HR Block 2006 Annual Report Download - page 137

In addition to the aforementioned types of cases, we are parties to mortgage loans. We believe we have meritorious defenses to each of the
claims and lawsuits that we consider to be ordinary, routine disputes Other Claims and Lawsuits and are defending them vigorously.
incidental to our business (Other Claims and Lawsuits), including Although we cannot provide assurance we will ultimately prevail in
claims and lawsuits concerning the preparation of customers’ income each instance, we believe that amounts, if any, required to be paid in the
tax returns, tax planning services, the fees charged customers for discharge of liabilities or settlements pertaining to Other Claims and
various services, investment products, relationships with franchisees, Lawsuits will not have a material adverse effect on our consolidated
contract disputes, employment matters and civil actions, arbitrations, financial statements. Regardless of outcome, claims and litigation can
regulatory inquiries and class actions arising out of our business as a adversely affect us due to defense costs, diversion of management
broker-dealer and provider of investment products and as a servicer of attention and time, and publicity related to such matters.
NOTE 18: SUBSEQUENT EVENTS
In March 2006, the OTS approved the charter of the H&R Block Bank. reporting structure. In May 2006, H&R Block Bank purchased certain
The bank commenced operations on May 1, 2006, at which time we mortgage loans accumulated during the last quarter of fiscal year 2006,
realigned certain segments of our business to reflect a new management which were held by Option One at April 30, 2006.
NOTE 19: SEGMENT INFORMATION
The principal business activity of our operating subsidiaries is providing products, as well as the same flexible product line available through
tax and financial services and products to the general public. brokers, are offered through H&R Block Mortgage Corporation retail
Management has determined the reportable segments identified below offices and some other retail offices.
according to types of services offered and the manner in which BUSINESS SERVICES –This segment offers middle-market companies
operational decisions are made. We operate in the following four accounting, tax and business consulting services, wealth management,
reportable segments: retirement resources, payroll services, corporate finance, and financial
TAX SERVICES –This segment is primarily engaged in providing tax process outsourcing. This segment offers services through offices located
return preparation and related services and products in the U.S., throughout the U.S. Revenues of this segment are seasonal in nature.
Canada, Australia and the United Kingdom. Segment revenues include INVESTMENT SERVICES –This segment is primarily engaged in
fees earned for tax-related services performed at company-owned tax offering investment services and securities products through H&R
offices, royalties from franchise offices, sales of tax preparation and Block Financial Advisors, Inc., a full-service securities broker-dealer, to
other software, fees from online tax preparation, and payments related the general public. Investment advice and services are primarily offered
to RALs. This segment includes the Company’s tax preparation through H&R Block Financial Advisors branch offices.
software – TaxCut˛from H&R Block, and other personal productivity CORPORATE –Corporate support departments provide services to
software offered to the general public, and offers online our operating segments, consisting of marketing, information
do-it-yourself-tax preparation, online tax advice to the general public technology, facilities, human resources, executive, legal, finance,
through the www.hrblock.com website. Revenues of this segment are government relations and corporate communications. These support
seasonal in nature. department costs are largely allocated to our operating segments. Our
Our international operations contributed $129.1 million, captive insurance and franchise financing subsidiaries are also included
$110.0 million and $97.6 million in revenues for fiscal years 2006, 2005 below within Corporate, as was our small business initiatives subsidiary
and 2004, respectively, and $19.8 million, $11.3 million and $11.1 million in fiscal year 2004. The pretax loss from Corporate for fiscal year 2005
of pretax income, respectively. includes a non-operating gain of $17.3 million, or $0.03 per diluted
MORTGAGE SERVICES –This segment is primarily engaged in the share, resulting from legal recoveries.
origination of non-prime mortgage loans, sales and securitizations of IDENTIFIABLE ASSETS –Identifiable assets are those assets, including
mortgage assets and servicing of non-prime loans in the U.S. This goodwill and intangible assets, associated with each reportable segment.
segment mainly offers, through a network of independent mortgage The remaining assets are classified as corporate assets and consist
brokers, a flexible product line to borrowers who are creditworthy but primarily of cash, marketable securities and equipment.
do not meet traditional underwriting criteria. Prime mortgage loan
H&R BLOCK 2006 Form 10K
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