HR Block 2013 Annual Report Download - page 42

H&R Block 2013 Form 10-K 35
See additional discussion of regulatory and capital requirements of HRB Bank in Item 1A, "Risk Factors" and in
"Regulatory Environment" below.
ASSETS HELD BY FOREIGN SUBSIDIARIES - At April 30, 2013, cash and short-term investment balances
of $273.1 million were held by our foreign subsidiaries. These funds would have to be repatriated to be available to
fund domestic operations, and income taxes would be accrued and paid on those amounts. During the current year, a
Canadian subsidiary purchased an intangible asset from a U.S. subsidiary and an Australian subsidiary paid a dividend
to its U.S. parent. These transactions effectively brought $72.5 million to the U.S. from our foreign subsidiaries, and
resulted in approximately $6 million of income tax upon repatriation.
BORROWINGS
The following table provides ratings for debt issued by Block Financial as of April 30, 2013 and 2012:
As of April 30, 2013 April 30, 2012
Short-term Long-term Outlook Short-term Long-term Outlook
Moody’s P-2 Baa2 Negative P-2 Baa2 Stable
S&P A-2 BBB Negative A-2 BBB Negative
During fiscal year 2013, we issued $500.0 million in Senior Notes, the proceeds of which were used towards
repayment of our $600.0 million Senior Notes that were due in January 2013. Additionally, we entered into a new
CLOC agreement. See additional discussion in Item 8, note 9 to the consolidated financial statements.
Borrowing needs in our Canadian operations are typically funded by our U.S. operations. To mitigate foreign currency
exchange rate risk, in fiscal years 2012 and 2011 we entered into foreign exchange forward contracts. We did not enter
into any similar contracts in fiscal year 2013, and there were no forward contracts outstanding as of April 30, 2013.
We do not currently expect to enter into any similar contracts in the future.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
A summary of our obligations to make future payments as of April 30, 2013, is as follows:
(in 000s)
Total Less Than
1 Year 1 - 3 Years 4 - 5 Years After 5 Years
Long-term debt (including interest) $ 1,188,520 $ 48,000 $ 464,898 $ 55,000 $620,622
Customer deposits (including interest) 942,688 940,771 1,570 347 —
Contingent acquisition payments 11,277 9,533 1,744 — —
Capital lease obligations 9,702 722 1,545 1,807 5,628
Operating leases 420,556 178,068 200,639 34,261 7,588
Total contractual cash obligations $ 2,572,743 $ 1,177,094 $ 670,396 $ 91,415 $633,838
The table above does not reflect unrecognized tax benefits of approximately $146 million due to the high degree
of uncertainty regarding the future cash outflows associated with these amounts.
See discussion of contractual obligations and commitments in Item 8, within the notes to the consolidated financial
statements.
REGULATORY ENVIRONMENT
The Holding Companies are SLHCs and HRB Bank is a federal savings bank. The Federal Reserve is the primary
federal regulator of our Holding Companies and the OCC is the primary federal regulator of HRB Bank.
The Dodd-Frank Act made extensive changes to the laws regulating banks, holding companies and financial services
firms, and requires various federal agencies to adopt a broad range of new implementing rules and regulations and
prepare numerous studies and reports for Congress.