Document and Entity Information
Document and Entity Information (USD $) | |||
12 Months Ended
Apr. 30, 2010 | May. 31, 2010
| Oct. 31, 2009
| |
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | 2010-04-30 | ||
Document Fiscal Year Focus | 2,010 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | H&R BLOCK INC | ||
Entity Central Index Key | 0000012659 | ||
Current Fiscal Year End Date | --04-30 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 323,306,058 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $6,250,540,705 | ||
Entity Current Reporting Status | Yes |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (USD $) | |||
In Thousands, except Per Share data | 12 Months Ended
Apr. 30, 2010 | 12 Months Ended
Apr. 30, 2009 | 12 Months Ended
Apr. 30, 2008 |
REVENUES: | |||
Service revenues | $3,231,487 | $3,437,906 | $3,393,906 |
Product and other revenues | 520,440 | 491,155 | 541,166 |
Interest income | 122,405 | 154,516 | 151,558 |
Total revenues | 3,874,332 | 4,083,577 | 4,086,630 |
OPERATING EXPENSES: | |||
Cost of revenues | 2,467,996 | 2,596,218 | 2,588,193 |
Selling, general and administrative | 631,499 | 648,490 | 788,898 |
Total operating expenses | 3,099,495 | 3,244,708 | 3,377,091 |
Operating income | 774,837 | 838,869 | 709,539 |
Other income, net | 9,298 | 501 | 25,532 |
Income from continuing operations before income taxes | 784,135 | 839,370 | 735,071 |
Income taxes | 295,189 | 326,315 | 289,124 |
Net income from continuing operations | 488,946 | 513,055 | 445,947 |
Net loss from discontinued operations | (9,704) | (27,382) | (754,594) |
NET INCOME (LOSS) | 479,242 | 485,673 | (308,647) |
BASIC EARNINGS (LOSS) PER SHARE: | |||
Net income from continuing operations | 1.47 | 1.53 | 1.37 |
Net loss from discontinued operations | -0.03 | -0.08 | -2.32 |
Net income (loss) | 1.44 | 1.45 | -0.95 |
DILUTED EARNINGS (LOSS) PER SHARE: | |||
Net income from continuing operations | 1.46 | 1.53 | 1.35 |
Net loss from discontinued operations | -0.03 | -0.08 | -2.3 |
Net income (loss) | 1.43 | 1.45 | -0.95 |
COMPREHENSIVE INCOME (LOSS): | |||
Net Income (Loss) | 479,242 | 485,673 | (308,647) |
Unrealized gains (losses) on securities, net of taxes: | |||
Unrealized holding gains (losses) arising during the year, net of taxes of $188, $(1,736) and $2,683 | 274 | (2,836) | 4,402 |
Reclassification adjustment for gains included in income, net of taxes of $811, $762 and $130 | (1,399) | (1,164) | (205) |
Change in foreign currency translation adjustments | 14,442 | (10,125) | (391) |
Comprehensive income (loss) | $492,559 | $471,548 | ($304,841) |
1_CONSOLIDATED STATEMENTS OF OP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) | |||
In Thousands | 12 Months Ended
Apr. 30, 2010 | 12 Months Ended
Apr. 30, 2009 | 12 Months Ended
Apr. 30, 2008 |
Tax effect of unrealized holding gains (losses) arising during the year | $188 | ($1,736) | $2,683 |
Tax effect of reclassification adjustment for gains included in income | $811 | $762 | $130 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Thousands | Apr. 30, 2010
| Apr. 30, 2009
|
ASSETS | ||
Cash and cash equivalents | $1,804,045 | $1,654,663 |
Cash and cash equivalents - restricted | 34,350 | 51,656 |
Receivables, less allowance for doubtful accounts of $112,475 and $128,541 | 517,986 | 512,814 |
Prepaid expenses and other current assets | 292,655 | 351,947 |
Total current assets | 2,649,036 | 2,571,080 |
Mortgage loans held for investment, less allowance for loan losses of $93,535 and $84,073 | 595,405 | 744,899 |
Property and equipment, at cost less accumulated depreciation and amortization of $657,008 and $625,075 | 345,470 | 368,289 |
Intangible assets, net | 367,432 | 385,998 |
Goodwill | 840,447 | 850,230 |
Other assets | 436,528 | 439,226 |
Total assets | 5,234,318 | 5,359,722 |
LIABILITIES: | ||
Customer banking deposits | 852,555 | 854,888 |
Accounts payable, accrued expenses and other current liabilities | 756,577 | 705,945 |
Accrued salaries, wages and payroll taxes | 199,496 | 259,698 |
Accrued income taxes | 459,175 | 543,967 |
Current portion of long-term debt | 3,688 | 8,782 |
Current Federal Home Loan Bank borrowings | 50,000 | 25,000 |
Total current liabilities | 2,321,491 | 2,398,280 |
Long-term debt | 1,035,144 | 1,032,122 |
Long-term Federal Home Loan Bank borrowings | 25,000 | 75,000 |
Other noncurrent liabilities | 412,053 | 448,461 |
Total liabilities | 3,793,688 | 3,953,863 |
STOCKHOLDERS' EQUITY: | ||
Common stock, no par, stated value $.01 per share, 800,000,000 shares authorized, shares issued of 431,390,599 and 444,176,510 | 4,314 | 4,442 |
Convertible preferred stock, no par, stated value $0.01 per share, 500,000 shares authorized | ||
Additional paid-in capital | 832,604 | 836,477 |
Accumulated other comprehensive income (loss) | 1,678 | (11,639) |
Retained earnings | 2,658,586 | 2,671,437 |
Less treasury shares, at cost | (2,056,552) | (2,094,858) |
Total stockholders' equity | 1,440,630 | 1,405,859 |
Total liabilities and stockholders' equity | $5,234,318 | $5,359,722 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Thousands, except Share data | Apr. 30, 2010
| Apr. 30, 2009
|
Allowance for doubtful accounts | $112,475 | $128,541 |
Allowance for loan losses | 93,535 | 84,073 |
Accumulated depreciation and amortization | $657,008 | $625,075 |
Common stock, stated value per share | 0.01 | 0.01 |
Common stock, shares authorized | 800,000,000 | 800,000,000 |
Common stock, shares issued | 431,390,599 | 444,176,510 |
Preferred stock, stated value per share | 0.01 | 0.01 |
Preferred stock, shares authorized | 500,000 | 500,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | |||
In Thousands | 12 Months Ended
Apr. 30, 2010 | 12 Months Ended
Apr. 30, 2009 | 12 Months Ended
Apr. 30, 2008 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net Income (Loss) | $479,242 | $485,673 | ($308,647) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 126,901 | 123,631 | 119,514 |
Provision for bad debts and loan losses | 161,296 | 181,829 | 174,813 |
Provision for deferred taxes | 170,566 | 73,213 | (51,695) |
Stock-based compensation | 29,369 | 26,557 | 40,373 |
Net cash provided by discontinued operations | 97,578 | 213,045 | |
Changes in assets and liabilities, net of acquisitions: | |||
Cash and cash equivalents - restricted | 2,497 | (44,625) | (3,168) |
Receivables | (87,889) | (77,447) | (120,676) |
Prepaid expenses and other current assets | (2,320) | 84,279 | 6,796 |
Accounts payable, accrued expenses and other current liabilities | (305) | (36,024) | 16,215 |
Accrued salaries, wages and payroll taxes | (59,617) | (106,014) | 65,845 |
Accrued income taxes | (77,254) | 126,594 | 204,472 |
Other noncurrent liabilities | (65,261) | (56,001) | (34,738) |
Other, net | (89,756) | 145,196 | (63,389) |
Net cash provided by operating activities | 587,469 | 1,024,439 | 258,760 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Purchases of available-for-sale securities | (5,365) | (5,092) | (11,794) |
Sales of and payments received on available-for-sale securities | 15,758 | 15,075 | 18,175 |
Principal payments on mortgage loans held for investment, net | 72,832 | 91,329 | 207,606 |
Purchases of property and equipment | (90,515) | (97,880) | (101,554) |
Payments made for business acquisitions, net of cash acquired | (10,539) | (293,805) | (24,872) |
Net cash provided by investing activities of discontinued operations | 255,066 | 1,044,990 | |
Other, net | 49,182 | 40,867 | 14,738 |
Net cash provided by investing activities | 31,353 | 5,560 | 1,147,289 |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Repayments of commercial paper | (1,406,013) | (5,125,279) | |
Proceeds from issuance of commercial paper | 1,406,013 | 4,133,197 | |
Proceeds from issuance of Senior Notes | 599,376 | ||
Repayments of other borrowings | (4,267,773) | (4,762,294) | (9,055,426) |
Proceeds from other borrowings | 4,242,727 | 4,733,294 | 8,505,426 |
Customer banking deposits, net | 17,539 | 64,357 | (345,391) |
Dividends paid | (200,899) | (198,685) | (183,628) |
Repurchase of common stock, including shares surrendered | (254,250) | (106,189) | (7,280) |
Proceeds from issuance of common stock, net | 141,415 | ||
Proceeds from exercise of stock options | 16,682 | 71,594 | 23,322 |
Net cash provided by (used in) financing activities of discontinued operations | 4,783 | (64,439) | |
Other, net | (35,144) | 11,492 | (37,947) |
Net cash used in financing activities | (481,118) | (40,233) | (1,558,069) |
Effects of exchange rates on cash | 11,678 | ||
Net increase (decrease) in cash and cash equivalents | 149,382 | 989,766 | (152,020) |
Cash and cash equivalents at beginning of the year | 1,654,663 | 664,897 | 816,917 |
Cash and cash equivalents at end of the year | 1,804,045 | 1,654,663 | 664,897 |
SUPPLEMENTARY CASH FLOW DATA: | |||
Income taxes paid, net of refunds received of $12,587, $158,862 and $317,849 | 359,559 | (1,593) | (238,803) |
Interest paid on borrowings | 78,305 | 89,541 | 173,181 |
Interest paid on deposits | 10,156 | 14,004 | 44,501 |
Transfers of loans to foreclosed assets | $19,341 | $65,171 |
2_CONSOLIDATED STATEMENTS OF CA
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $) | |||
In Thousands | Apr. 30, 2010
| Apr. 30, 2009
| Apr. 30, 2008
|
Income tax refunds received | $12,587 | $158,862 | $317,849 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) | |||||||
In Thousands | Common Stock
| Convertible Preferred Stock
| Additional Paid-in Capital
| Accumulated Other Comprehensive Income (Loss)
| Retained Earnings
| Treasury Stock
| Total
|
Balances, value at Apr. 30, 2007 | $4,359 | $676,766 | ($1,320) | $2,886,440 | ($2,151,746) | $1,414,499 | |
Balances, shares at Apr. 30, 2007 | 435,891 | (112,672) | |||||
Remeasurement of uncertain tax positions upon adoption of new accounting standard | (9,716) | (9,716) | |||||
Net Income (Loss) | (308,647) | (308,647) | |||||
Unrealized translation gain(loss) | (391) | (391) | |||||
Change in net unrealized gain (loss) on available-for-sale securities | 4,197 | 4,197 | |||||
Stock-based compensation | 50,410 | 50,410 | |||||
Shares issued for: | |||||||
Option exercises, shares | 1,736 | ||||||
Option exercises, value | (11,090) | 33,174 | 22,084 | ||||
Nonvested shares, shares | 963 | ||||||
Nonvested shares, value | (20,097) | 18,387 | (1,710) | ||||
ESPP, shares | 413 | ||||||
ESPP, value | (65) | 7,872 | 7,807 | ||||
Acquisitions, shares | 8 | ||||||
Acquisitions, value | 35 | 158 | 193 | ||||
Acquisition of treasury shares, shares | (328) | ||||||
Acquisition of treasury shares, value | (7,280) | (7,280) | |||||
Cash dividends paid | (183,628) | (183,628) | |||||
Balance, shares at Apr. 30, 2008 | 435,891 | (109,880) | |||||
Balance, value at Apr. 30, 2008 | 4,359 | 695,959 | 2,486 | 2,384,449 | (2,099,435) | 987,818 | |
Net Income (Loss) | 485,673 | 485,673 | |||||
Unrealized translation gain(loss) | (10,125) | (10,125) | |||||
Change in net unrealized gain (loss) on available-for-sale securities | (4,000) | (4,000) | |||||
Proceeds from common stock Issuance, net of expenses, shares | 8,286 | ||||||
Proceeds from common stock Issuance, net of expenses, value | 83 | 141,332 | 141,415 | ||||
Stock-based compensation | 32,600 | 32,600 | |||||
Shares issued for: | |||||||
Option exercises, shares | 4,481 | ||||||
Option exercises, value | (12,624) | 85,624 | 73,000 | ||||
Nonvested shares, shares | 1,015 | ||||||
Nonvested shares, value | (20,392) | 19,402 | (990) | ||||
ESPP, shares | 292 | ||||||
ESPP, value | (423) | 5,577 | 5,154 | ||||
Acquisitions, shares | 8 | ||||||
Acquisitions, value | 25 | 163 | 188 | ||||
Acquisition of treasury shares, shares | (5,991) | ||||||
Acquisition of treasury shares, value | (106,189) | (106,189) | |||||
Cash dividends paid | (198,685) | (198,685) | |||||
Balance, shares at Apr. 30, 2009 | 444,177 | (110,075) | |||||
Balance, value at Apr. 30, 2009 | 4,442 | 836,477 | (11,639) | 2,671,437 | (2,094,858) | 1,405,859 | |
Net Income (Loss) | 479,242 | 479,242 | |||||
Unrealized translation gain(loss) | 14,442 | 14,442 | |||||
Change in net unrealized gain (loss) on available-for-sale securities | (1,125) | (1,125) | |||||
Stock-based compensation | 29,369 | 29,369 | |||||
Shares issued for: | |||||||
Option exercises, shares | 1,293 | 1,293 | |||||
Option exercises, value | (10,840) | 24,616 | 13,776 | ||||
Nonvested shares, shares | 677 | 677 | |||||
Nonvested shares, value | (13,806) | (300) | 12,879 | (1,227) | |||
ESPP, shares | 266 | 266 | |||||
ESPP, value | (924) | 5,058 | 4,134 | ||||
Acquisitions, shares | |||||||
Acquisitions, value | |||||||
Acquisition of treasury shares, shares | (246) | (246) | |||||
Acquisition of treasury shares, value | (4,247) | (4,247) | |||||
Retirement of common shares, shares | (12,786) | (12,786) | |||||
Retirement of common shares, value | (128) | (7,672) | (242,203) | (250,003) | |||
Cash dividends declared | (48,691) | (48,691) | |||||
Cash dividends paid | (200,899) | (200,899) | |||||
Balance, shares at Apr. 30, 2010 | 431,391 | (108,085) | (323,306) | ||||
Balance, value at Apr. 30, 2010 | $4,314 | $832,604 | $1,678 | $2,658,586 | ($2,056,552) | $1,440,630 |
3_CONSOLIDATED STATEMENTS OF ST
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (USD $) | |||
12 Months Ended
Apr. 30, 2010 | 12 Months Ended
Apr. 30, 2009 | 12 Months Ended
Apr. 30, 2008 | |
Cash dividends paid per share | 0.6 | 0.59 | 0.56 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
12 Months Ended
Apr. 30, 2010 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE1:SUMMARY OF SIGNIFICANTACCOUNTING POLICIES NATURE OF OPERATIONSOur operating subsidiaries provide a variety of services to the general public, principally in the United States (U.S.). Specifically, we offer: tax return preparation; tax and consulting services to business clients; certain retail banking services; tax preparation and related software; and refund anticipation loans (RALs) offered by third-party lending institutions. Tax preparation services are also provided in Canada and Australia. Our Tax Services segment comprised 76.8% of our consolidated revenues from continuing operations for fiscal year 2010. PRINCIPLES OF CONSOLIDATIONThe consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated. Some of our subsidiaries operate in regulated industries and their underlying accounting records reflect the policies and requirements of these industries. RECLASSIFICATIONSCertain reclassifications have been made to prior year amounts to conform to the current year presentation. We realigned our segments as discussed in note21, and accordingly restated segment disclosures for prior periods. These changes had no effect on our results of operations or stockholders' equity as previously reported. MANAGEMENT ESTIMATESThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, assumptions and judgments are applied in the determination of our allowance for loan losses, potential losses from loan repurchase and indemnity obligations associated with our discontinued mortgage business, contingent losses associated with pending litigation, fair value of reporting units, valuation allowances based on future taxable income, reserves for uncertain tax positions and related matters. We seek to change our estimates when facts and circumstances dictate, however, future events and their effects cannot be determined with absolute certainty. As such, actual results could differ materially from those estimates. CONCENTRATIONS OF RISKThe overall credit quality of our mortgage loans held for investment is impacted by the strength of the U.S.economy and local economies. Our mortgage loans held for investment include concentrations of loans to borrowers in certain states, which may result in increased exposure to loss as a result of changes in real estate values and underlying economic or market conditions related to a particular geographical location. Approximately 51% of our mortgage loan portfolio consists of loans to borrowers located in the states of Florida, California and New York. CASH AND CASH EQUIVALENTSCash and cash equivalents include cash on hand, cash due from banks and federal funds sold. For purposes of the consolidated balance sheets and consolidated statements of cash flo |
Business Combinations and Dispo
Business Combinations and Disposals | |
12 Months Ended
Apr. 30, 2010 | |
BUSINESS COMBINATIONS AND DISPOSALS | NOTE2:BUSINESS COMBINATIONS AND DISPOSALS We periodically acquire the businesses of franchisees and account for the transaction as a business combination. We also periodically sell company-owned offices to franchisees and record a gain if the sale qualifies as a divestiture for accounting purposes and upon determination that collection of the sales proceeds is reasonably assured. Gains are reported in operating income because the transactions are considered a recurring part of our business, and are included as a reduction of selling, general and administrative expenses in our consolidated income statements. During fiscal years 2010 and 2009, we sold certain offices to existing franchisees for cash proceeds of $65.7million and $16.9million, respectively, and recorded gains on these sales of $49.0million and $14.9million, respectively. Effective November3, 2008, we acquired the assets and franchise rights of our last major independent franchise operator for an aggregate purchase price of $279.2million. Goodwill recognized on this transaction is included in the Tax Services segment and is deductible for tax purposes. During fiscal years 2010, 2009 and 2008, we made other acquisitions, which were accounted for as purchases with cash payments totaling $10.3million, $12.6million and $21.4million, respectively. Operating results of the acquired businesses, which are not material, are included in the consolidated income statements since the date of acquisition. During fiscal years 2010, 2009 and 2008 we also paid $0.2million, $1.9million and $3.6million, respectively, for contingent payments on prior acquisitions. |
Earnings per Share
Earnings per Share | |
12 Months Ended
Apr. 30, 2010 | |
EARNINGS PER SHARE | NOTE3:EARNINGS PER SHARE Basic and diluted earnings per share is computed using the two-class method. See note1 for additional information on our adoption of the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Per share amounts are computed by dividing net income from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period. The computations of basic and diluted earnings per share from continuing operations are as follows: (in 000s, except per share amounts) Year Ended April 30, 2010 2009 2008 Net income from continuing operations attributable to shareholders $ 488,946 $ 513,055 $ 445,947 Amounts allocated to participating securities (nonvested shares) (1,888 ) (2,042 ) (2,453 ) Net income from continuing operations attributable to common shareholders $ 487,058 $ 511,013 $ 443,494 Basic weighted average common shares 332,283 332,787 324,810 Potential dilutive shares 953 1,752 2,658 Dilutive weighted average common shares 333,236 334,539 327,468 Earnings per share from continuing operations attributable to common shareholders: Basic $ 1.47 $ 1.53 $ 1.37 Diluted 1.46 1.53 1.35 Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain restrictions or the exercise of options to purchase 13.7million, 15.7million and 18.2million shares of stock for fiscal years 2010, 2009 and 2008, respectively, as the effect would be antidilutive. |
Marketable Securities Available
Marketable Securities Available-For-Sale | |
12 Months Ended
Apr. 30, 2010 | |
MARKETABLE SECURITIES AVAILABLE-FOR-SALE | NOTE4: MARKETABLE SECURITIES AVAILABLE-FOR-SALE The amortized cost and fair value of securities classified as available-for-sale held at April30, 2010 and 2009 are summarized below: (in 000s) As of April 30, 2010 2009 Gross Gross Gross Gross Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses(1) Value Cost Gains Losses(1) Value Mortgage-backed securities $ 23,026 $ 39 $ (49 ) $ 23,016 $ 27,466 $ 25 $ (698 ) $ 26,793 Municipal bonds 8,442 459 8,901 9,560 491 (4 ) 10,047 Trust preferred security 1,854 (1,823 ) 31 3,454 (3,162 ) 292 $ 33,322 $ 498 $ (1,872 ) $ 31,948 $ 40,480 $ 516 $ (3,864 ) $ 37,132 (1) At April30, 2010, investments with a cost of $15.7million and gross unrealized losses of $1.9million had been in continuous loss position for more than twelve months. At April30, 2009, investments with a cost of $30.3million and gross unrealized losses of $3.9million had been in continuous loss position for more than twelve months. Proceeds from the sales of AFS securities were $2.1million, $8.3million and $13.9million during fiscal years 2010, 2009 and 2008, respectively. We recorded no gross realized gains or losses on those sales during fiscal year 2010. Gross realized gains on those sales during fiscal years 2009 and 2008 were $0.7million and $0.4million, respectively; gross realized losses were $1.3million and $0.1million, respectively. During fiscal years 2010, 2009 and 2008, we recorded other-than-temporary impairments of AFS securities totaling $1.6million, $1.5million and $0.4million, respectively, as a result of an assessment that it was probable we would not collect all amounts due or an assessment that we would not be able to hold the investments until potential recovery of market value. Contractual maturities of AFS debt securities at April30, 2010, occur at varying dates over the next two to 27years, and are set forth in the table below. (in 000s) Cost Basis Fair Value Maturing in: Two to five years $ 4,091 $ 4,311 Five to ten years 4,351 4,590 Beyond 24,880 23,047 $ 33,322 $ 31,948 HRB Bank is required to maintain a restricted investment in FHLB stock for borrowing availability. The cost of this investment, $6.0million, represents its redemption value, as these investments do not have a ready market. |
Mortgage Loans Held for Investm
Mortgage Loans Held for Investment and Related Assets | |
12 Months Ended
Apr. 30, 2010 | |
MORTGAGE LOANS HELD FOR INVESTMENT AND RELATED ASSETS | NOTE5: MORTGAGE LOANS HELD FOR INVESTMENT AND RELATED ASSETS The composition of our mortgage loan portfolio as of April30, 2010 and 2009 is as follows: (dollars in 000s) 2010 2009 As of April 30, Amount % of Total Amount % of Total Adjustable-rate loans $ 411,122 60 % $ 534,943 65 % Fixed-rate loans 272,562 40 % 286,894 35 % 683,684 100 % 821,837 100 % Unamortized deferred fees and costs 5,256 7,135 Less: Allowance for loan losses (93,535 ) (84,073 ) $ 595,405 $ 744,899 Activity in the allowance for loan losses for the years ended April30, 2010 and 2009 is as follows: (in 000s) Year Ended April 30, 2010 2009 2008 Balance at beginning of the year $ 84,073 $ 45,401 $ 3,448 Provision 47,750 63,897 42,004 Recoveries 88 54 999 Charge-offs (38,376 ) (25,279 ) (1,050 ) Balance at end of the year $ 93,535 $ 84,073 $ 45,401 Our loan loss reserve as a percent of mortgage loans was 13.7% at April30, 2010, compared to 10.2% at April30, 2009. The loan loss provision as a percent of mortgage loans increased during the current year as a result of declining collateral values due to declining residential home prices and increasing delinquencies occurring in our portfolio. Mortgage loans held for investment include loans originated by SCC, which were purchased by HRB Bank. Those loans have experienced higher rates of delinquency than other loans in our portfolio and expose us to a higher risk of potential credit loss. Residential real estate markets have experienced significant declines in property values and mortgage default rates have been severe. If adverse market trends continue, including trends within our portfolio specifically, we may be required to record additional loan loss provisions, and those losses may be significant. Information related to our non-performing assets as of April30, 2010 and 2009 is as follows: (in 000s) April 30, 2010 2009 Impaired loans: 30 59days $ 330 $ 60 89days 11,851 21,415 90+ days, non-accrual 153,703 121,685 TDR loans, accrual 113,471 60,044 TDR loans, non-accrual 31,506 100,697 310,861 303,841 Real estate owned(1) 29,252 44,533 Total non-performing assets $ 340,113 $ 348,374 |
Assets and Liabilities Measured
Assets and Liabilities Measured at Fair Value | |
12 Months Ended
Apr. 30, 2010 | |
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE | NOTE6: ASSETS AND LIABILITIES MEASURED AT FAIR VALUE We use the following valuation methodologies for assets and liabilities measured at fair value and the general classification of these instruments pursuant to the fair value hierarchy. Available-for-sale securities Available-for-sale securities are carried at fair value on a recurring basis. When available, fair value is based on quoted prices in an active market and as such, would be classified as Level1. If quoted market prices are not available, fair values are estimated using quoted prices of securities with similar characteristics, discounted cash flows or other pricing models. Available-for-sale securities that we classify as Level2 include certain agency and non-agency mortgage-backed securities, U.S.states and political subdivisions debt securities and other debt and equity securities. Impaired mortgage loans held for investment The fair value of impaired mortgage loans held for investment are generally based on the net present value of discounted cash flows for TDR loans or the appraised value of the underlying collateral for all other loans. These loans are classified as Level3. The following methods were used to determine the fair values of our other financial instruments: Cash equivalents, accounts receivable, demand deposits, accounts payable, accrued liabilities and the current portion of long-term debt The carrying values reported in the balance sheet for these items approximate fair market value due to the relative short-term nature of the respective instruments. Mortgage loans held for investment The fair value of mortgage loans held for investment is generally determined using a pricing model based on current market information obtained from origination data, and bids received from time to time. The fair value of certain impaired loans held for investment is primarily based on the appraised value of the underlying collateral less estimated selling costs. IRAs and other time deposits The fair value is calculated based on the discounted value of contractual cash flows. Long-term debt The fair value of borrowings is based on rates currently available to us for obligations with similar terms and maturities, including current market rates on our Senior Notes. The following table presents for each hierarchy level the financial assets that are measured at fair value on both a recurring and non-recurring basis: (dollars in 000s) Total Level 1 Level 2 Level 3 As of April30, 2010: Recurring: Available-for-sale securities $ 31,948 $ $ 31,948 $ Non-recurring: Impaired mortgage loans held for investment 249,549 249,549 $ 281,497 $ $ 31,948 $ 249,549 As a percentage of total assets 5.4 % % 0.6 % 4.8 % As of April30, 2009: |
Property and Equipment
Property and Equipment | |
12 Months Ended
Apr. 30, 2010 | |
PROPERTY AND EQUIPMENT | NOTE7:PROPERTY AND EQUIPMENT The components of property and equipment are as follows: (in 000s) As of April 30, 2010 2009 Land and other non-depreciable assets $ 2,482 $ 5,353 Buildings 161,460 171,785 Computers and other equipment 488,160 469,066 Capitalized software 147,104 153,771 Leasehold improvements 199,370 187,180 Construction in process 3,902 6,209 1,002,478 993,364 Less: Accumulated depreciation and amortization (657,008 ) (625,075 ) $ 345,470 $ 368,289 During fiscal year 2010, we received $10.3million for tax incentives from certain government agencies related to our corporate headquarters building, which was recorded as a reduction of original cost. Property and equipment included above and subject to capital lease arrangements included the following: (in 000s) As of April 30, 2010 2009 Property and equipment under capital lease $ 47,844 $ 47,913 Less accumulated amortization (31,418 ) (25,368 ) $ 16,426 $ 22,545 Depreciation and amortization expense of continuing operations for fiscal years 2010, 2009 and 2008 was $96.9million, $96.6million and $90.1million, respectively. Included in depreciation and amortization expense of continuing operations is amortization of capitalized software of $21.8million, $23.4million and $19.9million, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | |
12 Months Ended
Apr. 30, 2010 | |
GOODWILL AND INTANGIBLE ASSETS | NOTE8:GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill by segment for the years ended April30, 2010 and 2009 are as follows: (in 000s) Tax Services Business Services Total Balance at May1, 2008: Goodwill $ 431,981 $ 399,333 $ 831,314 Accumulated impairment losses 431,981 399,333 831,314 Changes: Acquisitions 22,692 3,306 25,998 Disposals and foreign currency changes (4,894 ) (4,894 ) Impairments (2,188 ) (2,188 ) Balance at April30, 2009: Goodwill 449,779 402,639 852,418 Accumulated impairment losses (2,188 ) (2,188 ) 447,591 402,639 850,230 Changes: Acquisitions 5,136 1,112 6,248 Disposals and foreign currency changes (1,031 ) (1,031 ) Impairments (15,000 ) (15,000 ) Balance at April30, 2010: Goodwill 453,884 403,751 857,635 Accumulated impairment losses (2,188 ) (15,000 ) (17,188 ) $ 451,696 $ 388,751 $ 840,447 Goodwill and other indefinite-life intangible assets were tested for impairment in the fourth quarter of fiscal year 2010. RSM EquiCo is a separate reporting unit within our Business Services segment with goodwill totaling $29.3million. RSM EquiCo assists clients with capital markets transactions and has experienced declining revenues and profitability in the current economic environment. Accordingly, we evaluated RSM EquiCo's goodwill for impairment at January31, 2010. The measurement of impairment of goodwill consists of two steps. In the first step, we compared the fair value of RSM EquiCo, determined using discounted cash flows, to its carrying value. As the results of the first test indicated that the fair value of RSM EquiCo was less than its carrying value, we then performed the second step, which was to determine the implied fair value of RSM EquiCo's goodwill, and to compare that to its carrying value. The second step included hypothetically valuing all of the tangible and intangible assets of RSM EquiCo. As a result, we recorded an impairment of the reporting unit's goodwill of $15.0million, leaving a remaining goodwill balance of $14.3million. The impairment is included in selling, general and administrative expenses on the consolidated statements of operations. We have a separate reporting unit within our Tax Services segment with a goodwill balance totaling $28.6million at April30, 2010. Operating activities of the business consist principally of the development and sale of commercial tax preparation software. The estima |
Customer Banking Deposits
Customer Banking Deposits | |
12 Months Ended
Apr. 30, 2010 | |
CUSTOMER BANKING DEPOSITS | NOTE9: CUSTOMER BANKING DEPOSITS The components of customer banking deposits at April30, 2010 and 2009 are as follows: (in 000s) April 30, 2010 2009 Outstanding Interest Outstanding Interest Balance Expense Balance Expense Money-market deposits $ 195,220 $ 1,871 $ 144,617 $ 6,148 Savings deposits 12,460 128 16,943 270 Checking deposits: Interest-bearing 24,190 83 1,728 306 Non-interest-bearing 200,096 196,221 224,286 83 197,949 306 IRAs and other time deposits: Due in one year 60,348 83,164 Due in two years 12,479 7,207 Due in three years 6,079 10,442 Due in four years 3,105 5,670 Due in five years 1 3,028 IRAs 360,240 385,868 442,252 8,092 495,379 7,345 $ 874,218 $ 10,174 $ 854,888 $ 14,069 At April30, 2010, customer banking deposits totaling $21.7million have a maturity of greater than one year and are included in other noncurrent liabilities on our consolidated balance sheet. Accrued but unpaid interest on deposits totaled $0.2million at April30, 2010 and 2009. Time deposit accounts totaling $9.0million were in excess of Federal Deposit Insurance Corporation (FDIC) insured limits at April30, 2010, and mature as follows: (in 000s) Three months or less $ 509 Three to six months 1,140 Six to twelve months 5,275 Over twelve months 2,087 $ 9,011 |
Long-Term Debt
Long-Term Debt | |
12 Months Ended
Apr. 30, 2010 | |
LONG-TERM DEBT | NOTE10: LONG-TERM DEBT The components of long-term debt are as follows: (in 000s) As of April 30, 2010 2009 Senior Notes, 7.875%, due January 2013 $ 599,664 $ 599,539 Senior Notes, 5.125%, due October 2014 398,941 398,706 Acquisition obligations, due from May 2010 to May 2015 28,701 30,658 Capital lease obligations 11,526 12,001 1,038,832 1,040,904 Less: Current portion (3,688 ) (8,782 ) $ 1,035,144 $ 1,032,122 On March4, 2010, we entered into a new committed line of credit (CLOC) agreement to support commercial paper issuances, general corporate purposes or for working capital needs, and terminated the previous CLOCs. The new facility provides funding up to $1.7billion and matures July31, 2013. The new facility bears interest at an annual rate of LIBOR plus 1.30% to 2.80% or PRIME plus .30% to 1.80% (depending on the type of borrowing) and includes an annual facility fee of .20% to .70% of the committed amounts, based on our credit ratings. Covenants in the new facility are substantially similar to those in the previous CLOCs including: (1)maintenance of a minimum net worth of $650.0million on the last day of any fiscal quarter; and (2)reduction of the aggregate outstanding principal amount of short-term debt, as defined in the agreement, to $200.0million or less for thirty consecutive days during the period March 1 to June 30 of each year ("Clean-down requirement"). At April30, 2010, we were in compliance with these covenants and had net worth of $1.4billion. We had no balance outstanding under the CLOCs at April30, 2010 or 2009. On January11, 2008, we issued $600.0million of 7.875%Senior Notes under our shelf registration. The Senior Notes are due January15, 2013 and are not redeemable by the bondholders prior to maturity. The net proceeds of this transaction were used to repay a $500.0million facility, with the remaining proceeds used for working capital and general corporate purposes. On October26, 2004, we issued $400.0million of 5.125%Senior Notes under our shelf registration. The Senior Notes are due October30, 2014 and are not redeemable by the bondholders prior to maturity. The net proceeds of this transaction were used to repay $250.0million in 63/4%Senior Notes that were due in November 2004. The remaining proceeds were used for working capital, capital expenditures, repayment of other debt and other general corporate purposes. As of April30, 2010, we had $250.0million remaining under our shelf registration for additional debt issuances. We have obligations related to various acquisitions of $28.7million and $30.7million at April30, 2010 and 2009, respectively, which are due from May 2010 to May 2015. We have a capitalized lease obligation of $11.5million at April30, 2010, that is collateralized by land and buildings. The obligation is due in 11years. Effective January12, 2010, we entered into a $2.5billion committed line of credit agreement with HSBC Bank |
Other Noncurrent Assets and Lia
Other Noncurrent Assets and Liabilities | |
12 Months Ended
Apr. 30, 2010 | |
OTHER NONCURRENT ASSETS AND LIABILITIES | NOTE11: OTHER NONCURRENT ASSETS AND LIABILITIES We have deferred compensation plans that permit certain employees to defer portions of their compensation and accrue income on the deferred amounts. Included in other noncurrent liabilities is $135.5million and $112.6million at April30, 2010 and 2009, respectively, reflecting our obligation under these plans. We may purchase whole-life insurance contracts on certain employee participants to recover distributions made or to be made under the plans. The cash surrender value of the policies and other assets held by the Deferred Compensation Trust is recorded in other noncurrent assets and totaled $112.4million and $104.0million at April30, 2010 and 2009, respectively. These assets are restricted, as they are only available to fund the related liability. |
Stockholders' Equity
Stockholders' Equity | |
12 Months Ended
Apr. 30, 2010 | |
STOCKHOLDERS' EQUITY | NOTE12: STOCKHOLDERS' EQUITY During fiscal year 2010, we purchased and immediately retired 12.8million shares of our common stock at a cost of $250.0million. We may continue to repurchase and retire common stock or retire shares held in treasury in the future. On October27, 2008, we sold 8.3million shares of our common stock, without par value, at a price of $17.50 per share in a registered direct offering through subscription agreements with selected institutional investors. We received net proceeds of $141.4million, after deducting placement agent fees and other offering expenses. Proceeds were used for general corporate purposes. We are authorized to issue 6.0million shares of Preferred Stock without par value. At April30, 2010, we had 5.6million shares of authorized but unissued Preferred Stock. Of the unissued shares, 0.6million shares have been designated as Participating Preferred Stock. On March8, 1995, our Board of Directors authorized the issuance of a series of 0.5million shares of non-voting Preferred Stock designated as Convertible Preferred Stock without par value. At April30, 2010, we had 0.5million shares of authorized but unissued Convertible Preferred Stock. The holders of the Convertible Preferred Stock are not entitled to receive dividends paid in cash, property or securities and, in the event of any dissolution, liquidation or wind-up of the Company, will share ratably with the holders of Common Stock then outstanding in the assets of the Company after any distribution or payments are made to the holders of Participating Preferred stock or the holders of any other class or series of stock of the Company with preference over the Common Stock. |
Stock-Based Compensation
Stock-Based Compensation | |
12 Months Ended
Apr. 30, 2010 | |
STOCK-BASED COMPENSATION | NOTE13: STOCK-BASED COMPENSATION We utilize the fair value method to account for stock-based awards. Stock-based compensation expense of $29.4million, $32.6million and $50.4million was recorded in fiscal years 2010, 2009 and 2008, respectively, net of related tax benefits of $10.5million, $12.2million and $17.3million, respectively. Stock-based compensation expense of our continuing operations totaled $29.3million, $26.6million and $40.4million in fiscal years 2010, 2009 and 2008, respectively. Accounting standards require excess tax benefits from stock-based compensation to be included as a financing activity in the statements of cash flows. As a result, we classified $1.6million, $8.6million and $3.2million as cash inflows from financing activities for fiscal years 2010, 2009 and 2008, respectively. We realized tax benefits of $6.6million, $20.2million and $12.6million in fiscal years 2010, 2009 and 2008, respectively. We have four stock-based compensation plans which have been approved by our shareholders. As of April30, 2010, we had 0.8million shares reserved for future awards under stock-based compensation plans. We issue shares from our treasury stock to satisfy the exercise or release of stock-based awards. We believe we have adequate treasury stock to issue for the exercise or release of stock-based awards. Our 2003 Long-Term Executive Compensation Plan provides for awards of options (both incentive and nonqualified), nonvested shares, performance nonvested share units and other stock-based awards to employees. These awards entitle the holder to shares or the right to purchase shares of common stock as the award vests, typically over a three-year period with one-third vesting each year. Nonvested shares receive dividends during the vesting period and performance nonvested share units receive cumulative dividends at the end of the vesting period. We measure the fair value of options on the grant date or modification date using the Black-Scholes option valuation model. We measure the fair value of nonvested shares and performance nonvested share units based on the closing price of our common stock on the grant date. Generally, we expense the grant-date fair value, net of estimated forfeitures, over the vesting period on a straight-line basis. Awards granted to employees who are of retirement age or reach retirement age at least one year after the grant date, but prior to the end of the service period of the awards, are expensed over the shorter of the two periods. Options are generally granted at a price equal to the fair market value of our common stock on the grant date and have a contractual term of ten years. Our 1999 Stock Option Plan for Seasonal Employees, which provided for awards of nonqualified options to certain employees, was terminated effective December31, 2009, except for outstanding awards thereunder. These awards were granted to seasonal employees in our Tax Services segment and entitled the holder to the right to purchase shares of common stock as the award vests, typically over a two-year period. We measure the fair value of options on the grant date using the Black-Scholes option valuation mode |
Income Taxes
Income Taxes | |
12 Months Ended
Apr. 30, 2010 | |
INCOME TAXES | NOTE14: INCOME TAXES The components of income from continuing operations upon which domestic and foreign income taxes have been provided are as follows: (in 000s) Year Ended April 30, 2010 2009 2008 Domestic $ 745,912 $ 815,614 $ 700,162 Foreign 38,223 23,756 34,909 $ 784,135 $ 839,370 $ 735,071 The components of income tax expense (benefit) for continuing operations are as follows: (in 000s) Year Ended April 30, 2010 2009 2008 Current: Federal $ 92,992 $ 243,085 $ 196,676 State 23,625 38,418 54,096 Foreign 16,052 1,393 16,901 132,669 282,896 267,673 Deferred: Federal 128,900 36,739 48,788 State 33,448 6,582 (27,471 ) Foreign 172 98 134 162,520 43,419 21,451 Total income taxes for continuing operations $ 295,189 $ 326,315 $ 289,124 The reconciliation between the income tax provision and the amount computed by applying the statutory federal tax rate of 35% to income taxes of continuing operations is as follows: Year Ended April 30, 2010 2009 2008 U.S. statutory tax rate 35.0 % 35.0 % 35.0 % Change in tax rate resulting from: State income taxes, net of federal income tax benefit 3.8 % 4.2 % 5.0 % Permanent differences (0.5 )% 1.6 % 0.7 % Uncertain tax position liabilities 0.9 % 0.5 % 2.9 % Net decrease in valuation allowance (1.0 )% (1.2 )% (3.7 )% Other (0.6 )% (1.2 )% (0.6 )% Effective tax rate 37.6 % 38.9 % 39.3 % The significant components of deferred tax assets and liabilities of continuing operations are reflected in the following table: (in 000s) As of April 30, 2010 2009 Gross deferred tax assets: Accrued expenses $ 17,554 $ 49,239 Allowance for credit losses and related reserves 164,783 179,508 Net operating loss carryovers 200 5,495 Other 237 2,119 Valuation allowance (1,745 ) (4,773 ) Current 181,029 231,588 Deferred and stock-based compensation 71,970 65,493 Property and equipment 9,071 5,743 Deferred revenue 25,595 39,489 Net operating loss carryovers 26,292 27,315 Accrued expenses 31,892 42,291 |
Interest Income and Expense
Interest Income and Expense | |
12 Months Ended
Apr. 30, 2010 | |
INTEREST INCOME AND INTEREST EXPENSE | NOTE15:INTEREST INCOME AND INTEREST EXPENSE The following table shows the components of interest income and expense of our continuing operations. Interest expense is included in cost of other revenues on our consolidated statements of operations. (in 000s) Year Ended April 30, 2010 2009 2008 Interest income: Mortgage loans, net $ 31,877 $ 46,396 $ 74,895 Emerald Advance lines of credit 77,891 91,019 45,339 Investment securities 2,318 4,896 12,143 Other 10,319 12,205 19,181 $ 122,405 $ 154,516 $ 151,558 Interest expense: Borrowings $ 78,398 $ 83,193 $ 56,482 Deposits 10,174 14,069 42,878 FHLB advances 1,997 5,113 6,008 $ 90,569 $ 102,375 $ 105,368 |
Commitments and Contingencies
Commitments and Contingencies | |
12 Months Ended
Apr. 30, 2010 | |
COMMITMENTS AND CONTINGENCIES | NOTE16:COMMITMENTS AND CONTINGENCIES We offer guarantees under our POM program to tax clients whereby we will assume the cost of additional tax assessments, up to a cumulative per client limit of $5,000, attributable to tax return preparation error for which we are responsible. We defer all revenues and direct costs associated with these guarantees, recognizing these amounts over the term of the guarantee based on historical and actual payment of claims. The related current asset is included in prepaid expenses and other current assets. The related liability is included in accounts payable, accrued expenses and other current liabilities in the consolidated balance sheets. The related noncurrent asset and liability are included in other assets and other noncurrent liabilities, respectively, in the consolidated balance sheets. A loss on these POM guarantees would be recognized if the sum of expected costs for services exceeded unearned revenue. The changes in the deferred revenue liability for fiscal years 2010 and 2009 are as follows: (in 000s) Year Ended April 30, 2010 2009 Balance, beginning of the year $ 146,807 $ 140,583 Amounts deferred for new guarantees issued 74,889 84,429 Revenue recognized on previous deferrals (80,154 ) (78,205 ) Balance, end of the year $ 141,542 $ 146,807 During fiscal year 2009, we entered into an agreement to purchase $45.8million in media advertising between July1, 2009 and June30, 2013. At April30, 2010, our remaining obligation totaled $26.5million. We expect to make payments totaling $13.3million during fiscal years 2011 and 2012. We have various contingent purchase price obligations in connection with prior acquisitions. In many cases, contingent payments to be made in connection with these acquisitions are not subject to a stated limit. We estimate the potential payments (undiscounted) total $20.7million as of April30, 2010. Our estimate is based on current financial conditions. Should actual results differ materially from our assumptions, the potential payments will differ from the above estimate. We have contractual commitments to fund certain franchises requesting Franchise Equity Lines of Credit (FELCs). Our total obligation under these lines of credit was $82.4million at April30, 2010, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $36.8million. We are self-insured for certain risks, including, workers' compensation, property and casualty, professional liability and claims related to our POM program. These programs maintain various self-insured retentions. In all but POM, commercial insurance is purchased in excess of the self-insured retentions. We accrue estimated losses for self-insured retentions using actuarial models and assumptions based on historical loss experience. The nature of our business may subject us to error and omissions, casualty and professional liability lawsuits. To the extent that we are subject to claims exceeding our insurance coverage, such suits could have a |
Alternative Practice Structure
Alternative Practice Structure with McGladrey and Pullen LLP | |
12 Months Ended
Apr. 30, 2010 | |
ALTERNATIVE PRACTICE STRUCTURE WITH McGLADREY & PULLEN LLP | NOTE17: ALTERNATIVE PRACTICE STRUCTURE WITH McGLADREY PULLEN LLP McGladrey Pullen LLP (MP) is a limited liability partnership, owned 100% by certified public accountants (CPAs), which provides attest services to middle market clients. Under state accountancy regulations, a firm cannot provide attest services unless it is majority owned and controlled by licensed CPAs. As such, RSM McGladrey, Inc. (RSM) is unable to provide attest services. Since 1999, RSM and MP have operated in what is known as an "alternative practice structure" (APS). Through the APS, RSM and MP are able to offer clients a full-range of attest and non-attest services in full compliance with applicable accountancy regulations. An administrative services agreement between RSM and MP obligates RSM to provide MP with administrative services, information technology, office space, non-professional staff, and other infrastructure in exchange for market rate fees from MP. During fiscal year 2010, we received $22.6million in management fee revenues from MP. On July21, 2009, MP provided 210days notice of its intent to terminate the administrative services agreement, resulting in termination of the APS unless revoked or modified prior to the expiration of the notice period. As a protective measure, on September15, 2009, RSM also provided notice of its intent to terminate the administrative services agreement. Effective February3, 2010, RSM and MP entered into new agreements, withdrawing their prior notices of termination. Pursuant to a Governance and Operations Agreement effective February3, 2010, RSM and MP agreed to be bound by a final award of an arbitration panel, dated as of November24, 2009, regarding the applicability and enforceability of certain restrictive covenants between the parties. In the event the APS were ever terminated, MP would generally be prohibited as a result of these restrictive covenants, from (1)engaging in businesses in which RSM operates in for 17months, (2)soliciting any business with clients or potential clients of RSM or any of its subsidiaries or affiliates for 29months, and (3)soliciting employees of RSM or any of its subsidiaries or affiliates for 24months. Although not required by the Governance and Operations Agreement, all partners of MP, with the exception of MP's Managing Partner, are also managing directors employed by RSM. Approximately 86% of RSM's managing directors are also partners in MP. Certain other personnel are also employed by both MP and RSM. MP partners receive distributions from MP in their capacity as partners, as well as compensation from RSM in their capacity as managing directors. Distributions to MP partners are based on the profitability of MP and are not capped by this arrangement. Pursuant to the Governance and Operations Agreement, effective May1, 2010, the aggregate compensation payable to RSM managing directors by RSM in any given year shall generally equal 67percent of the combined profits of MP and RSM less any amounts paid in their capacity as MP partners. RSM followed a similar practice historically, except that the compensation pool for managing directors was based on 65percent of combined prof |
Litigation and Related Continge
Litigation and Related Contingencies | |
12 Months Ended
Apr. 30, 2010 | |
LITIGATION AND RELATED CONTINGENCIES | NOTE18: LITIGATION AND RELATED CONTINGENCIES We are party to investigations, legal claims and lawsuits arising out of our business operations. As required, we accrue our best estimate of loss contingencies when we believe a loss is probable and we can reasonably estimate the amount of any such loss. Amounts accrued, including obligations under indemnifications, totaled $35.5million and $27.9million at April30, 2010 and 2009, respectively. Litigation is inherently unpredictable and it is difficult to predict the outcome of particular matters with reasonable certainty and, therefore, the actual amount of any loss may prove to be larger or smaller than the amounts reflected in our consolidated financial statements. RAL LITIGATION We have been named in multiple lawsuits as defendants in litigation regarding our refund anticipation loan program in past years. All of those lawsuits have been settled or otherwise resolved, except for one. The sole remaining case is a putative class action styled Sandra J. Basile, et al.v. HR Block, Inc., et al., April Term 1992 Civil Action No.3246 in the Court of Common Pleas, First Judicial District Court of Pennsylvania, Philadelphia County, instituted on April23, 1993. The plaintiffs allege inadequate disclosures with respect to the RAL product and assert claims for violation of consumer protection statutes, negligent misrepresentation, breach of fiduciary duty, common law fraud, usury, and violation of the Truth In Lending Act. Plaintiffs seek unspecified actual and punitive damages, injunctive relief, attorneys' fees and costs. A Pennsylvania class was certified, but later decertified by the trial court in December 2003. The trial court's decertification decision is currently on appeal. We believe we have meritorious defenses to this case and intend to defend it vigorously. There can be no assurances, however, as to the outcome of this case or its impact on our consolidated results of operations. PEACE OF MIND LITIGATION We are defendants in lawsuits regarding our Peace of Mind program (collectively, the "POM Cases"), under which our applicable tax return preparation subsidiary assumes liability for additional tax assessments attributable to tax return preparation error. The POM Cases are described below. Lorie J. Marshall, et al. v. HR Block Tax Services, Inc., et al., Case No.08-CV-591 in the U.S.District Court for the Southern District of Illinois, is a putative class action case originally filed in the Circuit Court of Madison County, Illinois on January18, 2002. The plaintiffs allege that the sale of POM guarantees constitutes (1)statutory fraud by selling insurance without a license, (2)an unfair trade practice, by omission and by "cramming" (i.e., charging customers for the guarantee even though they did not request it or want it), and (3)a breach of fiduciary duty. The plaintiffs seek unspecified damages, injunctive relief, attorneys' fees and costs. The Madison County court ultimately certified a class consisting of all persons residing in 13states who paid a separate fee for POM from January1, 1997 to the date of a final judgment from the court. We subsequently removed the case |
Regulatory Requirements
Regulatory Requirements | |
12 Months Ended
Apr. 30, 2010 | |
REGULATORY REQUIREMENTS | NOTE19:REGULATORY REQUIREMENTS HRB Bank and the Company are subject to various regulatory requirements, including capital guidelines for HRB Bank, administered by federal banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on HRB Bank and our consolidated financial statements. All savings associations are subject to the capital adequacy guidelines and the regulatory framework for prompt corrective action. HRB Bank must meet specific capital guidelines that involve quantitative measures of HRB Bank's assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. HRB Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. HRB Bank files its regulatory Thrift Financial Report (TFR) on a calendar quarter basis. Quantitative measures established by regulation to ensure capital adequacy require HRB Bank to maintain minimum amounts and ratios of tangible equity, total risk-based capital and Tier1 capital, as set forth in the table below. In addition to these minimum ratio requirements, HRB Bank is required to continually maintain a 12.0% minimum leverage ratio. As of April30, 2010, HRB Bank's leverage ratio was 28.8%. As of March31, 2010, our most recent TFR filing with the Office of Thrift Supervision (OTS), HRB Bank was a "well capitalized" institution under the prompt corrective action provisions of the FDIC. The five capital categories are: (1)"well capitalized" (total risk-based capital ratio of 10%, Tier1 Risk-based capital ratio of 6% and leverage ratio of 5%); (2)"adequately capitalized;" (3)"undercapitalized;" (4)"significantly undercapitalized;" and (5)"critically undercapitalized." There are no conditions or events since March31, 2010 that management believes have changed HRB Bank's category. The following table sets forth HRB Bank's regulatory capital requirements at March31, 2010, as calculated in the most recently filed TFR: (dollars in 000s) To Be Well Capitalized For Capital Adequacy Prompt Corrective Actual Under Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio Total risk-based capital ratio (1) $ 420,401 75.7% $ 44,436 8.0% $ 55,545 10.0% Tier1 risk-based capital ratio (2) $ 413,074 74.4% N/A N/A $ 33,327 6.0% Tier1 capital ratio (leverage) (3) $ 413,074 24.9% $ 199,272 12.0% $ 83,030 5.0% Tangible equity ratio (4) $ 413,074 24.9% $ 24,909 1.5% N/A N/A (1) Total risk-based capital divided by risk-weighted assets. (2) Tier1 (core) capital less deduction for low-level recourse and residual in |
Discontinued Operations
Discontinued Operations | |
12 Months Ended
Apr. 30, 2010 | |
DISCONTINUED OPERATIONS | NOTE20: DISCONTINUED OPERATIONS Discontinued operations for the year ended April30, 2010, consist primarily of the continued wind-down of our mortgage operations. Fiscal year 2009 and 2008 include the results of operations of HR Block Financial Advisors, Inc. (HRBFA) and its direct corporate parent, as well as our mortgage operations and three smaller lines of business related to our Business Services segment. The financial results of discontinued operations are as follows: (in 000s) Year Ended April 30, 2010 2009 2008 Net revenue $ 372 $ 129,863 $ (105,964 ) Pretax loss from operations $ (23,872 ) $ (37,015 ) $ (1,120,216 ) Gain (loss) on sale and estimated impairments 6,194 (10,626 ) (45,510 ) Pretax loss (17,678 ) (47,641 ) (1,165,726 ) Income tax benefit (7,974 ) (20,259 ) (411,132 ) Net loss from discontinued operations $ (9,704 ) $ (27,382 ) $ (754,594 ) |
Segment Information
Segment Information | |
12 Months Ended
Apr. 30, 2010 | |
SEGMENT INFORMATION | NOTE21:SEGMENT INFORMATION Management has determined the reportable segments identified below according to types of services offered and the manner in which operational decisions are made. Operating results of our reportable segments are all seasonal. Effective May1, 2009, we realigned certain segments of our business to reflect a new management reporting structure. The operations of HRB Bank, which was previously reported as the Consumer Financial Services segment, have now been reclassified, with activities that support our retail tax network included in the Tax Services segment, and the net interest margin and gains and losses relating to our portfolio of mortgage loans held for investment and related assets included in corporate. Presentation of prior period results reflects the new segment reporting structure. TAX SERVICES Our Tax Services segment is primarily engaged in providing tax return preparation and related services and products in the U.S.and its territories, Canada and Australia. Major revenue sources include fees earned for tax preparation services performed at company-owned retail tax offices, royalties from franchise retail tax offices, fees for tax-related services, sales of tax preparation and other software, online tax preparation fees, participation in RALs, fees from activities related to HR Block Prepaid Emerald MasterCard, and interest and fees from Emerald Advance lines of credit. HRB Bank also offers traditional banking services including checking and savings accounts, individual retirement accounts and certificates of deposit. Our international operations contributed $190.9million, $160.7million and $170.2million in revenues for fiscal years 2010, 2009 and 2008, respectively, and $46.7million, $31.6million and $32.1million of pretax income, respectively. BUSINESS SERVICES This segment offers tax and consulting services, wealth management, and capital markets services to middle-market companies in offices located throughout the U.S. CORPORATE This segment's operations include interest income from U.S.passive investments, interest expense on borrowings, net interest margin and gains or losses relating to mortgage loans held for investment, real estate owned, residual interests in securitizations and other corporate expenses, principally related to finance, legal and other support departments. IDENTIFIABLE ASSETS Identifiable assets are those assets, including goodwill and intangible assets, associated with each reportable segment. The remaining assets are classified as Corporate assets, which consist primarily of cash and marketable securities. The carrying value of assets held outside the U.S.totaled $166.8million, $126.8million and $124.8million at April30, 2010, 2009 and 2008, respectively. Information concerning the Company's operations by reportable segment is as follows: (in 000s) Year Ended April 30, 2010 2009 2008 REVENUES : Tax Services $ 2,975,252 $ 3,132,077 $ 3,060,661 Business Services 860,349 897,809 941,686 |
Quarterly Financial Data
Quarterly Financial Data (Unaudited) | |
12 Months Ended
Apr. 30, 2010 | |
QUARTERLY FINANCIAL DATA (UNAUDITED) | NOTE22:QUARTERLY FINANCIAL DATA (UNAUDITED) (in 000s, except per share amounts) Fiscal Year 2010 Apr30, 2010 Jan31, 2010 Oct31, 2009 Jul31, 2009 Revenues $ 3,874,332 $ 2,337,894 $ 934,852 $ 326,081 $ 275,505 Income (loss) from continuing operations before taxes (benefit) $ 784,135 $ 1,110,410 $ 97,451 $ (212,853 ) $ (210,873 ) Income taxes (benefit) 295,189 417,978 43,848 (86,381 ) (80,256 ) Net income (loss) from continuing operations 488,946 692,432 53,603 (126,472 ) (130,617 ) Net loss from discontinued operations (9,704 ) (1,604 ) (2,968 ) (2,115 ) (3,017 ) Net income (loss) $ 479,242 $ 690,828 $ 50,635 $ (128,587 ) $ (133,634 ) Basic earnings (loss) per share: Net income (loss) from continuing operations $ 1.47 $ 2.11 $ 0.16 $ (0.38 ) $ (0.39 ) Net loss from discontinued operations (0.03 ) (0.01 ) (0.01 ) Net income (loss) $ 1.44 $ 2.11 $ 0.15 $ (0.38 ) $ (0.40 ) Diluted earnings (loss) per share: Net income (loss) from continuing operations $ 1.46 $ 2.11 $ 0.16 $ (0.38 ) $ (0.39 ) Net loss from discontinued operations (0.03 ) (0.01 ) (0.01 ) (0.01 ) Net income (loss) 1.43 $ 2.10 $ 0.15 $ (0.38 ) $ (0.40 ) Fiscal Year 2009 Apr30, 2009 Jan31, 2009 Oct31, 2008 Jul31, 2008 Revenues $ 4,083,577 $ 2,466,753 $ 993,446 $ 351,469 $ 271,909 Income (loss) from continuing operations before taxes (benefit) $ 839,370 $ 1,178,054 $ 101,739 $ (227,453 ) $ (212,970 ) Income taxes (benefit) 326,315 470,245 34,909 (94,292 ) (84,547 ) Net income (loss) from continuing operations 513,055 707,809 66,830 (133,161 ) (128,423 ) Net loss from discontinued operations (27,382 ) (906 ) (19,467 ) (2,713 ) (4,296 ) Net income (loss) $ 485,673 $ 706,903 $ 47,363 $ (135,874 ) $ (132,719 ) Basic earnings (loss) per share: |
Condensed Consolidating Financi
Condensed Consolidating Financial Statements | |
12 Months Ended
Apr. 30, 2010 | |
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS | NOTE23: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS BFC is an indirect, wholly-owned consolidated subsidiary of the Company. BFC is the Issuer and the Company is the Guarantor of the Senior Notes issued on January11, 2008 and October26, 2004, the CLOCs and other indebtedness issued from time to time. These condensed consolidating financial statements have been prepared using the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Company's investment in subsidiaries account. The elimination entries eliminate investments in subsidiaries, related stockholders' equity and other intercompany balances and transactions. CONDENSED CONSOLIDATING INCOME STATEMENTS (in 000s) HR Block, Inc. BFC Other Consolidated Year Ended April30, 2010 (Guarantor) (Issuer) Subsidiaries Elims HR Block Total revenues $ $ 271,704 $ 3,602,721 $ (93 ) $ 3,874,332 Cost of revenues 257,245 2,210,868 (117 ) 2,467,996 Selling, general and administrative 36,946 594,646 (93 ) 631,499 Total expenses 294,191 2,805,514 (210 ) 3,099,495 Operating income (loss) (22,487 ) 797,207 117 774,837 Other income, net 784,135 5,644 3,771 (784,252 ) 9,298 Income (loss) from continuing operations before taxes (benefit) 784,135 (16,843 ) 800,978 (784,135 ) 784,135 Income taxes (benefit) 295,189 (6,368 ) 301,557 (295,189 ) 295,189 Net income (loss) from continuing operations 488,946 (10,475 ) 499,421 (488,946 ) 488,946 Net loss from discontinued operations (9,704 ) (5,276 ) (4,428 ) 9,704 (9,704 ) Net income (loss) $ 479,242 $ (15,751 ) $ 494,993 $ (479,242 ) $ 479,242 HR Block, Inc. BFC Other Consolidated Year Ended April30, 2009 (Guarantor) (Issuer) Subsidiaries Elims HR Block Total revenues $ $ 251,758 $ 3,834,880 $ (3,061 ) $ 4,083,577 Cost of revenues 278,789 2,317,439 (10 ) 2,596,218 Selling, general and administrative 66,230 582,812 (552 ) 648,490 |
Schedule II - Valuation and Qua
Schedule II - Valuation and Qualifying Accounts | |
12 Months Ended
Apr. 30, 2010 | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | HR BLOCK, INC.SCHEDULE II VALUATION AND QUALIFYING ACCOUNTSYEARS ENDED APRIL 30, 2010, 2009 AND 2008 Additions Balance at Charged to Beginning of Costs and Balance at End of Description Period Expenses Deductions (1) Period Allowance for Doubtful Accounts deducted from accounts receivable in the balance sheet 2010 $ 128,541,000 $ 111,754,000 $ 127,820,000 $ 112,475,000 2009 $ 120,155,000 $ 181,829,000 $ 173,443,000 $ 128,541,000 2008 $ 95,161,000 $ 174,813,000 $ 149,819,000 $ 120,155,000 Liability related to Mortgage Services restructuring charge 2010 $ 7,533,000 $ $ 5,764,000 $ 1,769,000 2009 $ 27,920,000 $ $ 20,387,000 $ 7,533,000 2008 $ 14,607,000 $ 76,388,000 $ 63,075,000 $ 27,920,000 (1) Deductions from the Allowance for Doubtful Accounts reflect recoveries and charge-offs. Deductions from the restructuring charge liability represent payments made. |