HR Block 2005 Annual Report Download - page 81

Our key strategic priorities can be summarized as follows: 쐍Business Services revenues and pretax income increased
쐍Tax Services – continue expanding our office network, 14.8% and 54.7%, respectively, over the prior year. The
improve our client service and satisfaction scores, focus on increase was primarily due to higher demand for traditional
advice that supports client growth and increased brand accounting, tax and consulting services.
loyalty. 쐍Investment Services reported a pretax loss of $75.4 million
쐍Mortgage Services – continue growing origination volumes compared to $75.6 million in the prior year. Operating results
while lowering our cost of origination, distinguish our for the fourth quarter of fiscal year 2005 showed marked
service quality, minimize risk and volatility in performance improvement, which we hope will continue into the fiscal
and optimize value from secondary markets. year 2006.
쐍Business Services – continue expansion of our national
Consolidated Results of Operations (in 000s, except per share amounts)
accounting, tax and consulting business, add extended
Restated Restated
services to middle-market companies and enhance our client
Year ended April 30, 2005 2004 2003
service culture.
쐍Investment Services – work to align the segment’s cost REVENUES ⬎⬎⬎
structure with its revenues, attract and retain productive Tax Services $ 2,358,293 $ 2,191,177 $ 1,946,763
Mortgage Services 1,246,018 1,323,709 1,150,080
advisors, serve the broad consumer market through advisory
Business Services 573,316 499,210 434,140
relationships and integrate the Tax Services client base into Investment Services 239,244 229,470 200,794
this segment. Corporate 3,148 4,314 (651)
$ 4,420,019 $ 4,247,880 $ 3,731,126
OVERVIEW ⬎⬎⬎
PRETAX INCOME (LOSS) ⬎⬎⬎
A summary of our fiscal year 2005 results is as follows: Tax Services $ 663,518 $ 638,493 $ 556,703
쐍Revenues grew 4.1% over the prior year, primarily due to our Mortgage Services 496,093 688,523 656,324
Tax Services and Business Services segments, with this Business Services 29,871 19,312 (16,033)
growth somewhat offset by a revenue decline at our Investment Services (75,370) (75,614) (219,421)
Corporate (96,397) (107,739) (122,009)
Mortgage Services segment.
1,017,715 1,162,975 855,564
쐍Diluted earnings per share declined 4.1% from fiscal year
Income taxes 381,858 447,367 377,949
2004 to $1.88, primarily due to lower profitability in our
Net income before change in
Mortgage Services segment. Current year results included a accounting principle 635,857 715,608 477,615
non-operating gain of $0.03 per diluted share for legal Cumulative effect of change
recoveries. in accounting principle –(6,359) –
쐍Tax Services fell short of its target client levels, although Net income $ 635,857 $ 709,249 $ 477,615
increases in our pricing and the complexity of returns Basic earnings per share $ 1.92 $ 2.00 $ 1.33
prepared allowed the segment’s revenue growth to continue. Diluted earnings per share 1.88 1.96 1.30
Segment revenues increased 7.6% over the prior year and
segment pretax income increased $25.0 million, or 3.9%.
쐍Mortgage Services’ origination volumes of $31.0 billion were
at record levels, but margin compression drove gains on
sales of mortgage assets to decline 10.5% to $822.1 million.
CRITICAL ACCOUNTING POLICIES ⬎⬎⬎
We consider the policies discussed below to be critical to forecasted, and estimates routinely require adjustment and may
securing an understanding of our financial statements, as they require material adjustment.
require the use of significant judgment and estimation in order to REVENUE RECOGNITION ⬎⬎⬎ We have many different
measure, at a specific point in time, matters that are inherently revenue sources, each governed by specific revenue recognition
uncertain. Specific risks for these critical accounting policies are policies. Our revenue recognition policies can be found in Item 8,
described in the following paragraphs. For all of these policies, note 1 to our consolidated financial statements. Additional
we caution that future events rarely develop precisely as discussion of our recognition of gains on sales of mortgage assets
follows.
H&R BLOCK 2005 Form 10K
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