HR Block 2014 Annual Report Download - page 35

H&R Block, Inc. | 2014 Form 10-K 27
Total compensation and benefits increased $76.5 million primarily due to higher variable field wages resulting
from increased revenues and increases to in-office customer service support staff. Occupancy and equipment expenses
increased $9.2 million, or 2.6%, primarily due to a 4.8% increase in company-owned offices. Marketing and advertising
expensed declined $33.0 million due to a planned reduction in national advertising spend. Depreciation and
amortization expense increased $23.5 million, or 25.5%, primarily due to office upgrades and competitor acquisitions.
Other expenses increased $12.8 million, or 4.8%, primarily due to foreign currency losses in the current year.
Pretax income for fiscal year 2014 increased $45.2 million, or 5.5%, over the prior year. The pretax margin for the
segment increased to 28.9% in fiscal year 2014 from 28.5% in fiscal year 2013.
FISCAL 2013 COMPARED TO FISCAL 2012 – Tax Services' revenues increased $15.6 million, or 0.5%, compared to fiscal
year 2012. U.S. tax preparation fees decreased $36.7 million, or 2.1% primarily due to a 3.3% decline in returns
prepared, partially offset by a 1.2% increase in our average charge. Total assisted tax returns processed by the IRS in
the 2013 tax season fell 1.0%.
International tax preparation fees increased $15.4 million, or 7.5%, due primarily to a 10.4% increase in Australian
tax returns prepared, partially offset by unfavorable exchange rates.
Royalties increased $9.8 million, or 3.2%, primarily due to a 2.7% increase in the average charge, partially offset
by a 1.7% decrease in returns prepared in franchise offices.
Fees earned on RACs increased $25.8 million, or 19.5%, primarily due to our decision to discontinue a promotion
for free RACs offered last year, partially offset by lower RAC volumes.
Emerald Card fees decreased $5.2 million, or 5.0%, primarily due to lower transaction volumes resulting from a
decrease of approximately 14% in prepaid debit cards issued.
Other revenue increased $10.8 million, or 4.7%, primarily due to an increase in online tax preparation revenues.
Total expenses decreased $101.6 million, or 4.7%, from fiscal year 2012. Total compensation and benefits decreased
$72.0 million primarily due to lower field wages in fiscal year 2013 resulting from workforce reductions and severance
costs of $31.1 million recorded in fiscal year 2012. Occupancy and equipment expenses decreased $27.1 million
primarily 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 fiscal year 2013.
Pretax income for fiscal year 2013 increased $117.1 million, or 16.6%, over fiscal year 2012. The pretax margin for
the segment increased to 28.5% from 24.6% in fiscal year 2012.
CORPORATE AND ELIMINATIONS
Corporate operating results include net interest income and gains or losses relating to mortgage loans held for
investment and residual interests in securitizations, interest expense on borrowings, other corporate expenses, and
eliminations of intercompany activities.
Corporate – Operating Results (in 000s)
Year ended April 30, 2014 2013 2012
Total revenues $ 24,835 $ 27,976 $ 31,393
Interest expense 53,611 73,649 83,658
Compensation and benefits 36,302 29,555 23,487
Other, net 34,173 43,904 52,180
124,086 147,108 159,325
Pretax loss $ (99,251) $ (119,132) $ (127,932)