18. Condensed Consolidating Financial Statements

Block Financial LLC (Block Financial) is an indirect, wholly-owned subsidiary of the Company. Block Financial is the Issuer and the Company is the Guarantor of the Senior Notes issued on October 25, 2012, January 11, 2008 and October 26, 2004, our 2012 CLOC, and other indebtedness issued from time to time. These condensed consolidating financial statements have been prepared using the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Company’s investment in subsidiaries account. The elimination entries eliminate investments in subsidiaries, related stockholders’ equity and other intercompany balances and transactions.


Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)										(in 000s)
Three months ended	H&R Block, Inc.		Block Financial		Other				Consolidated
October 31, 2012	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Total revenues	$	-	$	17,986	$	119,299	$	(22)	$	137,263
Cost of revenues		-		33,871		178,162		(22)		212,011
Selling, general and administrative		-		7,321		83,006		-		90,327
Total expenses		-		41,192		261,168		(22)		302,338
Operating loss		-		(23,206)		(141,869)		-		(165,075)
Other income (expense), net		(162,288)		1,186		1,601		162,288		2,787
Loss from continuing operations before tax benefit		(162,288)		(22,020)		(140,268)		162,288		(162,288)
Income tax benefit		(61,089)		(6,703)		(54,386)		61,089		(61,089)
Net loss from continuing operations		(101,199)		(15,317)		(85,882)		101,199		(101,199)
Net loss from discontinued operations		(4,044)		(3,909)		(135)		4,044		(4,044)
Net loss from continuing operations		(105,243)		(19,226)		(86,017)		105,243		(105,243)
Other comprehensive income		1,335		119		1,216		(1,335)		1,335
Comprehensive loss	$	(103,908)	$	(19,107)	$	(84,801)	$	103,908	$	(103,908)


Three months ended	H&R Block, Inc.		Block Financial		Other				Consolidated
October 31, 2011	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Total revenues	$	-	$	17,560	$	111,634	$	-	$	129,194
Cost of revenues		-		36,978		190,635		-		227,613
Selling, general and administrative		-		6,444		101,568		-		108,012
Total expenses		-		43,422		292,203		-		335,625
Operating loss		-		(25,862)		(180,569)		-		(206,431)
Other income (expense), net		(203,929)		3,065		(563)		203,929		2,502
Loss from continuing operations before tax benefit		(203,929)		(22,797)		(181,132)		203,929		(203,929)
Income tax benefit		(80,916)		(15,063)		(65,853)		80,916		(80,916)
Net loss from continuing operations		(123,013)		(7,734)		(115,279)		123,013		(123,013)
Net income (loss) from discontinued operations		(18,711)		(19,066)		355		18,711		(18,711)
Net loss		(141,724)		(26,800)		(114,924)		141,724		(141,724)
Other comprehensive income (loss)		(8,333)		843		(9,176)		8,333		(8,333)
Comprehensive loss	$	(150,057)	$	(25,957)	$	(124,100)	$	150,057	$	(150,057)


Six months ended	H&R Block, Inc.		Block Financial		Other				Consolidated
October 31, 2012	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Total revenues	$	-	$	39,915	$	193,915	$	(78)	$	233,752
Cost of revenues		-		68,813		336,700		(78)		405,435
Selling, general and administrative		-		14,961		150,844		-		165,805
Total expenses		-		83,774		487,544		(78)		571,240
Operating loss		-		(43,859)		(293,629)		-		(337,488)
Other income (expense), net		(331,557)		2,510		3,421		331,557		5,931
Loss from continuing operations before tax benefit		(331,557)		(41,349)		(290,208)		331,557		(331,557)
Income tax benefit		(124,708)		(14,958)		(109,750)		124,708		(124,708)
Net loss from continuing operations		(206,849)		(26,391)		(180,458)		206,849		(206,849)
Net income (loss) from discontinued operations		(5,835)		(6,020)		185		5,835		(5,835)
Net loss		(212,684)		(32,411)		(180,273)		212,684		(212,684)
Other comprehensive income (loss)		(3,460)		254		(3,714)		3,460		(3,460)
Comprehensive loss	$	(216,144)	$	(32,157)	$	(183,987)	$	216,144	$	(216,144)


Six months ended	H&R Block, Inc.		Block Financial		Other				Consolidated
October 31, 2011	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Total revenues	$	-	$	39,333	$	190,484	$	-	$	229,817
Cost of revenues		-		74,640		365,557		-		440,197
Selling, general and administrative		-		14,339		186,326		-		200,665
Total expenses		-		88,979		551,883		-		640,862
Operating loss		-		(49,646)		(361,399)		-		(411,045)
Other income (expense), net		(404,530)		6,346		169		404,530		6,515
Loss from continuing operations before tax benefit		(404,530)		(43,300)		(361,230)		404,530		(404,530)
Income tax benefit		(162,362)		(16,913)		(145,449)		162,362		(162,362)
Net loss from continuing operations		(242,168)		(26,387)		(215,781)		242,168		(242,168)
Net loss from discontinued operations		(74,654)		(20,703)		(53,951)		74,654		(74,654)
Net loss		(316,822)		(47,090)		(269,732)		316,822		(316,822)
Other comprehensive income (loss)		(6,874)		1,765		(8,639)		6,874		(6,874)
Comprehensive loss	$	(323,696)	$	(45,325)	$	(278,371)	$	323,696	$	(323,696)


Condensed Consolidating Balance Sheets										(in 000s)
	H&R Block, Inc.		Block Financial		Other				Consolidated
As of October 31, 2012	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Cash & cash equivalents	$	-	$	491,772	$	769,995	$	(866)	$	1,260,901
Cash & cash equivalents – restricted		-		696		37,971		-		38,667
Receivables, net		-		98,007		26,504		-		124,511
Mortgage loans held for investment		-		370,850		-		-		370,850
Intangible assets and goodwill, net		-		-		696,788		-		696,788
Investments in subsidiaries		2,906,582		641		19		(2,906,582)		660
Other assets		9,357		611,904		783,092		-		1,404,353
Total assets	$	2,915,939	$	1,573,870	$	2,314,369	$	(2,907,448)	$	3,896,730

Customer deposits	$	-	$	790,972	$	-	$	(866)	$	790,106
Long-term debt		-		1,496,695		10,108		-		1,506,803
Other liabilities		308		284,042		622,538		-		906,888
Net intercompany advances		2,222,698		(689,702)		(1,532,996)		-		-
Stockholders’ equity		692,933		(308,137)		3,214,719		(2,906,582)		692,933
Total liabilities and stockholders’ equity	$	2,915,939	$	1,573,870	$	2,314,369	$	(2,907,448)	$	3,896,730


	H&R Block, Inc.		Block Financial		Other				Consolidated
As of April 30, 2012	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Cash & cash equivalents	$	-	$	515,147	$	1,430,030	$	(843)	$	1,944,334
Cash & cash equivalents – restricted		-		8,814		39,286		-		48,100
Receivables, net		-		90,755		103,103		-		193,858
Mortgage loans held for investment, net		-		406,201		-		-		406,201
Intangible assets and goodwill, net		-		-		692,017		-		692,017
Investments in subsidiaries		2,525,473		-		715		(2,525,473)		715
Other assets		8,887		623,032		732,423		-		1,364,342
Total assets	$	2,534,360	$	1,643,949	$	2,997,574	$	(2,526,316)	$	4,649,567
Customer deposits	$	-	$	828,392	$	-	$	(843)	$	827,549
Long-term debt		-		999,325		41,224		-		1,040,549
Other liabilities		22,690		(33,609)		1,466,496		-		1,455,577
Net intercompany advances		1,185,778		62,734		(1,248,512)		-		-
Stockholders’ equity		1,325,892		(212,893)		2,738,366		(2,525,473)		1,325,892
Total liabilities and stockholders’ equity	$	2,534,360	$	1,643,949	$	2,997,574	$	(2,526,316)	$	4,649,567



Condensed Consolidating Statements of Cash Flows										(in 000s)
Six months ended	H&R Block, Inc.		Block Financial		Other				Consolidated
October 31, 2012	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Net cash provided by (used in) operating activities:	$	(367)	$	2,026	$	(568,695)	$	-	$	(567,036)
Cash flows from investing:
Purchases of AFS securities		-		(67,474)		-		-		(67,474)
Maturities of AFS securities		-		53,064		34		-		53,098
Mortgage loans held for investment, net		-		23,608		-		-		23,608
Purchases of property & equipment, net		-		(912)		(59,808)		-		(60,720)
Payments made for acquisitions of businesses and intangibles, net		-		-		(10,442)		-		(10,442)
Proceeds from sales of businesses, net		-		-		943		-		943
Loans made to franchisees		-		(20,670)		-		-		(20,670)
Repayments from franchisees		-		8,303		-		-		8,303
Net intercompany advances		447,426		-		-		(447,426)		-
Other, net		-		5,023		4,252		-		9,275
Net cash provided by (used in) investing activities		447,426		942		(65,021)		(447,426)		(64,079)
Cash flows from financing:
Repayments of long-term debt		-		-		(30,831)		-		(30,831)
Proceeds from long-term debt		-		497,185		-		-		497,185
Customer banking deposits, net		-		(37,890)		-		(23)		(37,913)
Dividends paid		(108,428)		-		-		-		(108,428)
Repurchase of common stock		(339,919)		-		-		-		(339,919)
Proceeds from exercise of stock options, net		1,288		-		-		-		1,288
Net intercompany advances		-		(475,147)		27,721		447,426		-
Other, net		-		(10,491)		(22,513)		-		(33,004)
Net cash used in financing activities		(447,059)		(26,343)		(25,623)		447,403		(51,622)
Effects of exchange rates on cash		-		-		(696)		-		(696)
Net decrease in cash		-		(23,375)		(660,035)		(23)		(683,433)
Cash – beginning of period		-		515,147		1,430,030		(843)		1,944,334
Cash – end of period	$	-	$	491,772	$	769,995	$	(866)	$	1,260,901


Six months ended	H&R Block, Inc.		Block Financial		Other				Consolidated
October 31, 2011	(Guarantor)		(Issuer)		Subsidiaries		Eliminations		H&R Block

Net cash provided by (used in) operating activities:	$	5,821	$	(40,451)	$	(547,998)	$	-	$	(582,628)
Cash flows from investing:
Purchases of AFS securities		-		(155,159)		-		-		(155,159)
Maturities of AFS securities		-		22,199		1,050		-		23,249
Mortgage loans held for investment, net		-		22,978		-		-		22,978
Purchases of property & equipment, net		-		(94)		(40,416)		-		(40,510)
Payments made for acquisitions of businesses and intangibles, net		-		-		(8,164)		-		(8,164)
Proceeds from sales of businesses, net		-		-		37,036		-		37,036
Loans made to franchisees		-		(27,682)		-		-		(27,682)
Repayments from franchisees		-		7,447		-		-		7,447
Net intercompany advances		266,274		-		-		(266,274)		-
Other, net		-		6,101		7,584		-		13,685
Net cash provided by (used in) investing activities		266,274		(124,210)		(2,910)		(266,274)		(127,120)
Cash flows from financing:
Repayments of commercial paper		-		(37,989)		-		-		(37,989)
Proceeds from commercial paper		-		77,979		-		-		77,979
Customer banking deposits, net		-		(129,055)		-		(230)		(129,285)
Dividends paid		(91,446)		-		-		-		(91,446)
Repurchase of common stock		(180,222)		-		-		-		(180,222)
Proceeds from exercise of stock options, net		(430)		-		-		-		(430)
Net intercompany advances		-		17,228		(283,502)		266,274		-
Other, net		3		952		(29,012)		-		(28,057)
Net cash used in financing activities		(272,095)		(70,885)		(312,514)		266,044		(389,450)
Effects of exchange rates on cash		-		-		(6,035)		-		(6,035)
Net decrease in cash		-		(235,546)		(869,457)		(230)		(1,105,233)
Cash – beginning of period		-		616,238		1,061,656		(50)		1,677,844
Cash – end of period	$	-	$	380,692	$	192,199	$	(280)	$	572,611