HR Block 2008 Annual Report Download - page 40

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discontinued operations, which incurred significant losses in fiscal years 2008 and 2007. The data set forth below
should be read in conjunction with Item 7 and our consolidated financial statements in Item 8.
April 30, 2008 2007 2006 2005 2004
(in 000s, except per share amounts)
Revenues $ 4,403,877 $ 4,021,274 $ 3,574,753 $ 3,146,369 $ 2,895,786
Net income before discontinued operations and
change in accounting principle 454,476 374,337 297,541 319,749 275,769
Net income (loss) (308,647) (433,653) 490,408 623,910 694,093
Basic earnings (loss) per share:
Net income before discontinued operations and
change in accounting principle $ 1.40 $ 1.16 $ 0.91 $ 0.96 $ 0.78
Net income (loss) (0.95) (1.34) 1.49 1.88 1.96
Diluted earnings (loss) per share:
Net income before discontinued operations and
change in accounting principle $ 1.39 $ 1.15 $ 0.89 $ 0.95 $ 0.76
Net income (loss) (0.94) (1.33) 1.47 1.85 1.92
Total assets $ 5,623,425 $ 7,544,050 $ 5,989,135 $ 5,538,056 $ 5,233,827
Long-term debt 1,031,784 537,134 417,262 922,933 545,811
Dividends per share $ 0.56 $ 0.53 $ 0.49 $ 0.43 $ 0.39
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Our company has subsidiaries that provide tax, investment, retail banking and business services and products. We
are the only major company offering a full range of software, online and in-office tax preparation solutions,
combined with personalized financial advice concerning retirement savings, home ownership and other
opportunities to help clients build a better financial future.
Corporate Cost Reduction Program. During the third quarter of fiscal year 2008, we announced the
implementation of a program we expect will reduce corporate staff and overhead expenses by approximately
$110 million per year. As a result of this initiative, we recorded a pretax charge for severance-related benefits of
$19.5 million during fiscal year 2008. Of the total severance charge, $11.3 million was recorded in our corporate
operations, while $3.1 million, $2.4 million and $2.7 million was recorded in our Tax Services, Business Services
and Consumer Financial Services segments, respectively. We expect these actions will result in reduced
compensation expense of approximately $50 million per year. In addition, we are seeking to eliminate
approximately $60 million of non-compensation overhead expenses such as consulting, marketing, travel and
entertainment.
Discontinued Operations — Recent Developments. Effective November 2006, our Board of Directors
approved a plan to exit the mortgage business operated through our subsidiary, OOMC, and we began reporting
that business as discontinued operations. During our third fiscal quarter ended January 31, 2008, OOMC ceased all
loan origination activities, and initiated a plan to sell its servicing operations.
On April 30, 2008, OOMC sold its loan servicing assets to an affiliate of WL Ross pursuant to a previously
announced agreement dated March 17, 2008. After repayment of debt outstanding under OOMC’s servicing
advance facility totaling $986.2 million, OOMC realized net cash proceeds of $212.5 million from WL Ross and
$19.9 million previously held in escrow pursuant to the servicing advance facility, for a total of $232.4 million at
closing. OOMC also retained a receivable relating to certain servicing assets of $117.4 million.
During fiscal year 2007, we also committed to a plan to sell two smaller lines of business and completed the
wind-down of one other line of business, all of which were previously reported in our Business Services segment.
The two businesses held-for-sale were sold during fiscal year 2008. Additionally, during fiscal year 2007, we
completed the wind-down of our tax operations in the United Kingdom, which were previously reported in Tax
Services.
At April 30, 2008, we met the criteria requiring us to present the related financial results of these businesses as
discontinued operations in the consolidated financial statements. All periods presented reflect our discontinued
operations. See Item 8, note 19 to our consolidated financial statements for additional information.
20 H&R BLOCK 2008 Form 10K