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26 2014 Form 10-K | H&R Block, Inc.
Tax Services – Financial Results (dollars in 000s)
Year ended April 30, 2014 2013 2012
Tax preparation fees:
U.S. $ 1,794,043 $ 1,712,319 $ 1,749,032
International 200,152 220,870 205,466
1,994,195 1,933,189 1,954,498
Royalties 316,153 318,386 308,561
Fees from refund anticipation checks 181,394 158,176 132,361
Fees from Emerald Card 103,730 98,896 104,143
Fees from Peace of Mind® guarantees 89,685 71,355 75,603
Interest and fee income on Emerald Advance 56,877 59,657 59,660
Other 257,426 238,308 227,552
Total revenues 2,999,460 2,877,967 2,862,378
Compensation and benefits:
Field wages 702,312 654,794 691,680
Other wages 169,583 150,306 150,908
Benefits and other compensation 158,203 148,492 183,037
1,030,098 953,592 1,025,625
Occupancy and equipment 363,590 354,430 381,572
Marketing and advertising 237,214 270,240 278,231
Depreciation and amortization 115,488 92,004 88,836
Bad debt 71,733 77,402 68,082
Supplies 36,454 40,131 44,236
Impairment of goodwill and intangible assets 277 3,581 11,389
Other, net 278,239 265,444 260,405
2,133,093 2,056,824 2,158,376
Pretax income $ 866,367 $ 821,143 $ 704,002
Pretax margin 28.9% 28.5% 24.6%
FISCAL 2014 COMPARED TO FISCAL 2013 – Tax Services' revenues increased $121.5 million, or 4.2%, compared to the
prior year primarily due to an increase in U.S. tax preparation fees of $81.7 million, or 4.8%. Elimination in virtually
all markets of a prior year offer to prepare certain 1040EZ tax returns at no charge (resulting in a one-time increase
of over $30 million), a shift to more complex returns, and other pricing changes resulted in higher revenues. Other
pricing changes primarily related to targeted changes to our pricing strategy for a limited number of clients who were
receiving significant discounts and beginning to charge for tax return extensions. This increase was partially offset by
a 6.3% decline in returns prepared driven primarily by our decision to discontinue the free 1040EZ offer.
International tax preparation fees decreased $20.7 million, or 9.4%, due primarily to unfavorable exchange rates
and extension of the Canadian tax season to May 5th.
Fees earned on RACs increased $23.2 million, or 14.7%, primarily due to elimination of certain price discounts and
higher volumes for our online clients.
Revenue from fees for our POM guarantees is initially deferred, and recognized over the term of the guarantee
based on actual claims paid in relation to projected claims. Revenue increased in fiscal year 2014 primarily due to
improving claim experience and lower estimates of projected claims.
Other revenue increased $19.1 million, or 8.0%, primarily due to an increase in online tax preparation revenues.
Total expenses increased $76.3 million, or 3.7%, from the prior year primarily due to increases in compensation
and benefits, depreciation and amortization, and partially offset by a planned reduction in marketing and advertising
spend of $33.0 million.