|
(Mark One)
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the quarterly period ended October 31, 2013
|
|
|
OR
|
¨
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the transition period from to
|
MISSOURI
|
|
44-0607856
|
(State or other jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or organization)
|
|
Identification No.)
|
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
As of October 31, 2013, October 31, 2012 and April 30, 2013
|
|
|
|
|
|
Consolidated Statements of Operations and Comprehensive Loss
|
|
|
Three and six months ended October 31, 2013 and 2012
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows
|
|
|
Six months ended October 31, 2013 and 2012
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal Proceedings
|
||
|
|
|
Risk Factors
|
||
|
|
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
||
|
|
|
Item 3.
|
Defaults Upon Senior Securities
|
|
|
|
|
Item 4.
|
Mine Safety Disclosures
|
|
|
|
|
|
|
|
Exhibits
|
||
|
|
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
CONSOLIDATED BALANCE SHEETS
|
|
(in 000s, except share and
per share amounts)
|
|
|||||||||
As of
|
|
October 31, 2013
|
|
|
October 31, 2012
|
|
|
April 30, 2013
|
|
|||
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
||||
ASSETS
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
790,772
|
|
|
$
|
1,260,901
|
|
|
$
|
1,747,584
|
|
Cash and cash equivalents — restricted
|
|
47,521
|
|
|
38,667
|
|
|
117,837
|
|
|||
Receivables, less allowance for doubtful accounts of $52,969, $42,761 and $50,399
|
|
131,701
|
|
|
124,511
|
|
|
206,835
|
|
|||
Prepaid expenses and other current assets
|
|
225,660
|
|
|
282,874
|
|
|
390,087
|
|
|||
Total current assets
|
|
1,195,654
|
|
|
1,706,953
|
|
|
2,462,343
|
|
|||
Mortgage loans held for investment, less allowance for loan losses of $12,704, $18,125 and $14,314
|
|
295,907
|
|
|
370,850
|
|
|
338,789
|
|
|||
Investments in available-for-sale securities
|
|
465,344
|
|
|
388,640
|
|
|
486,876
|
|
|||
Property and equipment, at cost less accumulated depreciation and amortization of $449,738, $492,670 and $420,318
|
|
311,157
|
|
|
272,438
|
|
|
267,880
|
|
|||
Intangible assets, net
|
|
296,213
|
|
|
275,193
|
|
|
284,439
|
|
|||
Goodwill
|
|
442,812
|
|
|
434,492
|
|
|
434,782
|
|
|||
Other assets
|
|
267,426
|
|
|
448,164
|
|
|
262,670
|
|
|||
Total assets
|
|
$
|
3,274,513
|
|
|
$
|
3,896,730
|
|
|
$
|
4,537,779
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
||||||
LIABILITIES:
|
|
|
|
|
|
|
||||||
Customer banking deposits
|
|
$
|
655,129
|
|
|
$
|
790,106
|
|
|
$
|
936,464
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
426,994
|
|
|
406,447
|
|
|
523,921
|
|
|||
Accrued salaries, wages and payroll taxes
|
|
41,584
|
|
|
39,345
|
|
|
134,970
|
|
|||
Accrued income taxes
|
|
22,475
|
|
|
95,126
|
|
|
416,128
|
|
|||
Current portion of long-term debt
|
|
400,503
|
|
|
600,678
|
|
|
722
|
|
|||
Total current liabilities
|
|
1,546,685
|
|
|
1,931,702
|
|
|
2,012,205
|
|
|||
Long-term debt
|
|
506,078
|
|
|
906,125
|
|
|
905,958
|
|
|||
Other noncurrent liabilities
|
|
266,775
|
|
|
365,970
|
|
|
356,069
|
|
|||
Total liabilities
|
|
2,319,538
|
|
|
3,203,797
|
|
|
3,274,232
|
|
|||
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|||
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
|
||||||
Common stock, no par, stated value $.01 per share, 800,000,000 shares authorized, shares issued of 316,628,110
|
|
3,166
|
|
|
3,166
|
|
|
3,166
|
|
|||
Convertible preferred stock, no par, stated value $0.01 per share, 500,000 shares authorized
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Additional paid-in capital
|
|
757,828
|
|
|
748,298
|
|
|
752,483
|
|
|||
Accumulated other comprehensive income
|
|
1,463
|
|
|
8,685
|
|
|
10,550
|
|
|||
Retained earnings
|
|
1,003,842
|
|
|
795,707
|
|
|
1,333,445
|
|
|||
Less treasury shares, at cost
|
|
(811,324
|
)
|
|
(862,923
|
)
|
|
(836,097
|
)
|
|||
Total stockholders’ equity
|
|
954,975
|
|
|
692,933
|
|
|
1,263,547
|
|
|||
Total liabilities and stockholders’ equity
|
|
$
|
3,274,513
|
|
|
$
|
3,896,730
|
|
|
$
|
4,537,779
|
|
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
1
|
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
|
|
(unaudited, in 000s, except
per share amounts)
|
|
|||||||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
|
||||||||
Service revenues
|
|
$
|
112,432
|
|
|
$
|
116,438
|
|
|
$
|
220,232
|
|
|
$
|
196,334
|
|
Product and other revenues
|
|
11,282
|
|
|
10,966
|
|
|
19,480
|
|
|
17,686
|
|
||||
Interest income
|
|
10,626
|
|
|
9,859
|
|
|
21,823
|
|
|
19,732
|
|
||||
|
|
134,340
|
|
|
137,263
|
|
|
261,535
|
|
|
233,752
|
|
||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenues:
|
|
|
|
|
|
|
|
|
||||||||
Compensation and benefits
|
|
60,526
|
|
|
54,764
|
|
|
106,838
|
|
|
94,349
|
|
||||
Occupancy and equipment
|
|
82,358
|
|
|
82,398
|
|
|
161,094
|
|
|
162,349
|
|
||||
Provision for bad debt and loan losses
|
|
2,849
|
|
|
3,725
|
|
|
14,340
|
|
|
8,370
|
|
||||
Interest
|
|
14,314
|
|
|
23,390
|
|
|
28,760
|
|
|
45,467
|
|
||||
Depreciation of property and equipment
|
|
20,144
|
|
|
16,196
|
|
|
36,948
|
|
|
30,730
|
|
||||
Other
|
|
40,673
|
|
|
31,538
|
|
|
82,937
|
|
|
64,170
|
|
||||
|
|
220,864
|
|
|
212,011
|
|
|
430,917
|
|
|
405,435
|
|
||||
Selling, general and administrative
|
|
94,092
|
|
|
90,327
|
|
|
190,789
|
|
|
165,805
|
|
||||
|
|
314,956
|
|
|
302,338
|
|
|
621,706
|
|
|
571,240
|
|
||||
Operating loss
|
|
(180,616
|
)
|
|
(165,075
|
)
|
|
(360,171
|
)
|
|
(337,488
|
)
|
||||
Other income (expense), net
|
|
1,254
|
|
|
2,787
|
|
|
(3,685
|
)
|
|
5,931
|
|
||||
Loss from continuing operations before income tax benefit
|
|
(179,362
|
)
|
|
(162,288
|
)
|
|
(363,856
|
)
|
|
(331,557
|
)
|
||||
Income tax benefit
|
|
(76,347
|
)
|
|
(61,089
|
)
|
|
(147,571
|
)
|
|
(124,708
|
)
|
||||
Net loss from continuing operations
|
|
(103,015
|
)
|
|
(101,199
|
)
|
|
(216,285
|
)
|
|
(206,849
|
)
|
||||
Net loss from discontinued operations
|
|
(1,928
|
)
|
|
(4,044
|
)
|
|
(3,845
|
)
|
|
(5,835
|
)
|
||||
NET LOSS
|
|
$
|
(104,943
|
)
|
|
$
|
(105,243
|
)
|
|
$
|
(220,130
|
)
|
|
$
|
(212,684
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
BASIC AND DILUTED LOSS PER SHARE:
|
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
|
$
|
(0.38
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(0.76
|
)
|
Discontinued operations
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
(0.01
|
)
|
|
(0.02
|
)
|
||||
Consolidated
|
|
$
|
(0.39
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.80
|
)
|
|
$
|
(0.78
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
DIVIDENDS PER SHARE
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
||||||||
COMPREHENSIVE INCOME (LOSS):
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
$
|
(104,943
|
)
|
|
$
|
(105,243
|
)
|
|
$
|
(220,130
|
)
|
|
$
|
(212,684
|
)
|
Unrealized gains (losses) on available-for-sale securities, net of taxes:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gains (losses) arising during the period, net of taxes (benefit) of $728, $131, ($4,337) and $283
|
|
1,138
|
|
|
187
|
|
|
(6,577
|
)
|
|
357
|
|
||||
Reclassification adjustment for gains included in income, net of taxes of $ -, $71, $ - and $71
|
|
—
|
|
|
(104
|
)
|
|
—
|
|
|
(104
|
)
|
||||
Change in foreign currency translation adjustments
|
|
582
|
|
|
1,252
|
|
|
(2,510
|
)
|
|
(3,713
|
)
|
||||
Other comprehensive income (loss)
|
|
1,720
|
|
|
1,335
|
|
|
(9,087
|
)
|
|
(3,460
|
)
|
||||
Comprehensive loss
|
|
$
|
(103,223
|
)
|
|
$
|
(103,908
|
)
|
|
$
|
(229,217
|
)
|
|
$
|
(216,144
|
)
|
|
|
|
|
|
|
|
|
|
2
|
H&R Block Q2 FY2014 Form 10-Q
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(unaudited, in 000s)
|
|
|||||
Six months ended October 31,
|
|
2013
|
|
|
2012
|
|
||
|
|
|
|
|
||||
NET CASH USED IN OPERATING ACTIVITIES
|
|
$
|
(492,373
|
)
|
|
$
|
(567,036
|
)
|
|
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
||||
Purchases of available-for-sale securities
|
|
(45,158
|
)
|
|
(67,474
|
)
|
||
Maturities of and payments received on available-for-sale securities
|
|
55,615
|
|
|
53,098
|
|
||
Principal payments on mortgage loans held for investment, net
|
|
24,340
|
|
|
23,608
|
|
||
Purchases of property and equipment
|
|
(86,926
|
)
|
|
(60,720
|
)
|
||
Payments made for business acquisitions, net of cash acquired
|
|
(20,927
|
)
|
|
(10,442
|
)
|
||
Franchise loans:
|
|
|
|
|
||||
Loans funded
|
|
(22,114
|
)
|
|
(20,670
|
)
|
||
Payments received
|
|
15,883
|
|
|
8,303
|
|
||
Other, net
|
|
15,255
|
|
|
10,218
|
|
||
Net cash used in investing activities
|
|
(64,032
|
)
|
|
(64,079
|
)
|
||
|
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
||||
Repayments of long-term debt
|
|
—
|
|
|
(30,831
|
)
|
||
Proceeds from issuance of long-term debt
|
|
—
|
|
|
497,185
|
|
||
Customer banking deposits, net
|
|
(275,800
|
)
|
|
(37,913
|
)
|
||
Dividends paid
|
|
(109,324
|
)
|
|
(108,428
|
)
|
||
Repurchase of common stock, including shares surrendered
|
|
(5,329
|
)
|
|
(339,919
|
)
|
||
Proceeds from exercise of stock options
|
|
24,536
|
|
|
1,288
|
|
||
Other, net
|
|
(26,619
|
)
|
|
(33,004
|
)
|
||
Net cash used in financing activities
|
|
(392,536
|
)
|
|
(51,622
|
)
|
||
|
|
|
|
|
||||
Effects of exchange rates on cash
|
|
(7,871
|
)
|
|
(696
|
)
|
||
|
|
|
|
|
||||
Net decrease in cash and cash equivalents
|
|
(956,812
|
)
|
|
(683,433
|
)
|
||
Cash and cash equivalents at beginning of the period
|
|
1,747,584
|
|
|
1,944,334
|
|
||
Cash and cash equivalents at end of the period
|
|
$
|
790,772
|
|
|
$
|
1,260,901
|
|
|
|
|
|
|
||||
SUPPLEMENTARY CASH FLOW DATA:
|
|
|
|
|
||||
Income taxes paid, net of refunds received
|
|
$
|
116,099
|
|
|
$
|
48,201
|
|
Interest paid on borrowings
|
|
27,804
|
|
|
42,106
|
|
||
Interest paid on deposits
|
|
1,180
|
|
|
2,683
|
|
||
Transfers of foreclosed loans to other assets
|
|
3,889
|
|
|
5,312
|
|
||
Accrued additions to property and equipment
|
|
6,729
|
|
|
10,273
|
|
||
Transfer of mortgage loans held for investment to held for sale
|
|
7,608
|
|
|
—
|
|
||
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
3
|
4
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
5
|
(in 000s)
|
|
|||||||||||
As of
|
|
October 31, 2013
|
|
|
October 31, 2012
|
|
|
April 30, 2013
|
|
|||
Loans to franchisees
|
|
$
|
70,390
|
|
|
$
|
69,110
|
|
|
$
|
65,413
|
|
Receivables for tax preparation and related fees
|
|
35,927
|
|
|
34,083
|
|
|
49,356
|
|
|||
Canadian CashBack receivables
|
|
2,036
|
|
|
3,863
|
|
|
47,658
|
|
|||
Emerald Advance lines of credit
|
|
21,692
|
|
|
23,630
|
|
|
23,218
|
|
|||
Royalties from franchisees
|
|
10,732
|
|
|
8,744
|
|
|
10,722
|
|
|||
Credit cards
|
|
6,115
|
|
|
—
|
|
|
7,733
|
|
|||
Other
|
|
37,778
|
|
|
27,842
|
|
|
53,134
|
|
|||
|
|
184,670
|
|
|
167,272
|
|
|
257,234
|
|
|||
Allowance for doubtful accounts
|
|
(52,969
|
)
|
|
(42,761
|
)
|
|
(50,399
|
)
|
|||
|
|
$
|
131,701
|
|
|
$
|
124,511
|
|
|
$
|
206,835
|
|
|
|
|
|
|
|
|
6
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
7
|
(in 000s)
|
|
|||||||||||||||||||||||
|
|
EAs
|
|
|
Loans
to Franchisees |
|
|
CashBack
|
|
|
Credit Cards
|
|
|
All Other
|
|
|
Total
|
|
||||||
Balances as of May 1, 2013
|
|
$
|
7,390
|
|
|
$
|
—
|
|
|
$
|
2,769
|
|
|
$
|
7,304
|
|
|
$
|
40,240
|
|
|
$
|
57,703
|
|
Provision
|
|
—
|
|
|
—
|
|
|
188
|
|
|
4,957
|
|
|
966
|
|
|
6,111
|
|
||||||
Charge-offs
|
|
—
|
|
|
—
|
|
|
(479
|
)
|
|
(6,225
|
)
|
|
(1,049
|
)
|
|
(7,753
|
)
|
||||||
Balances as of October 31, 2013
|
|
$
|
7,390
|
|
|
$
|
—
|
|
|
$
|
2,478
|
|
|
$
|
6,036
|
|
|
$
|
40,157
|
|
|
$
|
56,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balances as of May 1, 2012
|
|
$
|
6,200
|
|
|
$
|
—
|
|
|
$
|
2,279
|
|
|
$
|
—
|
|
|
$
|
36,110
|
|
|
$
|
44,589
|
|
Provision
|
|
310
|
|
|
—
|
|
|
290
|
|
|
—
|
|
|
550
|
|
|
1,150
|
|
||||||
Charge-offs
|
|
—
|
|
|
—
|
|
|
(1,507
|
)
|
|
—
|
|
|
(1,471
|
)
|
|
(2,978
|
)
|
||||||
Balances as of October 31, 2012
|
|
$
|
6,510
|
|
|
$
|
—
|
|
|
$
|
1,062
|
|
|
$
|
—
|
|
|
$
|
35,189
|
|
|
$
|
42,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in 000s)
|
|
||||||||||||||||||||
As of
|
|
October 31, 2013
|
|
October 31, 2012
|
|
April 30, 2013
|
|||||||||||||||
|
|
Amount
|
|
|
% of Total
|
|
|
Amount
|
|
|
% of Total
|
|
|
Amount
|
|
|
% of Total
|
|
|||
Adjustable-rate loans
|
|
$
|
165,289
|
|
|
54
|
%
|
|
$
|
210,610
|
|
|
55
|
%
|
|
$
|
191,093
|
|
|
55
|
%
|
Fixed-rate loans
|
|
140,814
|
|
|
46
|
%
|
|
175,257
|
|
|
45
|
%
|
|
159,142
|
|
|
45
|
%
|
|||
|
|
306,103
|
|
|
100
|
%
|
|
385,867
|
|
|
100
|
%
|
|
350,235
|
|
|
100
|
%
|
|||
Unamortized deferred fees and costs
|
|
2,508
|
|
|
|
|
3,108
|
|
|
|
|
2,868
|
|
|
|
||||||
Less: Allowance for loan losses
|
|
(12,704
|
)
|
|
|
|
(18,125
|
)
|
|
|
|
(14,314
|
)
|
|
|
||||||
|
|
$
|
295,907
|
|
|
|
|
$
|
370,850
|
|
|
|
|
$
|
338,789
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
9
|
(1)
|
We do not accrue interest on loans past due
90
days or more.
|
10
|
H&R Block Q2 FY2014 Form 10-Q
|
(in 000s)
|
|
|||||||||||
As of
|
|
October 31, 2013
|
|
|
October 31, 2012
|
|
|
April 30, 2013
|
|
|||
Portion of total allowance for loan losses allocated to impaired loans and TDR loans:
|
|
|
|
|
|
|
||||||
Based on collateral value method
|
|
$
|
2,583
|
|
|
$
|
5,261
|
|
|
$
|
3,762
|
|
Based on discounted cash flow method
|
|
4,598
|
|
|
5,972
|
|
|
4,924
|
|
|||
|
|
$
|
7,181
|
|
|
$
|
11,233
|
|
|
$
|
8,686
|
|
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
11
|
(in 000s)
|
|
|||||||||||||||
|
|
Amortized
Cost |
|
|
Gross
Unrealized Gains |
|
|
Gross
Unrealized Losses (1) |
|
|
Fair Value
|
|
||||
As of October 31, 2013:
|
|
|
|
|
|
|
|
|
||||||||
Long-term:
|
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed securities
|
|
$
|
465,861
|
|
|
$
|
4,422
|
|
|
$
|
(9,348
|
)
|
|
$
|
460,935
|
|
Municipal bonds
|
|
4,149
|
|
|
260
|
|
|
—
|
|
|
4,409
|
|
||||
|
|
$
|
470,010
|
|
|
$
|
4,682
|
|
|
$
|
(9,348
|
)
|
|
$
|
465,344
|
|
As of October 31, 2012:
|
|
|
|
|
|
|
|
|
||||||||
Short-term:
|
|
|
|
|
|
|
|
|
||||||||
Municipal bonds
|
|
$
|
1,003
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
1,014
|
|
Long-term:
|
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed securities
|
|
378,055
|
|
|
6,116
|
|
|
(109
|
)
|
|
384,062
|
|
||||
Municipal bonds
|
|
4,207
|
|
|
371
|
|
|
—
|
|
|
4,578
|
|
||||
|
|
382,262
|
|
|
6,487
|
|
|
(109
|
)
|
|
388,640
|
|
||||
|
|
$
|
383,265
|
|
|
$
|
6,498
|
|
|
$
|
(109
|
)
|
|
$
|
389,654
|
|
As of April 30, 2013:
|
|
|
||||||||||||||
Long-term:
|
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed securities
|
|
$
|
476,450
|
|
|
$
|
6,592
|
|
|
$
|
(664
|
)
|
|
$
|
482,378
|
|
Municipal bonds
|
|
4,178
|
|
|
320
|
|
|
—
|
|
|
4,498
|
|
||||
|
|
$
|
480,628
|
|
|
$
|
6,912
|
|
|
$
|
(664
|
)
|
|
$
|
486,876
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As of
October 31, 2013
and April 30, 2013, we had
no
securities that had been in a continuous loss position for more than twelve months. As of
October 31, 2012
, mortgage-backed securities with a cost of
$4.6 million
and gross unrealized losses of
$1 thousand
had been in a continuous loss position for more than twelve months.
|
12
|
H&R Block Q2 FY2014 Form 10-Q
|
(in 000s)
|
|
|||||||||||
|
|
Goodwill
|
|
|
Accumulated Impairment Losses
|
|
|
Net
|
|
|||
Balances as of April 30, 2013
|
|
$
|
467,079
|
|
|
$
|
(32,297
|
)
|
|
$
|
434,782
|
|
Acquisitions
|
|
9,207
|
|
|
—
|
|
|
9,207
|
|
|||
Disposals and foreign currency changes, net
|
|
(1,177
|
)
|
|
—
|
|
|
(1,177
|
)
|
|||
Impairments
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balances as of October 31, 2013
|
|
$
|
475,109
|
|
|
$
|
(32,297
|
)
|
|
$
|
442,812
|
|
|
|
|
|
|
|
|
||||||
Balances as of April 30, 2012
|
|
$
|
459,863
|
|
|
$
|
(32,297
|
)
|
|
$
|
427,566
|
|
Acquisitions
|
|
6,922
|
|
|
—
|
|
|
6,922
|
|
|||
Disposals and foreign currency changes, net
|
|
4
|
|
|
—
|
|
|
4
|
|
|||
Impairments
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balances as of October 31, 2012
|
|
$
|
466,789
|
|
|
$
|
(32,297
|
)
|
|
$
|
434,492
|
|
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
13
|
(in 000s)
|
|
|||||||||||
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|||
As of October 31, 2013:
|
|
|
|
|
|
|
||||||
Reacquired franchise rights
|
|
$
|
222,371
|
|
|
$
|
(20,414
|
)
|
|
$
|
201,957
|
|
Customer relationships
|
|
109,237
|
|
|
(53,501
|
)
|
|
55,736
|
|
|||
Internally-developed software
|
|
98,738
|
|
|
(76,517
|
)
|
|
22,221
|
|
|||
Noncompete agreements
|
|
23,659
|
|
|
(21,898
|
)
|
|
1,761
|
|
|||
Franchise agreements
|
|
19,201
|
|
|
(6,294
|
)
|
|
12,907
|
|
|||
Purchased technology
|
|
14,800
|
|
|
(13,169
|
)
|
|
1,631
|
|
|||
Trade name
|
|
300
|
|
|
(300
|
)
|
|
—
|
|
|||
|
|
$
|
488,306
|
|
|
$
|
(192,093
|
)
|
|
$
|
296,213
|
|
As of October 31, 2012:
|
|
|
|
|
|
|
||||||
Reacquired franchise rights
|
|
$
|
214,330
|
|
|
$
|
(16,143
|
)
|
|
$
|
198,187
|
|
Customer relationships
|
|
95,647
|
|
|
(50,151
|
)
|
|
45,496
|
|
|||
Internally-developed software
|
|
82,405
|
|
|
(69,508
|
)
|
|
12,897
|
|
|||
Noncompete agreements
|
|
22,313
|
|
|
(21,525
|
)
|
|
788
|
|
|||
Franchise agreements
|
|
19,201
|
|
|
(5,014
|
)
|
|
14,187
|
|
|||
Purchased technology
|
|
14,700
|
|
|
(11,495
|
)
|
|
3,205
|
|
|||
Trade name
|
|
1,300
|
|
|
(867
|
)
|
|
433
|
|
|||
|
|
$
|
449,896
|
|
|
$
|
(174,703
|
)
|
|
$
|
275,193
|
|
As of April 30, 2013:
|
|
|
|
|
|
|
||||||
Reacquired franchise rights
|
|
$
|
214,330
|
|
|
$
|
(18,204
|
)
|
|
$
|
196,126
|
|
Customer relationships
|
|
100,719
|
|
|
(48,733
|
)
|
|
51,986
|
|
|||
Internally-developed software
|
|
91,745
|
|
|
(72,764
|
)
|
|
18,981
|
|
|||
Noncompete agreements
|
|
23,058
|
|
|
(21,728
|
)
|
|
1,330
|
|
|||
Franchise agreements
|
|
19,201
|
|
|
(5,654
|
)
|
|
13,547
|
|
|||
Purchased technology
|
|
14,800
|
|
|
(12,331
|
)
|
|
2,469
|
|
|||
Trade name
|
|
300
|
|
|
(300
|
)
|
|
—
|
|
|||
|
|
$
|
464,153
|
|
|
$
|
(179,714
|
)
|
|
$
|
284,439
|
|
|
|
|
|
|
|
|
▪
|
Level 1
–
inputs to the valuation are quoted prices in an active market for identical assets.
|
▪
|
Level 2
–
inputs to the valuation include quoted prices for similar assets in active markets utilizing a third-party pricing service to determine fair value.
|
▪
|
Level 3
–
valuation is based on significant inputs that are unobservable in the market and our own estimates of assumptions that we believe market participants would use in pricing the asset.
|
14
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
15
|
▪
|
REO includes foreclosed properties securing mortgage loans. Foreclosed assets are recorded at estimated fair value, generally based on independent market prices or appraised values of the collateral, less costs to sell upon foreclosure. The assets are remeasured quarterly based on independent appraisals or broker price opinions. Subsequent holding period gains and losses arising from the sale of REO are reported when realized. Because our REO is valued based on significant inputs that are unobservable in the market and our own estimates of assumptions that we believe market participants would use in pricing the asset, these assets are classified as Level 3.
|
▪
|
The fair value of impaired mortgage loans held for investment is 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. Impaired and TDR loans are required to be evaluated at least annually, based on HRB Bank's Loan Policy. Impaired loans are typically remeasured every nine months, while TDRs are evaluated quarterly. These loans are classified as Level 3.
|
16
|
H&R Block Q2 FY2014 Form 10-Q
|
(in 000s)
|
|
|||||||||||||||||||||||
As of
|
|
October 31, 2013
|
|
October 31, 2012
|
|
April 30, 2013
|
||||||||||||||||||
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
|
$
|
790,772
|
|
|
$
|
790,772
|
|
|
$
|
1,260,901
|
|
|
$
|
1,260,901
|
|
|
$
|
1,747,584
|
|
|
$
|
1,747,584
|
|
Cash and cash equivalents – restricted
|
|
47,521
|
|
|
47,521
|
|
|
38,667
|
|
|
38,667
|
|
|
117,837
|
|
|
117,837
|
|
||||||
Receivables, net – short-term
|
|
131,701
|
|
|
133,884
|
|
|
124,511
|
|
|
124,511
|
|
|
206,835
|
|
|
206,810
|
|
||||||
Mortgage loans held for investment, net
|
|
295,907
|
|
|
211,690
|
|
|
370,850
|
|
|
226,885
|
|
|
338,789
|
|
|
210,858
|
|
||||||
Investments in AFS securities
|
|
465,344
|
|
|
465,344
|
|
|
389,654
|
|
|
389,654
|
|
|
486,876
|
|
|
486,876
|
|
||||||
Receivables, net – long-term
|
|
129,180
|
|
|
130,023
|
|
|
134,359
|
|
|
134,359
|
|
|
125,048
|
|
|
134,283
|
|
||||||
Note receivable (including interest)
|
|
62,786
|
|
|
69,827
|
|
|
58,049
|
|
|
64,508
|
|
|
60,352
|
|
|
69,472
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Deposits
|
|
656,305
|
|
|
656,300
|
|
|
795,519
|
|
|
795,227
|
|
|
938,331
|
|
|
934,019
|
|
||||||
Long-term borrowings
|
|
906,581
|
|
|
947,350
|
|
|
1,506,803
|
|
|
1,540,333
|
|
|
906,680
|
|
|
964,630
|
|
||||||
Contingent consideration payments
|
|
12,454
|
|
|
12,454
|
|
|
10,277
|
|
|
10,277
|
|
|
11,277
|
|
|
11,277
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
▪
|
Cash and cash equivalents, including restricted
–
Fair value approximates the carrying amount (Level 1).
|
▪
|
Receivables
–
short-term
–
For short-term balances with the exception of credit card receivables, the carrying values reported in the balance sheet approximate fair market value due to the relative short-term nature of the respective instruments (Level 1). The fair value of credit card balances is determined using market pricing sources based on projected future cash flows of the pooled assets and performance characteristics (Level 3).
|
▪
|
Investments in available-for-sale securities
–
We use a third-party pricing service to determine fair value. The service's pricing model is based on market data and utilizes available trade, bid and other market information for similar securities (Level 2).
|
▪
|
Mortgage loans held for investment, net
–
The fair value of mortgage loans held for investment is determined using market pricing sources based on projected future cash flows of each individual asset, and loan characteristics including channel and performance characteristics (Level 3).
|
▪
|
Receivables
–
long-term
–
The carrying values for the long-term portion of loans to franchisees approximate fair market value due to the variable interest rates (Level 1). Long-term EA receivables are carried at net realizable value which approximates fair value (Level 3). Net realizable value is determined based on historical collection rates. The fair value of credit card balances is determined using market pricing sources based on projected future cash flows of the pooled assets and performance characteristics (Level 3).
|
▪
|
Note receivable
–
The fair value of the long-term note receivable from M&P assumes no prepayment and is determined using market pricing sources for similar instruments based on projected future cash flows (Level 3).
|
▪
|
Deposits
–
The fair value of deposits with no stated maturity such as non-interest-bearing demand deposits, checking, money market and savings accounts is equal to the amount payable on demand (Level 1). The fair value of IRAs and other time deposits is estimated by discounting the future cash flows using the rates currently offered by HRB Bank for products with similar remaining maturities (Level 3).
|
▪
|
Long-term borrowings – The fair value of our Senior Notes is based on quotes from multiple banks. (Level 2).
|
H&R Block Q2 FY2014 Form 10-Q
|
17
|
▪
|
Contingent consideration payments
–
Fair value approximates the carrying amount (Level 3).
|
(in 000s)
|
|
|||||||||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Interest income:
|
|
|
|
|
|
|
|
|
||||||||
Mortgage loans, net
|
|
$
|
3,631
|
|
|
$
|
4,168
|
|
|
$
|
7,173
|
|
|
$
|
8,585
|
|
Loans to franchisees
|
|
2,384
|
|
|
2,391
|
|
|
4,673
|
|
|
4,746
|
|
||||
AFS securities
|
|
2,513
|
|
|
1,753
|
|
|
4,854
|
|
|
3,392
|
|
||||
Credit cards
|
|
635
|
|
|
—
|
|
|
1,863
|
|
|
—
|
|
||||
Other
|
|
1,463
|
|
|
1,547
|
|
|
3,260
|
|
|
3,009
|
|
||||
|
|
$
|
10,626
|
|
|
$
|
9,859
|
|
|
$
|
21,823
|
|
|
$
|
19,732
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
||||||||
Borrowings
|
|
$
|
13,801
|
|
|
$
|
21,995
|
|
|
$
|
27,604
|
|
|
$
|
42,749
|
|
Deposits
|
|
513
|
|
|
1,395
|
|
|
1,156
|
|
|
2,718
|
|
||||
|
|
$
|
14,314
|
|
|
$
|
23,390
|
|
|
$
|
28,760
|
|
|
$
|
45,467
|
|
|
|
|
|
|
|
|
|
|
18
|
H&R Block Q2 FY2014 Form 10-Q
|
(in 000s)
|
|
|||||||
Six months ended October 31,
|
|
2013
|
|
|
2012
|
|
||
Balance, beginning of the period
|
|
$
|
146,286
|
|
|
$
|
141,080
|
|
Amounts deferred for new guarantees issued
|
|
1,840
|
|
|
1,383
|
|
||
Revenue recognized on previous deferrals
|
|
(46,977
|
)
|
|
(45,555
|
)
|
||
Balance, end of the period
|
|
$
|
101,149
|
|
|
$
|
96,908
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
19
|
20
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
21
|
22
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
23
|
24
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
25
|
26
|
H&R Block Q2 FY2014 Form 10-Q
|
(in 000s)
|
|
|||||||||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Pretax income (loss) from operations:
|
|
|
|
|
|
|
|
|
||||||||
RSM and related businesses
|
|
$
|
(608
|
)
|
|
$
|
(221
|
)
|
|
$
|
(1,836
|
)
|
|
$
|
307
|
|
Mortgage
|
|
(2,538
|
)
|
|
(6,411
|
)
|
|
(4,436
|
)
|
|
(9,874
|
)
|
||||
|
|
(3,146
|
)
|
|
(6,632
|
)
|
|
(6,272
|
)
|
|
(9,567
|
)
|
||||
Income tax benefit
|
|
(1,218
|
)
|
|
(2,588
|
)
|
|
(2,427
|
)
|
|
(3,732
|
)
|
||||
Net loss from discontinued operations
|
|
$
|
(1,928
|
)
|
|
$
|
(4,044
|
)
|
|
$
|
(3,845
|
)
|
|
$
|
(5,835
|
)
|
|
|
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
27
|
(dollars in 000s)
|
|
|||||||||||||||||||||
|
|
Actual
|
|
Minimum
Capital Requirement
|
|
|
Minimum to be
Well Capitalized
|
|||||||||||||||
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
|
Amount
|
|
Ratio
|
|||||||||
As of September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total risk-based capital ratio
(1)
|
|
$
|
506,449
|
|
|
140.0
|
%
|
|
$
|
28,950
|
|
|
8.0
|
%
|
|
|
$
|
36,188
|
|
|
10.0
|
%
|
Tier 1 risk-based capital ratio
(2)
|
|
501,720
|
|
|
138.6
|
%
|
|
N/A
|
|
|
N/A
|
|
|
|
21,713
|
|
|
6.0
|
%
|
|||
Tier 1 capital ratio (leverage)
(3)
|
|
501,720
|
|
|
40.4
|
%
|
|
148,869
|
|
|
12.0
|
%
|
(5)
|
|
62,029
|
|
|
5.0
|
%
|
|||
Tangible equity ratio
(4)
|
|
501,720
|
|
|
40.4
|
%
|
|
18,609
|
|
|
1.5
|
%
|
|
|
N/A
|
|
|
N/A
|
|
|||
As of September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total risk-based capital ratio
(1)
|
|
$
|
462,454
|
|
|
128.2
|
%
|
|
$
|
28,868
|
|
|
8.0
|
%
|
|
|
$
|
36,085
|
|
|
10.0
|
%
|
Tier 1 risk-based capital ratio
(2)
|
|
457,760
|
|
|
126.9
|
%
|
|
N/A
|
|
|
N/A
|
|
|
|
21,651
|
|
|
6.0
|
%
|
|||
Tier 1 capital ratio (leverage)
(3)
|
|
457,760
|
|
|
36.8
|
%
|
|
49,696
|
|
|
12.0
|
%
|
(5)
|
|
62,120
|
|
|
5.0
|
%
|
|||
Tangible equity ratio
(4)
|
|
457,760
|
|
|
36.8
|
%
|
|
18,636
|
|
|
1.5
|
%
|
|
|
N/A
|
|
|
N/A
|
|
|||
As of March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total risk-based capital ratio
(1)
|
|
$
|
506,734
|
|
|
131.6
|
%
|
|
$
|
30,806
|
|
|
8.0
|
%
|
|
|
$
|
38,508
|
|
|
10.0
|
%
|
Tier 1 risk-based capital ratio
(2)
|
|
501,731
|
|
|
130.3
|
%
|
|
N/A
|
|
|
N/A
|
|
|
|
23,105
|
|
|
6.0
|
%
|
|||
Tier 1 capital ratio (leverage)
(3)
|
|
501,731
|
|
|
25.5
|
%
|
|
236,315
|
|
|
12.0
|
%
|
(5)
|
|
98,464
|
|
|
5.0
|
%
|
|||
Tangible equity ratio
(4)
|
|
501,731
|
|
|
25.5
|
%
|
|
29,539
|
|
|
1.5
|
%
|
|
|
N/A
|
|
|
N/A
|
|
(1)
|
Total risk-based capital divided by risk-weighted assets.
|
(2)
|
Tier 1 (core) capital less deduction for low-level recourse and residual interest divided by risk-weighted assets.
|
(3)
|
Tier 1 (core) capital divided by adjusted total assets.
|
(4)
|
Tangible capital divided by tangible assets.
|
(5)
|
Effective April 5, 2012, the minimum capital requirement was changed to
4%
by the OCC, although HRB Bank plans to maintain a minimum of
12.0%
leverage capital at the end of each calendar quarter.
|
(in 000s)
|
|
|||||||||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
REVENUES :
|
|
|
|
|
|
|
|
|
||||||||
Tax Services
|
|
$
|
128,040
|
|
|
$
|
129,819
|
|
|
$
|
249,731
|
|
|
$
|
220,072
|
|
Corporate and eliminations
|
|
6,300
|
|
|
7,444
|
|
|
11,804
|
|
|
13,680
|
|
||||
|
|
$
|
134,340
|
|
|
$
|
137,263
|
|
|
$
|
261,535
|
|
|
$
|
233,752
|
|
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES :
|
|
|
|
|
|
|
|
|
||||||||
Tax Services
|
|
$
|
(159,314
|
)
|
|
$
|
(130,109
|
)
|
|
$
|
(303,708
|
)
|
|
$
|
(271,014
|
)
|
Corporate and eliminations
|
|
(20,048
|
)
|
|
(32,179
|
)
|
|
(60,148
|
)
|
|
(60,543
|
)
|
||||
|
|
$
|
(179,362
|
)
|
|
$
|
(162,288
|
)
|
|
$
|
(363,856
|
)
|
|
$
|
(331,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
28
|
H&R Block Q2 FY2014 Form 10-Q
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
|
(in 000s)
|
|
|||||||||||||||||
Three months ended October 31, 2013
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Total revenues
|
|
$
|
—
|
|
|
$
|
21,170
|
|
|
$
|
113,204
|
|
|
$
|
(34
|
)
|
|
$
|
134,340
|
|
Cost of revenues
|
|
—
|
|
|
26,932
|
|
|
193,966
|
|
|
(34
|
)
|
|
220,864
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
1,369
|
|
|
92,723
|
|
|
—
|
|
|
94,092
|
|
|||||
Total expenses
|
|
—
|
|
|
28,301
|
|
|
286,689
|
|
|
(34
|
)
|
|
314,956
|
|
|||||
Operating loss
|
|
—
|
|
|
(7,131
|
)
|
|
(173,485
|
)
|
|
—
|
|
|
(180,616
|
)
|
|||||
Other income (expense), net
|
|
(179,362
|
)
|
|
1,662
|
|
|
(408
|
)
|
|
179,362
|
|
|
1,254
|
|
|||||
Loss from continuing operations before tax benefit
|
|
(179,362
|
)
|
|
(5,469
|
)
|
|
(173,893
|
)
|
|
179,362
|
|
|
(179,362
|
)
|
|||||
Income tax benefit
|
|
(76,347
|
)
|
|
(2,203
|
)
|
|
(74,144
|
)
|
|
76,347
|
|
|
(76,347
|
)
|
|||||
Net loss from continuing operations
|
|
(103,015
|
)
|
|
(3,266
|
)
|
|
(99,749
|
)
|
|
103,015
|
|
|
(103,015
|
)
|
|||||
Net loss from discontinued operations
|
|
(1,928
|
)
|
|
(1,553
|
)
|
|
(375
|
)
|
|
1,928
|
|
|
(1,928
|
)
|
|||||
Net loss
|
|
(104,943
|
)
|
|
(4,819
|
)
|
|
(100,124
|
)
|
|
104,943
|
|
|
(104,943
|
)
|
|||||
Other comprehensive income
|
|
1,720
|
|
|
1,108
|
|
|
612
|
|
|
(1,720
|
)
|
|
1,720
|
|
|||||
Comprehensive loss
|
|
$
|
(103,223
|
)
|
|
$
|
(3,711
|
)
|
|
$
|
(99,512
|
)
|
|
$
|
103,223
|
|
|
$
|
(103,223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October 31, 2012
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Total revenues
|
|
$
|
—
|
|
|
$
|
17,986
|
|
|
$
|
119,299
|
|
|
$
|
(22
|
)
|
|
$
|
137,263
|
|
Cost of revenues
|
|
—
|
|
|
33,871
|
|
|
178,162
|
|
|
(22
|
)
|
|
212,011
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
7,321
|
|
|
83,006
|
|
|
—
|
|
|
90,327
|
|
|||||
Total expenses
|
|
—
|
|
|
41,192
|
|
|
261,168
|
|
|
(22
|
)
|
|
302,338
|
|
|||||
Operating loss
|
|
—
|
|
|
(23,206
|
)
|
|
(141,869
|
)
|
|
—
|
|
|
(165,075
|
)
|
|||||
Other income (expense), net
|
|
(162,288
|
)
|
|
1,186
|
|
|
1,601
|
|
|
162,288
|
|
|
2,787
|
|
|||||
Loss from continuing operations before tax benefit
|
|
(162,288
|
)
|
|
(22,020
|
)
|
|
(140,268
|
)
|
|
162,288
|
|
|
(162,288
|
)
|
|||||
Income tax benefit
|
|
(61,089
|
)
|
|
(6,703
|
)
|
|
(54,386
|
)
|
|
61,089
|
|
|
(61,089
|
)
|
|||||
Net loss from continuing operations
|
|
(101,199
|
)
|
|
(15,317
|
)
|
|
(85,882
|
)
|
|
101,199
|
|
|
(101,199
|
)
|
|||||
Net loss from discontinued operations
|
|
(4,044
|
)
|
|
(3,909
|
)
|
|
(135
|
)
|
|
4,044
|
|
|
(4,044
|
)
|
|||||
Net loss
|
|
(105,243
|
)
|
|
(19,226
|
)
|
|
(86,017
|
)
|
|
105,243
|
|
|
(105,243
|
)
|
|||||
Other comprehensive income
|
|
1,335
|
|
|
119
|
|
|
1,216
|
|
|
(1,335
|
)
|
|
1,335
|
|
|||||
Comprehensive loss
|
|
$
|
(103,908
|
)
|
|
$
|
(19,107
|
)
|
|
$
|
(84,801
|
)
|
|
$
|
103,908
|
|
|
$
|
(103,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
29
|
Six months ended October 31, 2013
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Total revenues
|
|
$
|
—
|
|
|
$
|
48,385
|
|
|
$
|
213,340
|
|
|
$
|
(190
|
)
|
|
$
|
261,535
|
|
Cost of revenues
|
|
—
|
|
|
66,291
|
|
|
364,816
|
|
|
(190
|
)
|
|
430,917
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
15,407
|
|
|
175,382
|
|
|
—
|
|
|
190,789
|
|
|||||
Total expenses
|
|
—
|
|
|
81,698
|
|
|
540,198
|
|
|
(190
|
)
|
|
621,706
|
|
|||||
Operating loss
|
|
—
|
|
|
(33,313
|
)
|
|
(326,858
|
)
|
|
—
|
|
|
(360,171
|
)
|
|||||
Other income (expense), net
|
|
(363,856
|
)
|
|
1,706
|
|
|
(5,391
|
)
|
|
363,856
|
|
|
(3,685
|
)
|
|||||
Loss from continuing operations before tax benefit
|
|
(363,856
|
)
|
|
(31,607
|
)
|
|
(332,249
|
)
|
|
363,856
|
|
|
(363,856
|
)
|
|||||
Income tax benefit
|
|
(147,571
|
)
|
|
(11,601
|
)
|
|
(135,970
|
)
|
|
147,571
|
|
|
(147,571
|
)
|
|||||
Net loss from continuing operations
|
|
(216,285
|
)
|
|
(20,006
|
)
|
|
(196,279
|
)
|
|
216,285
|
|
|
(216,285
|
)
|
|||||
Net loss from discontinued operations
|
|
(3,845
|
)
|
|
(2,716
|
)
|
|
(1,129
|
)
|
|
3,845
|
|
|
(3,845
|
)
|
|||||
Net loss
|
|
(220,130
|
)
|
|
(22,722
|
)
|
|
(197,408
|
)
|
|
220,130
|
|
|
(220,130
|
)
|
|||||
Other comprehensive loss
|
|
(9,087
|
)
|
|
(6,616
|
)
|
|
(2,471
|
)
|
|
9,087
|
|
|
(9,087
|
)
|
|||||
Comprehensive loss
|
|
$
|
(229,217
|
)
|
|
$
|
(29,338
|
)
|
|
$
|
(199,879
|
)
|
|
$
|
229,217
|
|
|
$
|
(229,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended October 31, 2012
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Total revenues
|
|
$
|
—
|
|
|
$
|
39,915
|
|
|
$
|
193,915
|
|
|
$
|
(78
|
)
|
|
$
|
233,752
|
|
Cost of revenues
|
|
—
|
|
|
68,813
|
|
|
336,700
|
|
|
(78
|
)
|
|
405,435
|
|
|||||
Selling, general and administrative
|
|
—
|
|
|
14,961
|
|
|
150,844
|
|
|
—
|
|
|
165,805
|
|
|||||
Total expenses
|
|
—
|
|
|
83,774
|
|
|
487,544
|
|
|
(78
|
)
|
|
571,240
|
|
|||||
Operating loss
|
|
—
|
|
|
(43,859
|
)
|
|
(293,629
|
)
|
|
—
|
|
|
(337,488
|
)
|
|||||
Other income (expense), net
|
|
(331,557
|
)
|
|
2,510
|
|
|
3,421
|
|
|
331,557
|
|
|
5,931
|
|
|||||
Loss from continuing operations before tax benefit
|
|
(331,557
|
)
|
|
(41,349
|
)
|
|
(290,208
|
)
|
|
331,557
|
|
|
(331,557
|
)
|
|||||
Income tax benefit
|
|
(124,708
|
)
|
|
(14,958
|
)
|
|
(109,750
|
)
|
|
124,708
|
|
|
(124,708
|
)
|
|||||
Net loss from continuing operations
|
|
(206,849
|
)
|
|
(26,391
|
)
|
|
(180,458
|
)
|
|
206,849
|
|
|
(206,849
|
)
|
|||||
Net income (loss) from discontinued operations
|
|
(5,835
|
)
|
|
(6,020
|
)
|
|
185
|
|
|
5,835
|
|
|
(5,835
|
)
|
|||||
Net loss
|
|
(212,684
|
)
|
|
(32,411
|
)
|
|
(180,273
|
)
|
|
212,684
|
|
|
(212,684
|
)
|
|||||
Other comprehensive income (loss)
|
|
(3,460
|
)
|
|
254
|
|
|
(3,714
|
)
|
|
3,460
|
|
|
(3,460
|
)
|
|||||
Comprehensive loss
|
|
$
|
(216,144
|
)
|
|
$
|
(32,157
|
)
|
|
$
|
(183,987
|
)
|
|
$
|
216,144
|
|
|
$
|
(216,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
30
|
H&R Block Q2 FY2014 Form 10-Q
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
(in 000s)
|
|
|||||||||||||||||
As of October 31, 2013
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Cash & cash equivalents
|
|
$
|
—
|
|
|
$
|
389,915
|
|
|
$
|
401,303
|
|
|
$
|
(446
|
)
|
|
$
|
790,772
|
|
Cash & cash equivalents — restricted
|
|
—
|
|
|
6,795
|
|
|
40,726
|
|
|
—
|
|
|
47,521
|
|
|||||
Receivables, net
|
|
—
|
|
|
99,867
|
|
|
31,834
|
|
|
—
|
|
|
131,701
|
|
|||||
Mortgage loans held for investment, net
|
|
—
|
|
|
295,907
|
|
|
—
|
|
|
—
|
|
|
295,907
|
|
|||||
Intangible assets and goodwill, net
|
|
—
|
|
|
—
|
|
|
739,025
|
|
|
—
|
|
|
739,025
|
|
|||||
Investments in subsidiaries
|
|
3,114,988
|
|
|
—
|
|
|
1,336
|
|
|
(3,114,988
|
)
|
|
1,336
|
|
|||||
Amounts due from affiliates
|
|
—
|
|
|
397,526
|
|
|
2,167,944
|
|
|
(2,565,470
|
)
|
|
—
|
|
|||||
Other assets
|
|
8,512
|
|
|
616,434
|
|
|
643,305
|
|
|
—
|
|
|
1,268,251
|
|
|||||
Total assets
|
|
$
|
3,123,500
|
|
|
$
|
1,806,444
|
|
|
$
|
4,025,473
|
|
|
$
|
(5,680,904
|
)
|
|
$
|
3,274,513
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Customer deposits
|
|
$
|
—
|
|
|
$
|
655,575
|
|
|
$
|
—
|
|
|
$
|
(446
|
)
|
|
$
|
655,129
|
|
Long-term debt
|
|
—
|
|
|
897,236
|
|
|
9,345
|
|
|
—
|
|
|
906,581
|
|
|||||
Other liabilities
|
|
581
|
|
|
226,671
|
|
|
530,576
|
|
|
—
|
|
|
757,828
|
|
|||||
Amounts due to affiliates
|
|
2,167,944
|
|
|
—
|
|
|
397,526
|
|
|
(2,565,470
|
)
|
|
—
|
|
|||||
Stockholders’ equity
|
|
954,975
|
|
|
26,962
|
|
|
3,088,026
|
|
|
(3,114,988
|
)
|
|
954,975
|
|
|||||
Total liabilities and stockholders’ equity
|
|
$
|
3,123,500
|
|
|
$
|
1,806,444
|
|
|
$
|
4,025,473
|
|
|
$
|
(5,680,904
|
)
|
|
$
|
3,274,513
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2012
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Cash & cash equivalents
|
|
$
|
—
|
|
|
$
|
491,772
|
|
|
$
|
769,995
|
|
|
$
|
(866
|
)
|
|
$
|
1,260,901
|
|
Cash & cash equivalents — restricted
|
|
—
|
|
|
696
|
|
|
37,971
|
|
|
—
|
|
|
38,667
|
|
|||||
Receivables, net
|
|
—
|
|
|
98,007
|
|
|
26,504
|
|
|
—
|
|
|
124,511
|
|
|||||
Mortgage loans held for investment, net
|
|
—
|
|
|
370,850
|
|
|
—
|
|
|
—
|
|
|
370,850
|
|
|||||
Intangible assets and goodwill, net
|
|
—
|
|
|
—
|
|
|
709,685
|
|
|
—
|
|
|
709,685
|
|
|||||
Investments in subsidiaries
|
|
2,906,582
|
|
|
641
|
|
|
19
|
|
|
(2,906,582
|
)
|
|
660
|
|
|||||
Amounts due from affiliates
(1)
|
|
50
|
|
|
689,702
|
|
|
2,222,748
|
|
|
(2,912,500
|
)
|
|
—
|
|
|||||
Other assets
|
|
9,357
|
|
|
611,904
|
|
|
770,195
|
|
|
—
|
|
|
1,391,456
|
|
|||||
Total assets
|
|
$
|
2,915,989
|
|
|
$
|
2,263,572
|
|
|
$
|
4,537,117
|
|
|
$
|
(5,819,948
|
)
|
|
$
|
3,896,730
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Customer deposits
|
|
$
|
—
|
|
|
$
|
790,972
|
|
|
$
|
—
|
|
|
$
|
(866
|
)
|
|
$
|
790,106
|
|
Long-term debt
|
|
—
|
|
|
1,496,695
|
|
|
10,108
|
|
|
—
|
|
|
1,506,803
|
|
|||||
Other liabilities
|
|
308
|
|
|
284,042
|
|
|
622,538
|
|
|
—
|
|
|
906,888
|
|
|||||
Amounts due to affiliates
(1)
|
|
2,222,748
|
|
|
—
|
|
|
689,752
|
|
|
(2,912,500
|
)
|
|
—
|
|
|||||
Stockholders’ equity
|
|
692,933
|
|
|
(308,137
|
)
|
|
3,214,719
|
|
|
(2,906,582
|
)
|
|
692,933
|
|
|||||
Total liabilities and stockholders’ equity
|
|
$
|
2,915,989
|
|
|
$
|
2,263,572
|
|
|
$
|
4,537,117
|
|
|
$
|
(5,819,948
|
)
|
|
$
|
3,896,730
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts have been restated to conform to the current period presentation, including the presentation of income tax receivables settled with affiliates and the presentation of intercompany receivables and payables gross, rather than net.
|
H&R Block Q2 FY2014 Form 10-Q
|
31
|
As of April 30, 2013
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Cash & cash equivalents
|
|
$
|
—
|
|
|
$
|
558,110
|
|
|
$
|
1,192,197
|
|
|
$
|
(2,723
|
)
|
|
$
|
1,747,584
|
|
Cash & cash equivalents — restricted
|
|
—
|
|
|
75,096
|
|
|
42,741
|
|
|
—
|
|
|
117,837
|
|
|||||
Receivables, net
|
|
769
|
|
|
99,844
|
|
|
106,222
|
|
|
—
|
|
|
206,835
|
|
|||||
Mortgage loans held for investment, net
|
|
—
|
|
|
338,789
|
|
|
—
|
|
|
—
|
|
|
338,789
|
|
|||||
Intangible assets and goodwill, net
|
|
—
|
|
|
—
|
|
|
719,221
|
|
|
—
|
|
|
719,221
|
|
|||||
Investments in subsidiaries
|
|
3,444,442
|
|
|
473
|
|
|
—
|
|
|
(3,444,442
|
)
|
|
473
|
|
|||||
Amounts due from affiliates
|
|
—
|
|
|
410,590
|
|
|
2,189,625
|
|
|
(2,600,215
|
)
|
|
—
|
|
|||||
Other assets
|
|
8,390
|
|
|
645,166
|
|
|
753,484
|
|
|
—
|
|
|
1,407,040
|
|
|||||
Total assets
|
|
$
|
3,453,601
|
|
|
$
|
2,128,068
|
|
|
$
|
5,003,490
|
|
|
$
|
(6,047,380
|
)
|
|
$
|
4,537,779
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Customer deposits
|
|
$
|
—
|
|
|
$
|
939,187
|
|
|
$
|
—
|
|
|
$
|
(2,723
|
)
|
|
$
|
936,464
|
|
Long-term debt
|
|
—
|
|
|
896,978
|
|
|
9,702
|
|
|
—
|
|
|
906,680
|
|
|||||
Other liabilities
|
|
429
|
|
|
245,862
|
|
|
1,184,797
|
|
|
—
|
|
|
1,431,088
|
|
|||||
Amounts due to affiliates
|
|
2,189,625
|
|
|
—
|
|
|
410,590
|
|
|
(2,600,215
|
)
|
|
—
|
|
|||||
Stockholders’ equity
|
|
1,263,547
|
|
|
46,041
|
|
|
3,398,401
|
|
|
(3,444,442
|
)
|
|
1,263,547
|
|
|||||
Total liabilities and stockholders’ equity
|
|
$
|
3,453,601
|
|
|
$
|
2,128,068
|
|
|
$
|
5,003,490
|
|
|
$
|
(6,047,380
|
)
|
|
$
|
4,537,779
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
|
(in 000s)
|
|
|||||||||||||||||
Six months ended October 31, 2013
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Net cash provided by (used in) operating activities:
|
|
$
|
799
|
|
|
$
|
46,969
|
|
|
$
|
(540,141
|
)
|
|
$
|
—
|
|
|
$
|
(492,373
|
)
|
Cash flows from investing:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of AFS securities
|
|
—
|
|
|
(45,158
|
)
|
|
—
|
|
|
—
|
|
|
(45,158
|
)
|
|||||
Maturities and payments received on AFS securities
|
|
—
|
|
|
55,615
|
|
|
—
|
|
|
—
|
|
|
55,615
|
|
|||||
Mortgage loans held for investment, net
|
|
—
|
|
|
24,340
|
|
|
—
|
|
|
—
|
|
|
24,340
|
|
|||||
Purchases of property & equipment
|
|
—
|
|
|
(57
|
)
|
|
(86,869
|
)
|
|
—
|
|
|
(86,926
|
)
|
|||||
Payments for business acquisitions, net
|
|
—
|
|
|
—
|
|
|
(20,927
|
)
|
|
—
|
|
|
(20,927
|
)
|
|||||
Loans made to franchisees
|
|
—
|
|
|
(22,114
|
)
|
|
—
|
|
|
—
|
|
|
(22,114
|
)
|
|||||
Repayments from franchisees
|
|
—
|
|
|
15,883
|
|
|
—
|
|
|
—
|
|
|
15,883
|
|
|||||
Intercompany advances (payments)
|
|
89,318
|
|
|
—
|
|
|
—
|
|
|
(89,318
|
)
|
|
—
|
|
|||||
Other, net
|
|
—
|
|
|
11,368
|
|
|
3,887
|
|
|
—
|
|
|
15,255
|
|
|||||
Net cash provided by (used in) investing activities
|
|
89,318
|
|
|
39,877
|
|
|
(103,909
|
)
|
|
(89,318
|
)
|
|
(64,032
|
)
|
|||||
Cash flows from financing:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Customer banking deposits, net
|
|
—
|
|
|
(278,077
|
)
|
|
—
|
|
|
2,277
|
|
|
(275,800
|
)
|
|||||
Dividends paid
|
|
(109,324
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109,324
|
)
|
|||||
Repurchase of common stock
|
|
(5,329
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,329
|
)
|
|||||
Proceeds from stock options
|
|
24,536
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,536
|
|
|||||
Intercompany advances (payments)
|
|
—
|
|
|
23,036
|
|
|
(112,354
|
)
|
|
89,318
|
|
|
—
|
|
|||||
Other, net
|
|
—
|
|
|
—
|
|
|
(26,619
|
)
|
|
—
|
|
|
(26,619
|
)
|
|||||
Net cash used in financing activities
|
|
(90,117
|
)
|
|
(255,041
|
)
|
|
(138,973
|
)
|
|
91,595
|
|
|
(392,536
|
)
|
|||||
Effects of exchange rates on cash
|
|
—
|
|
|
—
|
|
|
(7,871
|
)
|
|
—
|
|
|
(7,871
|
)
|
|||||
Net decrease in cash
|
|
—
|
|
|
(168,195
|
)
|
|
(790,894
|
)
|
|
2,277
|
|
|
(956,812
|
)
|
|||||
Cash – beginning of the period
|
|
—
|
|
|
558,110
|
|
|
1,192,197
|
|
|
(2,723
|
)
|
|
1,747,584
|
|
|||||
Cash – end of the period
|
|
$
|
—
|
|
|
$
|
389,915
|
|
|
$
|
401,303
|
|
|
$
|
(446
|
)
|
|
$
|
790,772
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
H&R Block Q2 FY2014 Form 10-Q
|
Six months ended October 31, 2012
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
|||||
Net cash provided by (used in) operating activities:
|
|
$
|
(367
|
)
|
|
$
|
2,026
|
|
|
$
|
(568,695
|
)
|
|
$
|
—
|
|
|
$
|
(567,036
|
)
|
Cash flows from investing:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of AFS securities
|
|
—
|
|
|
(67,474
|
)
|
|
—
|
|
|
—
|
|
|
(67,474
|
)
|
|||||
Maturities and payments received on AFS securities
|
|
—
|
|
|
53,064
|
|
|
34
|
|
|
—
|
|
|
53,098
|
|
|||||
Mortgage loans held for investment, net
|
|
—
|
|
|
23,608
|
|
|
—
|
|
|
—
|
|
|
23,608
|
|
|||||
Purchases of property & equipment
|
|
—
|
|
|
(912
|
)
|
|
(59,808
|
)
|
|
—
|
|
|
(60,720
|
)
|
|||||
Payments for business acquisitions, net
|
|
—
|
|
|
—
|
|
|
(10,442
|
)
|
|
—
|
|
|
(10,442
|
)
|
|||||
Loans made to franchisees
|
|
—
|
|
|
(20,670
|
)
|
|
—
|
|
|
—
|
|
|
(20,670
|
)
|
|||||
Repayments from franchisees
|
|
—
|
|
|
8,303
|
|
|
—
|
|
|
—
|
|
|
8,303
|
|
|||||
Net intercompany advances
|
|
447,426
|
|
|
—
|
|
|
—
|
|
|
(447,426
|
)
|
|
—
|
|
|||||
Other, net
|
|
—
|
|
|
5,023
|
|
|
5,195
|
|
|
—
|
|
|
10,218
|
|
|||||
Net cash provided by (used in) investing activities
|
|
447,426
|
|
|
942
|
|
|
(65,021
|
)
|
|
(447,426
|
)
|
|
(64,079
|
)
|
|||||
Cash flows from financing:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repayments of other borrowings
|
|
—
|
|
|
—
|
|
|
(30,831
|
)
|
|
—
|
|
|
(30,831
|
)
|
|||||
Proceeds from long-term debt
|
|
—
|
|
|
497,185
|
|
|
—
|
|
|
—
|
|
|
497,185
|
|
|||||
Customer banking deposits, net
|
|
—
|
|
|
(37,890
|
)
|
|
—
|
|
|
(23
|
)
|
|
(37,913
|
)
|
|||||
Dividends paid
|
|
(108,428
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(108,428
|
)
|
|||||
Repurchase of common stock
|
|
(339,919
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(339,919
|
)
|
|||||
Proceeds from stock options
|
|
1,288
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,288
|
|
|||||
Net intercompany advances
|
|
—
|
|
|
(475,147
|
)
|
|
27,721
|
|
|
447,426
|
|
|
—
|
|
|||||
Other, net
|
|
—
|
|
|
(10,491
|
)
|
|
(22,513
|
)
|
|
—
|
|
|
(33,004
|
)
|
|||||
Net cash used in financing activities
|
|
(447,059
|
)
|
|
(26,343
|
)
|
|
(25,623
|
)
|
|
447,403
|
|
|
(51,622
|
)
|
|||||
Effects of exchange rates on cash
|
|
—
|
|
|
—
|
|
|
(696
|
)
|
|
—
|
|
|
(696
|
)
|
|||||
Net decrease in cash
|
|
—
|
|
|
(23,375
|
)
|
|
(660,035
|
)
|
|
(23
|
)
|
|
(683,433
|
)
|
|||||
Cash – beginning of the period
|
|
—
|
|
|
515,147
|
|
|
1,430,030
|
|
|
(843
|
)
|
|
1,944,334
|
|
|||||
Cash – end of the period
|
|
$
|
—
|
|
|
$
|
491,772
|
|
|
$
|
769,995
|
|
|
$
|
(866
|
)
|
|
$
|
1,260,901
|
|
|
|
|
|
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
33
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Consolidated Results of Operations Data
|
|
|
|
(in 000s, except per share amounts)
|
|
|||||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
REVENUES:
|
|
|
|
|
|
|
|
|
||||||||
Tax Services
|
|
$
|
128,040
|
|
|
$
|
129,819
|
|
|
$
|
249,731
|
|
|
$
|
220,072
|
|
Corporate and eliminations
|
|
6,300
|
|
|
7,444
|
|
|
11,804
|
|
|
13,680
|
|
||||
|
|
$
|
134,340
|
|
|
$
|
137,263
|
|
|
$
|
261,535
|
|
|
$
|
233,752
|
|
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES:
|
|
|
|
|
|
|
|
|
||||||||
Tax Services
|
|
$
|
(159,314
|
)
|
|
$
|
(130,109
|
)
|
|
$
|
(303,708
|
)
|
|
$
|
(271,014
|
)
|
Corporate and eliminations
|
|
(20,048
|
)
|
|
(32,179
|
)
|
|
(60,148
|
)
|
|
(60,543
|
)
|
||||
|
|
(179,362
|
)
|
|
(162,288
|
)
|
|
(363,856
|
)
|
|
(331,557
|
)
|
||||
Income tax benefit
|
|
(76,347
|
)
|
|
(61,089
|
)
|
|
(147,571
|
)
|
|
(124,708
|
)
|
||||
Net loss from continuing operations
|
|
(103,015
|
)
|
|
(101,199
|
)
|
|
(216,285
|
)
|
|
(206,849
|
)
|
||||
Net loss from discontinued operations
|
|
(1,928
|
)
|
|
(4,044
|
)
|
|
(3,845
|
)
|
|
(5,835
|
)
|
||||
NET LOSS
|
|
$
|
(104,943
|
)
|
|
$
|
(105,243
|
)
|
|
$
|
(220,130
|
)
|
|
$
|
(212,684
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
BASIC AND DILUTED LOSS PER SHARE:
|
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
|
$
|
(0.38
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(0.76
|
)
|
Discontinued operations
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
(0.01
|
)
|
|
(0.02
|
)
|
||||
Consolidated
|
|
$
|
(0.39
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.80
|
)
|
|
$
|
(0.78
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
EBITDA FROM CONTINUING OPERATIONS
(1)
|
|
$
|
(138,380
|
)
|
|
$
|
(116,845
|
)
|
|
$
|
(285,554
|
)
|
|
$
|
(243,486
|
)
|
EBITDA FROM CONTINUING OPERATIONS - ADJUSTED
(1)
|
|
(142,018
|
)
|
|
(117,024
|
)
|
|
(280,690
|
)
|
|
(246,238
|
)
|
||||
|
|
|
|
|
|
|
|
|
(1)
|
See “Non-GAAP Financial Information” at the end of this item for a reconciliation of non-GAAP measures.
|
34
|
H&R Block Q2 FY2014 Form 10-Q
|
Tax Services – Financial Results
|
|
|
|
|
|
(dollars in 000s)
|
|
|||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Tax preparation fees:
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
|
$
|
29,011
|
|
|
$
|
23,805
|
|
|
$
|
51,037
|
|
|
$
|
42,640
|
|
International
|
|
41,568
|
|
|
51,525
|
|
|
73,662
|
|
|
65,583
|
|
||||
|
|
70,579
|
|
|
75,330
|
|
|
124,699
|
|
|
108,223
|
|
||||
Royalties
|
|
9,527
|
|
|
9,630
|
|
|
16,089
|
|
|
15,481
|
|
||||
Fees from Emerald Card
|
|
9,999
|
|
|
8,281
|
|
|
24,610
|
|
|
20,337
|
|
||||
Fees from Peace of Mind® guarantees
|
|
19,151
|
|
|
18,572
|
|
|
46,977
|
|
|
45,555
|
|
||||
Other
|
|
18,784
|
|
|
18,006
|
|
|
37,356
|
|
|
30,476
|
|
||||
Total revenues
|
|
128,040
|
|
|
129,819
|
|
|
249,731
|
|
|
220,072
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Compensation and benefits:
|
|
|
|
|
|
|
|
|
||||||||
Field wages
|
|
49,531
|
|
|
45,290
|
|
|
89,435
|
|
|
77,698
|
|
||||
Other wages
|
|
35,665
|
|
|
34,592
|
|
|
70,400
|
|
|
68,959
|
|
||||
Benefits and other compensation
|
|
22,178
|
|
|
18,765
|
|
|
38,115
|
|
|
33,539
|
|
||||
|
|
107,374
|
|
|
98,647
|
|
|
197,950
|
|
|
180,196
|
|
||||
Occupancy and equipment
|
|
83,634
|
|
|
82,267
|
|
|
162,184
|
|
|
162,118
|
|
||||
Marketing and advertising
|
|
12,566
|
|
|
11,386
|
|
|
19,583
|
|
|
18,838
|
|
||||
Depreciation and amortization
|
|
26,632
|
|
|
23,393
|
|
|
49,434
|
|
|
43,864
|
|
||||
Other
|
|
57,148
|
|
|
44,235
|
|
|
124,288
|
|
|
86,070
|
|
||||
Total expenses
|
|
287,354
|
|
|
259,928
|
|
|
553,439
|
|
|
491,086
|
|
||||
Pretax loss
|
|
$
|
(159,314
|
)
|
|
$
|
(130,109
|
)
|
|
$
|
(303,708
|
)
|
|
$
|
(271,014
|
)
|
|
|
|
|
|
|
|
|
|
H&R Block Q2 FY2014 Form 10-Q
|
35
|
Corporate – Operating Results
|
|
|
|
|
|
|
|
(in 000s)
|
|
|||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Interest income on mortgage loans held for investment
|
|
$
|
3,631
|
|
|
$
|
4,168
|
|
|
$
|
7,173
|
|
|
$
|
8,585
|
|
Other
|
|
2,669
|
|
|
3,276
|
|
|
4,631
|
|
|
5,095
|
|
||||
Total revenues
|
|
6,300
|
|
|
7,444
|
|
|
11,804
|
|
|
13,680
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
13,399
|
|
|
21,903
|
|
|
26,823
|
|
|
42,571
|
|
||||
Provision for loan losses
|
|
(379
|
)
|
|
2,750
|
|
|
7,224
|
|
|
6,750
|
|
||||
Other, net
|
|
13,328
|
|
|
14,970
|
|
|
37,905
|
|
|
24,902
|
|
||||
Total expense
|
|
26,348
|
|
|
39,623
|
|
|
71,952
|
|
|
74,223
|
|
||||
Pretax loss
|
|
$
|
(20,048
|
)
|
|
$
|
(32,179
|
)
|
|
$
|
(60,148
|
)
|
|
$
|
(60,543
|
)
|
|
|
|
|
|
|
|
|
|
36
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
37
|
|
|
(in 000s)
|
|
|||||
Six months ended October 31,
|
|
2013
|
|
|
2012
|
|
||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
(492,373
|
)
|
|
$
|
(567,036
|
)
|
Investing activities
|
|
(64,032
|
)
|
|
(64,079
|
)
|
||
Financing activities
|
|
(392,536
|
)
|
|
(51,622
|
)
|
||
Effects of exchange rates on cash
|
|
(7,871
|
)
|
|
(696
|
)
|
||
Net change in cash and cash equivalents
|
|
$
|
(956,812
|
)
|
|
$
|
(683,433
|
)
|
|
|
|
|
|
38
|
H&R Block Q2 FY2014 Form 10-Q
|
As of
|
|
October 31, 2013
|
|
April 30, 2013
|
||||||||
|
|
Short-term
|
|
Long-term
|
|
Outlook
|
|
Short-term
|
|
Long-term
|
|
Outlook
|
Moody’s
|
|
P-2
|
|
Baa2
|
|
Stable
|
|
P-2
|
|
Baa2
|
|
Negative
|
S&P
|
|
A-2
|
|
BBB
|
|
Negative
|
|
A-2
|
|
BBB
|
|
Negative
|
H&R Block Q2 FY2014 Form 10-Q
|
39
|
▪
|
4.5% CET1 to risk-weighted assets
|
▪
|
6.0% Tier 1 capital to risk-weighted assets
|
▪
|
8.0% Total capital to risk-weighted assets
|
▪
|
We exclude from our non-GAAP financial measures litigation charges we incur and favorable reserve adjustments. This does not include legal defense costs.
|
▪
|
We exclude from our non-GAAP financial measures non-cash charges to adjust the carrying values of goodwill, intangible assets, other long-lived assets and investments to their estimated fair values.
|
▪
|
We exclude from our non-GAAP financial measures severance and other restructuring charges in connection with the termination of personnel, closure of offices and related costs.
|
40
|
H&R Block Q2 FY2014 Form 10-Q
|
▪
|
We exclude from our non-GAAP financial measures the gains and losses on business dispositions, including investment banking, legal and accounting fees.
|
▪
|
We exclude from our non-GAAP financial measures the gains and losses on extinguishment of debt.
|
H&R Block Q2 FY2014 Form 10-Q
|
41
|
|
|
|
|
|
|
(in 000s)
|
|
|||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
October 31,
|
|
October 31,
|
||||||||||||
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
||||
Pretax loss from continuing operations - reported
|
|
$
|
(179,362
|
)
|
|
$
|
(162,288
|
)
|
|
$
|
(363,856
|
)
|
|
$
|
(331,557
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Loss contingencies - litigation
|
|
350
|
|
|
(2,451
|
)
|
|
723
|
|
|
(4,753
|
)
|
||||
Impairment of goodwill and intangible assets
|
|
—
|
|
|
1,421
|
|
|
—
|
|
|
1,421
|
|
||||
Severance
|
|
1,828
|
|
|
1,558
|
|
|
2,933
|
|
|
1,057
|
|
||||
Professional fees related to pending HRB Bank transaction
|
|
(5,217
|
)
|
|
47
|
|
|
1,807
|
|
|
47
|
|
||||
Gain on sales of tax offices
|
|
(599
|
)
|
|
(754
|
)
|
|
(599
|
)
|
|
(524
|
)
|
||||
|
|
(3,638
|
)
|
|
(179
|
)
|
|
4,864
|
|
|
(2,752
|
)
|
||||
Pretax loss from continuing operations - adjusted
|
|
$
|
(183,000
|
)
|
|
$
|
(162,467
|
)
|
|
$
|
(358,992
|
)
|
|
$
|
(334,309
|
)
|
|
|
|
|
|
|
|
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
42
|
H&R Block Q2 FY2014 Form 10-Q
|
H&R Block Q2 FY2014 Form 10-Q
|
43
|
(1)
|
We purchased approximately
40 thousand
shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted shares and restricted share units. There were no open-market repurchases.
|
(2)
|
In June 2008, our Board of Directors approved an authorization to purchase up to $2.0 billion of our common stock through June 2012. In June 2012, our Board of Directors extended this authorization through June 2015.
|
44
|
H&R Block Q2 FY2014 Form 10-Q
|
3.1
|
Amended and Restated Articles of Incorporation of H&R Block, Inc., filed as Exhibit 3.1 to the Company's current report on Form 8-K filed September 16, 2013, file number 1-06089, is incorporated herein by reference.
|
3.2
|
Amended and Restated Bylaws of H&R Block, Inc., filed as Exhibit 3.2 to the Company's current report on Form 8-K filed September 16, 2013, file number 1-06089, is incorporated herein by reference.
|
10.1
|
Form of H&R Block, Inc. 2013 Long Term Incentive Plan Deferred Stock Units Award Agreement for Non-Employee Directors
|
10.2
|
The H&R Block, Inc. 2000 Employee Stock Purchase Plan, as amended and restated effective November 7, 2013
|
10.3
|
H&R Block, Inc. Executive Severance Plan, as amended and restated effective November 8, 2013, filed as Exhibit 10.01 to the Company's current report on Form 8-K filed November 8, 2013, file number 1-06089, is incorporated herein by reference.
|
32.1
|
Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification by Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
|
H&R Block Q2 FY2014 Form 10-Q
|
45
|
H&R BLOCK, INC.
|
|
/s/ William C. Cobb
|
William C. Cobb
|
President and Chief Executive Officer
|
December 10, 2013
|
|
/s/ Gregory J. Macfarlane
|
Gregory J. Macfarlane
|
Chief Financial Officer
|
December 10, 2013
|
|
/s/ Jeffrey T. Brown
|
Jeffrey T. Brown
|
Chief Accounting and Risk Officer
|
December 10, 2013
|
46
|
H&R Block Q2 FY2014 Form 10-Q
|
(ii)
|
make and amend all rules, regulations, guidelines, procedures and policies for administering the Plan;
|
(iii)
|
decide all questions and settle all disputes that may arise in connection with the Plan;
|
(iv)
|
appoint persons and entities to act as designated representatives on its behalf in administering the Plan pursuant to its provisions (in which case the term "Administrator" as used herein shall include such persons or entities to the extent of such appointment);
|
(v)
|
establish accounts with a person or entity appointed pursuant to (iv) above ("Custodian") to hold Common Stock purchased under the Plan ("Stock Account");
|
(vi)
|
cause Block to enter into a written agreement with the Custodian setting forth the terms and conditions upon which Stock Accounts shall be governed ("Custodial Agreement"); and
|
(vii)
|
require Participants to hold shares of Common Stock under the Plan in Stock Accounts (in which case each Participant's decision to participate in the Plan shall constitute the appointment of such Custodian as custodial agent for the purpose of holding such shares) until such time as shall be specified in the Custodial Agreement.
|
(i)
|
increase the number of shares reserved for purchase under the Plan, unless such increase is by reason of any change in the capital structure of the Company referred to in Section 3 hereof;
|
(ii)
|
change the designation of corporations or other entities whose employees may be offered Options under the Plan, except as permitted under Treasury Regulations ss.1.423-2(c)(4);
|
(iii)
|
materially modify the requirements as to eligibility for participation in the Plan; or
|
Date:
|
December 10, 2013
|
|
/s/ William C. Cobb
|
|
|
|
William C. Cobb
|
|
|
|
Chief Executive Officer
H&R Block, Inc.
|
Date:
|
December 10, 2013
|
|
/s/ Gregory J. Macfarlane
|
|
|
|
Gregory J. Macfarlane
|
|
|
|
Chief Financial Officer
H&R Block, Inc.
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ William C. Cobb
|
William C. Cobb
Chief Executive Officer
H&R Block, Inc.
|
December 10, 2013
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Gregory J. Macfarlane
|
Gregory J. Macfarlane
Chief Financial Officer
H&R Block, Inc.
|
December 10, 2013
|