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26 H&R Block 2013 Form 10-K
due to a 4.8% reduction in company-owned offices and other cost-saving initiatives. Bad debt expense increased $9.3
million, or 13.7%, primarily due to credit losses associated with the initial offering of credit cards to our clients. Other
expenses increased $5.0 million, or 1.9%, primarily due to lower gains on the sale of tax offices, which declined $15.3
million, partially offset by a reduction in litigation expenses in the current year.
Pretax income for fiscal year 2013 increased $117.1 million, or 16.6%, over the prior year. The pretax margin for
the segment increased to 28.5% from 24.6% in fiscal year 2012.
FISCAL 2012 COMPARED TO FISCAL 2011 - Tax Services' revenues decreased $50.0 million, or 1.7%, compared
to the prior year. U.S. tax preparation fees were essentially flat compared to fiscal year 2011, as return volume and
pricing in U.S. company-owned offices were relatively unchanged from fiscal year 2011.
International tax preparation fees increased $25.2 million, or 14.0%, due primarily to an extension of the Canadian
tax season and favorable exchange rates.
Royalties increased $4.4 million, or 1.4%, primarily due to a 1.9% increase in returns prepared in franchise offices.
Fees earned on RACs decreased $49.3 million, or 27.1%, due to a promotional offering, whereby clients were
eligible to receive a RAC at no charge through February 4, if they elected to have their refund direct deposited onto an
Emerald Card.
Emerald Card fees increased $13.7 million, or 15.1%, primarily due to higher transaction volumes resulting from
an increase of approximately 24% in prepaid debit cards issued.
Interest income earned on EAs decreased $34.6 million, or 36.7%, as a result of lower EA volumes principally
resulting from changes in underwriting criteria in fiscal year 2012.
Other revenue decreased $4.8 million, or 2.1%, primarily due to the last of our RAL revenues ($17.2 million)
recognized in the prior year, partially offset by an increase in online tax preparation revenues.
Total expenses increased $13.5 million, or 0.6%, compared to fiscal year 2011. Benefits and other compensation
increased $8.8 million, or 5.0%, primarily due to incremental severance costs. Marketing and advertising increased
$35.7 million, or 14.7%, as we expanded our marketing efforts, primarily in television and online. Bad debt expense
decreased $71.0 million, or 51.0%, primarily as a result of lower EA volumes and better collection rates in the current
year. Other expenses increased $59.9 million, or 29.9%, primarily due to incremental litigation expenses recorded in
fiscal year 2012 and a decline in gains on the sale of tax offices of $28.5 million, as we sold 83 offices in fiscal year
2012 compared to 280 in fiscal year 2011.
Pretax income for fiscal year 2012 decreased $63.5 million, or 8.3%, from fiscal year 2011.