HR Block 2012 Annual Report Download - page 75

NOTE 13: STOCKHOLDERS’ EQUITY
A summary of our share repurchase and retirements for fiscal years 2012, 2011 and 2010 is as follows:
(in 000s)
Shares Cost
Fiscal year:
2012 14,554 $ 199,989
2011 18,950 279,947
2010 12,786 250,003
Through June 25 of the first quarter of fiscal year 2013, we repurchased and immediately retired an additional
21.3 million shares at a cost of $315.0 million. We also retired 60.0 million shares of treasury stock in June 2012.
The June retirement of treasury stock had no impact on our total consolidated stockholders’ equity.
We are authorized to issue 6.0 million shares of Preferred Stock without par value. At April 30, 2012, we had
5.6 million shares of authorized but unissued Preferred Stock. Of the unissued shares, 0.6 million shares have
been designated as Participating Preferred Stock.
We are authorized to issue 0.5 million shares of non-voting Preferred Stock designated as Convertible
Preferred Stock without par value. At April 30, 2012, we had 0.5 million shares of authorized but unissued
Convertible Preferred Stock. The holders of the Convertible Preferred Stock are not entitled to receive
dividends paid in cash, property or securities and, in the event of any dissolution, liquidation or wind-up of the
Company, will share ratably with the holders of Common Stock then outstanding in the assets of the Company
after any distribution or payments are made to the holders of Participating Preferred stock or the holders of any
other class or series of stock of the Company with preference over the Common Stock.
NOTE 14: STOCK-BASED COMPENSATION
We utilize the fair value method to account for stock-based awards. Stock-based compensation expense of $15.0
million, $14.5 million and $29.4 million was recorded in fiscal years 2012, 2011 and 2010, respectively, net of
related tax benefits of $5.4 million, $5.4 million and $10.5 million, respectively. Stock-based compensation
expense of our continuing operations totaled $14.2 million, $10.5 million and $22.7 million in fiscal years 2012,
2011 and 2010, respectively.
Accounting standards require excess tax benefits from stock-based compensation to be included as a
financing activity in the statements of cash flows. As a result, we classified $0.1 million, $0.5 million and $1.6
million as cash inflows from financing activities for fiscal years 2012, 2011 and 2010, respectively. We realized
tax benefits of $4.4 million, $4.4 million and $6.6 million in fiscal years 2012, 2011 and 2010, respectively.
As of April 30, 2012, we had 10.2 million shares reserved for future awards under stock-based compensation
plans. We issue shares from our treasury stock to satisfy the exercise or release of stock-based awards and
believe we have adequate treasury stock balances available for future issuances.
Our 2003 Long-Term Executive Compensation Plan (2003 Plan) provides for awards of options (both
incentive and nonqualified), nonvested shares, nonvested share units, performance-based nonvested share units
and other stock-based awards to employees. These awards entitle the holder to shares or the right to purchase
shares of common stock as the award vests. Options and nonvested shares typically vest over a three-year or
four-year period with a portion vesting each year, while both types of nonvested share units typically cliff vest
at the end of a three-year period. Historically, nonvested shares have received dividends during the vesting
period, however awards granted after October 1, 2010 do not receive dividends during the vesting period.
Nonvested share units and performance-based nonvested share units receive cumulative dividends at the end of
the vesting period. We measure the fair value of options on the grant date or modification date using the Black-
Scholes option valuation model. We measure the fair value of nonvested shares and nonvested share units
based on the closing price of our common stock on the grant date. The fair value of performance-based
nonvested share units is determined based on the Monte Carlo valuation model. Generally, we expense the
grant-date fair value, net of estimated forfeitures, over the vesting period on a straight-line basis. Awards
granted to employees who are of retirement age or early retirement age (age 65 or age 55 and ten years of
service) or reach either retirement age prior to the end of the service period of the awards, are expensed over
the shorter of the two periods. Options are generally granted at a price equal to the fair market value of our
common stock on the grant date. All types of awards granted under the 2003 Plan have a contractual term of ten
years.
H&R BLOCK 2012 Form 10K 61