HR Block 2011 Annual Report Download - page 71

expense of our continuing operations totaled $14.5 million, $29.3 million and $26.6 million in fiscal years 2011, 2010
and 2009, respectively.
Accounting standards require excess tax benefits from stock-based compensation to be included as a financing
activity in the statements of cash flows. As a result, we classified $0.5 million, $1.6 million and $8.6 million as cash
inflows from financing activities for fiscal years 2011, 2010 and 2009, respectively. We realized tax benefits of
$4.4 million, $6.6 million and $20.2 million in fiscal years 2011, 2010 and 2009, respectively.
We have four stock-based compensation plans which have been approved by our shareholders. As of April 30,
2011, we had 11.5 million shares reserved for future awards under stock-based compensation plans. We issue
shares from our treasury stock to satisfy the exercise or release of stock-based awards. We believe we have
adequate treasury stock to issue for the exercise or release of stock-based awards.
Our 2003 Long-Term Executive Compensation Plan provides for awards of options (both incentive and
nonqualified), nonvested shares, performance nonvested share units and other stock-based awards to
employees. These awards entitle the holder to shares or the right to purchase shares of common stock as the
award vests, typically over a three-year or four-year period with a portion vesting each year. Historically, nonvested
shares have received dividends during the vesting period, however awards granted after October 1, 2010 will no
longer receive dividends during the vesting period. Performance nonvested share units receive cumulative
dividends at the end of the vesting period. We measure the fair value of options on the grant date or
modification date using the Black-Scholes option valuation model. We measure the fair value of nonvested
shares and performance nonvested share units based on the closing price of our common stock on the grant date.
Generally, we expense the grant-date fair value, net of estimated forfeitures, over the vesting period on a straight-
line basis. Awards granted to employees who are of retirement age or early retirement age (age 65 or age 55 and ten
years of service) or reach either retirement age prior to the end of the service period of the awards, are expensed
over the shorter of the two periods. Options are generally granted at a price equal to the fair market value of our
common stock on the grant date and have a contractual term of ten years.
Our 1999 Stock Option Plan for Seasonal Employees, which provided for awards of nonqualified options to
certain employees, was terminated effective December 31, 2009, except for outstanding awards thereunder. These
awards were granted to seasonal employees in our Tax Services segment and entitled the holder to the right to
purchase shares of common stock as the award vests, typically over a two-year period. We measured the fair value
of options on the grant date using the Black-Scholes option valuation model. We expensed the grant-date fair value,
net of estimated forfeitures, over the seasonal service period. Options were granted at a price equal to the fair
market value of our common stock on the grant date, are exercisable during September through November in each
of the two years following the calendar year of the grant, and have a contractual term of 29 months.
Our 1989 Stock Option Plan for Outside Directors, which provided for awards of nonqualified options to outside
directors, was terminated effective June 11, 2008, except for outstanding awards thereunder. The plan was
replaced by the 2008 Deferred Stock Unit Plan for Outside Directors. The number of deferred stock units credited
to an outside director’s account pursuant to an award is determined by dividing the dollar amount of the award by
the average current market value per share of common stock for the ten consecutive trading dates ending on the
date the deferred stock units are granted to the outside directors. Each deferred stock unit granted is vested upon
award and the settlement of shares occurs six months after separation of service from the Board of Directors. The
vested shares receive dividends prior to settlement, which are reinvested and settled in shares at the time of
settlement.
Our 2000 Employee Stock Purchase Plan (ESPP) provides employees the option to purchase shares of our
common stock through payroll deductions. The purchase price of the stock is 90% of the lower of either the fair
market value of our common stock on the first trading day within the Option Period or on the last trading day of the
Option Period. The Option Periods are six-month periods beginning on January 1 and July 1 each year. We measure
the fair value of options on the grant date utilizing the Black-Scholes option valuation model. The fair value of the
option includes the value of the 10% discount and the look-back feature. We expense the grant-date fair value over
the six-month vesting period.
H&R BLOCK 2011 Form 10K 59