HR Block 2007 Annual Report Download - page 29

INTRODUCTION AND FORWARD LOOKING STATEMENTS
Specified portions of our proxy statement, which will be filed in July markets in which we operate, and our assumptions and beliefs at that
2007, are listed as ‘‘incorporated by reference’’ in response to certain time. These statements speak only as of the date on which they are
items. Our proxy statement will be printed within our Annual Report made, are not guarantees of future performance, and involve certain
and mailed to shareholders in July 2007 and will also be available on our risks, uncertainties and assumptions, which are difficult to predict.
website at www.hrblock.com.Therefore, actual outcomes and results could materially differ from
In this report, and from time to time throughout the year, we share what is expressed, implied or forecast in these forward-looking
our expectations for the Company’s future performance. These forward- statements. Words such as ‘‘believe,’’ ‘‘will,’’ ‘‘plan,’’ ‘‘expect,’’ ‘‘intend,’’
looking statements are based upon current information, expectations, ‘‘estimate,’’ ‘‘approximate,’’ and similar expressions may identify such
estimates and projections regarding the Company, the industries and forward-looking statements.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS –
H&R Block, Inc. is a financial services company with subsidiaries RECENT DEVELOPMENTS –H&R Block Bank (HRB Bank)
providing tax, investment, mortgage, and accounting and business commenced operations on May 1, 2006, at which time H&R Block, Inc.
consulting services and products. Our Tax Services segment provides became a savings and loan holding company. At that time, we also
income tax return preparation and other services and products related realigned certain segments of our business to reflect a new management
to tax return preparation to the general public in the United States, reporting structure. The previously reported Investment Services
Canada and Australia. Our Business Services segment is a national segment and HRB Bank have been combined in the Consumer Financial
accounting, tax and business consulting firm primarily serving mid-sized Services segment. See ‘‘Description of Business’’ for additional
1m
businesses under the RSM McGladrey name. Our Consumer Financial information on this new segment.
Services segment offers brokerage services, along with investment Conditions in the non-prime mortgage industry were challenging
planning and related financial advice through H&R Block Financial throughout fiscal year 2007, and particularly in our fourth quarter. Our
Advisors and full-service banking through H&R Block Bank. Our mortgage operations, as well as the entire industry, were impacted by
mortgage operations offer a full range of home mortgage services deteriorating conditions in the secondary market, where reduced
through Option One Mortgage Corporation and H&R Block Mortgage investor demand for loan purchases, higher investor yield requirements
Corporation. See additional discussion of our plans to dispose of our and increased estimates for future losses reduced the value of non-
mortgage operations in ‘‘Recent Developments.’’ prime loans. Under these conditions non-prime originators generally
reported significant increases in losses and many were unable to meet
H&R BLOCK’S MISSION –their financial obligations. During the fourth quarter we tightened our
‘‘To help our clients achieve their financial objectives underwriting standards, which had the effect of reducing our loan
by serving as their tax and financial partner.’’ origination volumes, but we expect will result in the origination of
higher quality loans with better pricing in the secondary markets.
We serve our clients’ financial needs through the consistent high
Our discontinued operations reported a pretax loss of $1.2 billion,
quality delivery of a variety of tax and financial services. Operating
which includes losses of $50.2 million from our Business Services and
through multiple lines of business allows us to better meet the changing
TaxServices discontinued operations, with the remainder from our
financial needs of our clients.
mortgage business. The results of our mortgage operations include
H&R Block, Inc. was organized as a corporation in 1955 under the
$388.7 million in loss provisions and repurchase reserves, impairments
laws of the State of Missouri, and is a holding company with operating
of residual interests of $168.9 million and impairments of other assets
subsidiaries providing financial services and products to the general
totaling $345.8 million. If conditions in the industry, particularly in home
public. ‘‘H&R Block,’’ ‘‘the Company,’’ ‘‘we,’’ ‘‘our’’ and ‘‘us’’ are used
appreciation, continue to decline, our future results would continue to
interchangeably to refer to H&R Block, Inc. or to H&R Block, Inc. and
be negatively impacted. See additional discussion of the performance of
its subsidiaries, as appropriate to the context. A complete list of our
our mortgage operations in Item 7, under ‘‘Discontinued Operations.’’
subsidiaries can be found in Exhibit 21.
H&R BLOCK 2007 Form 10K