|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
7
|
The computations of basic and diluted loss per share from continuing operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s, except per share amounts)
|
|
|
|
Three months ended January 31,
|
|
Nine months ended January 31,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net loss from continuing operations attributable to shareholders
|
|
$
|
(119,779
|
)
|
|
$
|
(242,925
|
)
|
|
$
|
(439,513
|
)
|
|
$
|
(519,055
|
)
|
Amounts allocated to participating securities
|
|
(160
|
)
|
|
(177
|
)
|
|
(446
|
)
|
|
(498
|
)
|
Net loss from continuing operations attributable to common shareholders
|
|
$
|
(119,939
|
)
|
|
$
|
(243,102
|
)
|
|
$
|
(439,959
|
)
|
|
$
|
(519,553
|
)
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares
|
|
205,532
|
|
|
209,080
|
|
|
206,242
|
|
|
208,693
|
|
Potential dilutive shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dilutive weighted average common shares
|
|
205,532
|
|
|
209,080
|
|
|
206,242
|
|
|
208,693
|
|
|
|
|
|
|
|
|
|
|
Loss per share from continuing operations attributable to common shareholders:
|
Basic
|
|
$
|
(0.58
|
)
|
|
$
|
(1.16
|
)
|
|
$
|
(2.13
|
)
|
|
$
|
(2.49
|
)
|
Diluted
|
|
(0.58
|
)
|
|
(1.16
|
)
|
|
(2.13
|
)
|
|
(2.49
|
)
|
|
|
|
|
|
|
|
|
|
The weighted average shares outstanding for the
three and nine
months ended
January 31, 2019
decreased
to
205.5 million
and
206.2 million
, respectively, from
209.1 million
and
208.7 million
, respectively, for the
three and nine
months ended
January 31, 2018
. The decrease is due to share repurchases completed in the current year. During the
nine
months ended
January 31, 2019
, we purchased and immediately retired
4.7 million
shares at an aggregate cost of
$109.4 million
(average price of
$23.29
per share). We did not repurchase and retire any shares during the
nine
months ended
January 31, 2018
. The cost of shares retired during the current period was allocated to the components of stockholders’ equity as follows:
|
|
|
|
|
|
|
|
(in 000s)
|
|
|
|
|
Common stock
|
|
$
|
47
|
|
Additional paid-in-capital
|
|
2,818
|
|
Retained earnings
|
|
106,541
|
|
Total
|
|
$
|
109,406
|
|
|
|
|
STOCK-BASED COMPENSATION
– During the
nine
months ended
January 31, 2019
, we also acquired
0.2 million
shares of our common stock at an aggregate cost of
$5.0 million
, which represent shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards. During the
nine
months ended
January 31, 2018
, we acquired
0.3 million
shares at an aggregate cost of
$7.7 million
for similar purposes.
During the
nine
months ended
January 31, 2019
and
2018
, we issued
0.7 million
and
2.2 million
shares of common stock, respectively, due to the vesting or exercise of stock-based awards.
During the
nine
months ended
January 31, 2019
, we granted equity awards equivalent to
1.0 million
shares under our stock-based compensation plans, consisting primarily of nonvested units. Stock-based compensation expense of our continuing operations totaled
$6.2 million
and
$18.0 million
for the
three and nine
months ended
January 31, 2019
, respectively, and
$5.4 million
and
$17.1 million
for the
three and nine
months ended
January 31, 2018
, respectively. As of
January 31, 2019
, unrecognized compensation cost for stock options totaled
$0.7 million
, and for nonvested shares and units totaled
$31.8 million
.
|
|
|
8
|
Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
NOTE 4: RECEIVABLES
Receivables, net of their related allowance, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
As of
|
|
January 31, 2019
|
|
January 31, 2018
|
|
April 30, 2018
|
|
|
Short-term
|
|
Long-term
|
|
Short-term
|
|
Long-term
|
|
Short-term
|
|
Long-term
|
Loans to franchisees
|
|
$
|
28,941
|
|
|
$
|
41,669
|
|
|
$
|
41,062
|
|
|
$
|
47,434
|
|
|
$
|
30,596
|
|
|
$
|
35,212
|
|
Receivables for U.S. assisted and DIY tax preparation and related fees
|
|
281,266
|
|
|
5,503
|
|
|
299,805
|
|
|
6,316
|
|
|
41,572
|
|
|
5,503
|
|
H&R Block Instant Refund
TM
receivables
|
|
5,822
|
|
|
247
|
|
|
6,848
|
|
|
—
|
|
|
27,192
|
|
|
2,057
|
|
H&R Block Emerald Advance
TM
lines of credit
|
|
362,400
|
|
|
7,667
|
|
|
353,972
|
|
|
9,081
|
|
|
15,642
|
|
|
5,754
|
|
Software receivables from retailers
|
|
8,396
|
|
|
—
|
|
|
7,744
|
|
|
—
|
|
|
6,769
|
|
|
—
|
|
Royalties and other receivables from franchisees
|
|
54,907
|
|
|
733
|
|
|
56,149
|
|
|
788
|
|
|
9,239
|
|
|
761
|
|
Other
|
|
16,485
|
|
|
2,698
|
|
|
26,038
|
|
|
3,608
|
|
|
15,764
|
|
|
3,147
|
|
|
|
$
|
758,217
|
|
|
$
|
58,517
|
|
|
$
|
791,618
|
|
|
$
|
67,227
|
|
|
$
|
146,774
|
|
|
$
|
52,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances presented above as short-term are included in receivables, while the long-term portions are included in other noncurrent assets in the consolidated balance sheets.
LOANS TO FRANCHISEES
–
Franchisee loan balances consist of term loans made primarily to finance the purchase of franchises and revolving lines of credit primarily for the purpose of funding off-season working capital needs. As of
January 31, 2019
and
2018
, loans with a principal balance of
$0.9 million
and
$1.3 million
, respectively, were more than 90 days past due. We had no loans to franchisees on non-accrual status.
H&R BLOCK INSTANT REFUND
TM
PROGRAM
–
H&R Block Instant Refund
TM
(formerly Instant Cash Back®) amounts are generally received from the Canada Revenue Agency (CRA) within 60 days of filing the client's return, with the remaining balance collectible from the client. As of
January 31,
2019
and
2018
, we had
$19 thousand
and
$45 thousand
, respectively, of Instant Refund balances more than 60 days old due from the CRA.
We review the credit quality of our Instant Refund receivables based on pools, which are segregated by the year of origination, with older years being deemed more unlikely to be repaid. As of
January 31, 2019
, gross balances of
$5.2 million
and
$0.9 million
, were related to tax returns for calendar year
2019
and
2018
and prior, respectively.
H&R BLOCK EMERALD ADVANCE
TM
LINES OF CREDIT
–
We review the credit quality of our purchased participation interests in EA receivables based on pools, which are segregated by the year of origination, with older years being deemed more unlikely to be repaid. Balances and amounts on non-accrual status and classified as impaired, or more than
60
days past due, as of
January 31, 2019
, by year of origination, are as follows:
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
Year of origination:
|
|
Balance
|
|
|
Non-Accrual
|
|
2019
|
|
$
|
365,620
|
|
|
$
|
—
|
|
2018 and prior
|
|
14,068
|
|
|
14,068
|
|
Revolving loans
|
|
18,896
|
|
|
12,221
|
|
|
|
398,584
|
|
|
$
|
26,289
|
|
Allowance
|
|
(28,517
|
)
|
|
|
Net balance
|
|
$
|
370,067
|
|
|
|
|
|
|
|
|
|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
9
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS
–
Activity in the allowance for doubtful accounts for our EA and all other short-term and long-term receivables for the
nine
months ended
January 31, 2019
and
2018
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
|
|
EAs
|
|
|
All Other
|
|
|
Total
|
|
Balances as of April 30, 2018
|
|
$
|
26,622
|
|
|
$
|
55,191
|
|
|
$
|
81,813
|
|
Provision
|
|
18,254
|
|
|
16,755
|
|
|
35,009
|
|
Charge-offs, recoveries and other
(1)
|
|
(16,359
|
)
|
|
(55,459
|
)
|
|
(71,818
|
)
|
Balances as of January 31, 2019
|
|
$
|
28,517
|
|
|
$
|
16,487
|
|
|
$
|
45,004
|
|
|
|
|
|
|
|
|
Balances as of April 30, 2017
|
|
$
|
10,123
|
|
|
$
|
46,552
|
|
|
$
|
56,675
|
|
Provision
|
|
17,682
|
|
|
15,747
|
|
|
33,429
|
|
Charge-offs, recoveries and other
(1)
|
|
—
|
|
|
(44,889
|
)
|
|
(44,889
|
)
|
Balances as of January 31, 2018
|
|
$
|
27,805
|
|
|
$
|
17,410
|
|
|
$
|
45,215
|
|
|
|
|
|
|
|
|
(1)
In fiscal year 2019 we charged-off older EA balances in December while in prior years, these charge-offs happened in April.
NOTE 5: GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the
nine
months ended
January 31, 2019
and
2018
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
|
|
Goodwill
|
|
|
Accumulated Impairment Losses
|
|
|
Net
|
|
Balances as of April 30, 2018
|
|
$
|
540,168
|
|
|
$
|
(32,297
|
)
|
|
$
|
507,871
|
|
Acquisitions
|
|
13,076
|
|
|
—
|
|
|
13,076
|
|
Disposals and foreign currency changes, net
|
|
(942
|
)
|
|
—
|
|
|
(942
|
)
|
Impairments
|
|
—
|
|
|
—
|
|
|
—
|
|
Balances as of January 31, 2019
|
|
$
|
552,302
|
|
|
$
|
(32,297
|
)
|
|
$
|
520,005
|
|
|
|
|
|
|
|
|
Balances as of April 30, 2017
|
|
$
|
523,504
|
|
|
$
|
(32,297
|
)
|
|
$
|
491,207
|
|
Acquisitions
|
|
11,579
|
|
|
—
|
|
|
11,579
|
|
Disposals and foreign currency changes, net
|
|
2,003
|
|
|
—
|
|
|
2,003
|
|
Impairments
|
|
—
|
|
|
—
|
|
|
—
|
|
Balances as of January 31, 2018
|
|
$
|
537,086
|
|
|
$
|
(32,297
|
)
|
|
$
|
504,789
|
|
|
|
|
|
|
|
|
We test goodwill for impairment annually in our fourth quarter, or more frequently if events occur or circumstances change which would, more likely than not, reduce the fair value of a reporting unit below its carrying value.
|
|
|
10
|
Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
Components of intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
As of January 31, 2019:
|
|
|
|
|
|
|
Reacquired franchise rights
|
|
$
|
350,459
|
|
|
$
|
(130,618
|
)
|
|
$
|
219,841
|
|
Customer relationships
|
|
274,293
|
|
|
(187,080
|
)
|
|
87,213
|
|
Internally-developed software
|
|
147,465
|
|
|
(119,664
|
)
|
|
27,801
|
|
Noncompete agreements
|
|
33,369
|
|
|
(31,040
|
)
|
|
2,329
|
|
Franchise agreements
|
|
19,201
|
|
|
(13,014
|
)
|
|
6,187
|
|
Purchased technology
|
|
54,700
|
|
|
(42,082
|
)
|
|
12,618
|
|
Acquired assets pending final allocation
(1)
|
|
963
|
|
|
—
|
|
|
963
|
|
|
|
$
|
880,450
|
|
|
$
|
(523,498
|
)
|
|
$
|
356,952
|
|
As of January 31, 2018:
|
|
|
|
|
|
|
Reacquired franchise rights
|
|
$
|
339,544
|
|
|
$
|
(108,063
|
)
|
|
$
|
231,481
|
|
Customer relationships
|
|
251,792
|
|
|
(156,234
|
)
|
|
95,558
|
|
Internally-developed software
|
|
151,095
|
|
|
(123,309
|
)
|
|
27,786
|
|
Noncompete agreements
|
|
32,853
|
|
|
(29,195
|
)
|
|
3,658
|
|
Franchise agreements
|
|
19,201
|
|
|
(11,734
|
)
|
|
7,467
|
|
Purchased technology
|
|
54,700
|
|
|
(36,329
|
)
|
|
18,371
|
|
Acquired assets pending final allocation
(1)
|
|
6,672
|
|
|
—
|
|
|
6,672
|
|
|
|
$
|
855,857
|
|
|
$
|
(464,864
|
)
|
|
$
|
390,993
|
|
As of April 30, 2018:
|
|
|
|
|
|
|
Reacquired franchise rights
|
|
$
|
339,779
|
|
|
$
|
(113,856
|
)
|
|
$
|
225,923
|
|
Customer relationships
|
|
256,137
|
|
|
(164,005
|
)
|
|
92,132
|
|
Internally-developed software
|
|
140,255
|
|
|
(111,734
|
)
|
|
28,521
|
|
Noncompete agreements
|
|
32,899
|
|
|
(29,673
|
)
|
|
3,226
|
|
Franchise agreements
|
|
19,201
|
|
|
(12,054
|
)
|
|
7,147
|
|
Purchased technology
|
|
54,700
|
|
|
(37,770
|
)
|
|
16,930
|
|
Acquired assets pending final allocation
(1)
|
|
102
|
|
|
—
|
|
|
102
|
|
|
|
$
|
843,073
|
|
|
$
|
(469,092
|
)
|
|
$
|
373,981
|
|
|
|
|
|
|
|
|
(1)
Represents business acquisitions for which final purchase price allocations have not yet been determined.
During the
nine
months ended
January 31, 2019
and
2018
, we made payments to acquire franchisee and competitor businesses totaling
$42.4 million
and
$39.4 million
, respectively.
The
increase
in the gross carrying amount of intangible assets resulted primarily from the acquisition of approximately
175
offices to our company-owned and franchise network. The amounts and weighted-average lives of intangible assets acquired or added during the
nine
months ended
January 31, 2019
are as follows:
|
|
|
|
|
|
|
|
(dollars in 000s)
|
|
|
Amount
|
|
|
Weighted-Average Life (in years)
|
Reacquired franchise rights
|
|
$
|
10,734
|
|
|
5
|
Customer relationships
|
|
17,520
|
|
|
5
|
Noncompete agreements
|
|
488
|
|
|
5
|
Total
|
|
$
|
28,742
|
|
|
5
|
|
|
|
|
|
|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
11
|
Amortization of intangible assets for the
three and nine
months ended
January 31, 2019
was
$18.7 million
and
$54.5 million
, respectively. Amortization for the
three and nine
months ended
January 31, 2018
was
$20.8 million
and
$59.5 million
, respectively. Estimated amortization of intangible assets for fiscal years
2019
,
2020
,
2021
,
2022
and
2023
is
$73.2 million
,
$60.7 million
,
$44.2 million
,
$31.4 million
and
$18.2 million
, respectively.
NOTE 6: LONG-TERM DEBT
The components of long-term debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
As of
|
|
January 31, 2019
|
|
|
January 31, 2018
|
|
|
April 30, 2018
|
|
Senior Notes, 4.125%, due October 2020
|
|
$
|
650,000
|
|
|
$
|
650,000
|
|
|
$
|
650,000
|
|
Senior Notes, 5.500%, due November 2022
|
|
500,000
|
|
|
500,000
|
|
|
500,000
|
|
Senior Notes, 5.250%, due October 2025
|
|
350,000
|
|
|
350,000
|
|
|
350,000
|
|
Committed line of credit borrowings
|
|
385,000
|
|
|
790,000
|
|
|
—
|
|
Capital lease obligation
|
|
—
|
|
|
5,878
|
|
|
5,628
|
|
Debt issuance costs and discounts
|
|
(8,011
|
)
|
|
(10,632
|
)
|
|
(9,993
|
)
|
|
|
1,876,989
|
|
|
2,285,246
|
|
|
1,495,635
|
|
Less: Current portion
|
|
—
|
|
|
(1,015
|
)
|
|
(1,026
|
)
|
|
|
$
|
1,876,989
|
|
|
$
|
2,284,231
|
|
|
$
|
1,494,609
|
|
|
|
|
|
|
|
|
UNSECURED COMMITTED LINE OF CREDIT
– On September 21, 2018, we entered into a Third Amended and Restated Credit and Guarantee Agreement (2018 CLOC), which amended and restated our Second Amended and Restated Credit and Guarantee Agreement (2017 CLOC), extending the scheduled maturity date from September 22, 2022 to September 21, 2023. Other material terms remain unchanged from our 2017 CLOC. The 2018 CLOC provides for an unsecured senior revolving credit facility in the aggregate principal amount of
$2.0 billion
, which includes a
$200.0 million
sublimit for swingline loans and a
$50.0 million
sublimit for standby letters of credit. We may request increases in the aggregate principal amount of the revolving credit facility of up to
$500.0 million
, subject to obtaining commitments from lenders and meeting certain other conditions. The 2018 CLOC will mature on September 21, 2023,
unless extended pursuant to the terms of the 2018 CLOC, at which time all outstanding amounts thereunder will be due and payable. The 2018 CLOC includes an annual facility fee, which will vary depending on our then current credit ratings.
The 2018 CLOC is subject to various conditions, triggers, events or occurrences that could result in earlier termination and contains customary representations, warranties, covenants and events of default, including, without limitation: (1) a covenant requiring the Company to maintain a debt-to-EBITDA ratio calculated on a consolidated basis of no greater than (a)
3.50
to 1.00 as of the last day of each fiscal quarter ending on April 30, July 31, and October 31 of each year and (b)
4.50
to 1.00 as of the last day of each fiscal quarter ending on January 31 of each year; (2) a covenant requiring us to maintain an interest coverage ratio (EBITDA-to-interest expense) calculated on a consolidated basis of not less than
2.50
to 1.00 as of the last date of any fiscal quarter; and (3) covenants restricting our ability to incur certain additional debt, incur liens, merge or consolidate with other companies, sell or dispose of assets (including equity interests), liquidate or dissolve, engage in certain transactions with affiliates or enter into certain restrictive agreements. The 2018 CLOC includes provisions for an equity cure which could potentially allow us to independently cure certain defaults. Proceeds under the 2018 CLOC may be used for working capital needs or for other general corporate purposes. We were in compliance with these requirements as of
January 31, 2019
.
We had an outstanding balance of
$385.0 million
under the 2018 CLOC as of
January 31, 2019
, and may borrow up to the full capacity of
$2.0 billion
.
In October 2018, we exercised a purchase option to acquire an office building previously recorded as a capital lease.
The estimated fair value of our long-term debt as of
January 31, 2019
and
2018
and
April 30, 2018
totaled
$1.9 billion
,
$2.4 billion
and
$1.5 billion
, respectively.
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12
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Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
NOTE 7: INCOME TAXES
We file a consolidated federal income tax return in the U.S. with the IRS and file tax returns in various state, local, and foreign jurisdictions. Tax returns are typically examined and either settled upon completion of the examination or through the appeals process. The Company's U.S. federal income tax return for 2016 is currently under examination. Our U.S. federal income tax return for 2015 remains open for examination. Our U.S. federal income tax returns for 2014 and all prior periods are closed. With respect to state and local jurisdictions and countries outside of the U.S., we are typically subject to examination for three to six years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest, and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that might be incurred due to federal, state, local or foreign audits.
On December 22, 2017, the U.S. government enacted the legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Legislation), which made broad and complex changes to the U.S. tax code that impacted our financial statements, the most significant being a reduction in the U.S. federal corporate income tax rate from 35% to 21% and the imposition of a one-time transition tax on certain earnings of foreign subsidiaries. In addition, the Securities and Exchange Commission staff issued Staff Accounting Bulletin 118 (SAB 118), which provided guidance on accounting for the tax effects of the Tax Legislation. SAB 118 provided a measurement period that should not extend beyond one year from the Tax Legislation’s enactment date for companies to complete their analysis and apply the provisions of the Tax Legislation to their financial statements. As of the third quarter of fiscal 2019, we have completed our accounting for all aspects of the Tax Legislation and our financial statements reflect the final effects of the Tax Legislation in computing our deferred taxes, the one-time transition tax, the tax on global intangible low taxed income (GILTI), unrecognized tax benefits, and the indirect impacts of the Tax Legislation on state and local taxes. The adjustments during the quarter were immaterial to the provisional amounts previously recorded. We have elected to account for GILTI as a period cost at the time it is incurred.
Consistent with prior years, our pretax loss for the
nine
months ended
January 31, 2019
is expected to be offset by income in the fourth quarter due to the established pattern of seasonality in our primary business operations. As such, management has determined that it is at least more-likely-than-not that realization of tax benefits recorded in our financial statements will occur within our fiscal year. The amount of tax benefit recorded for the
nine
months ended
January 31, 2019
reflects management’s estimate of the annual effective tax rate applied to the year-to-date loss from continuing operations adjusted for the tax impact of items discrete to the quarter.
Our effective tax rate from continuing operations, including the effects of discrete income tax items, was
25.4%
and
7.7%
for the
nine
months ended
January 31, 2019
and
2018
, respectively. Rate reconciliations between the statutory U.S. federal corporate income rates and the effective tax rates for continuing operations are below:
|
|
|
|
|
|
|
|
Nine months ended January 31,
|
|
2019
|
|
|
2018
|
|
U.S. statutory tax rate
|
|
21.0
|
%
|
|
21.0
|
%
|
Change in tax rate resulting from:
|
|
|
|
|
State income taxes, net of federal income tax benefit
|
|
2.1
|
%
|
|
2.2
|
%
|
Earnings taxed in foreign jurisdictions
|
|
(3.2
|
)%
|
|
(2.3
|
)%
|
Permanent differences
|
|
0.3
|
%
|
|
0.3
|
%
|
Uncertain tax positions
|
|
4.3
|
%
|
|
6.0
|
%
|
Remeasurement of deferred tax assets and liabilities
|
|
(0.1
|
)%
|
|
2.4
|
%
|
Tax benefit due to effective date of statutory rate change
|
|
—
|
|
|
(16.4
|
)%
|
One-time transition tax
|
|
—
|
|
|
(2.4
|
)%
|
Other
|
|
1.0
|
%
|
|
(3.1
|
)%
|
Effective tax rate
|
|
25.4
|
%
|
|
7.7
|
%
|
|
|
|
|
|
The increase in the effective tax rate compared to the prior year is due to the impact of lowering the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018, had in fiscal year 2018. The impact of the rate decrease was exaggerated in fiscal year 2018 due to the seasonality of our business and our differing year ends for corporate income tax filing and financial reporting purposes, which is included as “tax benefit due to effective date of statutory rate change” in the table above. Our tax returns for the U.S. are filed on a calendar year-end basis. Therefore, pretax losses for the eight months ended December 31, 2017 resulted in income tax benefits based on the statutory rate of 35%, while the pretax income we generated in the four months ending April 30, 2018 was taxed at the statutory rate of 21%.
We had gross unrecognized tax benefits of
$178.1 million
,
$163.1 million
and
$186.1 million
as of
January 31, 2019
and
2018
and
April 30, 2018
, respectively. The gross unrecognized tax benefits
decreased
$8.0 million
and
increased
$13.1 million
during the
nine
months ended
January 31, 2019
and
2018
, respectively. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately
$46.7 million
within the next twelve months.
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|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
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13
|
The anticipated decrease is due to the expiration of statutes of limitations, anticipated closure of various tax matters currently under examination, and settlements with tax authorities. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.
The
increase
in noncurrent deferred tax assets and income taxes receivable of
$107.3 million
from
April 30, 2018
is primarily due to the adoption of ASU 2016-16. See
note 1
for additional information.
NOTE 8: OTHER INCOME AND OTHER EXPENSES
The following table shows the components of other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
|
|
Three months ended January 31,
|
|
Nine months ended January 31,
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Interest income
|
|
2,258
|
|
|
699
|
|
|
$
|
11,260
|
|
|
$
|
3,454
|
|
Foreign currency gains (losses), net
|
|
33
|
|
|
21
|
|
|
(94
|
)
|
|
35
|
|
Other, net
|
|
(22
|
)
|
|
308
|
|
|
109
|
|
|
(230
|
)
|
|
|
$
|
2,269
|
|
|
$
|
1,028
|
|
|
$
|
11,275
|
|
|
$
|
3,259
|
|
|
|
|
|
|
|
|
|
|
NOTE 9: COMMITMENTS AND CONTINGENCIES
Assisted tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client for penalties and interest attributable to an H&R Block error on a return. DIY tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client up to a maximum of
$10,000
if our software makes an arithmetic error that results in payment of penalties and/or interest to the IRS that a client would otherwise not have been required to pay. Our liability related to estimated losses under the 100% accuracy guarantee was
$7.0 million
,
$3.3 million
and
$9.4 million
as of
January 31, 2019
and
2018
and
April 30, 2018
, respectively. The short-term and long-term portions of this liability are included in deferred revenue and other liabilities in the consolidated balance sheets.
Our liability related to acquisitions for estimated contingent consideration was
$11.3 million
,
$11.9 million
and
$12.1 million
as of
January 31, 2019
and
2018
and
April 30, 2018
, respectively, with amounts recorded in deferred revenue and other liabilities. Estimates of contingent payments are typically based on expected financial performance of the acquired business and economic conditions at the time of acquisition. Should actual results differ from our assumptions, future payments made will differ from the above estimate and any differences will be recorded in results from continuing operations.
We have contractual commitments to fund certain franchises with approved revolving lines of credit. Our total obligation under these lines of credit was
$30.8 million
at
January 31, 2019
, and net of amounts drawn and outstanding, our remaining commitment to fund totaled
$9.3 million
.
Emerald Advance
TM
lines of credit (EAs) are originated by Axos. We purchase a
90%
participation interest, at par, in all EAs originated by Axos in accordance with our participation agreement. At
January 31, 2019
, the principal balance of purchased participation interests for the current year totaled
$360.6 million
.
On July 26, 2018, we entered into a Refund Advance Program Agreement and certain ancillary agreements with Axos, pursuant to which they originate and fund Refund Advance loans, and provide technology, software, and underwriting support services related to such loans during the 2019 tax season. Refund Advance loans are offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by the loan originator. We pay loan origination fees based on volume and customer type. The loan origination fees are intended to cover expected loan losses and payments to capital providers, among other items. We have provided two limited guarantees related to this agreement. We have provided a limited guarantee up to
$7.5 million
related to loans to clients prior to the IRS accepting electronic filing. At
January 31, 2019
we accrued an estimated liability of
$1.4 million
related to this guarantee, compared to
$1.6 million
at
January 31, 2018
. We paid
$1.5 million
related to this guarantee for the fiscal year 2018 tax season. Additionally, we provided a limited guarantee for the remaining loans, up to
$57 million
in the aggregate, which would cover certain incremental loan losses. We were not required to make a payment in connection with this guarantee for the fiscal year 2018 tax season, and we do not expect that a material amount will be paid for this guarantee under anticipated loss scenarios related to the fiscal year 2019 tax season.
LOSS CONTINGENCIES PERTAINING TO DISCONTINUED MORTGAGE OPERATIONS
– SCC ceased originating mortgage loans in December 2007 and, in April 2008, sold its servicing assets and discontinued its remaining operations. Mortgage loans originated by SCC were sold either as whole loans to single third-party buyers, who generally securitized such loans, or in the form of residential mortgage-backed securities (RMBSs). In connection with the sale of loans and/or RMBSs, SCC made certain representations and warranties. Claims under these representations and warranties
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|
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14
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Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
together with any settlement arrangements related to these losses are collectively referred to as "representation and warranty claims."
SCC accrues a liability for losses related to representation and warranty claims when those losses are believed to be both probable and reasonably estimable. SCC’s loss estimate is based on the best information currently available, management judgment, developments in relevant case law, and the terms of bulk settlements. In periods when a liability is accrued for such loss contingencies, the liability is included in deferred revenue and other current liabilities on the consolidated balance sheets. SCC had
no
liability accrued for these losses as of
January 31, 2019
and
2018
or
April 30, 2018
.
See
note 10
, which addresses contingent losses that may be incurred with respect to various indemnification or contribution claims by underwriters, depositors, and securitization trustees in securitization transactions in which SCC participated.
NOTE 10: LITIGATION AND OTHER RELATED CONTINGENCIES
We are a defendant in numerous litigation matters, arising both in the ordinary course of business and otherwise, including as described below. The matters described below are not all of the lawsuits to which we are subject. In some of the matters, very large or indeterminate amounts, including punitive damages, are sought. U.S. jurisdictions permit considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. We believe that the monetary relief which may be specified in a lawsuit or a claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in litigating or resolving through settlement of numerous claims over an extended period of time.
The outcome of a litigation matter and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.
In addition to litigation matters, we are also subject to claims and other loss contingencies arising out of our business activities, including as described below.
We accrue liabilities for litigation, claims, including indemnification and contribution claims, and other related loss contingencies and any related settlements (each referred to, individually, as a "matter" and, collectively, as "matters") when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, we accrue the minimum amount in the range.
For such matters where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, no accrual has been made. It is possible that such matters could require us to pay damages or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of
January 31, 2019
. While the potential future liabilities could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known, we do not believe any such liabilities are likely to have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows. As of
January 31, 2019
and
2018
and
April 30, 2018
, our total accrued liabilities were
$3.1 million
,
$2.5 million
and
$2.7 million
, respectively.
Our aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a loss is believed to be reasonably possible, but a liability has not been accrued. This aggregate range only represents those losses as to which we are currently able to estimate a reasonably possible loss or range of loss. It does not represent our maximum loss exposure. The estimated range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties. The
|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
15
|
matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. As of
January 31, 2019
, we believe the aggregate range of reasonably possible losses in excess of amounts accrued is not material.
For other matters, we are not currently able to estimate the reasonably possible loss or range of loss. We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the reasonably possible loss or range of loss, such as precise information about the amount of damages or other remedies being asserted, the defenses to the claims being asserted, discovery from other parties and investigation of factual allegations, rulings by courts on motions or appeals, analysis by experts, or the status or terms of any settlement negotiations.
On a quarterly and annual basis, we review relevant information with respect to litigation and other loss contingencies and update our accruals, disclosures, and estimates of reasonably possible loss or range of loss based on such reviews. Costs incurred with defending matters are expensed as incurred. Any receivable for insurance recoveries is recorded separately from the corresponding liability, and only if recovery is determined to be probable and reasonably estimable.
We believe we have meritorious defenses to the claims asserted in the various matters described in this note, and we intend to defend them vigorously, but there can be no assurances as to their outcomes. In the event of unfavorable outcomes, it could require modifications to our operations; in addition, the amounts that may be required to be paid to discharge or settle the matters could be substantial and could have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.
LITIGATION, CLAIMS, INCLUDING INDEMNIFICATION AND CONTRIBUTION CLAIMS, OR OTHER LOSS CONTINGENCIES PERTAINING TO DISCONTINUED MORTGAGE OPERATIONS
– Although SCC ceased its mortgage loan origination activities in December 2007 and sold its loan servicing business in April 2008, SCC or the Company has been, remains, and may in the future be, subject to litigation, claims, including indemnification and contribution claims, and other loss contingencies pertaining to SCC's mortgage business activities that occurred prior to such termination and sale. These lawsuits, claims, and other loss contingencies include actions by regulators, third parties seeking indemnification or contribution, including depositors, underwriters, and securitization trustees, individual plaintiffs, and cases in which plaintiffs seek to represent a class of others alleged to be similarly situated. Among other things, these lawsuits, claims, and other loss contingencies allege or may allege discriminatory or unfair and deceptive loan origination and servicing (including debt collection, foreclosure, and eviction) practices, other common law torts, rights to indemnification or contribution, breach of contract, violations of securities laws, and violations of a variety of federal statutes, including the Truth in Lending Act (TILA), Equal Credit Opportunity Act, Fair Housing Act, Real Estate Settlement Procedures Act (RESPA), Home Ownership & Equity Protection Act (HOEPA), as well as similar state statutes. It is difficult to predict either the likelihood of new matters being initiated or the outcome of existing matters. In many of these matters it is not possible to estimate a reasonably possible loss or range of loss due to, among other things, the inherent uncertainties involved in these matters, some of which are beyond the Company's control, and the indeterminate damages sought in some of these matters.
Mortgage loans originated by SCC were sold either as whole loans to single third-party buyers, who generally securitized such loans, or in the form of RMBSs. In connection with the sale of loans and/or RMBSs, SCC made certain representations and warranties. The statute of limitations for a contractual claim to enforce a representation and warranty obligation is generally six years or such shorter limitations period that may apply under the law of a state where the economic injury occurred. On June 11, 2015, the New York Court of Appeals, New York’s highest court, held in
ACE Securities Corp. v. DB Structured Products, Inc.
, that the six-year statute of limitations under New York law starts to run at the time the representations and warranties are made, not the date when the repurchase demand was denied. This decision applies to claims and lawsuits brought against SCC where New York law governs. New York law governs many, though not all, of the RMBS transactions into which SCC entered. However, this decision would not affect representation and warranty claims and lawsuits SCC has received or may receive, for example, where the statute of limitations has been tolled by agreement or a suit was timely filed.
In response to the statute of limitations rulings in the
ACE
case and similar rulings in other state and federal courts, parties seeking to pursue representation and warranty claims or lawsuits have sought, and may in the future seek, to distinguish certain aspects of the
ACE
decision, pursue alternate legal theories of recovery, or assert claims against other contractual parties such as securitization trustees. For example, a 2016 ruling by a New York intermediate
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|
|
16
|
Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
appellate court, followed by the federal district court in the second Homeward case described below, allowed a counterparty to pursue litigation on additional loans in the same trust even though only some of the loans complied with the condition precedent of timely pre-suit notice and opportunity to cure or repurchase. Additionally, plaintiffs in litigation to which SCC is not party have alleged breaches of an independent contractual duty to provide notice of material breaches of representations and warranties and pursued separate claims to which, they argue, the statute of limitations ruling in the
ACE
case does not apply. The impact on SCC from alternative legal theories seeking to avoid or distinguish the
ACE
decision, or judicial limitations on the
ACE
decision, is unclear. SCC has not accrued liabilities for claims not subject to a tolling arrangement or not relating back to timely filed litigation.
On May 31, 2012, a lawsuit was filed by Homeward Residential, Inc. (Homeward) in the Supreme Court of the State of New York, County of New York, against SCC styled
Homeward Residential, Inc. v. Sand Canyon Corporation
(Index No. 651885/2012). SCC removed the case to the United States District Court for the Southern District of New York on June 28, 2012 (Case No. 12-cv-5067). The plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-2 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract, anticipatory breach, indemnity, and declaratory judgment in connection with alleged losses incurred as a result of the breach of representations and warranties relating to SCC and to loans sold to the trust. The plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses, as well as a repurchase of all loans due to alleged misrepresentations by SCC as to itself and as to the loans' compliance with its underwriting standards and the value of underlying real estate. In response to a motion filed by SCC, the court dismissed the plaintiff's claims for breach of the duty to cure or repurchase, anticipatory breach, indemnity, and declaratory judgment. The case is proceeding on the remaining claims. Representatives of a holder of certificates in the trust filed a motion to intervene to add H&R Block, Inc. to the lawsuit and assert claims against H&R Block, Inc. based on alter ego, corporate veil-piercing, and agency law. On February 12, 2018, the court denied the motion to intervene. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter.
On September 28, 2012, a second lawsuit was filed by Homeward in the United States District Court for the Southern District of New York against SCC styled
Homeward Residential, Inc. v. Sand Canyon Corporation
(Case No. 12-cv-7319). The plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-3 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract and indemnity in connection with losses allegedly incurred as a result of the breach of representations and warranties relating to
96
loans sold to the trust. The plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses. In response to a motion filed by SCC, the court dismissed the plaintiff's claims for breach of the duty to cure or repurchase and for indemnification of its costs associated with the litigation. On September 30, 2016, the court granted a motion allowing the plaintiff to file a second amended complaint to include breach of contract claims with respect to
649
additional loans in the trust and to allow such claims with respect to other loans in the trust proven to be in material breach of SCC’s representations and warranties. SCC filed a motion for reconsideration, followed by a motion for leave to appeal the ruling, both of which were denied. On October 6, 2016, the plaintiff filed its second amended complaint. In response to a motion filed by SCC, the court dismissed the plaintiff's claim for breach of one of the representations. The case is proceeding on the remaining claims. Representatives of a holder of certificates in the trust filed a motion to intervene to add H&R Block, Inc. to the lawsuit and assert claims against H&R Block, Inc. based on alter ego, corporate veil-piercing, and agency law. On February 12, 2018, the court denied the motion to intervene. Settlement payments that were made in fiscal year 2018 for representation and warranty claims are related to some of the loans in this case. We have not concluded that a loss related to this lawsuit is probable, nor have we accrued a liability related to this lawsuit.
Underwriters and depositors are, or have been, involved in multiple lawsuits related to securitization transactions in which SCC participated. These lawsuits allege or alleged a variety of claims, including violations of federal and state securities laws and common law fraud, based on alleged materially inaccurate or misleading disclosures. SCC has received notices of claims for indemnification relating to lawsuits to which underwriters or depositors are party. Based on information currently available to SCC, it believes that the
21
lawsuits in which notice of a claim has been made involve
39
securitization transactions with original investments of approximately
$14 billion
(of which the outstanding principal amount is approximately
$3.1 billion
). Additional lawsuits against the underwriters or depositors may be filed in the future, and SCC may receive additional notices of claims for indemnification or contribution from underwriters or depositors with respect to existing or new lawsuits or settlements of such lawsuits. Certain of the
|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
17
|
notices received included, and future notices may include, a reservation of rights to assert claims for contribution, which are referred to herein as "contribution claims." Contribution claims may become operative if indemnification is unavailable or insufficient to cover all of the losses and expenses involved. We have not concluded that a loss related to any of these indemnification or contribution claims is probable, nor have we accrued a liability related to any of these claims.
Securitization trustees also are, or have been, involved in lawsuits related to securitization transactions in which SCC participated. Plaintiffs in these lawsuits allege, among other things, that originators, depositors, servicers, or other parties breached their representations and warranties or otherwise failed to fulfill their obligations, including that securitization trustees breached their contractual obligations, breached their fiduciary duties, or violated statutory requirements by failing to properly protect the certificate holders’ interests. SCC has received notices from securitization trustees of potential indemnification obligations, and may receive additional notices with respect to existing or new lawsuits or settlements of such lawsuits, in its capacity as originator, depositor, or servicer. We have not concluded that a loss related to any of these indemnification claims is probable, nor have we accrued a liability related to any of these claims.
If the amount that SCC is ultimately required to pay with respect to claims and litigation related to its past sales and securitizations of mortgage loans, together with payment of SCC's related administration and legal expense, exceeds SCC's net assets, the creditors of SCC, other potential claimants, or a bankruptcy trustee if SCC were to file or be forced into bankruptcy, may attempt to assert claims against us for payment of SCC's obligations. Claimants may also attempt to assert claims against or seek payment directly from the Company even if SCC's assets exceed its liabilities. SCC's principal assets, as of
January 31, 2019
, total approximately
$293 million
and consist of an intercompany note receivable. We believe our legal position is strong on any potential corporate veil-piercing arguments; however, if this position is challenged and not upheld, it could have a material adverse effect on our business and our consolidated financial position, results of operations, and cash flows.
LITIGATION, CLAIMS AND OTHER LOSS CONTINGENCIES PERTAINING TO OTHER DISCONTINUED OPERATIONS
–
Express IRA Litigation.
On January 2, 2008, the Mississippi Attorney General in the Chancery Court of Hinds County, Mississippi First Judicial District (Case No. G 2008 6 S 2) filed a lawsuit regarding our former Express IRA product that is styled
Jim Hood, Attorney for the State of Mississippi v. H&R Block, Inc., H&R Block Financial Advisors, Inc
.,
et al.
The complaint alleges fraudulent business practices, deceptive acts and practices, common law fraud and breach of fiduciary duty with respect to the sale of the product in Mississippi and seeks equitable relief, disgorgement of profits, damages and restitution, civil penalties and punitive damages. We have not concluded that a loss related to this matter is probable, nor have we accrued a loss contingency related to this matter.
Although we sold H&R Block Financial Advisors, Inc. effective November 1, 2008, we remain responsible for any liabilities relating to the Express IRA litigation through an indemnification agreement.
OTHER
– We are from time to time a party to litigation, claims and other loss contingencies not discussed herein arising out of our business operations. These matters may include actions by state attorneys general, other state regulators, federal regulators, individual plaintiffs, and cases in which plaintiffs seek to represent others who may be similarly situated.
While we cannot provide assurance that we will ultimately prevail in each instance, we believe the amount, if any, we are required to pay to discharge or settle these other matters will not have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.
We believe we have meritorious defenses to the claims asserted in the various matters described in this note, and we intend to defend them vigorously. The amounts claimed in the matters are substantial, however, and there can be no assurances as to their outcomes. In the event of unfavorable outcomes, it could require modifications to our operations; in addition, the amounts that may be required to be paid to discharge or settle the matters could be substantial and could have a material adverse impact on our business and our consolidated financial position, results of operations, and cash flows.
|
|
|
18
|
Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
NOTE 11: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Block Financial LLC (Block Financial) is a 100% owned subsidiary of the Company. Block Financial is the Issuer and the Company is the full and unconditional Guarantor of the Senior Notes, our 2018 CLOC 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 STATEMENTS OF OPERATIONS
|
|
(in 000s)
|
|
Three months ended January 31, 2019
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
53,461
|
|
|
$
|
433,144
|
|
|
$
|
(18,221
|
)
|
|
$
|
468,384
|
|
Cost of revenues
|
|
—
|
|
|
34,533
|
|
|
396,672
|
|
|
(10,179
|
)
|
|
421,026
|
|
Selling, general and administrative
|
|
—
|
|
|
10,347
|
|
|
183,153
|
|
|
(8,042
|
)
|
|
185,458
|
|
Total operating expenses
|
|
—
|
|
|
44,880
|
|
|
579,825
|
|
|
(18,221
|
)
|
|
606,484
|
|
Other income (expense), net
|
|
(134,984
|
)
|
|
8,903
|
|
|
348
|
|
|
128,002
|
|
|
2,269
|
|
Interest expense on external borrowings
|
|
—
|
|
|
(22,833
|
)
|
|
—
|
|
|
—
|
|
|
(22,833
|
)
|
Loss from continuing operations before income
taxes (benefit)
|
|
(134,984
|
)
|
|
(5,349
|
)
|
|
(146,333
|
)
|
|
128,002
|
|
|
(158,664
|
)
|
Income taxes (benefit)
|
|
(8,530
|
)
|
|
75
|
|
|
(30,430
|
)
|
|
—
|
|
|
(38,885
|
)
|
Net loss from continuing operations
|
|
(126,454
|
)
|
|
(5,424
|
)
|
|
(115,903
|
)
|
|
128,002
|
|
|
(119,779
|
)
|
Net loss from discontinued operations
|
|
—
|
|
|
(6,675
|
)
|
|
—
|
|
|
—
|
|
|
(6,675
|
)
|
Net loss
|
|
(126,454
|
)
|
|
(12,099
|
)
|
|
(115,903
|
)
|
|
128,002
|
|
|
(126,454
|
)
|
Other comprehensive inco
me
|
|
1,238
|
|
|
—
|
|
|
1,238
|
|
|
(1,238
|
)
|
|
1,238
|
|
Comprehensive loss
|
|
$
|
(125,216
|
)
|
|
$
|
(12,099
|
)
|
|
$
|
(114,665
|
)
|
|
$
|
126,764
|
|
|
$
|
(125,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
Three months ended January 31, 2018
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
55,795
|
|
|
$
|
449,608
|
|
|
$
|
(16,977
|
)
|
|
$
|
488,426
|
|
Cost of revenues
|
|
—
|
|
|
33,805
|
|
|
391,772
|
|
|
(8,976
|
)
|
|
416,601
|
|
Selling, general and administrative
|
|
—
|
|
|
10,823
|
|
|
166,276
|
|
|
(8,001
|
)
|
|
169,098
|
|
Total operating expenses
|
|
—
|
|
|
44,628
|
|
|
558,048
|
|
|
(16,977
|
)
|
|
585,699
|
|
Other income (expense), net
|
|
(250,732
|
)
|
|
7,819
|
|
|
(20,071
|
)
|
|
264,012
|
|
|
1,028
|
|
Interest expense on external borrowings
|
|
—
|
|
|
(24,491
|
)
|
|
(69
|
)
|
|
—
|
|
|
(24,560
|
)
|
Loss from continuing operations before income taxe
s (benefit)
|
|
(250,732
|
)
|
|
(5,505
|
)
|
|
(128,580
|
)
|
|
264,012
|
|
|
(120,805
|
)
|
Income taxes (benefi
t)
|
|
(5,087
|
)
|
|
15,600
|
|
|
111,607
|
|
|
—
|
|
|
122,120
|
|
Net loss from continuing operations
|
|
(245,645
|
)
|
|
(21,105
|
)
|
|
(240,187
|
)
|
|
264,012
|
|
|
(242,925
|
)
|
Net loss from discontinued operations
|
|
—
|
|
|
(2,720
|
)
|
|
—
|
|
|
—
|
|
|
(2,720
|
)
|
Net loss
|
|
(245,645
|
)
|
|
(23,825
|
)
|
|
(240,187
|
)
|
|
264,012
|
|
|
(245,645
|
)
|
Other comprehensive inco
me
|
|
4,848
|
|
|
—
|
|
|
4,848
|
|
|
(4,848
|
)
|
|
4,848
|
|
Comprehensive loss
|
|
$
|
(240,797
|
)
|
|
$
|
(23,825
|
)
|
|
$
|
(235,339
|
)
|
|
$
|
259,164
|
|
|
$
|
(240,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
|
|
(in 000s)
|
|
Nine months ended January 31, 2019
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
81,751
|
|
|
$
|
706,775
|
|
|
$
|
(26,088
|
)
|
|
$
|
762,438
|
|
Cost of revenues
|
|
—
|
|
|
46,580
|
|
|
859,759
|
|
|
(12,938
|
)
|
|
893,401
|
|
Selling, general and administrative
|
|
1,476
|
|
|
16,444
|
|
|
399,747
|
|
|
(13,150
|
)
|
|
404,517
|
|
Total operating expenses
|
|
1,476
|
|
|
63,024
|
|
|
1,259,506
|
|
|
(26,088
|
)
|
|
1,297,918
|
|
Other income (expense), net
|
|
(465,085
|
)
|
|
27,748
|
|
|
6,498
|
|
|
442,114
|
|
|
11,275
|
|
Interest expense on external borrowings
|
|
—
|
|
|
(65,082
|
)
|
|
(132
|
)
|
|
—
|
|
|
(65,214
|
)
|
Loss from continuing operations before income tax
benefit
|
|
(466,561
|
)
|
|
(18,607
|
)
|
|
(546,365
|
)
|
|
442,114
|
|
|
(589,419
|
)
|
Income tax benefit
|
|
(11,161
|
)
|
|
(5,942
|
)
|
|
(132,803
|
)
|
|
—
|
|
|
(149,906
|
)
|
Net loss from continuing operations
|
|
(455,400
|
)
|
|
(12,665
|
)
|
|
(413,562
|
)
|
|
442,114
|
|
|
(439,513
|
)
|
Net loss from discontinued operations
|
|
—
|
|
|
(15,887
|
)
|
|
—
|
|
|
—
|
|
|
(15,887
|
)
|
Net loss
|
|
(455,400
|
)
|
|
(28,552
|
)
|
|
(413,562
|
)
|
|
442,114
|
|
|
(455,400
|
)
|
Other comprehensive loss
|
|
(3,339
|
)
|
|
—
|
|
|
(3,339
|
)
|
|
3,339
|
|
|
(3,339
|
)
|
Comprehensive loss
|
|
$
|
(458,739
|
)
|
|
$
|
(28,552
|
)
|
|
$
|
(416,901
|
)
|
|
$
|
445,453
|
|
|
$
|
(458,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in 000s)
|
|
Nine months ended January 31, 2018
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
85,056
|
|
|
$
|
704,762
|
|
|
$
|
(22,736
|
)
|
|
$
|
767,082
|
|
Cost of revenues
|
|
—
|
|
|
46,769
|
|
|
846,685
|
|
|
(9,119
|
)
|
|
884,335
|
|
Selling, general and administrative
|
|
—
|
|
|
17,614
|
|
|
377,196
|
|
|
(13,617
|
)
|
|
381,193
|
|
Total operating expenses
|
|
—
|
|
|
64,383
|
|
|
1,223,881
|
|
|
(22,736
|
)
|
|
1,265,528
|
|
Other income (expense), net
|
|
(538,995
|
)
|
|
20,884
|
|
|
(33,710
|
)
|
|
555,080
|
|
|
3,259
|
|
Interest expense on external borrowings
|
|
—
|
|
|
(66,873
|
)
|
|
(229
|
)
|
|
—
|
|
|
(67,102
|
)
|
Loss from continuing operations before income taxe
s (benefit)
|
|
(538,995
|
)
|
|
(25,316
|
)
|
|
(553,058
|
)
|
|
555,080
|
|
|
(562,289
|
)
|
Income taxes (bene
fit)
|
|
(9,217
|
)
|
|
9,987
|
|
|
(44,004
|
)
|
|
—
|
|
|
(43,234
|
)
|
Net loss from continuing operations
|
|
(529,778
|
)
|
|
(35,303
|
)
|
|
(509,054
|
)
|
|
555,080
|
|
|
(519,055
|
)
|
Net loss from discontinued operations
|
|
—
|
|
|
(10,721
|
)
|
|
(2
|
)
|
|
—
|
|
|
(10,723
|
)
|
Net loss
|
|
(529,778
|
)
|
|
(46,024
|
)
|
|
(509,056
|
)
|
|
555,080
|
|
|
(529,778
|
)
|
Other comprehensive inco
me
|
|
5,925
|
|
|
—
|
|
|
5,925
|
|
|
(5,925
|
)
|
|
5,925
|
|
Comprehensive loss
|
|
$
|
(523,853
|
)
|
|
$
|
(46,024
|
)
|
|
$
|
(503,131
|
)
|
|
$
|
549,155
|
|
|
$
|
(523,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
(in 000s)
|
|
As of January 31, 2019
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Cash & cash equivalents
|
|
$
|
—
|
|
|
$
|
4,722
|
|
|
$
|
198,504
|
|
|
$
|
—
|
|
|
$
|
203,226
|
|
Cash & cash equivalents - restricted
|
|
—
|
|
|
—
|
|
|
101,903
|
|
|
—
|
|
|
101,903
|
|
Receivables, net
|
|
—
|
|
|
392,257
|
|
|
365,960
|
|
|
—
|
|
|
758,217
|
|
Income taxes receivable
|
|
2,811
|
|
|
—
|
|
|
33,675
|
|
|
—
|
|
|
36,486
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
2,637
|
|
|
132,183
|
|
|
—
|
|
|
134,820
|
|
Total current assets
|
|
2,811
|
|
|
399,616
|
|
|
832,225
|
|
|
—
|
|
|
1,234,652
|
|
Property and equipment, net
|
|
—
|
|
|
466
|
|
|
220,039
|
|
|
—
|
|
|
220,505
|
|
Intangible assets, net
|
|
—
|
|
|
—
|
|
|
356,952
|
|
|
—
|
|
|
356,952
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
520,005
|
|
|
—
|
|
|
520,005
|
|
Deferred tax assets and income taxes receivable
|
|
1,794
|
|
|
17,941
|
|
|
121,631
|
|
|
—
|
|
|
141,366
|
|
Investments in subsidiaries
|
|
2,485,857
|
|
|
—
|
|
|
102,763
|
|
|
(2,588,620
|
)
|
|
—
|
|
Amounts due from affiliates
|
|
—
|
|
|
1,559,416
|
|
|
2,679,945
|
|
|
(4,239,361
|
)
|
|
—
|
|
Other noncurrent assets
|
|
—
|
|
|
57,230
|
|
|
38,096
|
|
|
—
|
|
|
95,326
|
|
Total assets
|
|
$
|
2,490,462
|
|
|
$
|
2,034,669
|
|
|
$
|
4,871,656
|
|
|
$
|
(6,827,981
|
)
|
|
$
|
2,568,806
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
14,823
|
|
|
$
|
18,475
|
|
|
$
|
168,803
|
|
|
$
|
—
|
|
|
$
|
202,101
|
|
Accrued salaries, wages and payroll taxes
|
|
—
|
|
|
1,333
|
|
|
139,569
|
|
|
—
|
|
|
140,902
|
|
Accrued income taxes and reserves for uncertain tax positions
|
|
—
|
|
|
1,060
|
|
|
47,949
|
|
|
—
|
|
|
49,009
|
|
Deferred revenue and other current liabilities
|
|
—
|
|
|
28,441
|
|
|
167,193
|
|
|
—
|
|
|
195,634
|
|
Total current liabilities
|
|
14,823
|
|
|
49,309
|
|
|
523,514
|
|
|
—
|
|
|
587,646
|
|
Long-term debt and line of credit borrowings
|
|
—
|
|
|
1,876,989
|
|
|
—
|
|
|
—
|
|
|
1,876,989
|
|
Deferred tax liabilities and reserves for uncertain tax positions
|
|
9,285
|
|
|
3,989
|
|
|
200,943
|
|
|
—
|
|
|
214,217
|
|
Deferred revenue and other noncurrent liabilities
|
|
—
|
|
|
1,619
|
|
|
101,926
|
|
|
—
|
|
|
103,545
|
|
Amounts due to affiliates
|
|
2,679,945
|
|
|
—
|
|
|
1,559,416
|
|
|
(4,239,361
|
)
|
|
—
|
|
Total liabilities
|
|
2,704,053
|
|
|
1,931,906
|
|
|
2,385,799
|
|
|
(4,239,361
|
)
|
|
2,782,397
|
|
Stockholders' equity (deficiency)
|
|
(213,591
|
)
|
|
102,763
|
|
|
2,485,857
|
|
|
(2,588,620
|
)
|
|
(213,591
|
)
|
Total liabilities and stockholders' equity
|
|
$
|
2,490,462
|
|
|
$
|
2,034,669
|
|
|
$
|
4,871,656
|
|
|
$
|
(6,827,981
|
)
|
|
$
|
2,568,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
(in 000s)
|
|
As of January 31, 2018
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Cash & cash equivalents
|
|
$
|
—
|
|
|
$
|
4,475
|
|
|
$
|
182,891
|
|
|
$
|
—
|
|
|
$
|
187,366
|
|
Cash & cash equivalents - restricted
|
|
—
|
|
|
—
|
|
|
83,033
|
|
|
—
|
|
|
83,033
|
|
Receivables, net
|
|
—
|
|
|
396,046
|
|
|
395,572
|
|
|
—
|
|
|
791,618
|
|
Income taxes receivable
|
|
3,250
|
|
|
—
|
|
|
69,525
|
|
|
—
|
|
|
72,775
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
2,908
|
|
|
146,441
|
|
|
—
|
|
|
149,349
|
|
Total current assets
|
|
3,250
|
|
|
403,429
|
|
|
877,462
|
|
|
—
|
|
|
1,284,141
|
|
Property and equipment, net
|
|
—
|
|
|
814
|
|
|
249,097
|
|
|
—
|
|
|
249,911
|
|
Intangible assets, net
|
|
—
|
|
|
—
|
|
|
390,993
|
|
|
—
|
|
|
390,993
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
504,789
|
|
|
—
|
|
|
504,789
|
|
Deferred tax assets and income taxes receivable
|
|
—
|
|
|
20,427
|
|
|
4,878
|
|
|
—
|
|
|
25,305
|
|
Investments in subsidiaries
|
|
1,655,160
|
|
|
—
|
|
|
67,690
|
|
|
(1,722,850
|
)
|
|
—
|
|
Amounts due from affiliates
|
|
—
|
|
|
1,910,351
|
|
|
2,335,670
|
|
|
(4,246,021
|
)
|
|
—
|
|
Other noncurrent assets
|
|
—
|
|
|
66,497
|
|
|
39,664
|
|
|
—
|
|
|
106,161
|
|
Total assets
|
|
$
|
1,658,410
|
|
|
$
|
2,401,518
|
|
|
$
|
4,470,243
|
|
|
$
|
(5,968,871
|
)
|
|
$
|
2,561,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,516
|
|
|
$
|
15,514
|
|
|
$
|
145,623
|
|
|
$
|
—
|
|
|
$
|
163,653
|
|
Accrued salaries, wages and payroll taxes
|
|
—
|
|
|
954
|
|
|
134,672
|
|
|
—
|
|
|
135,626
|
|
Accrued income taxes and reserves for uncertain tax positions
|
|
—
|
|
|
—
|
|
|
164,246
|
|
|
—
|
|
|
164,246
|
|
Current portion of long-term debt
|
|
—
|
|
|
—
|
|
|
1,015
|
|
|
—
|
|
|
1,015
|
|
Deferred revenue and other current liabilities
|
|
—
|
|
|
29,052
|
|
|
172,936
|
|
|
—
|
|
|
201,988
|
|
Total current liabilities
|
|
2,516
|
|
|
45,520
|
|
|
618,492
|
|
|
—
|
|
|
666,528
|
|
Long-term debt and line of credit borrowings
|
|
—
|
|
|
2,279,368
|
|
|
4,863
|
|
|
—
|
|
|
2,284,231
|
|
Deferred tax liabilities and reserves for uncertain tax positions
|
|
18,293
|
|
|
8,037
|
|
|
175,054
|
|
|
—
|
|
|
201,384
|
|
Deferred revenue and other noncurrent liabilities
|
|
—
|
|
|
903
|
|
|
106,323
|
|
|
—
|
|
|
107,226
|
|
Amounts due to affiliates
|
|
2,335,670
|
|
|
—
|
|
|
1,910,351
|
|
|
(4,246,021
|
)
|
|
—
|
|
Total liabilities
|
|
2,356,479
|
|
|
2,333,828
|
|
|
2,815,083
|
|
|
(4,246,021
|
)
|
|
3,259,369
|
|
Stockholders' equity (deficiency)
|
|
(698,069
|
)
|
|
67,690
|
|
|
1,655,160
|
|
|
(1,722,850
|
)
|
|
(698,069
|
)
|
Total liabilities and stockholders' equity
|
|
$
|
1,658,410
|
|
|
$
|
2,401,518
|
|
|
$
|
4,470,243
|
|
|
$
|
(5,968,871
|
)
|
|
$
|
2,561,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
Q3 FY2019 Form 10-Q |
H&R Block, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
(in 000s)
|
|
As of April 30, 2018
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Cash & cash equivalents
|
|
$
|
—
|
|
|
$
|
4,346
|
|
|
$
|
1,540,598
|
|
|
$
|
—
|
|
|
$
|
1,544,944
|
|
Cash & cash equivalents - restricted
|
|
—
|
|
|
—
|
|
|
118,734
|
|
|
—
|
|
|
118,734
|
|
Receivables, net
|
|
—
|
|
|
51,562
|
|
|
95,212
|
|
|
—
|
|
|
146,774
|
|
Income taxes receivable
|
|
2,801
|
|
|
—
|
|
|
12,310
|
|
|
(2,801
|
)
|
|
12,310
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
1,954
|
|
|
66,997
|
|
|
—
|
|
|
68,951
|
|
Total current assets
|
|
2,801
|
|
|
57,862
|
|
|
1,833,851
|
|
|
(2,801
|
)
|
|
1,891,713
|
|
Property and equipment, net
|
|
—
|
|
|
467
|
|
|
231,421
|
|
|
—
|
|
|
231,888
|
|
Intangible assets, net
|
|
—
|
|
|
—
|
|
|
373,981
|
|
|
—
|
|
|
373,981
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
507,871
|
|
|
—
|
|
|
507,871
|
|
Deferred tax assets and income taxes receivable
|
|
1,400
|
|
|
17,798
|
|
|
14,897
|
|
|
—
|
|
|
34,095
|
|
Investments in subsidiaries
|
|
2,801,808
|
|
|
—
|
|
|
131,315
|
|
|
(2,933,123
|
)
|
|
—
|
|
Amounts due from affiliates
|
|
—
|
|
|
1,541,954
|
|
|
2,400,938
|
|
|
(3,942,892
|
)
|
|
—
|
|
Other noncurrent assets
|
|
—
|
|
|
50,073
|
|
|
51,328
|
|
|
—
|
|
|
101,401
|
|
Total assets
|
|
$
|
2,806,009
|
|
|
$
|
1,668,154
|
|
|
$
|
5,545,602
|
|
|
$
|
(6,878,816
|
)
|
|
$
|
3,140,949
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,074
|
|
|
$
|
16,628
|
|
|
$
|
233,273
|
|
|
$
|
—
|
|
|
$
|
251,975
|
|
Accrued salaries, wages and payroll taxes
|
|
—
|
|
|
1,161
|
|
|
140,338
|
|
|
—
|
|
|
141,499
|
|
Accrued income taxes and reserves for uncertain tax positions
|
|
—
|
|
|
1,060
|
|
|
264,791
|
|
|
(2,801
|
)
|
|
263,050
|
|
Current portion of long-term debt
|
|
—
|
|
|
—
|
|
|
1,026
|
|
|
—
|
|
|
1,026
|
|
Deferred revenue and other current liabilities
|
|
—
|
|
|
22,172
|
|
|
163,929
|
|
|
—
|
|
|
186,101
|
|
Total current liabilities
|
|
2,074
|
|
|
41,021
|
|
|
803,357
|
|
|
(2,801
|
)
|
|
843,651
|
|
Long-term debt
|
|
—
|
|
|
1,490,007
|
|
|
4,602
|
|
|
—
|
|
|
1,494,609
|
|
Deferred tax liabilities and reserves for uncertain tax positions
|
|
9,286
|
|
|
4,963
|
|
|
215,181
|
|
|
—
|
|
|
229,430
|
|
Deferred revenue and other noncurrent liabilities
|
|
—
|
|
|
848
|
|
|
178,700
|
|
|
—
|
|
|
179,548
|
|
Amounts due to affiliates
|
|
2,400,938
|
|
|
—
|
|
|
1,541,954
|
|
|
(3,942,892
|
)
|
|
—
|
|
Total liabilities
|
|
2,412,298
|
|
|
1,536,839
|
|
|
2,743,794
|
|
|
(3,945,693
|
)
|
|
2,747,238
|
|
Stockholders' equity
|
|
393,711
|
|
|
131,315
|
|
|
2,801,808
|
|
|
(2,933,123
|
)
|
|
393,711
|
|
Total liabilities and stockholders' equity
|
|
$
|
2,806,009
|
|
|
$
|
1,668,154
|
|
|
$
|
5,545,602
|
|
|
$
|
(6,878,816
|
)
|
|
$
|
3,140,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
|
(in 000s)
|
|
Nine months ended January 31, 2019
|
|
H&R Block, Inc.
(Guarantor)
|
|
|
Block Financial
(Issuer)
|
|
|
Other
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
H&R Block
|
|
Net cash used in operating activities
|
|
$
|
—
|
|
|
$
|
(359,101
|
)
|
|
$
|
(988,355
|
)
|
|
$
|
—
|
|
|
$
|
(1,347,456
|
)
|
Cash flows from investing:
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
—
|
|
|
(166
|
)
|
|
(79,816
|
)
|
|
—
|
|
|
(79,982
|
)
|
Payments made for business acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(42,428
|
)
|
|
—
|
|
|
(42,428
|
)
|
Franchise loans funded
|
|
—
|
|
|
(16,198
|
)
|
|
(677
|
)
|
|
—
|
|
|
(16,875
|
)
|
Payments received on franchise loans
|
|
—
|
|
|
14,834
|
|
|
315
|
|
|
—
|
|
|
15,149
|
|
Intercompany borrowings (payments)
|
|
—
|
|
|
(18,579
|
)
|
|
(254,491
|
)
|
|
273,070
|
|
|
—
|
|
Other, net
|
|
—
|
|
|
(4,746
|
)
|
|
9,623
|
|
|
—
|
|
|
4,877
|
|
Net cash used in investing activities
|
|
—
|
|
|
(24,855
|
)
|
|
(367,474
|
)
|
|
273,070
|
|
|
(119,259
|
)
|
Cash flows from financing:
|
|
|
|
|
|
|
|
|
|
|
Repayments of line of credit borrowings
|
|
—
|
|
|
(230,000
|
)
|
|
—
|
|
|
—
|
|
|
(230,000
|
)
|
Proceeds from line of credit borrowings
|
|
—
|
|
|
615,000
|
|
|
—
|
|
|
—
|
|
|
615,000
|
|
Dividends paid
|
|
(154,866
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(154,866
|
)
|
Repurchase of common stock, including shares surrendered
|
|
(102,152
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(102,152
|
)
|
Proceeds from exercise of stock options
|
|
2,527
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,527
|
|
Intercompany borrowings (payments)
|
|
254,491
|
|
|
—
|
|
|
18,579
|
|
|
(273,070
|
)
|
|
—
|
|
Other, net
|
|
—
|
|
|
(668
|
)
|
|
(19,458
|
)
|
|
—
|
|
|
(20,126
|
)
|
Net cash provided by (used in) financing
activities
|
|
—
|
|
|
384,332
|
|
|
(879
|
)
|
|
(273,070
|
)
|
|
110,383
|
|
Effects of exchange rates on cash
|
|
—
|
|
|
—
|
|
|
(2,217
|
)
|
|
—
|
|
|
(2,217
|
)
|
Net increase (decrease) in cash, cash equivalents and rest
ricted cash
|
|
—
|
|
|
376
|
|
|
(1,358,925
|
)
|
|
—
|
|
|
(1,358,549
|
)
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
—
|
|
|
4,346
|
|
|
1,659,332
|
|
|
—
|
|
|
1,663,678
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
—
|
|
|
$
|
4,722
|
|
|
$
|
300,407
|
|
|
$
|
—
|
|
|
$
|
305,129
|
|
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24
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Q3 FY2019 Form 10-Q |
H&R Block, Inc.
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CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
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(in 000s)
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Nine months ended January 31, 2018
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H&R Block, Inc.
(Guarantor)
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Block Financial
(Issuer)
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Other
Subsidiaries
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Eliminations
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Consolidated
H&R Block
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Net cash used in operating activities
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$
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—
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$
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(353,081
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)
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$
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(1,004,620
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)
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$
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—
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$
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(1,357,701
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)
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Cash flows from investing:
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Capital expenditures
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—
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(794
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)
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(77,071
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)
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—
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(77,865
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)
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Payments made for business acquisitions, net of cash acquired
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—
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—
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(39,397
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)
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—
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(39,397
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)
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Franchise loans funded
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—
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(20,080
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)
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(146
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)
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—
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(20,226
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)
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Payments received on franchise loans
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—
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13,058
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333
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—
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13,391
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Intercompany borrowings (payments)
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—
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(427,473
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)
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(129,736
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)
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557,209
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—
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Other, net
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—
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(9,039
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)
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10,563
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—
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1,524
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Net cash used in investing activities
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—
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(444,328
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)
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(235,454
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)
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557,209
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(122,573
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)
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Cash flows from financing:
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Repayments of line of credit borrowings
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—
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(40,000
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)
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—
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—
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(40,000
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)
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Proceeds from line of credit borrowings
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—
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830,000
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—
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—
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830,000
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Dividends paid
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(150,258
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)
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—
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—
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—
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(150,258
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)
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Repurchase of common stock, including shares surrendered
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(7,746
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)
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—
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—
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—
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(7,746
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)
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Proceeds from exercise of stock options
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28,268
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—
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—
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—
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28,268
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Intercompany borrowings (payments)
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129,736
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—
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427,473
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(557,209
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)
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—
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Other, net
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—
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(662
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)
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(28,260
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)
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—
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(28,922
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)
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Net cash provided by financing activi
ties
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—
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789,338
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399,213
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(557,209
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)
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631,342
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Effects of exchange rates on cash
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—
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—
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1,792
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—
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1,792
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Net decrease in cash, cash equivalents and restricted cash
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—
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(8,071
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)
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(839,069
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)
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—
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(847,140
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)
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Cash, cash equivalents and restricted cash, beginning of period
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—
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12,546
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1,104,993
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—
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1,117,539
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Cash, cash equivalents and restricted cash, end of period
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$
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—
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$
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4,475
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$
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265,924
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$
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—
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$
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270,399
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H&R Block, Inc.
| Q3 FY2019 Form 10-Q
|
25
|