HR Block 2013 Annual Report Download - page 79

72 H&R Block 2013 Form 10-K
benefits of $5.8 million, $5.4 million and $5.4 million, respectively. Stock-based compensation expense of our
continuing operations totaled $15.3 million, $14.2 million and $10.5 million in fiscal years 2013, 2012 and 2011,
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 $0.4 million, $0.1 million and $0.5 million as cash
inflows from financing activities for fiscal years 2013, 2012 and 2011, respectively. We realized tax benefits of $5.0
million, $4.4 million and $4.4 million in fiscal years 2013, 2012 and 2011, respectively.
As of April 30, 2013, we had 11.3 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.
We measure the fair value of options on the grant date or modification date using the Black-Scholes-Merton (Black-
Scholes) option valuation model based upon the expected term of the options. We measure the fair value of nonvested
shares and share units based on the closing price of our common stock on the grant date, discounted for non-receipt of
dividends, as necessary. We measure the fair value of performance-based share units based on the Monte Carlo valuation
model, taking into account as necessary those provisions of the performance-based nonvested share units that are
characterized as market conditions.
We generally expense the grant-date fair value, net of estimated forfeitures, over the vesting period on a straight-
line basis. We expense awards to employees who are of retirement age or early retirement age (as defined in the plans),
or who reach retirement age or early retirement age before the end of the service period of the awards, over the longer
of one year from the grant date or the date upon which the employees reach retirement age or early retirement age, as
applicable.
Our 2013 Long Term Incentive Plan (2013 Plan) became effective January 1, 2013. The 2013 Plan replaced our
2003 Long-Term Executive Compensation Plan (2003 Plan), which terminated effective December 31, 2012, except
for outstanding awards thereunder. Like the 2003 Plan, the 2013 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. These awards entitle the holder to receive or purchase shares of common stock as the awards vest.
Options, nonvested shares and nonvested share units typically vest based upon service over a three-year or four-year
period with a portion vesting each year. Performance-based nonvested share units typically cliff vest at the end of a
three-year period based upon satisfaction of both service-based and performance-based requirements. For grants made
prior to April 2013, nonvested share units did not receive dividends or dividend equivalents. For grants made beginning
in April 2013, nonvested share units receive cumulative dividend equivalents at the time of distribution. Performance-
based nonvested share units receive cumulative dividend equivalents at the time of distribution. We grant options from
the 2013 Plan or 2003 Plan at a price equal to the fair market value of our common stock on the grant date. Awards
granted under the 2013 Plan or 2003 Plan have a maximum contractual term of ten years.
Our 2008 Deferred Stock Unit Plan for Outside Directors (DSU Plan) provides vested stock units that are settled
after the director separates from services as a director of the Company. The number of deferred stock units credited to
an outside director's account pursuant to an award is determined by dividing the dollar amount of the award by the
average current market value per share of common stock for the ten consecutive trading dates ending on the date the
deferred stock units are granted to the outside directors. Each deferred stock unit granted is vested upon award and the
settlement of shares occurs on the earlier of six months after the director's separation of service from the Board of
Directors, or within 90 days after the director's death. The vested stock units receive dividend equivalents prior to
settlement, which are reinvested and settled in shares at the time of settlement. We measure the fair value of the deferred
stock units based on the closing price of our common stock on the grant date. The DSU Plan replaced the 1989 Stock
Option Plan for Outside Directors, which was terminated effective June 11, 2008 except for outstanding awards
thereunder. After January 1, 2013 awards of deferred stock units will be granted under the 2013 Plan. No deferred stock
units were granted under the 2013 Plan during the 2013 fiscal year.
Our 2000 Employee Stock Purchase Plan (ESPP) provides employees the option to purchase shares of our common
stock through payroll deductions. The purchase price of the stock is 85% of the fair market value of our common stock
on the last trading day of the Option Period. The Option Periods are six-month periods beginning on January 1 and
July 1 each year. We measure the fair value of options on the grant date utilizing the Black-Scholes option valuation