HR Block 2008 Annual Report Download - page 79

NOTE 3: EARNINGS PER SHARE
Basic earnings per share is computed using the weighted-average number of common shares outstanding. The
dilutive effect of potential common shares outstanding is included in diluted earnings per share. The computations
of basic and diluted earnings per share from continuing operations are as follows:
Year Ended April 30, 2008 2007 2006
(in 000s, except per share amounts)
Net income from continuing operations $ 454,476 $ 374,337 $ 297,541
Basic weighted average common shares 324,810 322,688 328,118
Dilutive potential shares from stock options and nonvested stock 2,656 3,464 5,067
Convertible preferred stock 222
Dilutive weighted average common shares 327,468 326,154 333,187
Earnings per share from continuing operations:
Basic $ 1.40 $ 1.16 $ 0.91
Diluted 1.39 1.15 0.89
Diluted earnings per share excludes the impact of nonvested common shares or the exercise of options to
purchase 18.2 million, 16.8 million and 8.7 million shares of stock for fiscal years 2008, 2007 and 2006, respectively,
as the effect would be antidilutive.
NOTE 4: MARKETABLE SECURITIES AVAILABLE-FOR-SALE
The amortized cost and fair value of securities classified as available-for-sale held at April 30, 2008 and 2007 are
summarized below:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(1)
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(1)
Fair
Value
2008 2007
(in 000s)
Mortgage-backed
securities $ 30,809 $ 10 $ (1,418) $ 29,401 $ 35,122 $ 83 $ (121) $ 35,084
Municipal bonds 9,449 233 – 9,682 9,527 47 (6) 9,568
Common stock 3,359 586 (113) 3,832 3,845 747 (45) 4,547
Trust preferred
securities 3,500 – (691) 2,809 3,500 – – 3,500
Residual interests in
securitizations
(2)
4,289 10,170 – 14,459 –– – –
$ 51,406 $ 10,999 $ (2,222) $ 60,183 $ 51,994 $ 877 $ (172) $ 52,699
(1)
At April 30, 2008, investments in common stock with a cost of $33,400 and gross unrealized losses of $3,000 had been in continuous
loss position for more than twelve months. At April 30, 2007, investments in common stock with a cost of $101,000 and gross
unrealized losses of $11,000 had been in continuous loss position for more than twelve months.
(2)
At April 30, 2007, AFS residual interests in securitizations totaling $90.3 million were included in noncurrent assets of discontinued
operations.
Proceeds from the sales of AFS securities were $13.9 million, $3.5 million and $11.2 million during fiscal years
2008, 2007 and 2006, respectively. Gross realized gains on those sales during fiscal years 2008, 2007 and 2006 were
$0.4 million, $0.3 million and $0.7 million, respectively; gross realized losses were $0.1 million, $0.1 million and
$0.2 million, respectively. During fiscal year 2008, we recorded other-than-temporary impairments of AFS
securities totaling $0.4 million.
Contractual maturities of AFS debt securities at April 30, 2008, occur at varying dates over the next two to eight
years. AFS debt securities with a cost basis of $6.2 million and fair value of $6.4 million mature in the next two to
five years. AFS debt securities with a cost basis of $3.2 million and fair value of $3.3 million mature in the next five
to ten years. Because expected maturities differ from contractual maturities due to the issuers’ rights to prepay
certain obligations or the seller’s rights to call certain obligations, the first call date, put date or auction date for
municipal bonds and notes is considered the contractual maturity date.
HRB Bank is required to maintain a restricted investment in FHLB stock for borrowing availability. The cost of
this investment, $7.5 million, represents its redemption value, as these investments do not have a ready market.
H&R BLOCK 2008 Form 10K 59