HR Block 2008 Annual Report Download - page 45

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BUSINESS SERVICES
This segment offers accounting, tax and business consulting services, wealth management and capital market
services to middle-market companies. The following discussion excludes the results of the three businesses
reported in discontinued operations for all periods presented.
Year Ended April 30, 2008 2007 2006
Business Services – Operating Statistics
ACCOUNTING, TAX AND BUSINESS CONSULTING:
Chargeable hours (000s) 4,971 5,075 4,357
Chargeable hours per person 1,423 1,373 1,385
Net billed rate per hour $ 147 $ 148 $ 141
Average margin per person $ 120,638 $ 118,415 $ 114,755
Year Ended April 30, 2008 2007 2006
Business Services – Operating Results (in 000s)
Tax services $ 442,521 $ 408,857 $ 340,185
Business consulting 223,971 198,265 170,964
Accounting services 57,399 65,372 59,568
Capital markets 51,144 48,886 59,553
Leased employee revenue 25,100 83,244 72,436
Reimbursed expenses 18,654 13,436 20,346
Other 122,897 114,301 105,081
Total revenues 941,686 932,361 828,133
Compensation and benefits 507,275 511,257 457,050
Occupancy 74,841 68,859 55,883
Other 93,994 96,303 79,691
Cost of revenues 676,110 676,419 592,624
Amortization of intangible assets 14,439 15,521 16,165
Selling, general and administrative 162,340 182,760 148,683
Total expenses 852,889 874,700 757,472
Pretax income $ 88,797 $ 57,661 $ 70,661
FISCAL 2008 COMPARED TO FISCAL 2007 – Business Services’ revenues for fiscal year 2008 increased $9.3 million,
or 1.0%, over the prior year.
Tax services revenues increased $33.7 million, or 8.2%, over the prior year. Business consulting revenues
increased $25.7 million, or 13.0%, over the prior year. 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 primarily due to a change in organizational structure between the
businesses we acquired from American Express Tax and Business Services, Inc. (AmexTBS) and the Attest
Firms that, while not affiliates of our company, also serve our clients. Employees we previously leased to the Attest
Firms have now been transferred to the separate attest practices. As a result, we no longer record the revenues and
expenses associated with leasing these employees, which resulted in a reduction of $58.1 million to current year
revenues, and a similar reduction in compensation and benefits.
Total expenses decreased $21.8 million, or 2.5%, for fiscal year 2008 compared to the prior year. 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 of
$12.4 million and $4.6 million in external consulting and legal fees, respectively. 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 the prior year.
FISCAL 2007 COMPARED TO FISCAL 2006 – Business Services’ revenues for fiscal year 2007 increased
$104.2 million, or 12.6%, over fiscal year 2006.
Accounting, tax and consulting revenues increased $101.8 million, or 17.8%, over fiscal year 2006. This increase
resulted primarily from the acquisition of AmexTBS, which contributed $98.7 million in additional service revenues.
H&R BLOCK 2008 Form 10K 25