HR Block 2009 Annual Report Download - page 70

Substantially all of the operations of our subsidiaries are conducted in leased premises. Most of the operating
leases are for periods ranging from three years to five years, with renewal options and provide for fixed monthly
rentals. Future minimum operating lease commitments of our continuing operations at April 30, 2009, are as
follows:
(in 000s)
2010 $248,712
2011 186,389
2012 128,874
2013 74,714
2014 44,145
2015 and beyond 79,464
$762,298
Rent expense of our continuing operations for fiscal years 2009, 2008 and 2007 totaled $308.1 million,
$299.6 million and $284.9 million, respectively.
DISCONTINUED OPERATIONS – SCC maintains recourse with respect to loans previously sold or securitized
under indemnification of loss provisions relating to breach of representations and warranties made to purchasers
or insurers. As a result, SCC may be required to repurchase loans or otherwise indemnify third-parties for losses.
These representations and warranties and corresponding repurchase obligations generally are not subject to
stated limits or a stated term and, therefore, may continue. SCC has established a liability related to potential
losses under these indemnifications and monitors the adequacy of the repurchase liability on an ongoing basis. To
the extent that future claim volumes differ from current estimates, or the value of mortgage loans and residential
home prices change, future losses may be different than these estimates and those differences may be significant.
At April 30, 2009 and 2008, our loan repurchase liability totaled $206.6 million and $243.1 million, respectively.
This liability is included in accounts payable, accrued expenses and other current liabilities on our consolidated
balance sheets. During fiscal year 2009, we made payments to third-parties totaling $44.2 million representing loan
repurchases or loss indemnifications for various representation and warranties claims.
As described more fully in note 19, we entered into indemnifications in connection with our November 2008 sale
of HRBFA and recorded a liability with an estimated fair value of $15.5 million in connection with the sale.
We have recorded a restructuring liability which primarily relates to estimated lease obligations for vacant space
resulting from office closings and employee severance costs for our discontinued mortgage businesses. These
liabilities are included in accounts payable, accrued expenses and other current liabilities and accrued salaries,
wages and payroll taxes on our consolidated balance sheets, respectively. Actual results could differ from these
estimates. Changes in our restructuring liability during the year ended April 30, 2009 are as follows:
Accrual Balance as of
April 30, 2008
Cash
Payments
Other
Adjustments
Accrual Balance as of
April 30, 2009
(in 000s)
Employee severance costs $ 4,807 $ (5,068) $ 408 $ 147
Contract termination costs 23,113 (15,594) (133) 7,386
$ 27,920 $ (20,662) $ 275 $ 7,533
GENERAL – In the regular course of business, we are subject to routine examinations by federal, state and local
taxing authorities. In management’s opinion, the disposition of matters raised by such taxing authorities, if any,
would not have a material adverse impact on our consolidated financial statements.
We routinely enter into contracts that include embedded indemnifications that have characteristics similar to
guarantees. Other guarantees and indemnifications of the Company and its subsidiaries include obligations to
protect counterparties from losses arising from the following: (1) tax, legal and other risks related to the purchase
or disposition of businesses; (2) penalties and interest assessed by federal and state taxing authorities in
connection with tax returns prepared for clients; (3) indemnification of our directors and officers; and
(4) third-party claims relating to various arrangements in the normal course of business. Typically, there is no
stated maximum payment related to these indemnifications, and the terms of the indemnities may vary and in
many cases is limited only by the applicable statute of limitations. The likelihood of any claims being asserted
against us and the ultimate liability related to any such claims, if any, is difficult to predict. While we cannot
66 H&R BLOCK 2009 Form 10K