HR Block 2009 Annual Report Download - page 26

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Pretax income for the year ended April 30, 2009 of $96.1 million compares to $88.8 million in the prior year.
Pretax margin for the segment increased from 9.4% in fiscal year 2008, to 10.7% in fiscal year 2009, below our stated
goal to achieve a 12.0% pretax margin primarily due to poor results in our capital markets business and lower than
expected revenue growth in our core businesses.
FISCAL 2008 COMPARED TO FISCAL 2007 – Business Services’ revenues for fiscal year 2008 increased
$9.3 million, or 1.0%, over fiscal year 2007.
Tax services revenues increased $33.7 million, or 8.2% and business consulting revenues increased $31.6 million,
or 15.4%, over fiscal year 2007. These increases resulted primarily from both an increase in the number of client
service professionals as well as an improvement in productivity per professional.
Capital markets revenues increased $2.3 million, primarily due to a $12.6 million increase in underwriting
revenues due to a 37.4% increase in revenue per transaction. Valuation and seminar revenues declined $10.4 million
due to a 70.3% decline in the number of business valuation projects as a result of the wind-down of this service line.
Leased employee revenue decreased due to the change in organizational structure with AmexTBS as discussed
above, which resulted in a reduction of $58.1 million to fiscal year 2008 revenues, and a similar reduction in
compensation and benefits.
Total expenses decreased $21.8 million, or 2.5%, for fiscal year 2008 compared to 2007. Compensation and
benefits decreased due to the change in organizational structure with AmexTBS as discussed above, which was
almost entirely offset by additional compensation resulting from increases in the number of personnel and the
average wage per employee.
Selling, general and administrative expenses decreased $20.4 million, or 11.2%, primarily due to decreases in
external consulting and legal fees. During fiscal year 2007, additional consulting fees were incurred related to our
marketing initiatives, and additional legal expenses were incurred related to international acquisitions that were
ultimately not completed.
Pretax income for the year ended April 30, 2008 of $88.8 million compares to $57.7 million in fiscal year 2007.
CONSUMER FINANCIAL SERVICES
This segment is engaged in providing retail banking offerings primarily to Tax Services clients through HRB Bank.
HRB Bank offers traditional banking services including prepaid debit card accounts, Emerald Advance lines of
credit, checking and savings accounts, individual retirement accounts and certificates of deposit. This segment
previously included HRBFA, which has been presented as a discontinued operation in the accompanying
consolidated financial statements.
Year Ended April 30, 2009 2008 2007
Consumer Financial Services – Operating Statistics
Net interest margin
(1)
9.06% 5.54% 2.77%
Pretax return on average assets
(2)
(1.03%) 0.80% 2.60%
Total assets (in 000s) $1,117,000 $1,078,188 $1,501,390
Mortgage loans held for investment:
Loan loss reserve as a % of mortgage loans 10.23% 4.49% 0.25%
Delinquency rate (30+ days) 20.23% 11.71% 3.86%
(1)
Defined as net interest income divided by average earning assets. See “Reconciliation of Non-GAAP Financial Information” at the end
of Item 7.
(2)
Defined as pretax income divided by average assets. See “Reconciliation of Non-GAAP Financial Information” at the end of Item 7.
22 H&R BLOCK 2009 Form 10K