HR Block 2007 Annual Report Download - page 104

consolidated balance sheets. The related noncurrent asset and liability collateral held and the market value of securities receivable from
are included in other assets and other noncurrent liabilities, others, and seek to obtain additional collateral if insufficient protection
respectively, on the consolidated balance sheets. A loss on these POM against loss exists.
guarantees would be recognized if the sum of expected costs for HRBFAhas two secured lines of credit with an unaffiliated financial
services exceeded unearned revenue. The changes in the deferred institution with a total credit limit of $51.0 million. There were no
revenue liability for the fiscal years ended April 30, 2007 and 2006 are as borrowings on these lines of credit during fiscal years 2007 or 2006 and
follows: no outstanding balance at April 30, 2007 or 2006.
(in 000s)
We have contractual commitments to fund certain franchises
April 30, 2007 2006 requesting Franchise Equity Lines of Credit (FELCs). The commitment
to fund FELCs as of April 30, 2007 totaled $79.6 million, with a related
Balance, beginning of year $141,684 $130,762
Amounts deferred for new guarantees issued 80,736 78,900 receivable balance of $47.3 million included in the consolidated balance
Revenue recognized on previous deferrals (80,247) (67,978)
sheets. The receivable represents the amount drawn on the FELCs as of
Balance, end of year $142,173 $141,684 April 30, 2007
We are self-insured for certain risks, including certain employee
On November 1, 2006 we entered into an agreement to purchase health and benefit, workers’ compensation, property and general
$57.2 million in media advertising between November 1, 2006 and liability claims, and claims related to our POM program. We issued three
June 30, 2009. During the current year, we purchased $19.4 million in standby letters of credit to servicers paying claims related to our POM,
advertising for our retail tax business, leaving a remaining commitment errors and omissions and worker’s compensation insurance policies.
of $37.7 million at April 30, 2007. We expect to make payments totaling These letters of credit are for amounts not to exceed $16.5 million,
$20.6 million and $17.2 million during fiscal years 2008 and 2009, $3.5 million and $0.9 million, respectively. At April 30, 2007 there were
respectively. no balances outstanding on these letters of credit.
We have various contingent purchase price obligations in connection During fiscal year 2006, we entered into a transaction with the City of
with prior acquisitions. In many cases, contingent payments to be made Kansas City, Missouri, to provide us with sales and property tax savings
in connection with these acquisitions are not subject to a stated limit. on the furniture, fixtures and equipment for our new corporate
We estimate the potential payments (undiscounted) total approximately
m76
headquarters facility. Under the transaction, the City purchased
$19.9 million as of April 30, 2007. Our estimate is based on current equipment by issuing $31.0 million in industrial revenue bonds due in
financial conditions. Should actual results differ materially from the December 2015, and leased the furniture, fixtures and equipment to us
assumptions, the potential payments will differ from the above estimate. for an identical term under a capital lease. The City’s bonds were
Such payments, if and when paid, would typically be recorded as purchased by us. Because the City has assigned the lease to the bond
additional purchase price, generally goodwill. trustee for our benefit as the sole bondholder, we, in effect, control
Commitments exist to loan M&P the lower of the value of their enforcement of the lease against ourselves. As a result of the capital
accounts receivable, work-in-process and fixed assets or $75.0 million, lease treatment, the furniture, fixtures and equipment will remain a
on a revolving basis through January 31, 2011, subject to certain component of property, plant and equipment in our consolidated
termination clauses. This revolving facility bears interest at prime rate balance sheet. As a result of the legal right of offset, the capital lease
plus two percent on the outstanding amount. The loan is fully secured obligation and the corresponding bond investments have been
by the accounts receivable, work-in-process and fixed assets of M&P. eliminated in consolidation. The transaction provides us with property
We are required, in the event of non-delivery of customers’ securities tax exemptions for the leased furniture, fixtures and equipment.
owed to us by other broker-dealers or by our customers, to purchase Additional revenue bonds may be issued to cover the costs of certain
identical securities in the open market. Such purchases could result in improvements to this facility. The total amount of revenue bonds
losses not reflected in the accompanying consolidated financial authorized for issuance is $31.0 million. As of April 30, 2007, we have
statements. purchased $31.0 million in bonds.
As of April 30, 2007, we had pledged securities totaling $47.0 million, Substantially all of the operations of our subsidiaries are conducted
which satisfied margin deposit requirements of $35.6 million. in leased premises. Most of the operating leases are for periods ranging
We monitor the credit standing of brokers and dealers and customers from 3 years to 5 years, with renewal options and provide for fixed
with whom we do business. In addition, we monitor the market value of
H&R BLOCK 2007 Form 10K