HR Block 2006 Annual Report Download - page 106

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REGULATORY ENVIRONMENT
The U.S., various state, local, provincial and foreign governments and applicability of Laws to our services and products. In response to past
some self-regulatory organizations have enacted statutes and inquiries, we have agreed to comply with such Laws, convinced the
ordinances, and/or adopted rules and regulations, regulating aspects of authorities that such Laws were not applicable or that compliance
our business. These aspects include, but are not limited to, commercial already exists, and/or modified our activities in the applicable
income tax return preparers, income tax courses, the electronic filing of jurisdiction to avoid the application of all or certain parts of such Laws.
income tax returns, the facilitation of RALs, loan originations and We believe that the past resolution of such inquiries and our ongoing
assistance in loan originations, mortgage lending, privacy, consumer compliance with Laws have not had a material adverse effect on our
protection, franchising, sales methods, brokers, broker-dealers and consolidated financial statements. We cannot predict what effect future
various aspects of securities transactions, financial planners, Laws, changes in interpretations of existing Laws, or the results of
investment advisors, accountants and the accounting practice. We seek future regulator inquiries with respect to the applicability of Laws may
to determine the applicability of such statutes, ordinances, rules and have on our consolidated financial statements. See additional
regulations (collectively, ‘‘Laws’’) and comply with those Laws. discussion of legal matters in Item 3, ‘‘Legal Proceedings’’ and Item 8,
From time to time in the ordinary course of business, we receive note 17 to our consolidated financial statements.
inquiries from governmental and self-regulatory agencies regarding the
NEW ACCOUNTING PRONOUNCEMENTS
See Item 8, note 1 to our consolidated financial statements for a discussion of recently issued accounting pronouncements.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
We report our financial results in accordance with generally accepted accounting principles (GAAP). However, we believe certain non-GAAP
performance measures and ratios used in managing the business may provide additional meaningful comparisons between current year results and
prior periods, by excluding certain items that do not represent results from our basic operations. Reconciliations to GAAP financial measures are
provided below. These non-GAAP financial measures should be viewed in addition to, not as an alternative for, our reported GAAP results.
Origination Margin (dollars in 000s)
Year Ended April 30, 2006 2005 2004
Total Mortgage Services
expenses $ 925,522 $ 749,925 $ 635,186
Add: Expenses netted
against gain on sale
revenues 387,911 378,304 267,780
Less:
Cost of services 296,710 221,148 193,383
Cost of acquisition 150,981 169,621 114,707
Allocated support
departments 26,176 24,161 21,124
Other 62,500 20,323 31,378
Total cost of origination $ 777,066 $ 692,976 $ 542,374
Divided by origination
volume $ 40,779,763 $ 31,001,724 $ 23,256,013
Cost of origination margin 1.91% 2.23% 2.33%
36
H&R BLOCK 2006 Form 10K