HR Block 2007 Annual Report Download - page 30

DISCONTINUED OPERATIONS. On November 6, 2006 we party bids and valuations received at closing, and because market
announced we would evaluate strategic alternatives for Option conditions may change significantly during the period prior to
One Mortgage Corporation (OOMC), including a possible sale or closing, the value of the adjusted tangible net assets of the
other transaction through the public markets. On April 19, 2007, we business at closing may be significantly different than the value as
entered into an agreement to sell OOMC for cash consideration of April 30, 2007. Any such changes could impact the final
approximately equal to the fair value of the adjusted tangible net impairment amount recorded at closing. We expect the sale of
assets of OOMC (as defined by the agreement) at closing less OOMC to close during the second quarter of fiscal year 2008. See
$300.0 million. The agreement provides for us to receive one-half of discussion of additional conditions of the sale in Item 1A, under
OOMC’s cumulative net income from its origination business for ‘‘Potential Sale Transaction.’’
the 18 months following the closing, up to a maximum of During fiscal year 2007, we committed to a plan to sell and/or
$300.0 million, but no less than zero. The OOMC agreement is completed the wind-down of three smaller lines of business previously
subject to various closing conditions and may be terminated by reported in our Business Services segment, as well as our tax operations
either party if the transaction does not close by December 31, 2007. in the United Kingdom previously reported in Tax Services. We recorded
In conjunction with this plan, we also announced we would an additional impairment of $5.0 million related to these businesses.
terminate the operations of H&R Block Mortgage Corporation During fiscal year 2007, we met the criteria requiring us to present the
(HRBMC). We recorded impairments relating to the disposition of related financial results of these businesses as discontinued operations
our mortgage businesses during the fourth quarter of fiscal year and the assets and liabilities of all of the businesses being sold as held-
2007 of $345.8 million, including the full impairment of goodwill of for-sale in the consolidated financial statements. All periods presented
$152.5 million. Because the final sale price will be based on third- have been reclassified to reflect our discontinued operations.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
See discussion below and in Item 8, note 21 to our consolidated financial statements.
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DESCRIPTION OF BUSINESS
TAXSERVICES
GENERAL –Our Tax Services segment is primarily engaged in providing tax organizer and sends it to a tax professional for preparation and/or
tax return preparation and related services and products in the United signature.
States and its territories, Canada and Australia. Revenues include fees By offering professional and do-it-yourself tax preparation options
earned for services performed at company-owned retail tax offices, through multiple channels, we can serve our clients in the manner in
royalties from franchise retail tax offices, sales of Peace of Mind which they choose to be served.
(POM) guarantees, sales of tax preparation and other software, fees We also offer clients a number of options for receiving their income
from online tax preparation, and participation in refund anticipation tax refund, including a check directly from the Internal Revenue Service
loans (RALs) and Instant Money Advance Loans (IMALs). Segment (IRS), an electronic deposit directly to their bank account, a refund
revenues constituted 66.8% of our consolidated revenues of continuing anticipation check or a RAL.
operations for fiscal year 2007, 68.5% for 2006, and 74.9% for 2005. The following are some of the services we offer with our tax
Retail income tax return preparation and related services are preparation service:
provided by tax professionals via a system of retail offices operated PEACE OF MIND GUARANTEE –The POM guarantee is offered to
directly by us or by franchisees. We also offer our services through U.S. clients, whereby we (1) represent our clients if audited by the IRS,
seasonal offices located inside major retailers. and (2) assume the cost, subject to certain limits, of additional taxes
We offer a number of digital tax preparation alternatives. TaxCut˛owed by a client resulting from errors attributable to one of our tax
from H&R Block enables do-it-yourself users to prepare their federal professionals’ work. The POM program has a per client cumulative limit
and state tax returns easily and accurately. Our software products may of $5,000 in additional taxes assessed with respect to the federal, state
be purchased through third-party retail stores, direct mail or online. and local tax returns we prepared for the taxable year covered by the
We also offer our clients many online options: multiple versionsof do- program.
it-yourself tax preparation, professional tax review, tax advice and tax RALs –RALs are offered to our U.S. clients by a designated bank
preparation through a tax professional, whereby the client completes a primarily through a contractual relationship with HSBC Holdings plc
(HSBC). An eligible, electronic filing client may apply for a RAL at one
H&R BLOCK 2007 Form 10K