Page 18 - VTaxOnDemand Independent Industry Analysis of Accounting Industry

H&R Block

Revenue Decline
(Direct from H&R Block, Inc. 10-K Annual Report)

1.) Subsequent to the closing of the P&A Transaction, BofI began to offer certain H&R
Block-branded financial products and services that we distribute to our clients. As a result
of agreements we entered into with BofI for the offering of such products and services,
and our sale of AFS securities previously held by HRB Bank, our fiscal year 2016
revenues declined approximately $20 million and pretax income from continuing
operations declined approximately $35 million compared with the prior year. In addition,
as a result of the deregistration of our Holding Companies as SLHCs (see Item 1, under
"Recent Developments"), effective September 1, 2015 we began to report interest income
on investments as other income rather than revenue. This financial reporting change had
no impact on earnings, but reduced fiscal 2016 revenues by approximately $9 million
when compared to fiscal 2015, resulting in a total revenue decline of $29 million related
to the divestiture of HRB Bank.

2.) Revenues decreased $40.5 million, or 1.3%, compared to the prior year. Revenues were
negatively impacted by a 5.8% decline in assisted tax returns prepared (company-owned
and franchise offices combined), changes in foreign currency exchange rates, and the
opera �onal and fina
above. These negative impacts were partially offset by our acquisition of franchisee
businesses and favorable pricing and mix changes.

3.) Pretax earnings fell $173.3 million, or 23.3%, due primarily to lower client volumes,
operational impacts of BofI offering certain financial products and services, incremental
marketing spend, and costs associated with changes to our capital structure including the
divestiture of HRB Bank.

18