HR Block 2005 Annual Report Download - page 93

46.6% of total production revenues for fiscal year 2005, compared FISCAL 2004 COMPARED TO FISCAL 2003 ⬎⬎⬎
to 38.0% in the prior year. Advisor productivity averaged Investment Services’ revenues, net of interest expense, for fiscal
approximately $166,000 in the current year, essentially flat year 2004 increased $32.1 million, or 16.4%, over fiscal year 2003.
compared to the prior year. The improvement is primarily due to the increase in
Other service revenue declined $6.4 million, or 18.0%, from the annuitized revenues.
prior year due to fewer fixed income underwriting offerings and Production revenue increased $30.4 million, or 23.4% over
Express IRA revenues now being recorded as part of fiscal year 2003. Transactional revenue increased $8.0 million, or
Tax Services. 8.7%, from 2003 due to an increase in transactional trading
Margin interest revenue increased $10.3 million, or 30.8%, from activity, partially offset by a slight decline in average revenue per
the prior year, which is primarily a result of higher interest rates trade. Annuitized revenues increased $22.4 million, or 58.3%, due
earned, coupled with a 9.5% increase in average margin balances. to increased sales of annuities and mutual funds and an increase
Margin balances have increased from an average of $545.0 million in advisor productivity. Productivity averaged approximately
in fiscal year 2004 to $597.0 million in the current year. $166,000 per advisor in fiscal year 2004 compared to $122,000
Cost of services increased $3.7 million, or 2.4%, primarily due in 2003.
to $7.6 million of additional compensation and benefits resulting Margin interest revenue declined $3.9 million, or 10.4%, from
from a higher average commission rate than the prior year and 2003 primarily as a result of a 5.5% decline in average margin
other financial incentives for attracting new advisors. This balances coupled with lower interest rates. Margin balances
increase was partially offset by declines in depreciation and declined from an average of $577.0 million in fiscal year 2003 to
other expenses. $545.0 million in 2004. Accordingly, interest expense for fiscal
Selling, general and administrative expenses increased year 2004 declined $3.5 million, or 71.9%, from fiscal year 2003.
$4.1 million, or 2.8%, over the prior year primarily as the result of Cost of services increased $15.2 million over 2003 primarily due
$6.8 million in additional legal expenses, partially offset by gains to a $19.5 million increase in compensation and benefits,
of $4.6 million on the disposition of certain assets. resulting from an increase in customer trading and higher
The pretax loss for Investment Services for fiscal year 2005 was average commissions.
$75.4 million compared to a loss of $75.6 million last year. A goodwill impairment charge of $108.8 million was recorded
in fiscal year 2003 due to unsettled market conditions. This
FISCAL 2006 OUTLOOK ⬎⬎⬎ charge includes an additional impairment of $84.8 million as a
We believe the key to this segment’s profitability in the near-term result of the restatement of previously issued
is aligning the segment’s cost structure with its revenue. Our financial statements.
focus in the upcoming fiscal year will be on reducing costs and Selling, general and administrative expenses decreased
attracting productive advisors. In the fourth quarter of fiscal year $18.1 million primarily as a result of a reduction in consulting and
2005, we implemented a series of actions, which are not legal expenses.
production dependent, to reduce costs and enhance performance. The pretax loss for Investment Services for fiscal year 2004 was
We have also implemented strict advisor production standards. $75.6 million compared to a loss of $219.4 million in 2003.
Although we still expect to report an operating loss for fiscal
year 2006, we anticipate that loss will be approximately $25 to
$35 million less than the loss recorded in 2005.
H&R BLOCK 2005 Form 10K
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