HR Block 2009 Annual Report Download - page 35

fee in a range of 6 to 15 basis points per annum, based on our credit ratings. These lines are subject to various
affirmative and negative covenants, including (1) a minimum net worth covenant requiring us to maintain at least
$650.0 million of net worth on the last day of any fiscal quarter, (2) limits on our indebtedness and (3) a requirement
that we reduce the aggregate outstanding principal amount of short-term debt, as defined in the agreement, to
$200.0 million or less for a minimum period of thirty consecutive days during the period from March 1 to June 30 of
each year (the “Clean-down requirement”). At April 30, 2009, we were in compliance with these covenants and had
net worth of $1.4 billion. There was no balance outstanding on this facility at April 30, 2009.
Lehman Brothers Bank, FSB (Lehman) is a participating lender in our $2.0 billion CLOCs, with a $50.0 million
credit commitment. In September 2008, Lehman’s parent company declared bankruptcy. Since then, Lehman has
not honored any funding requests under these facilities, thereby effectively reducing our available liquidity under
our CLOCs to $1.95 billion. We do not expect this change to have a material impact on our liquidity or consolidated
financial statements.
On January 11, 2008, we issued $600.0 million of 7.875% Senior Notes under our shelf registration. The Senior
Notes are due January 15, 2013 and are not redeemable by the bondholders prior to maturity. The net proceeds of
this transaction were used to repay a $500.0 million facility, with the remaining proceeds used for working capital
and general corporate purposes. As of April 30, 2009, we had $250.0 million remaining under our shelf registration
for additional debt issuances.
We entered into a committed line of credit agreement with HSBC Finance Corporation effective January 14, 2009
for use as a funding source for the purchase of RAL participations. This line provided funding totaling $2.5 billion
through March 30, 2009 and $120.0 million thereafter through June 30, 2009. This line is subject to various
covenants that are similar to our CLOCs and is secured by our RAL participations. All borrowings on this facility
were repaid as of April 30, 2009 and the facility is now closed.
During fiscal year 2009, borrowing needs in our Canadian operations were funded by corporate borrowings in
the U.S. To mitigate the foreign currency exchange rate risk, we used foreign exchange forward contracts. We do
not enter into forward contracts for speculative purposes. In estimating the fair value of derivative positions, we
utilize quoted market prices, if available, or quotes obtained from external sources. There were no forward
contracts outstanding as of April 30, 2009.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
A summary of our obligations to make future payments as of April 30, 2009, is as follows:
Total
Less Than
1 Year 1 - 3 Years 4 - 5 Years After 5 Years
(in 000s)
Long-term debt (including interest) $1,286,214 $ 67,750 $135,500 $674,008 $408,956
Customer deposits 854,888 442,683 17,649 8,698 385,858
FHLB borrowings 100,000 25,000 75,000 – –
Acquisition payments 30,658 8,263 22,258 91 46
Media advertising purchase obligation 45,768 11,442 22,884 11,442 –
Capital lease obligations 12,001 519 1,091 1,411 8,980
Operating leases 762,298 248,712 315,263 118,859 79,464
Total contractual cash obligations $3,091,827 $804,369 $589,645 $814,509 $883,304
The amount of liabilities recorded in connection with FIN 48 that we expect to pay within twelve months is
$15.1 million at April 30, 2009 and is included in accounts payable, accrued expenses and other current liabilities
on our consolidated balance sheet. The remaining amount is included in other noncurrent liabilities on our
consolidated balance sheet. Because the ultimate amount and timing of any future cash settlements cannot be
predicted with reasonable certainty, the estimated FIN 48 liability has been excluded from the table above. See
Item 8, note 13 to the consolidated financial statements for additional information.
A summary of our commitments as of April 30, 2009, which may or may not require future payments, are as
follows:
Total
Less Than
1 Year 1 - 3 Years 4 - 5 Years After 5 Years
(in 000s)
Franchise Equity Lines of Credit $ 38,055 $ 20,569 $ 9,075 $ 8,411 $ –
Commitment to fund M&P 88,581 88,581 – – –
Contingent acquisition payments 24,165 5,062 18,487 227 389
Other commercial commitments 2,206 1,724 482 – –
Total commercial commitments $ 153,007 $ 115,936 $ 28,044 $ 8,638 $ 389
H&R BLOCK 2009 Form 10K 31