HR Block 2009 Annual Report Download - page 55

transaction is included in the Tax Services segment and is deductible for tax purposes. The allocation of the
purchase price to assets acquired and liabilities assumed has been completed and is as follows:
Asset Acquired Estimated Life Fair Value at Acquisition
(dollars in 000s)
Property and equipment various $ 6,169
Goodwill N/A 18,111
Reacquired franchise rights 52 years 229,438
Sub-franchise agreements 15 years 19,201
Customer relationships 5 years 5,691
Noncompete agreements 3 years 756
Other assets N/A 830
Liabilities N/A (954)
Weighted-average life of intangible assets 48 years $ 279,242
During fiscal year 2007, we acquired TaxWorks LLC, a provider of commercial tax preparation software
targeting the independent tax preparer market. The initial cash purchase price was $24.8 million, including the
present value of a $10.0 million payment made in April 2007 and a payment of $23.6 million due in May 2012. An
additional payment of up to $8.0 million, contingent on meeting certain performance targets, could be paid in April
2012 and would typically be recorded as additional purchase price, generally goodwill. Goodwill recognized in this
transaction is included in the Tax Services segment and is deductible for tax purposes.
During fiscal years 2009, 2008 and 2007, we made other acquisitions, which were accounted for as purchases
with cash payments totaling $12.6 million, $21.4 million and $32.8 million, respectively. Operating results of the
acquired businesses, which are not material, are included in the consolidated income statements since the date of
acquisition. During fiscal years 2009, 2008 and 2007 we also paid $1.9 million, $3.6 million and $5.4 million,
respectively, for contingent payments on prior acquisitions.
We periodically acquire the businesses of franchisees and account for the transaction as a business
combination. We also periodically sell company-operated offices to franchisees and record a gain if the sale
qualifies as a divestiture for accounting purposes and upon determination that collection of the sales proceeds is
reasonably assured. Gains are reported in operating income because the transactions are considered a recurring
part of our business. During fiscal year 2009, we sold certain offices to existing franchisees for cash proceeds of
$16.9 million, and recorded gains on these sales of $14.9 million.
NOTE 3: EARNINGS PER SHARE
Basic earnings per share is computed using the weighted-average number of common shares outstanding. The
dilutive effect of potential common shares outstanding is included in diluted earnings per share. The computations
of basic and diluted earnings per share from continuing operations are as follows:
Year Ended April 30, 2009 2008 2007
(in 000s, except per share amounts)
Net income from continuing operations $ 513,055 $ 445,947 $ 369,460
Basic weighted-average common shares 332,787 324,810 322,688
Dilutive potential shares from stock options and nonvested stock 1,750 2,656 3,464
Convertible preferred stock 222
Dilutive weighted-average common shares 334,539 327,468 326,154
Earnings per share from continuing operations:
Basic $ 1.54 $ 1.37 $ 1.14
Diluted 1.53 1.36 1.13
Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain
restrictions or the exercise of options to purchase 15.7 million, 18.2 million and 16.8 million shares of stock for
fiscal years 2009, 2008 and 2007, respectively, as the effect would be antidilutive.
H&R BLOCK 2009 Form 10K 51