HR Block 2008 Annual Report Download - page 97

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The financial results included in discontinued operations are as follows:
Year Ended April 30, 2008 2007 2006
(in 000s)
Net revenue $ (423,211) $ 74,574 $ 1,298,048
Pretax income (loss) from operations $ (1,130,366) $ (882,130) $ 316,911
Goodwill impairment – (157,511) –
Loss on sale and estimated impairments (45,510) (193,367) –
Pretax income (loss) (1,175,876) (1,233,008) 316,911
Income tax (benefit) (412,753) (425,018) 124,044
Net income (loss) from discontinued operations $ (763,123) $ (807,990) $ 192,867
Revenue of discontinued operations shown in the table above is net of loan repurchase reserves, which totaled
$582.4 million, $388.7 million and $73.6 million for fiscal years 2008, 2007 and 2006, respectively, and impairments
of residual interests in securitizations, which totaled $137.8 million, $168.9 million and $34.1 million, respectively.
In connection with ceasing all loan origination activities, OOMC terminated all remaining on- and off-balance
sheet warehouse facilities during fiscal year 2008. OOMC held $41.2 million in gross principal of mortgage loans for
sale as of April 30, 2008, with a related allowance of $28.2 million.
OOMC maintained a $1.2 billion facility to fund servicing advances, in which the servicing advances are
collateral for the facility. This on-balance sheet facility was repaid in full with the proceeds from the sale of
servicing assets on April 30, 2008 and was subsequently closed.
RESTRUCTURING CHARGE – During fiscal year 2006, OOMC initiated a restructuring plan to reduce costs.
Restructuring activities continued through fiscal year 2008, including our previously announced closure of all
mortgage origination activities. Charges incurred during fiscal years 2008, 2007 and 2006 totaled $119.2 million,
$21.5 million and $12.6 million, respectively. In fiscal year 2008, our restructuring activities included $33.9 million
in fixed asset write-offs, with the remainder included in “other adjustments” in the table below. These charges are
included in the net loss from discontinued operations on our consolidated income statements. Changes in the
restructuring charge liability during the year ended April 30, 2008, are as follows:
Accrual
Balance as of
April 30, 2007
Cash
Payments
Other
Adjustments
Accrual
Balance as of
April 30, 2008
(in 000s)
Employee severance costs $ 3,688 $ (52,344) $ 53,463 $ 4,807
Contract termination costs 10,919 (10,731) 22,925 23,113
$ 14,607 $ (63,075) $ 76,388 $ 27,920
The remaining liability related to this restructuring charge is included in accounts payable, accrued expenses
and other current liabilities and accrued salaries, wages and payroll taxes on our consolidated balance sheet and
primarily relates to lease obligations for vacant space resulting from branch office closings and employee
severance costs, respectively.
Employee severance costs include estimates regarding the amount of severance payments made to certain
terminated associates and contract termination costs include estimates regarding the length of time required to
sublease vacant space and expected recovery rates. Actual results could vary from these estimates.
NOTE 20: SEGMENT INFORMATION
At April 30, 2008, we continued to meet the criteria requiring us to present the related financial results of OOMC,
HRBMC and other businesses as discontinued operations in the consolidated financial statements. All periods
presented reflect these businesses as discontinued operations. See additional discussion in note 19.
Management has determined the reportable segments identified below according to types of services offered
and the manner in which operational decisions are made. We operate in the following reportable segments:
TAX SERVICES – This segment is primarily engaged in providing tax return preparation and related services and
products in the U.S., Canada and Australia. During fiscal year 2007, our operations in the United Kingdom were
closed. Segment revenues include fees earned for tax-related services performed at company-owned tax offices,
royalties from franchise offices, sales of tax preparation and other software, fees from online tax preparation and
payments related to RAL participations. This segment includes the Company’s tax preparation software, TaxCut»
from H&R Block, and other personal productivity software offered to the general public, as well as software
designed for small to mid-sized CPA firms who file taxes for individuals and businesses. This segment also offers
online do-it-yourself-tax preparation and online tax advice to the general public through various websites.
Revenues of this segment are seasonal in nature.
H&R BLOCK 2008 Form 10K 77