HR Block 2013 Annual Report Download - page 74

H&R Block 2013 Form 10-K 67
NOTE 9: LONG-TERM DEBT
The components of long-term debt are as follows:
(in 000s)
As of April 30, 2013 2012
Senior Notes, 5.500%, due November 2022 $ 497,330 $ —
Senior Notes, 5.125%, due October 2014 399,648 399,412
Capital lease obligations 9,702 10,393
Senior Notes, 7.875%, due January 2013 —599,913
Acquisition obligation, due June 2012 —30,831
906,680 1,040,549
Less: Current portion (722)(631,434)
$ 905,958 $409,115
On October 25, 2012, we issued $500.0 million principal amount of our 5.50% Senior Notes due 2022 for aggregate
proceeds of $497.2 million. The notes bear interest at 5.50% per annum, subject to adjustment based upon our credit
ratings. Interest is payable on May 1 and November 1 of each year beginning on May 1, 2013 until the stated maturity
date of November 1, 2022. The notes were issued by our wholly-owned subsidiary, Block Financial LLC (Block
Financial), and were fully and unconditionally guaranteed by H&R Block, Inc. The notes and the guarantee are senior
unsecured obligations of Block Financial and H&R Block, Inc. We may redeem some or all of the notes, at our option,
at any time at specified prices, and we must offer to repurchase the notes upon a change in control. The indenture
governing the notes, which also governs our 5.125% Senior Notes due 2014, does not contain any financial covenants
and contains only limited restrictive covenants regarding our ability to merge with another entity, convey, transfer or
lease substantially all of our assets, or incur liens, in each case, subject to certain exceptions.
On October 25, 2012, we provided notice to the trustee of our intention to redeem the entire $600.0 million aggregate
principal amount of our 7.875% Senior Notes that were due to mature in January 2013. The redemption settled on
November 26, 2012 for an aggregate price of $623.0 million, which included full payment of principal, a make-whole
premium of $5.8 million and interest accrued up to the redemption date of $17.2 million. Proceeds of the issuance of
our 5.50% Senior Notes, together with cash balances on hand, were used to redeem the 7.875% Senior Notes. We
recognized a loss on the extinguishment of this debt of $5.8 million in fiscal year 2013, which primarily represents the
interest that would have been paid on these notes if they had not been redeemed prior to maturity. This loss is included
in other income, net on our consolidated statements of income.
In August 2012, we terminated our previous unsecured committed line of credit agreement and we entered into a
new five-year, $1.5 billion unsecured committed line of credit governed by a Credit and Guarantee Agreement (2012
CLOC). Funds available under the 2012 CLOC may be used for general corporate purposes or for working capital
needs. The 2012 CLOC bears interest at an annual rate of LIBOR plus an applicable rate ranging from 0.750% to 1.45%
or PRIME plus an applicable rate ranging from 0.000% to 0.450% (depending on the type of borrowing and our then
current credit ratings) and includes an annual facility fee ranging from 0.125% to 0.300% of the committed amounts
(also depending on our then current credit ratings). The 2012 CLOC is subject to various conditions, triggers, events
or occurrences that could result in earlier termination and contains customary representations, warranties, covenants
and events of default, including, without limitation: (1) a covenant requiring the Company to maintain a debt-to-EBITDA
ratio calculated on a consolidated basis of no greater than (a) 3.50 for the fiscal quarters ending on April 30, July 31,
and October 31 of each year and (b) 3.75 for the fiscal quarter ending on January 31 of each year; (2) a covenant
requiring us to maintain an interest coverage (EBITDA-to-interest expense) ratio calculated on a consolidated basis of
no less than 2.50 as of the last date of any fiscal quarter; and (3) covenants restricting our ability to incur additional
debt, incur liens, merge or consolidate with other companies, sell or dispose of their respective assets (including equity
interests), liquidate or dissolve, make investments, loans, advances, guarantees and acquisitions, and engage in certain
transactions with affiliates or certain restrictive agreements. The 2012 CLOC includes provisions that allow for the
issuance of equity which would be added to EBITDA in determining compliance with the financial covenant calculations
as a separate and additional means to avoid a shortfall. We were in compliance with these requirements at April 30,
2013. We had no balances outstanding under the 2012 CLOC at April 30, 2013; however, we may borrow amounts