HR Block 2016 Annual Report Download - page 39

H&R Block, Inc. | 2016 Form 10-K 31
Capital Investment. Our business is not capital intensive. Capital expenditures totaled $99.9 million and $123.2
million in fiscal years 2016 and 2015, respectively. Our capital expenditures relate primarily to recurring improvements
to retail offices, as well as investments in computers, software and related assets. We expended net cash totaling
$88.8 million and $113.3 million in fiscal years 2016 and 2015 in connection with acquired businesses. We routinely
acquire competitor tax businesses and franchisees, and recurring capital allocated to acquisitions consists primarily
of this activity. In fiscal year 2014, we also acquired the assets, primarily purchased technology, of a business for $30.3
million.
FINANCING RESOURCES – On September 25, 2015, we issued $650.0 million of 4.125% Senior Notes due October
1, 2020, and $350.0 million of 5.250% Senior Notes due October 1, 2025. Proceeds of these Senior Notes, and cash
on hand, were used to repurchase shares, as discussed in Item 8, note 10 to the consolidated financial statements.
Our new 2015 CLOC has capacity up to $2.0 billion, and is scheduled to expire in September 2020. We intend to
borrow amounts under the 2015 CLOC from time to time, rather than issuing commercial paper, to support our working
capital needs or for other general corporate purposes. As of April 30, 2016, amounts available to borrow under the
2015 CLOC were limited by the debt-to-EBITDA covenant in the 2015 CLOC Agreement to approximately $1.2 billion,
however, our cash needs at April 30 generally do not require us to borrow on our CLOC at that time. We had no
outstanding balance under the 2015 CLOC as of April 30, 2016. See Item 8, note 8 to the consolidated financial
statements for discussion of the Senior Notes and our 2015 CLOC.
Our 5.125% Senior Notes with a principal amount of $400 million matured in October 2014 and, utilizing available
cash on hand, we repaid them according to their terms.
The following table provides ratings for debt issued by Block Financial as of April 30, 2016 and 2015:
As of April 30, 2016 April 30, 2015
Short-term Long-term Outlook Short-term Long-term Outlook
Moody's P-3 Baa3 Stable P-2 Baa2 Stable
S&P (1) A-2 BBB Stable A-2 BBB Negative
(1) Outlook of Negative effective June 10, 2016.
CASH AND INVESTMENT SECURITIES – As of April 30, 2016, we held cash and cash equivalents of $896.8 million,
including $104.5 million held by our foreign subsidiaries.
As discussed above, we liquidated the AFS securities previously held by HRB Bank in connection with the closing
of the P&A Transaction on August 31, 2015.
Foreign Operations. Seasonal borrowing needs of our Canadian operations are typically funded by our U.S.
operations. To mitigate foreign currency exchange rate risk, we sometimes enter into foreign exchange forward
contracts. There were no forward contracts outstanding as of April 30, 2016.
As of April 30, 2016, our Canadian operations had repaid their U.S. dollar denominated borrowings owed to various
U.S. subsidiaries. Non-borrowed funds would have to be repatriated to be available to fund domestic operations, and
in certain circumstances this would trigger additional income taxes on those amounts. We do not currently intend to
repatriate any non-borrowed funds held by our foreign subsidiaries.
The impact of changes in foreign exchange rates during the period on our international cash balances resulted in
a decrease of $10.6 million during fiscal year 2016 compared to decreases of $10.0 million and $17.6 million in fiscal
years 2015 and 2014, respectively. This change resulted primarily from a decline in Canadian exchange rates.