HR Block 2006 Annual Report Download - page 100

Corporate – Financial Results (in 000s)
technology department expenses increased $9.7 million primarily due to
higher compensation and benefits associated with higher headcount.
Year Ended April 30, 2006 2005 2004
Finance department expenses increased $15.2 million, primarily due to
Operating revenues $ 22,279 $ 13,592 $ 12,532
additional consulting expenses and increases in compensation
Eliminations (13,636) (10,444) (8,218)
expenses. Other support department expenses increased $14.7 million
Total revenues 8,643 3,148 4,314
primarily due to increases in stock-based compensation expenses and
Corporate expenses:
legal department expenses, partially offset by a decrease in supply
Interest expense 67,630 72,701 69,300
department expenses.
Other 65,484 51,262 50,476
Other income declined $4.0 million primarily as a result of
133,114 123,963 119,776
$17.3 million in legal recoveries we received during the prior year,
Support departments:
partially offset by other gains recorded in the current year.
Marketing 137,065 117,303 110,507
The pretax loss was $104.5 million, compared with last year’s loss of
Information technology 116,990 107,306 110,569
Finance 49,719 34,498 33,829
$96.4 million.
Other 122,232 107,562 78,593
Our effective tax rate for the year increased to 40.7% compared to 38.7%
426,006 366,669 333,498
in the prior year. This increase is due to higher deferred tax valuation
allowances and increases in reserves for uncertain tax positions.
Allocation of shared services (425,589) (366,742) (336,639)
Other income, net 20,356 24,345 4,582
Pretax loss $ (104,532) $ (96,397) $ (107,739)
FISCAL 2005 COMPARED TO FISCAL 2004 –Corporate expenses
increased $4.2 million primarily due to higher interest expense, resulting
FISCAL 2006 COMPARED TO FISCAL 2005 –Corporate expenses from higher interest rates and higher average debt balances.
increased $9.2 million primarily due to a $14.2 million increase in other Marketing department expenses increased $6.8 million, or 6.1%,
expenses, offset by a $5.1 million decline in interest expense. Other primarily due to additional marketing efforts in fiscal year 2005. Other
expenses increased due to higher finance and information technology support department expenses increased $29.0 million, primarily due to
department expenses. $15.1 million of additional stock-based compensation expenses,
Our consolidated interest expense, both operating and non-operating, increases in the cost of employee insurance and supplies.
totaled $103.8 million for fiscal year 2006, an increase of $15.9 million Other income increased $19.8 million primarily as a result of
over the prior year. Of the $103.8 million in total interest, $49.1 million $17.3 million in legal recoveries.
related to debt incurred on previous acquisitions, with the remaining The pretax loss was $96.4 million, compared with a loss of
$54.7 million related to our operations recorded directly in our $107.7 million in fiscal year 2004.
operating segments. Our effective income tax rate for fiscal year 2005 decreased to 38.7%
Marketing department expenses increased $19.8 million, or 16.8%, due compared to 39.8% in fiscal year 2004. The decrease is due to tax
primarily to an increase in digital advertising efforts. Information benefits realized on net operating loss carryforwards.
FINANCIAL CONDITION –
CAPITAL RESOURCES & LIQUIDITY BY SEGMENT
Our sources of capital include cash from operations, issuances of ISSUANCES OF COMMON STOCK –We issue shares of our common
common stock and debt. We use capital primarily to fund working stock in accordance with our stock-based compensation plans out of
capital, pay dividends, repurchase shares of our common stock and our treasury shares. Proceeds from the issuance of common stock
acquire businesses. totaled $108.5 million, $136.1 million and $120.0 million in fiscal years
CASH FROM OPERATIONS –Operating cash flows totaled 2006, 2005 and 2004, respectively.
$585.7 million, $513.8 million and $852.5 million in fiscal years 2006, DEBT –On October 26, 2004, we issued $400.0 million of 5.125%
2005 and 2004, respectively. Operating cash flows in fiscal year 2006 Senior Notes under our shelf registration statements. The proceeds
increased from fiscal year 2005 primarily due to lower income tax from the notes were used to repay our $250.0 million in 6
3
/
4
% Senior
payments, which totaled $270.5 million this year, compared to Notes, which were due on November 1, 2004. The remaining proceeds
$437.4 million in fiscal year 2005, partially offset by higher MSR were used for working capital, capital expenditures, repayment of other
balances and increased mortgage loans held for sale. debt and other general corporate purposes.
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H&R BLOCK 2006 Form 10K