HR Block 2012 Annual Report Download - page 15

INTRODUCTION AND FORWARD-LOOKING STATEMENTS
Specified portions of our proxy statement are listed as “incorporated by reference” in response to certain items.
Our proxy statement will be made available to shareholders in July 2012, and will also be available on our
website at www.hrblock.com.
This report and other documents filed with the Securities and Exchange Commission (SEC) may contain
forward-looking statements. In addition, our senior management may make forward-looking statements orally
to analysts, investors, the media and others. Forward-looking statements can be identified by the fact that they
do not relate strictly to historical or current facts. They often include words or variations of words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “would,” “should,” “could” or
“may.” Forward-looking statements provide management’s current expectations or predictions of future
conditions, events or results. They may include estimates of revenues, income, earnings per share, capital
expenditures, dividends, liquidity, capital structure or other financial items, descriptions of management’s plans
or objectives for future operations, products or services, or descriptions of assumptions underlying any of the
above. They are not guarantees of future performance. By their nature, forward-looking statements are subject
to risks and uncertainties. These statements speak only as of the date they are made and management does not
undertake to update them to reflect changes or events occurring after that date except as required by federal
securities laws. Details about risks affecting various aspects of our business are included throughout this Form
10-K. Investors should carefully consider all of these risks, and should pay particular attention to the section
entitled “Risk Factors” beginning on page 8 of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
H&R Block, Inc. has subsidiaries that provide tax preparation and banking services. Our Tax Services segment
provides assisted income tax return preparation, digital tax solutions and other services and products related to
income tax return preparation to the general public primarily in the United States (U.S.), and also in Canada and
Australia. This segment also offers financial services including the H&R Block Prepaid Emerald MasterCard
®
and Emerald Advance lines of credit through H&R Block Bank (HRB Bank), along with other retail banking
services. Corporate operations include net interest margin and gains or losses relating to mortgage loans held
for investment, real estate owned and residual interests in securitizations, along with interest expense on
borrowings and other corporate expenses.
H&R Block, Inc. was organized as a corporation in 1955 under the laws of the State of Missouri. “H&R Block,”
“the Company,” “we,” “our” and “us” are used interchangeably to refer to H&R Block, Inc. or to H&R Block, Inc.
and its subsidiaries, as appropriate to the context. A complete list of our subsidiaries can be found in Exhibit 21.
RECENT DEVELOPMENTS – In November 2011, we sold RSM McGladrey, Inc. (RSM) to McGladrey & Pullen
LLP (M&P) for net cash proceeds of $523.1 million. We also received at the time of sale a long-term note in the
amount of $54.0 million. M&P assumed substantially all liabilities of RSM, including contingent payments and
lease obligations. We have indemnified M&P for certain litigation matters as discussed in Item 8, note 20 to the
consolidated financial statements. The net after tax loss on the sale of RSM totaled $36.9 million, which
includes an $85.4 million impairment of goodwill recorded in our first quarter and tax benefits of $17.9 million
associated with capital loss carry-forwards utilized.
In fiscal year 2012, we also sold RSM EquiCo Inc.’s subsidiary, McGladrey Capital Markets LLC (MCM). As of
April 30, 2012, the results of operations of these businesses are presented as discontinued operations in the
consolidated financial statements. All periods presented in the consolidated balance sheets and statements of
income have been reclassified to reflect our discontinued operations.
In April 2012, we announced a strategic realignment which eliminated approximately 350 positions and closed
approximately 200 underperforming company-owned offices. We recorded $31.2 million in severance costs and
$5.5 million in lease termination costs and impairment charges in the fourth quarter of fiscal year 2012.
On June 7, 2012, the Board of Governors of the Federal Reserve System (Federal Reserve) and the Office of
the Comptroller of the Currency (OCC) issued notices of proposed rulemaking that would establish regulatory
capital requirements for savings and loan holding companies (SLHCs) and increase capital requirements for
federal savings banks.
H&R BLOCK 2012 Form 10K 1