. This
decision was based, in part, on CompuServe's reported first quarter and
projected second quarter losses, market uncertainties related to the online
industry and the planned September introduction of new interfaces for
CompuServe Information Service and WOW! As a result of this action, the
accompanying balance sheet as of April 30, 1996 has been reclassified to
include CompuServe's net assets as continuing operations.
In August 1996, CompuServe announced that incremental costs associated with the
introduction of CompuServe 3.0 and a new release of WOW! directed toward
teenagers are anticipated to result in a significant second quarter loss
reported by the Computer Services segment. In conjunction with the $17.7
million charge described in the Notes to Consolidated Financial Statements,
CompuServe expects to reduce costs over $20 million for the balance of fiscal
1997 and over $30 million on an annualized basis.
-6-
<PAGE> 9
RESULTS OF OPERATIONS
The analysis of operations that follows should be read in conjunction with the
table below and the Consolidated Statements of Operations found on page 2.
Prior period amounts have been reclassified to conform to current period
presentation.
THREE MONTHS ENDED JULY 31, 1996 COMPARED TO
THREE MONTHS ENDED JULY 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Revenues Earnings (loss)
--------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computer services $ 208,642 $ 186,550 $ (48,070) $ 44,130
Tax services 12,282 9,956 (45,229) (41,219)
Financial services 8,224 6,292 (1,022) 3,484
Unallocated corporate 109 575 (3,579) (2,219)
Corporate investment income - - 3,943 4,307
Inter-segment sales (1,999) (2,011) - -
------------ ----------- ------------ ------------
$ 227,258 $ 201,362 (93,957) 8,483
============ ===========
Income tax expense (benefit) (35,846) 3,257
------------ ------------
Net earnings (loss) before
minority interest (58,111) 5,226
Minority interest (5,885) -
------------ ------------
Net earnings (loss) $ (52,226) $ 5,226
============ ============
</TABLE>
Consolidated revenues for the three months ended July 31, 1996 increased 12.9%
to $227.258 million from $201.362 million last year. All of the operating
segments contributed to the increase in revenues.
The consolidated pretax loss before minority interest for the first quarter of
fiscal 1997 was $93.957 million, compared to pretax earnings of $8.483 million
in the first quarter of last year. The unfavorable trend in operating results
is primarily due to the Computer Services segment, which had a pretax loss of
$48.070 million compared to pretax earnings of $44.130 million last year.
Additionally, last year's results include the gain on the sale of MECA
Software, Inc. of $12.445 million before taxes, partially offset by a
write-down of impaired assets associated with the tax preparation software
business of $8.389 million. The net loss was $52.226 million, or $.50 per
share, compared to net earnings of $5.226 million, or $.05 per share, for the
same period last year.
An analysis of operations by segment follows.
COMPUTER SERVICES
Revenues increased 11.8% to $208.642 million from $186.550 million in the
comparable period last year due to increases in both Online Services and
Network Services revenues. Online Services revenues were 5.4% better than last
year as a result of an increase in the number of subscribers. The number of
CompuServe Information Service ("CIS") subscribers at July 31, 1996, exclusive
of the Japanese licensee, increased 26.1% to 3.1 million from 2.4 million last
year. This increase was significantly offset by a 24.2% decrease in the
average monthly CIS total revenue per subscriber, which was $14.48 for the
quarter ended July 31, 1996 compared to $19.11 for last year's first quarter.
This decrease is directly related to the new pricing structure implemented in
September 1995, which was the largest reduction in the history of the company.
Average monthly CIS total revenue per
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<PAGE> 10
subscriber includes revenues from fees, usage, product sales, online
advertising, mall, magazine and CD-ROM subscriptions.
Network Services revenues were 31.5% better than last year, also due to an
increase in the number of network customers and increased usage by existing
customers. The number of network customers increased 24.9% over last year to
1,009. Commercial customer hours increased to 19.5 million hours this quarter
from 9.7 million in last year's comparable quarter.
Operating expenses increased 82.4% to $259.843 million from $142.420 million
last year. Nearly half of the increase in expenses is attributable to the cost
of increased network hours and higher outsourced customer service costs and
additional customer service and network operations staff to support significant
world-wide customer growth during the past year. Online subscriber hours
increased 83.7% to 38.1 million hours for the first quarter of fiscal 1997 from
20.7 million hours in the comparable period last year. Marketing expenses for
the quarter increased $31.454 million over last year, due to $9.2 million
expended for the new WOW! service launched in March 1996 and increased general
consumer advertising on television and in periodicals. First quarter fiscal
1997 expenses also include a charge totalling $17.713 million before taxes.
This charge relates to the estimated loss on the potential sale or other
disposition of certain assets and business operations of a corporate computer
software group; the consolidation of certain U.S.-based staff functions and
office facilities; the renegotiation of certain third-party customer service
agreements; and the write-off of certain obsolete software costs for billing
and customer service systems.
The first quarter pretax loss was $48.070 million, compared to pretax earnings
of $44.130 million in the first quarter of fiscal 1996. The current quarter
pretax loss includes investment income of $3.131 million earned on the
remaining IPO proceeds.
TAX SERVICES
Revenues increased 23.4% to $12.282 million from $9.956 million last year, due
primarily to higher tax preparation fees resulting from increases in pricing
and in the number of returns prepared.
The pretax loss increased 9.7% to $45.229 million from $41.219 million in the
first quarter of last year, due to anticipated increases in compensation, rent
and utilities. Expenses for the quarter were higher than last year also due to
incremental operating costs and goodwill amortization resulting from the
acquisition of tax businesses during fiscal 1996. Due to the seasonality of
this segment's business, first quarter operating results are not indicative of
expected results for the entire fiscal year.
FINANCIAL SERVICES
Revenues increased 30.7% to $8.224 million compared to $6.292 million for the
same period last year. The increase is primarily due to larger revolving
balances associated with credit card operations.
The pretax loss was $1.022 million, compared to pretax earnings of $3.484
million in the first quarter of fiscal 1996. The first quarter of fiscal 1996
included a gain on the sale of MECA Software, Inc. of $12.445 million,
partially offset by a write-down of impaired assets associated with the tax
preparation software business of $8.389 million. Exclusive of these items, the
pretax loss increased from a loss of $572 thousand last year primarily due to
increased employee-related and marketing expenses.
-8-
<PAGE> 11
INVESTMENT INCOME
Investment income decreased 8.5% to $3.943 million from $4.307 million last
year. The decrease resulted primarily from less funds available for investment
in fiscal 1997.
CORPORATE AND ADMINISTRATIVE EXPENSES
The corporate and administrative pretax loss for the first quarter increased
61.3% to $3.579 million from $2.219 million in the comparable period last year,
primarily due to increased employee- and shareholder-related expenses.
Additionally, the Company incurred $535 thousand during the first quarter of
this year in anticipation of the planned spin-off of its remaining investment
in CompuServe. (See discussion under the Financial Condition section of
Management's Discussion and Analysis.)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In June 1996, a purported shareholder class action complaint was filed against
CompuServe and the Company in the Court of Common Pleas, Franklin County, Ohio,
entitled Greenfield v. CompuServe Corporation et al. A second purported
shareholder class action suit was filed in July 1996 against CompuServe and the
Company in federal district court for the Southern District of Ohio, entitled
Romine v. CompuServe Corporation, et al. A third purported shareholder class
action suit was filed in August 1996 against CompuServe, the Company and the
lead underwriters in CompuServe's initial public offering of its common stock
in April 1996 (the "IPO") in federal district court for the District of
Minnesota, entitled Acker v. CompuServe Corporation, et al. These three
complaints also name certain officers and directors of CompuServe at the time
of the IPO as additional defendants. Each suit alleges similar violations of
the Securities Act of 1933 based on assertions of omissions and misstatements
of fact in connection with CompuServe's public filings related to the IPO. The
Greenfield suit also alleges similar violations of the Ohio Securities Code and
common law of negligent misrepresentation. Relief sought is unspecified but
includes pleas for rescission and damages. In August 1996, an action for
discovery was filed solely against CompuServe on behalf of a shareholder in the
Court of Common Pleas, Franklin County, Ohio, entitled Schnipper v. CompuServe
Corporation, seeking factual support for a possible fourth claim relating to
disclosures in connection with the IPO. The Company and CompuServe intend to
vigorously defend these suits.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the
first quarter of fiscal year 1997.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
H&R BLOCK, INC.
----------------------------------------
(Registrant)
DATE 09/14/96 BY /s/ George T. Robson
------------ ----------------------------------------
George T. Robson
Senior Vice President,
Chief Financial Officer and Treasurer
DATE 09/14/96 BY /s/ Cheryl L. Givens
------------ ----------------------------------------
Cheryl L. Givens
Assistant Vice President
and Corporate Controller
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1996
<CASH> 151,155
<SECURITIES> 293,716
<RECEIVABLES> 364,151
<ALLOWANCES> 7,111
<INVENTORY> 0
<CURRENT-ASSETS> 864,715
<PP&E> 435,076<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,561,830
<CURRENT-LIABILITIES> 344,406
<BONDS> 0
<COMMON> 1,089
0
4
<OTHER-SE> 976,728
<TOTAL-LIABILITY-AND-EQUITY> 1,561,830
<SALES> 0
<TOTAL-REVENUES> 227,258
<CGS> 0
<TOTAL-COSTS> 328,289
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (93,957)
<INCOME-TAX> (35,846)
<INCOME-CONTINUING> (52,226)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,226)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> 0
<FN>
<F1>PP&E BALANCE IS NET OF ACCUMULATED DEPRECIATION AND AMORITIZATION.
</FN>
</TABLE>
