HR Block 2007 Annual Report Download - page 6

H&RBlock had an excellent tax season operationally
in 2007.Our solid performance against strategic
growth plans to better position the business for the
long term was especially evident in our retail offices
during the early season.We had been losing ground
over the past few years to competitors selling high-
cost pre-season and early season loans to clients
focused on getting cash fast.For tax season 2007,
we combined the new Instant Money Advance Loan,
or IMAL (originated by a third-party bank), with our
own bank’s H&RBlock Emerald Prepaid MasterCard®
to develop a low-cost offering that was right for
clients and our company.Our long-term strategy for
integrating H&RBlock Bank with Tax Services took an
important initial step, and, as a result, we have begun
to win back and grow our base of early season clients.
Strategic initiatives are under way to further assert
H&RBlock’s industry leadership and more aggressively
compete in each of the four segments of the U.S.tax
market (see pages 8 to 19).These initiatives build
on our brand and traditional strengths and should
help us to return value to shareholders by serving tax
clients in new and more tailored ways.
With the introduction of the H&RBlock Emerald
CardSM, we have a powerful differentiator in serving
early season tax clients.It’s a product that clients –
many of whom have limited banking relationships
–typically use at first to receive either a loan or IRS tax
4
SOLIDPERFORMANCE IN TAXSERVICES
Iam pleased to report that 2007 was one of our best
tax seasons ever.Tax Services’revenues increased
10 percent to $2.7 billion, and pretax income from
continuing operations advanced by 20 percent to
$705 million.Prior year results include a $70 million
pretax charge for litigation settlements and legal
costs.Among the year’s highlights:
.We opened approximately 4,500 U.S.retail offices
in November to better appeal to our “early season”
filers;
.We launched a new YouGot People advertising and
marketing campaign featuring our tax professionals
and their expertise;
.We achieved higher client satisfaction scores and
demonstrated once again that clients judge our
services to be valuable and fairly priced;
.Our Digital Tax Group posted a second straight year
of strong client growth, up more than 19 percent due
to aggressive marketing, a simplified product lineup
and smart pricing;and
.Our international tax operations delivered a
14 percent gain in pretax earnings from continuing
operations in Canada and Australia.(The small U.K.
operation is being discontinued.)
achieved record revenues and strengthened its
market leadership in meeting the accounting, tax
and business consulting needs of middle-market
companies.
As one of the steps in further focusing H&RBlock
on our core tax, accounting and related financial
services, in April 2007 we announced a transaction
to sell Option One Mortgage Corp., marking our exit
from the non-prime mortgage industry.We also have
exited several smaller businesses that did not offer
competitive advantage in our core operations.
Revenues from our continuing operations rose to
$4.0 billion in fiscal 2007 from $3.6 billion a year
earlier.Net income from continuing operations was
up to $374 million from $298 million, and earnings
per diluted share increased to $1.15 from 89 cents.
(The 2006 results include an after tax charge of
$42.5 million, or 13 cents per share, for litigation and
associated legal costs.)
We are working to complete the sale of Option One
to an affiliate of Cerberus Capital Management, LP
and to close H&RBlock Mortgage Corp.These two
businesses represented most of an $808 million net
loss from discontinued operations in fiscal 2007, or
$2.48 per diluted share, which led to a consolidated
net loss for the year of $434 million, or $1.33 per
diluted share.