HR Block 2010 Annual Report Download - page 45

A summary of our commitments as of April 30, 2010, which may or may not require future payments, are as follows:
Total
Less Than
1 Year 1 - 3 Years 4 - 5 Years After 5 Years
(in 000s)
Franchise Equity Lines of Credit $36,806 $21,819 $ 9,242 $5,745 $ –
Contingent acquisition payments 20,697 5,365 14,391 941 –
Other commercial commitments 482 482 – – –
Total commercial commitments $57,985 $27,666 $23,633 $6,686 $ –
See discussion of contractual obligations and commitments in Item 8, within the notes to our consolidated
financial statements.
REGULATORY ENVIRONMENT
HRB Bank is a federal savings bank and H&R Block, Inc. is a savings and loan holding company. As a result, each is
subject to regulation by the OTS. Federal savings banks are subject to extensive regulation and examination by the
OTS, their primary federal regulator, as well as the FDIC.
All savings associations are subject to the capital adequacy guidelines and the regulatory framework for prompt
corrective action. HRB Bank must meet specific capital guidelines involving quantitative measures of HRB Bank’s
assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. HRB
Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about
components, risk-weightings and other factors. As of March 31, 2010, our most recent Thrift Financial Report
(TFR) filing with the OTS, HRB bank was a “well capitalized” institution under the prompt corrective action
provisions of the FDIC. See Item 8, note 19 to the consolidated financial statements for additional discussion of
regulatory capital requirements and classifications.
HRB Bank is an indirect wholly-owned subsidiary of H&R Block, Inc. and its customer deposits are insured by
the FDIC. If an insured institution fails, claims for administrative expenses of the receiver and for deposits in
U.S. branches (including claims of the FDIC as subrogee of the failed institution) have priority over the claims of
general unsecured creditors. In addition, the FDIC has authority to require H&R Block, Inc. to reimburse it for
losses it incurs in connection with the failure of HRB Bank or with the FDIC’s provision of assistance to a banking
subsidiary that is in danger of failure.
H&R Block, Inc. is a legal entity separate and distinct from its subsidiary, HRB Bank. Various federal and state
statutory provisions and regulations limit the amount of dividends HRB Bank may pay without regulatory
approval. The OTS has authority to prohibit HRB Bank from engaging in unsafe or unsound practices in
conducting their business. The payment of dividends, depending on the financial condition of the bank, could
be deemed an unsafe or unsound practice. The ability of HRB Bank to pay dividends in the future is currently, and
could be further, influenced by bank regulatory policies and capital guidelines.
The U.S., various state, local, provincial and foreign governments and some self-regulatory organizations have
enacted statutes and ordinances, and/or adopted rules and regulations, regulating aspects of our business. These
aspects include, but are not limited to, commercial income tax return preparers, income tax courses, the
electronic filing of income tax returns, the facilitation of RALs, loan originations and assistance in loan
originations, mortgage lending, privacy, consumer protection, franchising, sales methods, banking,
accountants and the accounting practice. We seek to determine the applicability of such statutes, ordinances,
rules and regulations (collectively, “Laws”) and comply with those Laws.
From time to time in the ordinary course of business, we receive inquiries from governmental and self-
regulatory agencies regarding the applicability of Laws to our services and products. In response to past inquiries,
we have agreed to comply with such Laws, convinced the authorities that such Laws were not applicable or that
compliance already exists and/or modified our activities in the applicable jurisdiction to avoid the application of
all or certain parts of such Laws. We believe the past resolution of such inquiries and our ongoing compliance with
Laws has not had a material adverse effect on our consolidated financial statements. We cannot predict what effect
future Laws, changes in interpretations of existing Laws or the results of future regulator inquiries with respect to
the applicability of Laws may have on our consolidated financial statements. See additional discussion of legal
matters in Item 3, “Legal Proceedings” and Item 8, note 18 to our consolidated financial statements.
FUTURE LEGISLATION – In light of current conditions in the U.S. and global financial markets and the U.S. and
global economy, regulators have increased their focus on the regulation of the financial services industry.
Proposals that could substantially intensify the regulation of the financial services industry are expected to be
introduced in the U.S. Congress, in state legislatures and from applicable regulatory authorities. These proposals
may change banking statutes and regulation and our operating environment in substantial and unpredictable ways.
If enacted, these proposals could increase or decrease the cost of doing business, limit or expand permissible
H&R BLOCK 2010 Form 10K 29