HR Block 2015 Annual Report Download - page 68

H&R Block, Inc. | 2015 Form 10-K 61
or consolidate with other companies, sell or dispose of their respective assets (including equity interests), liquidate
or dissolve, make investments, loans, advances, guarantees and acquisitions, and engage in certain transactions with
affiliates or certain restrictive agreements. The 2012 CLOC includes provisions that allow for the issuance of equity
which would be added to EBITDA in determining compliance with the financial covenant calculations as a separate
and additional means to avoid a shortfall. We were in compliance with these requirements as of April 30, 2015. We
had no balance outstanding under the 2012 CLOC as of April 30, 2015; however, we may borrow amounts under the
2012 CLOC from time to time in the future to support working capital requirements or for general corporate purposes.
SENIOR NOTES – On October 25, 2012, we issued $500.0 million of 5.50% Senior Notes due November 1, 2022.
The Senior Notes are not redeemable by the bondholders prior to maturity. The Senior Notes' interest rate is subject
to adjustment based upon our credit ratings.
The 5.50% Senior Notes due 2022 were issued by our 100% owned subsidiary Block Financial and were fully and
unconditionally guaranteed by H&R Block, Inc. The notes and the guarantees are senior unsecured obligations of the
two entities. The indenture governing the notes does not contain any financial covenants and contains only limited
restrictive covenants.
In October 2014, our $400.0 million of 5.125% Senior Notes matured and, utilizing available cash on hand, we
repaid them according to their terms.
OTHER INFORMATION – The aggregate payments required to retire long-term debt are $0.8 million, $0.8 million,
$1.0 million, $1.0 million, $1.1 million and $501.4 million in fiscal years 2016, 2017, 2018, 2019, 2020 and beyond,
respectively.
HRB Bank is a member of the FHLB, which extends credit to member banks based on eligible collateral. As of
April 30, 2015, HRB Bank had FHLB advance capacity of $149.1 million. As of April 30, 2015, we had no amounts
outstanding on this facility. AFS securities of $157.4 million serve as eligible collateral and are used to determine total
capacity.
NOTE 11: FAIR VALUE
FAIR VALUE MEASUREMENT – We use the following classification of financial instruments pursuant to the fair value
hierarchy methodologies for assets measured at fair value:
Level 1 – inputs to the valuation are quoted prices in an active market for identical assets.
Level 2 – inputs to the valuation include quoted prices for similar assets in active markets utilizing a third-party
pricing service to determine fair value.
Level 3 – valuation is based on significant inputs that are unobservable in the market and our own estimates
of assumptions that we believe market participants would use in pricing the asset.
Assets measured on a recurring basis are initially measured at fair value and are required to be remeasured at fair
value in the financial statements at each reporting date. Our investments in AFS securities are carried at fair value on
a recurring basis with gains and losses reported as a component of other comprehensive income, except for losses
assessed to be other than temporary. Our AFS securities include certain agency and agency-sponsored mortgage-
backed securities and municipal bonds. Quoted market prices are not available for these securities, as they are not
actively traded and have fewer observable transactions. As a result, we use third-party pricing services to determine
fair value and classify the securities as Level 2. The third-party pricing services' models are based on market data and
utilize available trade, bid and other market information for similar securities. Quarterly, we compare the prices
obtained from our third-party pricing services to other available independent pricing information to validate the
reasonableness of the valuations provided. In addition, we also perform analytics to assess the reasonableness of the
fair value received from the third-party pricing service based on changes in the portfolio and changes in market
conditions. We evaluate whether adjustments to third-party pricing is necessary and historically, we have not made
adjustments to prices obtained from our third-party pricing services.
There were no transfers of AFS securities between hierarchy levels during the fiscal years ended April 30, 2015 and
2014. See note 6 for details of our AFS securities that were remeasured at fair value on a recurring basis during the
fiscal years ended April 30, 2015 and 2014 and the unrealized gains or losses on those remeasurements.