Investment Services posted its fourth consecutive quarter of improved year-over-year results. The pretax loss of $7.7 million in the quarter was 61 percent better than a loss of $19.8 million in the third quarter of fiscal 2005. Included in the quarterly loss in both years is $9.2 million of intangible amortization. Revenues in the fiscal 2006 third quarter rose 18 percent to $73.2 million from $62.1 million in the prior-year period.

The improvements were driven by higher production levels, higher net interest revenues due to higher rates and the benefits of cost control.

“The steady performance improvement at H&R Block Financial Advisors continues to be encouraging,” Ernst said. “We have expanded relationships between our financial advisors and tax professionals to serve more of the financial needs of our clients, and we’ve been successful in moving clients from Tax Services into Financial Advisor account relationships.”

Fiscal year to date through January 2006, nearly 11,000 new funded accounts from tax clients were opened, contributing assets of $542 million and about $8 million in revenues, a 55 percent improvement over the prior-year period. Total assets under administration at the end of January 2006 were $31.4 billion, up 11 percent year-over-year.

For the first nine months of fiscal 2006, revenues increased 25 percent to $211.2 million from $169.4 million in the prior-year period, and the pretax loss declined 62 percent to $23.1 million from $60.9 million.

H&R Block’s board of directors declared a quarterly cash dividend of 12.5 cents per share, payable April 3, 2006, to shareholders of record March 13, 2006. The payment will be the company’s 174^th consecutive quarterly dividend.

H&R Block will host a conference call for analysts, institutional investors and shareholders at 5 p.m. EST (4 p.m. CST) Feb. 23. Mark A. Ernst, chairman and chief executive officer, and William L. Trubeck, executive vice president and chief financial officer, will discuss the quarter and future expectations, as well as respond to analysts’ questions. To access the call, please dial the number below approximately 5 to 10 minutes prior to the scheduled starting time:

The call will be webcast in a listen-only format for the media and public. The link to the webcast can be obtained at www.hrblock.com. Supplemental financial and statistical information will be available in connection with the webcast, or can be accessed directly on H&R Block’s Investor Relations Web site at www.hrblock.com/about/investor following market close.

A replay of the call will be available beginning at 6 p.m. EST Feb. 23 and continuing until 12 a.m. EST March 10, by dialing (800) 642-1687 (U.S./Canada) or (706) 645-9291 (International). The replay access code is 2013187. A replay of the webcast will also be available on the company's Web site at www.hrblock.com/about/investor.

Except for historical information contained herein, the matters set forth in this press release are forward-looking statements based upon current information and expectations. Such statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that could cause actual results to differ materially from what is expressed, implied or forecast in such forward-looking statements.

Such differences could be caused by a number of factors, including, but not limited to: the uncertainty that the company will achieve or exceed its revenue, earnings, and earnings-per-share growth goals or expectations for fiscal year 2006; the uncertainty of the impact and effect of the company’s restatements of its financial statements; the uncertainty of the company’s ability to purchase shares of its common stock pursuant to the board’s authorization; the uncertainty of the effect of any share repurchases upon the company and its shareholders; changes in interest rates; changes in the company’s effective income tax rate; changes in economic, political or regulatory environments; changes in competition; litigation involving the company and its subsidiaries; and risks described from time to time in reports and registration statements filed by H&R Block Inc. and its subsidiaries with the Securities and Exchange Commission. Readers should take these factors into account in evaluating such forward-looking statements.

H&R Block Inc. (NYSE: HRB) is a leading provider of tax, financial, mortgage, accounting and business consulting services and products. H&R Block is the world’s largest tax services provider, having prepared more than 400 million tax returns since 1955. The company and its subsidiaries generated revenues of $4.4 billion and net income of $636 million in fiscal year 2005 from operations in four principal business segments: tax preparation and advice via in-office, online and software solutions; investment and financial advisory services; retail and wholesale mortgage services; and tax/accounting/business consulting services for mid-sized businesses. Headquartered in Kansas City, Mo., H&R Block markets its services and products under three leading brands – H&R Block, Option One and RSM McGladrey. For more information visit our Online Press Center at www.hrblock.com.

KEY OPERATING RESULTS

Preliminary and unaudited, amounts in thousands, except per share data

	Three months ended January 31,
	Revenues				Income (loss)
	2006		2005		2006			2005
			Restated ⁽¹⁾					Restated ⁽¹⁾
Tax Services	$	548,494	$	531,086	$	13,168		$	63,655
Mortgage Services		296,493		308,872		67,453			115,483
Business Services		235,840		132,872		(1,035	)		5,916
Investment Services		73,176		62,104		(7,668	)		(19,775	)
Corporate		2,744		1,302		(27,010	)		(12,001	)
	$	1,156,747	$	1,036,236		44,908			153,278
Income taxes						16,060			60,958
Net income					$	28,848		$	92,320

Basic earnings per share					$	0.09		$	0.28

Basic shares outstanding						327,289			329,039

Diluted earnings per share					$	0.09		$	0.28

Diluted shares outstanding						331,935			334,875

	Nine months ended January 31,
	Revenues				Income (loss)
	2006		2005		2006		2005
			Restated ⁽¹⁾				Restated ⁽¹⁾
Tax Services	$	686,498	$	655,639	($274,202	)	($182,923	)
Mortgage Services		943,082		865,177	248,160		332,980
Business Services		529,491		371,021	(9,943	)	(9,021	)
Investment Services		211,177		169,446	(23,126	)	(60,882	)
Corporate		6,535		3,457	(74,979	)	(65,494	)
	$	2,376,783	$	2,064,740	(134,090	)	14,660
Income taxes (benefit)					(52,711	)	5,830
Net income (loss)					($81,379	)	$8,830

Basic earnings (loss) per share					($0.25	)	$0.03

Basic shares outstanding					328,017		331,894

Diluted earnings (loss) per share					($0.25	)	$0.03

Diluted shares outstanding					328,017		337,889

⁽¹⁾ Restated amounts include restatement items noted in our Annual Report on Form 10-K/A for the year ended April 30 , 2005, as well as an estimate of the restatement impact of income tax adjustments as discussed in the notes attached hereto.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During our closing process for the three months ended January 31, 2006, we determined a restatement of our quarterly 2006 and fiscal year 2005 and 2004 financial statements was warranted. We determined a restatement was necessary as the cumulative adjustment required was too large to record in the third quarter of fiscal year 2006. The restatement pertains to errors in determining the Company's state effective income tax rate in prior periods, and had no impact on pretax results.

Financial results referred to in this release reflect preliminary income tax restatement adjustments for the current year and prior year. We have not completed our analysis of the income tax restatement adjustments, and accordingly, the effects are preliminary and subject to change. Because the restatement adjustments have not yet been reviewed by our registered public accounting firm, all results presented in this release are preliminary and unaudited. We will file amendments to our filings with the Securities and Exchange Commission to reflect the impact of restatement on our previously issued audited annual and unaudited interim financial statements and related disclosures.

On June 8, 2005, our Board of Directors declared a two-for-one stock split of the Company’s Common Stock in the form of a 100% stock distribution, effective August 22, 2005, to shareholders of record as of the close of business on August 1, 2005. All share and per share amounts have been adjusted to reflect the retroactive effect of the stock split.

Basic earnings per share is based on the weighted average number of shares outstanding. The dilutive effect of potential common shares is included in diluted earnings per share except in those periods with a loss.

Certain reclassifications have been made to prior year amounts to conform to the current period presentation. These reclassifications had no effect on the results of operations or stockholders' equity as previously reported.

CONDENSED CONSOLIDATED BALANCE SHEETS

Preliminary and unaudited, amounts in thousands, except share data

	January 31,			April 30,
	2006			2005
ASSETS				Restated ⁽²⁾
Current assets:
Cash and cash equivalents	$	1,460,180		$	1,100,213
Cash and cash equivalents - restricted		430,713			516,909
Receivables from customers, brokers, dealers and clearing
organizations, net		569,430			590,226
Receivables, net		1,810,945			418,788
Prepaid expenses and other current assets		561,484			444,498
Total current assets		4,832,752			3,070,634

Residual interests in securitizations - available-for-sale		175,068			205,936
Beneficial interest in Trusts - trading		279,714			215,367
Mortgage servicing rights		262,369			166,614
Property and equipment, net		415,844			330,150
Intangible assets, net		235,236			247,092
Goodwill, net		1,104,267			1,015,947
Other assets		369,164			287,543
Total assets	$	7,674,414		$	5,539,283

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	2,595,948		$	-
Current portion of long-term debt		13,373			25,545
Accounts payable to customers, brokers and dealers		851,827			950,684
Accounts payable, accrued expenses and other		763,244			564,749
Accrued salaries, wages and payroll taxes		291,811			318,644
Accrued income taxes		225,150			381,170
Total current liabilities		4,741,353			2,240,792

Long-term debt		916,926			923,073
Other noncurrent liabilities		417,200			430,919
Total liabilities		6,075,479			3,594,784

Stockholders' equity:
Common stock, no par, stated value $.01 per share		4,359			4,359
Additional paid-in capital		631,729			598,388
Accumulated other comprehensive income		33,641			68,718
Retained earnings		2,956,869			3,156,913
Less cost of 107,594,856 and 104,649,850 shares of
common stock in treasury		(2,027,663	)		(1,883,879	)
Total stockholders' equity		1,598,935			1,944,499
Total liabilities and stockholders' equity	$	7,674,414		$	5,539,283

⁽²⁾ Restated amounts include an estimate of the restatement impact of income tax adjustments as discussed in the notes attached hereto.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Preliminary and unaudited, amounts in thousands

		Nine months ended January 31,
		2006		2005
				Restated ⁽¹⁾
Cash flows from operating activities:
Net income (loss)		($81,379	)	$	8,830
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization		138,882			127,631
Accretion of residual interests in securitizations		(93,189	)		(96,242	)
Impairment of residual interests in securitizations		29,175			7,162
Additions to trading securities - residual interests in securitizations		(228,587	)		(115,213	)
Proceeds from net interest margin transactions		210,264			98,743
Realized gain on sale of residual interests		(28,675	)		0
Additions to mortgage servicing rights		(196,245	)		(94,569	)
Amortization and impairment of mortgage servicing rights		100,490			60,879
Net change in beneficial interest in Trusts		(64,347	)		(8,735	)
Other net changes in working capital, net of acquisitions		(1,475,936	)		(1,552,919	)
Net cash used in operating activities		(1,689,547	)		(1,564,433	)

Cash flows from investing activities:
Cash received from residual interests in securitizations		74,931			100,344
Cash received from sale of residual interests in securitizations		30,497			0
Purchases of property and equipment, net		(167,181	)		(143,232	)
Payments made for business acquisitions, net of cash acquired		(209,816	)		(26,348	)
Other, net		17,297			15,207
Net cash used in investing activities		(254,272	)		(54,029	)

Cash flows from financing activities:
Repayments of commercial paper		(2,632,444	)		(2,348,966	)
Proceeds from issuance of commercial paper		4,678,392			3,877,848
Proceeds from other short-term borrowings		550,000			0
Repayments of long-term debt		0			(250,000	)
Proceeds from issuance of long-term debt		0			395,221
Dividends paid		(118,665	)		(106,422	)
Acquisition of treasury shares		(260,078	)		(529,852	)
Proceeds from issuance of common stock		105,760			119,892
Other, net		(19,179	)		(35,414	)
Net cash provided by financing activities		2,303,786			1,122,307

Net increase (decrease) in cash and cash equivalents		359,967			(496,155	)
Cash and cash equivalents at beginning of the period		1,100,213			1,072,745
Cash and cash equivalents at end of the period	$	1,460,180		$	576,590

Supplementary cash flow data:
Income taxes paid	$	224,774		$	406,576
Interest paid		62,980			53,587

⁽¹⁾	Restated amounts include restatement items noted in our Annual Report on Form 10-K/A for the year ended April 30 , 2005, as well as an estimate of the restatement impact of income tax adjustments as discussed in the notes attached hereto.

CONDENSED CONSOLIDATED INCOME STATEMENTS

Preliminary and unaudited, amounts in thousands, except per share data

	Three months ended January 31,				Nine months ended January 31,
	2006		2005		2006			2005
			Restated ⁽¹⁾					Restated ⁽¹⁾
Revenues:
Service revenues	$	812,224	$	657,306	$	1,511,615		$	1,196,126
Other revenues:
Gains on sales of mortgage assets, net		157,897		198,579		541,595			566,087
Interest income		51,074		50,550		155,337			138,822
Product and other revenues		135,552		129,801		168,236			163,705
		1,156,747		1,036,236		2,376,783			2,064,740

Operating expenses:
Cost of service revenues		633,927		508,207		1,364,362			1,123,266
Cost of other revenues		144,663		133,343		402,884			307,987
Selling, general and administrative		324,746		248,114		720,547			593,177
		1,103,336		889,664		2,487,793			2,024,430

Operating income (loss)		53,411		146,572		(111,010	)		40,310
Interest expense		12,211		13,026		37,031			48,900
Other income, net		3,708		19,732		13,951			23,250

Income (loss) before taxes		44,908		153,278		(134,090	)		14,660
Income taxes (benefit)		16,060		60,958		(52,711	)		5,830

Net income (loss)	$	28,848	$	92,320		($81,379	)	$	8,830

Basic earnings (loss) per share	$	0.09	$	0.28		($0.25	)	$	0.03

Basic shares outstanding		327,289		329,039		328,017			331,894

Diluted earnings (loss) per share	$	0.09	$	0.28		($0.25	)	$	0.03

Diluted shares outstanding		331,935		334,875		328,017			337,889

⁽¹⁾	Restated amounts include restatement items noted in our Annual Report on Form 10-K/A for the year ended April 30 , 2005, as well as an estimate of the restatement impact of income tax adjustments as discussed in the notes attached hereto.

Preliminary U.S. Tax Operating Data

	(in thousands, except average fee and number of offices)
	Period
	1/1-1/31			2/1-2/15			YTD 2/15
Tax preparation & related fees:
Fiscal year 2006
Company-owned operations	$	379,959		$	434,958		$	814,917
Franchise operations		191,610			204,713			396,323
	$	571,569		$	639,671		$	1,211,240
Fiscal year 2005 ⁽¹⁾
Company-owned operations	$	367,294		$	436,695		$	803,989
Franchise operations		183,556			202,669			386,225
	$	550,850		$	639,364		$	1,190,214
Percent change
Company-owned operations		3.4	%		-0.4	%		1.4	%
Franchise operations		4.4	%		1.0	%		2.6	%
Total retail operations		3.8	%		0.0	%		1.8	%

Total clients served:
Fiscal year 2006
Company-owned operations		2,372			2,677			5,049
Franchise operations		1,398			1,487			2,885
		3,770			4,164			7,934
Fiscal year 2005 ⁽¹⁾
Company-owned operations		2,450			2,874			5,324
Franchise operations		1,403			1,544			2,947
		3,853			4,418			8,271
Percent change
Company-owned operations		-3.2	%		-6.9	%		-5.2	%
Franchise operations		-0.4	%		-3.7	%		-2.1	%
Total retail operations		-2.2	%		-5.7	%		-4.1	%

Average fee per client served: ⁽²⁾
Fiscal year 2006
Company-owned operations	$	160.19		$	162.48		$	161.40
Franchise operations		137.06			137.67			137.37
	$	151.61		$	153.62		$	152.66
Fiscal year 2005 ⁽¹⁾
Company-owned operations	$	149.92		$	151.95		$	151.01
Franchise operations		130.83			131.26			131.06
	$	142.97		$	144.72		$	143.90
Percent change
Company-owned operations		6.8	%		6.9	%		6.9	%
Franchise operations		4.8	%		4.9	%		4.8	%
Total retail operations		6.0	%		6.2	%		6.1	%

Offices:		FY 2006			FY 2005
Company-owned offices		6,387			5,811			9.9	%
Company-owned shared office locations ⁽³⁾		1,473			1,296			13.7	%
Total company-owned offices		7,860			7,107			10.6	%
Franchise offices		3,703			3,528			5.0	%
Franchise shared office locations ⁽³⁾		602			526			14.4	%
Total franchise offices		4,305			4,054			6.2	%
Total retail offices		12,165			11,161			9.0	%

⁽¹⁾ Prior year numbers have been reclassified between company-owned and franchise operations for offices which commenced company-owned operations during fiscal year 2006. Tax returns processed for other businesses, not under the H&R Block name.

⁽²⁾ Calculated as gross tax preparation and related fees divided by clients served.

⁽³⁾ Shared office locations include offices located within Wal-Mart, Sears and other third-party businesses.

SELECTED OPERATING DATA

Unaudited

Mortgage Services	Three months ended
	1/31/2006			1/31/2005			% change		10/31/2005			% change

Volume of loans originated (thousands):
Wholesale (non-prime)	$	7,941,048		$	7,378,071		7.6	%	$	11,078,960		-28.3	%

Retail: Non-prime		667,542			776,797		-14.1	%		1,111,924		-40.0	%
Prime		343,897			238,867		44.0	%		429,924		-20.0	%
		1,011,439			1,015,664		-0.4	%		1,541,848		-34.4	%

Total	$	8,952,487		$	8,393,735		6.7	%	$	12,620,808		-29.1	%

Loan characteristics:
Average loan size (thousands)	$	194		$	164		18.3	%	$	188		3.2	%
Weighted average interest rate (WAC) ⁽¹⁾		8.27	%		7.30	%	0.97	%		7.48	%	0.79	%
Weighted average FICO score ⁽¹⁾		621			615					629

Loan sales (thousands)	$	8,924,788		$	8,348,537		6.9	%	$	12,497,526		-28.6	%

Servicing portfolio:
Number of loans serviced		466,026			387,619		20.2	%		500,935		-7.0	%
Servicing portfolio (billions)	$	76.8		$	59.0		30.2	%	$	82.4		-6.8	%

⁽¹⁾ Represents non-prime production only.

Investment Services	Three months ended
	1/31/2006		1/31/2005		% change		10/31/2005		% change

Customer trades ⁽²⁾		255,879		245,612	4.2	%		233,262	9.7	%
Customer daily average trades		4,127		3,899	5.8	%		3,589	15.0	%
Average revenue per trade ⁽³⁾	$	113.83	$	120.62	-5.6	%	$	123.16	-7.6	%

Customer accounts: ⁽⁴⁾
Traditional brokerage		426,699		431,902	-1.2	%		428,543	-0.4	%
Express IRAs		381,859		295,676	29.1	%		378,200	1.0	%
		808,558		727,578	11.1	%		806,743	0.2	%

Ending balance of assets under administration (billions)	$	31.4	$	28.4	10.6	%	$	29.8	5.4	%
Average assets per traditional brokerage account	$	72,914	$	65,339	11.6	%	$	68,837	5.9	%

Average customer margin balances (millions)	$	529	$	596	-11.2	%	$	560	-5.5	%
Average payables to customers (millions)	$	769	$	989	-22.2	%	$	794	-3.1	%
Advisors		956		1,013	-5.6	%		995	-3.9	%

⁽²⁾	Includes only trades on which revenues are earned (“revenue trades”). Revenues, defined as trading revenues, are earned on both transactional and annuitized trades.

⁽³⁾	Calculated as trading revenues divided by revenue trades.

⁽⁴⁾	Includes only accounts with a positive period-end balance.

Media Relations:	Nick Iammartino, 816-932-4835, nick.iammartino@hrblock.com
Investor Relations:	Scott Dudley, 816-932-8342, scott.dudley@hrblock.com

	U.S./Canada	(888) 425-2715 – Access Code 2013187
	International	(706) 679-8257 – Access Code 2013187