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H&R Block, Inc. | 2014 Form 10-K 33
acquire competitor tax businesses and franchisees, and recurring capital allocated to acquisitions consists primarily
of this activity. In fiscal year 2014, we also acquired the assets, primarily purchased technology, of a business for $30.3
million.
FINANCING RESOURCES – Our 2012 CLOC has capacity up to $1.5 billion, and is scheduled to expire in August
2017. See additional discussion, including a description of related covenants, in Item 8, note 10 to the consolidated
financial statements.
While we use commercial paper borrowings to fund our seasonal working capital needs, we had no commercial
paper borrowings outstanding as of April 30, 2014 or 2013. Our commercial paper borrowings peaked at $195.0 million
in February 2014.
During fiscal year 2013, we issued $500.0 million in 5.50% Senior Notes, the proceeds of which, together with cash
balances on hand, were used to redeem $600.0 million of our 7.875% Senior Notes that were due to mature in January
2013. We also have $400.0 million in 5.125% Senior Notes which are due in October 2014.
The following table provides ratings for debt issued by Block Financial as of April 30, 2014 and 2013:
As of April 30, 2014 April 30, 2013
Short-term Long-term Outlook Short-term Long-term Outlook
Moody's P-2 Baa2 Stable P-2 Baa2 Negative
S&P A-2 BBB Negative A-2 BBB Negative
CASH AND INVESTMENT SECURITIES – As of April 30, 2014, we held cash and cash equivalents of $2.2 billion,
including $609.1 million held by HRB Bank and $119.6 million held by our foreign subsidiaries.
Dividends of cash balances held by HRB Bank would be subject to regulatory approval and are therefore not available
for general corporate purposes.
As of April 30, 2014, we also held investments, primarily mortgage backed securities, with a carrying value of $427.8
million which we classified as available for sale. As discussed above, it is our intent (subject to market conditions) to
liquidate the majority of these securities in connection with a closing of the P&A Transaction.
Foreign Operations. Seasonal borrowing needs of our Canadian operations are typically funded by our U.S.
operations. To mitigate foreign currency exchange rate risk, in fiscal years 2014 and 2012 we entered into foreign
exchange forward contracts, although we did not enter into any such contracts in fiscal year 2013. There were no
forward contracts outstanding as of April 30, 2014.
As of April 30, 2014, our Canadian operations had approximately $52 million of U.S. dollar denominated borrowings
owed to various U.S. subsidiaries. These borrowings may be repaid in full or in part at any time. Non-borrowed funds
would have to be repatriated to be available to fund domestic operations, and in certain circumstances this would
trigger additional income taxes on those amounts. We do not currently intend to repatriate any non-borrowed funds
held by our foreign subsidiaries.
The impact of changes in foreign exchange rates during the period on our international cash balances resulted in
a decrease of $17.6 million during fiscal year 2014 compared to an increase of $1.6 million and a decrease of $2.4
million in fiscal years 2013 and 2012, respectively. This change resulted primarily from a decline in Canadian exchange
rates.