HR Block 2006 Annual Report Download - page 99

Download and view the complete annual report

Please find page 99 of the 2006 HR Block annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 155

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155

Annualized productivity averaged approximately $194,000 per advisor Production revenue increased $5.4 million, or 3.4% over fiscal year
during the current year compared to $166,000 in the prior year. 2004. Transactional revenue decreased $11.0 million, or 11.1%, from the
Increased productivity was due to higher production levels across all prior year due primarily to an 18.7% decline in transactional trading
recruiting classes. Minimum production standards put into place during volume. This decline was partially offset by an increase in the average
the fourth quarter of fiscal year 2005 resulted in 111 advisors increasing revenue per trade. Annuitized revenue increased $16.4 million, or 27.0%,
their production. These standards also resulted in 152 low-producing due to increased sales of annuities, mutual funds and our fee-based
advisors leaving the company. We expect average advisor productivity wealth management accounts. Annuitized revenues represent 46.6% of
to continue increasing as we enforce minimum production standards, total production revenues for fiscal year 2005, compared to 38.0% in the
provide additional training to advisors and increase productivity levels prior year. Advisor productivity averaged approximately $166,000 in
of newly recruited advisors. fiscal year 2005, essentially flat compared to the prior year.
Margin interest revenue increased $17.1 million, or 39.1%, from the Other service revenue declined $6.4 million, or 18.0%, from fiscal year
prior year, as a result of higher interest rates earned, partially offset by a 2004 due to fewer fixed income underwriting offerings and Express IRA
decline in average margin balances. revenues now being recorded as part of Tax Services.
Total expenses increased $2.6 million, or 0.8%. Cost of services Margin interest revenue increased $10.3 million, or 30.8%, from fiscal
increased $19.2 million, or 12.1%, primarily as a result of $18.7 million of year 2004, which is primarily a result of higher interest rates earned,
additional compensation and benefits expenses resulting from higher coupled with a 9.5% increase in average margin balances. Margin
production revenues. balances have increased from an average of $545.0 million in fiscal year
Selling, general and administrative expenses decreased $16.5 million, 2004 to $597.0 million in fiscal year 2005.
or 10.8%, primarily due to a $4.8 million decline in legal expenses, due in Cost of services increased $3.7 million, or 2.4%, primarily due to
part to a favorable arbitration outcome. Current year results also $7.6 million of additional compensation and benefits resulting from a
improved due to reduced back-office headcount relating to cost higher average commission rate than fiscal year 2004 and other financial
containment efforts and gains on the disposition of certain assets during incentives for attracting new advisors. This increase was partially offset
the year. These decreases were partially offset by increased bonus by declines in depreciation and other expenses.
accruals associated with the segment’s improved performance. Selling, general and administrative expenses increased $4.1 million, or
The pretax loss for Investment Services for the year ended April 30, 2.8%, over fiscal year 2004 primarily as the result of $6.8 million in
2006 was $32.8 million compared to the prior year loss of $75.4 million. additional legal expenses, partially offset by gains of $4.6 million on the
disposition of certain assets.
FISCAL 2005 COMPARED TO FISCAL 2004 –Investment Services’ The pretax loss for Investment Services for fiscal year 2005 was
revenues, net of interest expense, for fiscal year 2005 increased $75.4 million compared to a loss of $75.6 million in the prior year.
$8.0 million, or 3.5%. The increase is primarily due to higher margin
interest revenue.
CORPORATE
Corporate support departments, which provide services to our generally allocated to our operating segments. Financial results for our
operating segments consist of marketing, information technology, captive insurance, franchise financing and banking subsidiaries are also
facilities, human resources, executive, legal, finance, government included below, as was our small business initiatives subsidiary in fiscal
relations and corporate communications. Support department costs are year 2004.
H&R BLOCK 2006 Form 10K
29