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74 H&R Block 2013 Form 10-K
A summary of nonvested shares and nonvested share units for the year ended April 30, 2013, is as follows:
(shares in 000s)
Shares Weighted–Average
Grant Date Fair Value
Outstanding, beginning of the year 1,454 $15.10
Granted 1,047 14.38
Released (446)15.57
Forfeited (249)14.59
Outstanding, end of the year 1,806 $14.64
The total fair value of shares and units vesting during fiscal years 2013, 2012 and 2011 was $6.9 million, $11.9
million and $13.0 million, respectively. Upon the grant of nonvested shares and nonvested share units, unearned
compensation cost is recorded as an offset to additional paid-in capital and is amortized as compensation expense over
the vesting period. As of April 30, 2013, we had $14.7 million of total unrecognized compensation cost related to these
shares. This cost is expected to be recognized over a weighted-average period of two years. Nonvested shares were not
granted during fiscal years 2013 or 2012.
A summary of performance-based nonvested share units for the year ended April 30, 2013, is as follows:
(shares in 000s)
Shares Weighted–Average
Grant Date Fair Value
Outstanding, beginning of the year 187 $17.36
Granted 513 16.72
Released (17)16.89
Forfeited (25)16.72
Outstanding, end of the year 658 $16.89
The total fair value of performance-based share units vesting during fiscal year 2013 was $0.3 million, compared
to zero in fiscal years 2012 and 2011. Upon the grant of performance-based nonvested share units, unearned
compensation cost is recorded as an offset to additional paid-in capital and is amortized as compensation expense over
the vesting period. As of April 30, 2013, we had $7.0 million of total unrecognized compensation cost related to these
units. This cost is expected to be recognized over a weighted-average period of two years.
For performance-based units, the number of units to be earned will depend on the performance against one of the
following metrics, as applicable to the grant: (1) H&R Block, Inc.'s achievement of specified earnings before interest,
taxes, depreciation and amortization (EBITDA) and revenue targets and H&R Block, Inc.'s total shareholder return
(TSR) ranked against that of other companies that are included in the Standard & Poor's 500 Index during the three-
year performance period; (2) H&R Block, Inc.'s achievement of specified average return on equity and H&R Block,
Inc.'s stock price during the three-year performance period; or (3) H&R Block, Inc.'s achievement of specified earnings
on cumulative three-year pretax earnings from continuing operations and H&R Block, Inc.'s total TSR ranked against
that of other companies included in the Standard & Poor's 500 Index during the three-year performance period.
Compensation expense for performance-based shares is initially estimated based on target performance and is adjusted
as appropriate through the performance period. Performance-based units cliff vest three years from the date of grant.
Employees who are of retirement age or early retirement age (age 60, or age 55 with five years of service) before the
end of the three-year performance period who retire at least one year after the grant date may be eligible to vest in a
pro rata portion of their performance-based units, if the market condition for the award is satisfied. Satisfaction of the
market condition is determined at the end of the three-year performance period. Shares are not distributed until the end
of the three-year performance period.
We utilize the Monte Carlo valuation model to value performance-based nonvested share units on the grant date.
We typically estimate the expected volatility using historical volatility for H&R Block, Inc. and selected comparable
companies. The dividend yield is calculated based on the current dividend and the market price of our common stock
on the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve in effect on the grant
date. Both expected volatility and the risk-free interest rate are based on a period that approximates the expected term.