HR Block 2009 Annual Report Download - page 34

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SEGMENT CASH FLOWS – A condensed consolidating statement of cash flows by segment for the fiscal year
ended April 30, 2009, follows. Generally, interest is not charged on intercompany activities between segments. Our
consolidated statements of cash flows are located in Item 8.
Tax
Services
Business
Services
Consumer
Financial
Services Corporate
(1)
Discontinued
Operations
Consolidated
H&R Block
(in 000s)
Cash provided by (used in):
Operations $ 531,151 $ 62,213 $ 62,419 $298,460 $ 70,196 $1,024,439
Investing (313,981) (24,691) 104,760 (15,594) 255,066 5,560
Financing (7,678) (2,786) 41,037 (75,589) 4,783 (40,233)
Net intercompany (199,582) (44,567) 19,663 554,531 (330,045) –
(1)
Income tax payments, net of refunds of $158.9 million received during fiscal year 2009, are included in Corporate operating cash flows.
Tax Services. Tax Services has historically been our largest provider of annual operating cash flows. The
seasonal nature of Tax Services generally results in a large positive operating cash flow in the fiscal fourth quarter.
Tax Services generated $531.2 million in operating cash flows primarily related to net income, as cash is generally
collected from clients at the time services are rendered. Cash used in investing activities of $314.0 million was
primarily for business acquisitions and capital expenditures.
Our international operations are generally self-funded. However, H&R Block Canada, Inc. (Block Canada)
utilized intercompany borrowings to fund its CashBack program and working capital requirements during the last
two fiscal years. Cash balances are held in Canada and Australia independently in local currencies.
Business Services. Business Services’ funding requirements are largely related to receivables for completed
work and “work in process” and funding relating to acquired businesses. We have provided funding in the normal
course of business sufficient to cover these working capital needs. Business Services also has future obligations
and commitments, which are summarized in “Contractual Obligations and Commercial Commitments.”
This segment generated $62.2 million in operating cash flows primarily related to net income. Additionally,
Business Services used $24.7 million in investing activities primarily related to capital expenditures.
Consumer Financial Services. In fiscal year 2009, Consumer Financial Services provided $104.8 million in
investing activities primarily due to principal payments received on mortgage loans held for investment. Cash
provided by financing activities of $41.0 million is primarily due to changes in customer deposits net of payments
on Federal Home Loan Bank (FHLB) borrowings.
HRB Bank’s current liquidity needs are generally met through deposits from banking clients. HRB Bank has
access to traditional funding sources such as deposits, federal funds purchased and repurchase agreements. HRB
Bank maintains a credit facility with the FHLB. At April 30, 2009, $100.0 million was drawn under this facility.
Block Financial LLC (BFC) made additional capital contributions to HRB Bank of $245.0 million during fiscal
year 2009. These contributions were provided for HRB Bank to meet its capital requirements due to seasonal
fluctuations in the size of its balance sheet. Also during fiscal year 2009, we submitted an application to the OTS
requesting that HRB Bank be allowed to pay dividends to BFC in an amount that would not exceed the capital
necessary to continuously maintain HRB Bank’s required 12.0% leverage ratio. The OTS approved our application
on January 12, 2009. HRB Bank paid dividends of $235.0 million to BFC in fiscal year 2009.
See additional discussion of regulatory and capital requirements of HRB Bank in “Regulatory Environment.”
We believe the funding sources for Consumer Financial Services are stable. Liquidity risk within this segment is
primarily limited to maintaining sufficient capital levels at HRB Bank.
Discontinued Operations. Discontinued operations provided $255.1 million in cash from investing activities
primarily due to proceeds received from the sale of HRBFA.
BORROWINGS
The following chart provides the debt ratings for BFC:
Short-term
April 30, 2009
Long-term Outlook Short-term
April 30, 2008
Long-term Outlook
Moody’s P-2 Baa1 Stable P-2 Baa1 Negative
S&P A-2 BBB Positive A-3 BBB- Negative
Fitch F2 BBB Stable F3 BBB Negative
DBRS R-2 (high) BBB (high) Positive R-2 (high) BBB (high) Negative
At April 30, 2009, we maintained $2.0 billion in revolving credit facilities to support commercial paper issuance
and for general corporate purposes. These CLOCs, and any outstanding borrowings thereunder, have a maturity
date of August 2010, bear interest in a range of LIBOR plus 14 to 45 basis points per annum and an annual facility
30 H&R BLOCK 2009 Form 10K