HR Block 2014 Annual Report Download - page 39

H&R Block, Inc. | 2014 Form 10-K 31
make judgments about future matters that are not certain, including projections of future taxable income and
evaluating potential tax-planning strategies.
Assumptions and Approach Used. Our deferred tax assets include tax loss carry-forwards, and have in the past
included capital loss carry-forwards, which in some cases have been reduced by a valuation allowance. We have
considered taxable income in carry-back periods, historical and forecasted earnings, future taxable income, the mix
of earnings in the jurisdictions in which we operate, and tax planning strategies in determining the need for a valuation
allowance and the estimated amount of these deferred tax assets that will more likely than not be realized.
Sensitivity of Estimate to Change. To the extent that actual results differ from our current assumptions, valuation
allowances for deferred tax assets will increase or decrease. In the event we determine that we could not realize all
or part of our deferred tax assets in the future, an adjustment would be charged to earnings in the period in which
we make such determination. Likewise, if we later determine it is more likely than not that we could realize the deferred
tax assets, we would reverse the applicable portion of the previously provided valuation allowance.
As of April 30, 2014, valuation allowances for our deferred tax assets totaled $19 million. As a result of changes in
deferred tax valuation allowances, our effective tax rate increased 1.5% in fiscal year 2014 and decreased 1.0% in
fiscal year 2013.
NEW ACCOUNTING PRONOUNCEMENTS
See Item 8, note 1 to the consolidated financial statements for a discussion of recently issued accounting
pronouncements.
FINANCIAL CONDITION
These comments should be read in conjunction with the consolidated balance sheets and consolidated statements
of cash flows included in Item 8.
CAPITAL RESOURCES AND LIQUIDITY –
OVERVIEW – Our primary sources of capital and liquidity include cash from operations (including changes in working
capital) and issuances of debt. We use capital primarily to fund working capital, service and repay debt, pay dividends,
repurchase shares of our common stock, and acquire businesses.
Our operations are highly seasonal and substantially all of our revenues and cash flow are generated during the
period from February through April. Therefore, we require the use of cash to fund operating losses from May through
January, and typically rely on available cash balances from the prior tax season and short-term borrowings to meet
our off-season liquidity needs.
Given the likely availability of a number of liquidity options discussed herein, including borrowing capacity under
the 2012 CLOC and the issuance of commercial paper, we believe that, in the absence of any unexpected developments,
our existing sources of capital as of April 30, 2014 are sufficient to meet our operating needs.
DISCUSSION OF CONSOLIDATED STATEMENTS OF CASH FLOWS – The following table summarizes our statements
of cash flows for fiscal years 2014, 2013 and 2012. See Item 8 for the complete consolidated statements of cash flows
for these periods.
(in 000s)
Year ended April 30, 2014 2013 2012
Net cash provided by (used in):
Operating activities $ 809,581 $ 497,108 $ 362,049
Investing activities 10,690 (110,937) 351,867
Financing activities (364,930) (584,541) (445,062)
Effects of exchange rate changes on cash (17,618) 1,620 (2,364)
Net change in cash and cash equivalents $ 437,723 $ (196,750) $ 266,490