HR Block 2014 Annual Report Download - page 40

32 2014 Form 10-K | H&R Block, Inc.
Cash from Operating Activities. Cash provided by operations, which consists primarily of cash received from
customers, increased $312.5 million from fiscal year 2013. The increase from the prior year was primarily due to higher
net income and changes in working capital.
Cash from Investing Activities. Cash from investing activities increased $121.6 million primarily due to a decline
in purchases of available-for-sale (AFS) securities, and proceeds received in fiscal year 2014 totaling $64.9 million from
full repayment of principal and accrued interest outstanding on notes receivable in connection with the sale of RSM
McGladrey in fiscal year 2012. We had proceeds in fiscal year 2013 totaling $81.1 million from liquidation of certain
company-owned life insurance policies.
Cash from Financing Activities. Cash used in financing activities decreased $219.6 million primarily due to a
reduction in stock repurchase and retirement activities. This was partially offset by cash used to fund declining customer
deposit balances.
CASH REQUIREMENTS –
Dividends and Share Repurchase. Returning capital to shareholders in the form of dividends and the repurchase
of outstanding shares has historically been a significant component of our capital allocation plan.
We have consistently paid quarterly dividends. Dividends paid totaled $219.0 million, $217.2 million and $208.8
million in fiscal years 2014, 2013 and 2012, respectively. Although we have historically paid dividends and plan to
continue to do so, there can be no assurances that circumstances will not change in the future that could affect our
ability or decisions to pay dividends.
Although we completed no open-market repurchases of outstanding shares of our common stock in fiscal year
2014, we did repurchase 21.3 million shares at a cost of $315 million in fiscal year 2013, and 14.6 million shares at a
cost of $200.0 million in fiscal year 2012.
We currently have Board of Directors' authorization to purchase up to $2.0 billion of our common stock through
June 2015. There was $857.5 million remaining under this authorization as of April 30, 2014. Although we have
historically from time to time repurchased common stock, there can be no assurances that circumstances will allow
us to continue to repurchase common stock in the future. As long as we remain subject to regulatory supervision of
the Federal Reserve, our share repurchase program will be closely supervised and we will likely be restricted from
repurchasing outstanding shares.
HRB Bank. In April 2014, we entered into the P&A Agreement with BofI. The P&A Agreement is subject to various
closing conditions, including the receipt of certain required approvals, entry into certain additional agreements, and
the fulfillment of various other customary conditions. If closing conditions (including regulatory approvals) are
satisfied, we will complete a closing of the P&A Transaction, including the sale of certain assets and transfer of certain
liabilities (principally deposit liabilities) to BofI. Due to the seasonality of our business, the timing of any closing will
impact the amount deposit liabilities transferred.
If a closing had occurred as of April 30, 2014, we would have made a cash payment to BofI for the difference in
the carrying value of assets sold and the carrying value of liabilities transferred of approximately $745 million. The
amount of the cash payment made at closing will primarily be equal to the carrying value of the liabilities to be
transferred since the carrying value of the assets to be transferred is immaterial. Actual amounts at closing will differ
from amounts as of April 30, 2014. We expect to fund any closing date cash payment due to BofI through liquidation
of our AFS securities (carrying value of $423 million at April 30, 2014), with any remaining balance expected to be
funded through available cash balances. As a result of our intent to liquidate our AFS securities, we recorded an other-
than-temporary impairment in our fourth quarter of fiscal year 2014 of $12.4 million.
See additional discussion in Item 1, under "Business," and in Item 8, note 2 to the consolidated financial statements.
See additional discussion of regulatory and capital requirements of HRB Bank in Item 1, "Regulation and Supervision
- Bank and Holding Companies," and Item 1A, "Risk Factors."
Capital Investment. Our business is not capital intensive. Capital expenditures totaled $147.0 million and $113.2
million in fiscal years 2014 and 2013, respectively. Our capital expenditures relate primarily to recurring improvements
to retail offices, as well as investments in computers, software and related assets. We expended net cash totaling
$68.4 million and $20.7 million in fiscal years 2014 and 2013 in connection with acquired businesses. We routinely