HR Block 2010 Annual Report Download - page 43

CASH FROM OPERATING ACTIVITIES – Cash provided by operations decreased $437.0 million from fiscal year
2009 primarily due to income tax payments of $359.6 million in the current year, compared to refunds received in
the prior year.
Restricted Cash. We hold certain cash balances that are restricted as to use. Cash and cash equivalents –
restricted totaled $34.4 million at April 30, 2010, and primarily consisted of cash held by our captive insurance
subsidiary that will be used to pay claims.
CASH FROM INVESTING ACTIVITIES – Changes in cash provided by investing activities primarily relate to the
following:
Mortgage Loans Held for Investment. We received net proceeds of $72.8 million, $91.3 million and
$207.6 million on our mortgage loans held for investment in fiscal years 2010, 2009 and 2008, respectively.
Purchases of Property and Equipment. Total cash paid for property and equipment was $90.5 million,
$97.9 million and $101.6 million for fiscal years 2010, 2009 and 2008, respectively.
Business Acquisitions. Total cash paid for acquisitions was $10.5 million, $293.8 million and $24.9 million
during fiscal years 2010, 2009 and 2008, respectively. In November 2008, we acquired our last major independent
franchise operator for an aggregate purchase price of $279.2 million.
Sales of Businesses. In fiscal year 2010, we sold 267 tax offices to franchisees for proceeds of $65.7 million. In
fiscal year 2009, we sold certain tax offices to franchisees for proceeds of $16.9 million. The majority of these sales
were financed through Franchise Equity Lines of Credit (FELCs). The increase in the lines of credit is also included
in investing activities.
Discontinued Operations. In fiscal year 2009, we sold our financial advisor business for proceeds of
$304.0 million. In fiscal year 2008, we sold our former mortgage loan origination and servicing business, as
well as three smaller lines of business previously reported in our Business Services segment, for cash proceeds of
$1.1 billion.
CASH FROM FINANCING ACTIVITIES – Changes in cash used in financing activities primarily relate to the
following:
Short-Term Borrowings. We had no short-term borrowings outstanding at April 30, 2010.
Customer Banking Deposits. Customer banking deposits provided $17.5 million in the current year compared
to $64.4 million provided in fiscal year 2009 and $345.4 million used in fiscal year 2008. These deposits are held by
HRB Bank
Dividends. We have consistently paid quarterly dividends. Dividends paid totaled $200.9 million, $198.7 million
and $183.6 million in fiscal years 2010, 2009 and 2008, respectively.
Repurchase and Retirement of Common Stock. During fiscal year 2010, we purchased and immediately
retired 12.8 million shares of our common stock at a cost of $250.0 million. We may continue to repurchase and
retire common stock or retire treasury stock in the future.
In June 2008, our Board of Directors rescinded the previous authorizations to repurchase shares of our common
stock and approved an authorization to purchase up to $2.0 billion of our common stock through June 2012. There
was $1.7 billion remaining under this authorization at April 30, 2010.
Issuances of Common Stock. In October 2008, we sold 8.3 million shares of our common stock, without par
value, at a price of $17.50 per share in a registered direct offering through subscription agreements with selected
institutional investors. We received net proceeds of $141.4 million, after deducting placement agent fees and other
offering expenses. The purpose of the equity offering was to ensure we maintained adequate equity levels, as a
condition of our CLOC, during our off-season. Proceeds were used for general corporate purposes.
Proceeds from the issuance of common stock in accordance with our stock-based compensation plans totaled
$16.7 million, $71.6 million, and $23.3 million in fiscal years 2010, 2009 and 2008, respectively.
HRB BANK – Block Financial LLC (BFC) typically makes capital contributions to HRB Bank to help it meet its
capital requirements. BFC made capital contributions to HRB Bank of $235.0 million during fiscal year 2010 and
$245.0 million during fiscal year 2009.
Historically, capital contributions by BFC have been repaid as a return of capital by HRB Bank as capital
requirements decline. A return of capital or dividend paid by HRB Bank must be approved by the Office of Thrift
Supervision (OTS). Although the OTS has approved such payments in the past, there is no assurance that they will
continue to do so in the future, in particular if they determine that higher capital levels at HRB Bank are necessary
due to non-performing asset levels. In addition, BFC may elect to maintain higher capital levels at HRB Bank. At
April 30, 2010, HRB Bank had cash balances of $701.0 million. Distribution of those cash balances would be subject
to OTS approval and are therefore not currently available for general corporate purposes.
HRB Bank received approval from the OTS on May 17, 2010 to pay a non-cash dividend by June 30, 2010 to BFC
of REO.
See additional discussion of regulatory and capital requirements of HRB Bank in “Regulatory Environment.”
H&R BLOCK 2010 Form 10K 27