HR Block 2007 Annual Report Download - page 66

A condensed consolidating statement of cash flows by segment for the fiscal year ended April 30, 2007 follows. Generally, interest is not charged
on intercompany activities between segments. Our consolidated statements of cash flows are located in Item 8.
(in 000s)
Consumer
TaxBusiness Financial Discontinued Consolidated
Services Services Services Corporate Operations H&R Block
Cash provided by (used in):
Operations $415,509 $112,189 $2,751 $(379,879) $(735,294) $(584,724)
Investing (91,929) (19,500) (1,005,120) (57,189) 15,362 (1,158,376)
Financing (11,109) (11,184) 1,298,768 662,215 52,421 1,991,111
Net intercompany (332,762) (71,492) (265,660) 2,403 667,511 –
Net intercompany activities are excluded from investing and to the purchase of mortgage loans from OOMC. Cash provided by
financing activities within the segment cash flows. We believe that by financing activities of $1.3 billion is due to customer deposits.
excluding intercompany activities, the cash flows by segment more To manage short-term liquidity, Block Financial Corporation
clearly depicts the cash generated and used by each segment. Had (BFC) provides HRBFA a $300.0 million unsecured credit facility. At the
intercompany activities been included, those segments in a net lending end of fiscal year 2007 there was no outstanding balance on this facility.
situation would have been included in investing activities, and those in a HRBFAhas two secured lines of credit with an unaffiliated financial
net borrowing situation would have been included in financing institution with a total credit limit of $51.0 million. There were no
activities. borrowings on these lines of credit during fiscal years 2007 or 2006 and
TAXSERVICES –Tax Services has historically been our largest no outstanding balance at April 30, 2007 or 2006.
provider of annual operating cash flows. The seasonal nature of Tax Liquidity needs relating to client trading and margin-borrowing
Services generally results in a large positive operating cash flow in the activities are met primarily through cash balances in client brokerage
fourth quarter. Tax Services generated $415.5 million in operating cash accounts and working capital. Stock loans have historically been used
flows primarily related to net income, as cash is generally collected as a secondary source of funding and could be used in the future, if
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from clients at the time services are rendered. Cash used in investing warranted.
activities of $91.9 million was for capital expenditures and business Securities borrowed and securities loaned transactions are generally
acquisitions. reported as collateralized financings. These transactions require us to
Our international operations are generally self-funded. Cash balances deposit cash and/or collateral with the counterparty. Securities loaned
are held in Canada and Australia independently in local currencies. H&R consist of customers’ securities purchased on margin. We receive cash
Block Canada, Inc. (Block Canada) has a commercial paper program for collateral approximately equal to the value of the securities loaned. The
up to $225.0 million (Canadian). At April 30, 2007, there was no amount of cash collateral is adjusted, as required, for market
commercial paper outstanding. The peak borrowing during fiscal year fluctuations in the value of the securities loaned. Interest rates paid on
2007 was $135.0 million (Canadian). the cash collateral fluctuate as short-term interest rates change.
BUSINESS SERVICES –Business Services’ funding requirements are To satisfy the margin deposit requirement of client option
largely related to receivables for completed work and ‘‘work in process’’ transactions with the Options Clearing Corporation (OCC), HRBFA
and funding relating to acquired businesses. We provide funding in the pledges customers’ margined securities. Pledged securities at the end of
normal course of business sufficient to cover these working capital fiscal year 2007 totaled $47.0 million, an excess of $11.5 million over the
needs. Business Services also has future obligations and commitments, margin requirement. Pledged securities at the end of fiscal year 2006
which are summarized in ‘‘Contractual Obligations and Commercial totaled $53.0 million, an excess of $9.9 million over the margin
Commitments.’’ requirement.
This segment generated $112.2 million in operating cash flows HRB Bank’s current liquidity needs are generally met through
primarily related to net income. Additionally, Business Services used deposits from banking clients. HRB Bank has access to traditional
$19.5 million in investing activities primarily related to capital funding sources such as deposits, federal funds purchased, and
expenditures, and $11.2 million in financing activities as a result of repurchase agreements. HRB Bank maintains a credit facility with the
payments on acquisition debt. Federal Home Loan Bank (FHLB). At April 30, 2007, $179.0 million was
CONSUMER FINANCIAL SERVICES –In fiscal year 2007, Consumer drawn under this facility.
Financial Services used $1.0 billion in investing activities primarily due See additional discussion of regulatory and capital requirements of
HRB Bank and HRBFA in ‘‘Regulatory Environment.’’
H&R BLOCK 2007 Form 10K