HR Block 2006 Annual Report Download - page 91

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RESULTS OF OPERATIONS –
Our business is divided into four reportable segments: Tax Services, Mortgage Services, Business Services and Investment Services.
TAX SERVICES
Tax Services – Financial Results (in 000s)
This segment primarily consists of our income tax preparation
businesses – retail, online and software. This segment includes our tax
Year Ended April 30, 2006 2005 2004
operations in the United States, Canada, Australia and the
Service revenues:
United Kingdom.
Tax preparation and related
fees $ 1,793,325 $ 1,718,867 $ 1,589,439
Tax Services – Operating Statistics (in 000s, except average fee) Other services 204,968 193,163 172,517
Year Ended April 30, 2006 2005(1) 2004(1)
1,998,293 1,912,030 1,761,956
Clients served –Royalties 207,728 197,551 184,882
United States: RAL participation fees 177,852 182,784 168,375
Company-owned operations 10,359 10,608 10,627 Other 67,933 65,928 75,964
Franchise operations 5,373 5,428 5,460 Total revenues 2,451,806 2,358,293 2,191,177
15,732 16,036 16,087 Cost of services:
Digital tax solutions (2) 3,721 3,017 3,234 Compensation and benefits 765,868 726,654 672,066
19,453 19,053 19,321 Occupancy 317,030 281,772 255,516
International (3) 2,459 2,333 2,253 Supplies 52,894 47,703 40,792
21,912 21,386 21,574 Depreciation and
amortization 44,846 54,579 48,808
Gross average fee per client served (4) –
Bad debt 31,927 33,046 27,328
Company-owned operations $ 169.58 $ 158.19 $ 146.34
Allocated shared services and
Franchise operations 143.52 135.98 127.91 other 102,711 103,560 92,137
$ 160.68 $ 150.67 $ 140.09
1,315,276 1,247,314 1,136,647
Net average fee per client served (5) –Provision for RAL litigation 70,200 ––
Company-owned operations $ 162.91 $ 153.53 $ 142.51 Other, selling, general and
RALs (6) –administrative 476,564 447,461 416,037
Company-owned operations 2,542 2,667 2,713 Total expenses 1,862,040 1,694,775 1,552,684
Franchise operations 1,487 1,499 1,508 Pretax income $ 589,766 $ 663,518 $ 638,493
4,029 4,166 4,221
FISCAL 2006 COMPARED TO FISCAL 2005 –Tax Services’ revenues
(1) Company-owned and franchise data for fiscal years 2005 and 2004 have not been
increased $93.5 million, or 4.0%, compared to the prior year. We opened
restated for franchise acquisitions.
more than 750 new offices, 550 of which were part of the expansion of
(2) Includes TaxCut federal units sold, online completed and paid federal returns, and
our company-owned retail distribution network. This expansion
state returns and e-filings only when no payment was made for a federal return.
contributed incremental revenues of $36.4 million and pretax losses of
(3) In the current year, the end of the Canadian tax season was extended from April 30
to May 1, 2006. Clients served in our international operations in fiscal year 2006
$8.5 million in fiscal year 2006.
includes approximately 41,400 returns in both company-owned and franchise
Tax preparation and related fees from our retail offices increased
offices which were accepted by the client on May 1, 2006. The revenues related to
$74.5 million, or 4.3%, for fiscal year 2006. This increase is primarily due
these returns will be recognized in fiscal year 2007. In the prior year, the end of the
to an increase of 6.1% in the net average fee per U.S. client served,
Canadian tax season was extended to May 2, 2005. Clients served in our
partially offset by a decrease of 2.3% in U.S. clients served in company-
international operations in fiscal year 2005 includes approximately 47,500 returns
owned offices. The decrease in clients served was partially due to a
which were accepted by the client on May 1 and 2, 2005. The revenues related to
number of technology problems that severely hurt the start of our filing
these returns were recognized in fiscal year 2006.
(4) Calculated as gross tax preparation and related fees divided by clients served (U.S. only).
season coupled with increased competition due to competitors’ refund
(5) Calculated as gross tax preparation and related fees, less discounts and coupons,
lending products. Our international operations contributed $18.1 million
divided by clients served (U.S. only).
to the increase, resulting from a 5.4% increase in clients served.
(6) Data is for tax season (January 1 – April 30) only.
H&R BLOCK 2006 Form 10K
21