HR Block 2005 Annual Report Download - page 90

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Two smaller transactions were completed in fiscal year 2004, certain of our ancillary fees previously charged to borrowers. The
which resulted in gains of $40.7 million. average servicing portfolio for fiscal year 2004 increased 38.9%.
Impairments of residual interests in securitizations of Cost of services increased $51.6 million, or 36.5%, as a result of
$26.1 million were recognized during 2004 compared with a higher average servicing portfolio and the acceleration of
$54.1 million in 2003. The impairments were due primarily to loan amortization of certain MSRs.
performance of older residuals and changes in assumptions to Cost of non-service revenues increased $43.8 million, or 18.0%,
more closely align with the current economic and interest rate over the prior year. Compensation and benefits increased
environment. $43.6 million as a result of a 22.9% increase in the number of
Total accretion of residual interests increased $40.1 million employees, reflecting resources needed to support higher loan
over 2003. This improvement is the result of write-ups in the production volumes. Occupancy expenses increased due to nine
related asset values in fiscal years 2003 and 2004. Increases in fair additional branch offices opened since October 2002.
value are realized in income through accretion over the remaining Selling, general and administrative expenses increased
expected life of the residual interest. $46.0 million, primarily due to $10.4 million in increased
We recorded favorable pretax mark-to-market adjustments, marketing expenses for retail mortgage direct mail advertising,
which increased the fair value of our residual interests $13.5 million in increased allocated corporate and shared costs
$199.7 million during 2004. These adjustments were recorded, net and $7.2 million in increased consulting expenses. Allocated costs
of write-downs of $32.6 million and deferred taxes of increased due to higher insurance costs and the expensing of
$63.8 million, in other comprehensive income. stock-based compensation.
Loan-servicing revenues increased $43.4 million, or 25.8%, in Pretax income increased $32.2 million, or 4.9%, for fiscal year
fiscal year 2004. The increase reflects a higher average loan- 2004.
servicing portfolio, which was partially offset by the reduction of
H&R BLOCK 2005 Form 10K
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