HR Block 2007 Annual Report Download - page 53

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related to our marketing efforts. We also incurred $7.5 million in On April 19, 2006, we entered into a settlement agreement, subject to
additional corporate wages and $7.1 million in additional legal costs in final court approval, regarding litigation entitled Lynne A. Carnegie, et
fiscal year 2006. During the fourth quarter of fiscal year 2006, we revised al. v. Household International, Inc., H&R Block, Inc., et al. (the
our estimate for the provision for bad debt related to our participation ‘‘Carnegie Settlement Agreement’’). Pursuant to the Carnegie Settlement
interests in RALs, resulting in a decrease to our provision for bad debt Agreement, we contributed a total of $19.5 million in cash for purposes
of $18.0 million during fiscal year 2006. of making payments to the settlement class, paying all attorneys’ fees
Pretax income for fiscal year 2006 decreased $75.2 million, or 11.3%, and costs to class counsel, incentive payment awards to plaintiff and all
from 2005, primarily due to the impact of the RAL litigation. notice and administration costs. We recorded a $19.5 million pretax
charge related to this settlement in the third quarter of fiscal year 2006.
RAL LITIGATION –On December 21, 2005, we entered into a settlement We are named as a defendant in one other class-action lawsuit and
agreement regarding litigation pertaining to our RAL programs entitled one state attorney general lawsuit alleging that we engaged in
Deadra D. Cummins, et al.v. H&R Block, Inc. et al.;Mitchell v. H&R wrongdoing with respect to the RAL program. We believe we have
Block, Inc. et al.; Green v. H&R Block, Inc. et al.; and Becker v. H&R meritorious defenses to the other lawsuits and will vigorously defend
Block, Inc. (the ‘‘Cummins Settlement Agreement’’).Pursuant to the our position. Nevertheless, the amounts claimed in these lawsuits are
Cummins Settlement Agreement’s terms, we contributed a total of up to very substantial, and there can be no assurances as to their ultimate
$62.5 million in cash for purposes of making payments to the settlement outcome, or as to their impact on our financial statements. See
class, paying all attorneys’ fees and costs to class counsel, and covering additional discussion of RAL Litigation in Item 3, ‘‘Legal Proceedings’’
service awards to the representative plaintiffs. In addition, we paid and in Item 8, note 19 to the consolidated financial statements.
costs for providing notice of the settlement to settlement class
members. Settlement of this matter resulted in a pretax charge of
$50.7 million in fiscal year 2006.
25 m
H&R BLOCK 2007 Form 10K