(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended July 31, 2013 | ||
OR | ||
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
MISSOURI | 44-0607856 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Consolidated Balance Sheets | ||
As of July 31, 2013, July 31, 2012 and April 30, 2013 | ||
Consolidated Statements of Operations and Comprehensive Loss | ||
Three months ended July 31, 2013 and 2012 | ||
Condensed Consolidated Statements of Cash Flows | ||
Three months ended July 31, 2013 and 2012 | ||
Notes to Consolidated Financial Statements | ||
Legal Proceedings | ||
Risk Factors | ||
Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Exhibits | ||
ITEM 1. | FINANCIAL STATEMENTS |
CONSOLIDATED BALANCE SHEETS | (in 000s, except share and per share amounts) | |||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | |||||||||
(unaudited) | (unaudited) | |||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 1,163,876 | $ | 939,871 | $ | 1,747,584 | ||||||
Cash and cash equivalents — restricted | 55,477 | 43,109 | 117,837 | |||||||||
Receivables, less allowance for doubtful accounts of $52,606, $43,477 and $50,399 | 121,309 | 116,357 | 206,835 | |||||||||
Prepaid expenses and other current assets | 356,662 | 318,262 | 390,087 | |||||||||
Mortgage loans held for sale | 7,608 | — | — | |||||||||
Total current assets | 1,704,932 | 1,417,599 | 2,462,343 | |||||||||
Mortgage loans held for investment, less allowance for loan losses of $15,514, $22,185 and $14,314 | 309,681 | 386,759 | 338,789 | |||||||||
Investments in available-for-sale securities | 487,033 | 380,765 | 486,876 | |||||||||
Property and equipment, at cost less accumulated depreciation and amortization of $432,681, $542,144 and $420,318 | 286,584 | 242,585 | 267,880 | |||||||||
Intangible assets, net | 280,455 | 271,533 | 284,439 | |||||||||
Goodwill | 435,667 | 431,101 | 434,782 | |||||||||
Other assets | 258,536 | 463,935 | 262,670 | |||||||||
Total assets | $ | 3,762,888 | $ | 3,594,277 | $ | 4,537,779 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
LIABILITIES: | ||||||||||||
Customer banking deposits | $ | 757,929 | $ | 648,378 | $ | 936,464 | ||||||
Accounts payable, accrued expenses and other current liabilities | 443,065 | 414,604 | 523,921 | |||||||||
Accrued salaries, wages and payroll taxes | 32,926 | 35,234 | 134,970 | |||||||||
Accrued income taxes | 215,834 | 278,539 | 416,128 | |||||||||
Current portion of long-term debt | 730 | 600,642 | 722 | |||||||||
Total current liabilities | 1,450,484 | 1,977,397 | 2,012,205 | |||||||||
Long-term debt | 905,902 | 408,992 | 905,958 | |||||||||
Other noncurrent liabilities | 301,187 | 362,215 | 356,069 | |||||||||
Total liabilities | 2,657,573 | 2,748,604 | 3,274,232 | |||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Common stock, no par, stated value $.01 per share, 800,000,000 shares authorized, shares issued of 316,628,110 | 3,166 | 3,166 | 3,166 | |||||||||
Convertible preferred stock, no par, stated value $0.01 per share, 500,000 shares authorized | — | — | — | |||||||||
Additional paid-in capital | 753,209 | 744,616 | 752,483 | |||||||||
Accumulated other comprehensive income (loss) | (257 | ) | 7,350 | 10,550 | ||||||||
Retained earnings | 1,163,651 | 955,873 | 1,333,445 | |||||||||
Less treasury shares, at cost | (814,454 | ) | (865,332 | ) | (836,097 | ) | ||||||
Total stockholders’ equity | 1,105,315 | 845,673 | 1,263,547 | |||||||||
Total liabilities and stockholders’ equity | $ | 3,762,888 | $ | 3,594,277 | $ | 4,537,779 | ||||||
H&R Block Q1 FY2014 Form 10-Q | 1 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | (unaudited, in 000s, except per share amounts) | |||||||
Three months ended July 31, | 2013 | 2012 | ||||||
REVENUES: | ||||||||
Service revenues | $ | 107,800 | $ | 79,896 | ||||
Product and other revenues | 8,198 | 6,720 | ||||||
Interest income | 11,197 | 9,873 | ||||||
127,195 | 96,489 | |||||||
OPERATING EXPENSES: | ||||||||
Cost of revenues: | ||||||||
Compensation and benefits | 46,312 | 39,585 | ||||||
Occupancy and equipment | 78,736 | 79,951 | ||||||
Provision for bad debt and loan losses | 11,491 | 4,645 | ||||||
Interest | 14,446 | 22,077 | ||||||
Depreciation and amortization of property and equipment | 16,804 | 14,534 | ||||||
Other | 42,264 | 32,632 | ||||||
210,053 | 193,424 | |||||||
Selling, general and administrative | 96,697 | 75,478 | ||||||
306,750 | 268,902 | |||||||
Operating loss | (179,555 | ) | (172,413 | ) | ||||
Other income (expense), net | (4,939 | ) | 3,144 | |||||
Loss from continuing operations before income tax benefit | (184,494 | ) | (169,269 | ) | ||||
Income tax benefit | (71,224 | ) | (63,619 | ) | ||||
Net loss from continuing operations | (113,270 | ) | (105,650 | ) | ||||
Net loss from discontinued operations | (1,917 | ) | (1,791 | ) | ||||
NET LOSS | $ | (115,187 | ) | $ | (107,441 | ) | ||
BASIC AND DILUTED LOSS PER SHARE: | ||||||||
Continuing operations | $ | (0.42 | ) | $ | (0.38 | ) | ||
Discontinued operations | — | (0.01 | ) | |||||
Consolidated | $ | (0.42 | ) | $ | (0.39 | ) | ||
DIVIDENDS PER SHARE | $ | 0.20 | $ | 0.20 | ||||
COMPREHENSIVE INCOME (LOSS): | ||||||||
Net loss | $ | (115,187 | ) | $ | (107,441 | ) | ||
Unrealized gains (losses) on available-for-sale securities, net of taxes: | ||||||||
Unrealized holding gains (losses) arising during the period, net of taxes (benefit) of ($5,065) and $152 | (7,715 | ) | 170 | |||||
Reclassification adjustment for gains included in income, net of taxes | — | — | ||||||
Change in foreign currency translation adjustments | (3,092 | ) | (4,965 | ) | ||||
Other comprehensive loss | (10,807 | ) | (4,795 | ) | ||||
Comprehensive loss | $ | (125,994 | ) | $ | (112,236 | ) | ||
2 | H&R Block Q1 FY2014 Form 10-Q |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | (unaudited, in 000s) | |||||||
Three months ended July 31, | 2013 | 2012 | ||||||
NET CASH USED IN OPERATING ACTIVITIES | $ | (318,742 | ) | $ | (373,140 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of available-for-sale securities | (45,158 | ) | (28,990 | ) | ||||
Maturities of and payments received on available-for-sale securities | 32,061 | 21,129 | ||||||
Principal payments on mortgage loans held for investment, net | 11,707 | 12,652 | ||||||
Purchases of property and equipment | (34,386 | ) | (13,273 | ) | ||||
Franchise loans: | ||||||||
Loans funded | (6,657 | ) | (5,062 | ) | ||||
Payments received | 7,164 | 5,154 | ||||||
Other, net | 6,179 | 1,675 | ||||||
Net cash used in investing activities | (29,090 | ) | (6,715 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayments of long-term debt | — | (30,831 | ) | |||||
Customer banking deposits, net | (179,364 | ) | (179,519 | ) | ||||
Dividends paid | (54,550 | ) | (54,201 | ) | ||||
Repurchase of common stock, including shares surrendered | (4,201 | ) | (339,088 | ) | ||||
Proceeds from exercise of stock options | 21,953 | 468 | ||||||
Other, net | (13,093 | ) | (19,939 | ) | ||||
Net cash used in financing activities | (229,255 | ) | (623,110 | ) | ||||
Effects of exchange rates on cash | (6,621 | ) | (1,498 | ) | ||||
Net decrease in cash and cash equivalents | (583,708 | ) | (1,004,463 | ) | ||||
Cash and cash equivalents at beginning of the period | 1,747,584 | 1,944,334 | ||||||
Cash and cash equivalents at end of the period | $ | 1,163,876 | $ | 939,871 | ||||
SUPPLEMENTARY CASH FLOW DATA: | ||||||||
Income taxes paid, net of refunds received | $ | 106,467 | $ | 19,747 | ||||
Interest paid on borrowings | 15,883 | 13,494 | ||||||
Interest paid on deposits | 640 | 1,336 | ||||||
Transfers of foreclosed loans to other assets | 2,100 | 3,074 | ||||||
Accrued additions to property and equipment | 8,048 | 7,107 | ||||||
Transfer of mortgage loans held for investment to held for sale | 7,608 | — | ||||||
H&R Block Q1 FY2014 Form 10-Q | 3 |
4 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s, except per share amounts) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Net loss from continuing operations attributable to shareholders | $ | (113,270 | ) | $ | (105,650 | ) | ||
Net loss allocated to participating securities | (62 | ) | (73 | ) | ||||
Net loss from continuing operations attributable to common shareholders | $ | (113,332 | ) | $ | (105,723 | ) | ||
Basic weighted average common shares | 273,080 | 277,155 | ||||||
Potential dilutive shares | — | — | ||||||
Dilutive weighted average common shares | 273,080 | 277,155 | ||||||
Loss per share from continuing operations attributable to common shareholders: | ||||||||
Basic | $ | (0.42 | ) | $ | (0.38 | ) | ||
Diluted | (0.42 | ) | (0.38 | ) |
H&R Block Q1 FY2014 Form 10-Q | 5 |
(in 000s) | ||||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | |||||||||
Loans to franchisees | $ | 64,041 | $ | 60,459 | $ | 65,413 | ||||||
Receivables for tax preparation and related fees | 37,547 | 35,194 | 49,356 | |||||||||
Canadian CashBack receivables | 2,412 | 6,601 | 47,658 | |||||||||
Emerald Advance lines of credit | 22,649 | 24,215 | 23,218 | |||||||||
Royalties from franchisees | 4,070 | 2,096 | 10,722 | |||||||||
Credit cards | 7,309 | — | 7,733 | |||||||||
Other | 35,887 | 31,269 | 53,134 | |||||||||
173,915 | 159,834 | 257,234 | ||||||||||
Allowance for doubtful accounts | (52,606 | ) | (43,477 | ) | (50,399 | ) | ||||||
$ | 121,309 | $ | 116,357 | $ | 206,835 | |||||||
(in 000s) | ||||||||||||||||
EAs | Loans to Franchisees | CashBack | Credit Cards | |||||||||||||
As of July 31, 2013: | ||||||||||||||||
Short-term | $ | 22,649 | $ | 64,041 | $ | 2,412 | $ | 7,309 | ||||||||
Long-term | 6,906 | 106,119 | — | 15,446 | ||||||||||||
$ | 29,555 | $ | 170,160 | $ | 2,412 | $ | 22,755 | |||||||||
As of July 31, 2012: | ||||||||||||||||
Short-term | $ | 24,215 | $ | 60,459 | $ | 6,601 | $ | — | ||||||||
Long-term | 11,689 | 112,810 | — | — | ||||||||||||
$ | 35,904 | $ | 173,269 | $ | 6,601 | $ | — | |||||||||
As of April 30, 2013: | ||||||||||||||||
Short-term | $ | 23,218 | $ | 65,413 | $ | 47,658 | $ | 7,733 | ||||||||
Long-term | 9,819 | 103,047 | — | 15,538 | ||||||||||||
$ | 33,037 | $ | 168,460 | $ | 47,658 | $ | 23,271 | |||||||||
6 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s) | ||||
Credit Quality Indicator – Year of origination: | ||||
2013 | $ | 8,657 | ||
2012 | 1,177 | |||
2011 | 2,083 | |||
2010 and prior | 6,297 | |||
Revolving loans | 11,341 | |||
$ | 29,555 | |||
(in 000s) | ||||
Tier 1 | $ | 5,127 | ||
Tier 2 | 9,532 | |||
Tier 3 | 2,815 | |||
Tier 4 | 5,281 | |||
$ | 22,755 | |||
(in 000s) | ||||
Current | $ | 13,740 | ||
Less than 30 days past due | 1,778 | |||
30 - 59 days past due | 1,262 | |||
60 - 89 days past due | 1,312 | |||
90 days or more past due | 4,663 | |||
$ | 22,755 | |||
H&R Block Q1 FY2014 Form 10-Q | 7 |
(in 000s) | ||||||||||||||||||||||||
EAs | Loans to Franchisees | CashBack | Credit Cards | All Other | Total | |||||||||||||||||||
Balance as of May 1, 2013 | $ | 7,390 | $ | — | $ | 2,769 | $ | 7,304 | $ | 40,240 | $ | 57,703 | ||||||||||||
Provision | — | — | 158 | 2,367 | 534 | 3,059 | ||||||||||||||||||
Charge-offs | — | — | (673 | ) | (2,523 | ) | (688 | ) | (3,884 | ) | ||||||||||||||
Balance as of July 31, 2013 | $ | 7,390 | $ | — | $ | 2,254 | $ | 7,148 | $ | 40,086 | $ | 56,878 | ||||||||||||
Balance as of May 1, 2012 | $ | 6,200 | $ | — | $ | 2,279 | $ | — | $ | 36,110 | $ | 44,589 | ||||||||||||
Provision | — | — | 225 | — | 72 | 297 | ||||||||||||||||||
Charge-offs | — | — | (972 | ) | — | (437 | ) | (1,409 | ) | |||||||||||||||
Balance as of July 31, 2012 | $ | 6,200 | $ | — | $ | 1,532 | $ | — | $ | 35,745 | $ | 43,477 | ||||||||||||
(dollars in 000s) | |||||||||||||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | ||||||||||||||||||
Amount | % of Total | Amount | % of Total | Amount | % of Total | ||||||||||||||||
Adjustable-rate loans | $ | 174,481 | 54 | % | $ | 222,474 | 55 | % | $ | 191,093 | 55 | % | |||||||||
Fixed-rate loans | 147,973 | 46 | % | 183,196 | 45 | % | 159,142 | 45 | % | ||||||||||||
322,454 | 100 | % | 405,670 | 100 | % | 350,235 | 100 | % | |||||||||||||
Unamortized deferred fees and costs | 2,741 | 3,274 | 2,868 | ||||||||||||||||||
Less: Allowance for loan losses | (15,514 | ) | (22,185 | ) | (14,314 | ) | |||||||||||||||
$ | 309,681 | $ | 386,759 | $ | 338,789 | ||||||||||||||||
8 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Balance at beginning of the period | $ | 14,314 | $ | 26,540 | ||||
Provision | 7,603 | 4,000 | ||||||
Recoveries | 767 | 1,186 | ||||||
Charge-offs | (7,170 | ) | (9,541 | ) | ||||
Balance at end of the period | $ | 15,514 | $ | 22,185 | ||||
(in 000s) | ||||||||||||||||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | |||||||||||||||||||||
Portfolio Balance | Related Allowance | Portfolio Balance | Related Allowance | Portfolio Balance | Related Allowance | |||||||||||||||||||
Pooled (less than 60 days past due) | $ | 186,082 | $ | 5,734 | $ | 238,999 | $ | 7,701 | $ | 207,319 | $ | 5,628 | ||||||||||||
Impaired: | ||||||||||||||||||||||||
Individually (TDRs) | 50,136 | 4,866 | 67,587 | 6,931 | 55,061 | 4,924 | ||||||||||||||||||
Individually (60 days or more past due) | 86,236 | 4,914 | 99,084 | 7,553 | 87,855 | 3,762 | ||||||||||||||||||
$ | 322,454 | $ | 15,514 | $ | 405,670 | $ | 22,185 | $ | 350,235 | $ | 14,314 | |||||||||||||
(dollars in 000s) | ||||||||||||||
Outstanding Principal Balance | Loan Loss Allowance | % 30+ Days Past Due | ||||||||||||
Amount | % of Principal | |||||||||||||
Purchased from SCC | $ | 183,551 | $ | 11,912 | 6.5 | % | 32.7 | % | ||||||
All other | 138,903 | 3,602 | 2.6 | % | 9.2 | % | ||||||||
$ | 322,454 | $ | 15,514 | 4.8 | % | 22.6 | % | |||||||
H&R Block Q1 FY2014 Form 10-Q | 9 |
(in 000s) | ||||||||||||
Credit Quality Indicators | Purchased from SCC | All Other | Total Portfolio | |||||||||
Occupancy status: | ||||||||||||
Owner occupied | $ | 134,582 | $ | 88,841 | $ | 223,423 | ||||||
Non-owner occupied | 48,969 | 50,062 | 99,031 | |||||||||
$ | 183,551 | $ | 138,903 | $ | 322,454 | |||||||
Documentation level: | ||||||||||||
Full documentation | $ | 60,826 | $ | 101,226 | $ | 162,052 | ||||||
Limited documentation | 6,069 | 14,132 | 20,201 | |||||||||
Stated income | 101,995 | 14,443 | 116,438 | |||||||||
No documentation | 14,661 | 9,102 | 23,763 | |||||||||
$ | 183,551 | $ | 138,903 | $ | 322,454 | |||||||
Internal risk rating: | ||||||||||||
High | $ | 56,475 | $ | — | $ | 56,475 | ||||||
Medium | 127,076 | — | 127,076 | |||||||||
Low | — | 138,903 | 138,903 | |||||||||
$ | 183,551 | $ | 138,903 | $ | 322,454 | |||||||
(in 000s) | ||||||||||||||||||||||||
Less than 60 Days Past Due | 60 – 89 Days Past Due | 90+ Days Past Due(1) | Total Past Due | Current | Total | |||||||||||||||||||
Purchased from SCC | $ | 11,890 | $ | 2,724 | $ | 61,237 | $ | 75,851 | $ | 107,700 | $ | 183,551 | ||||||||||||
All other | 5,266 | — | 12,311 | 17,577 | 121,326 | 138,903 | ||||||||||||||||||
$ | 17,156 | $ | 2,724 | $ | 73,548 | $ | 93,428 | $ | 229,026 | $ | 322,454 | |||||||||||||
(1) | We do not accrue interest on loans past due 90 days or more. |
10 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s) | ||||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | |||||||||
Loans: | ||||||||||||
Purchased from SCC | $ | 68,740 | $ | 81,539 | $ | 70,327 | ||||||
Other | 14,860 | 16,178 | 14,906 | |||||||||
83,600 | 97,717 | 85,233 | ||||||||||
TDRs: | ||||||||||||
Purchased from SCC | 3,247 | 3,398 | 3,719 | |||||||||
Other | 500 | 509 | 502 | |||||||||
3,747 | 3,907 | 4,221 | ||||||||||
Total non-accrual loans | $ | 87,347 | $ | 101,624 | $ | 89,454 | ||||||
(in 000s) | ||||||||||||||||
Balance With Allowance | Balance With No Allowance | Total Impaired Loans | Related Allowance | |||||||||||||
As of July 31, 2013: | ||||||||||||||||
Purchased from SCC | $ | 33,088 | $ | 80,132 | $ | 113,220 | $ | 7,396 | ||||||||
Other | 6,603 | 16,549 | 23,152 | 2,384 | ||||||||||||
$ | 39,691 | $ | 96,681 | $ | 136,372 | $ | 9,780 | |||||||||
As of July 31, 2012: | ||||||||||||||||
Purchased from SCC | $ | 45,719 | $ | 94,184 | $ | 139,903 | $ | 11,653 | ||||||||
Other | 8,199 | 18,569 | 26,768 | 2,831 | ||||||||||||
$ | 53,918 | $ | 112,753 | $ | 166,671 | $ | 14,484 | |||||||||
As of April 30, 2013: | ||||||||||||||||
Purchased from SCC | $ | 33,791 | $ | 84,592 | $ | 118,383 | $ | 6,573 | ||||||||
Other | 7,601 | 16,932 | 24,533 | 2,113 | ||||||||||||
$ | 41,392 | $ | 101,524 | $ | 142,916 | $ | 8,686 | |||||||||
(in 000s) | ||||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | |||||||||
Portion of total allowance for loan losses allocated to impaired loans and TDR loans: | ||||||||||||
Based on collateral value method | $ | 4,914 | $ | 7,553 | $ | 3,762 | ||||||
Based on discounted cash flow method | 4,866 | 6,931 | 4,924 | |||||||||
$ | 9,780 | $ | 14,484 | $ | 8,686 | |||||||
H&R Block Q1 FY2014 Form 10-Q | 11 |
(in 000s) | ||||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | |||||||||
Average impaired loans: | ||||||||||||
Purchased from SCC | $ | 130,287 | $ | 147,555 | $ | 133,936 | ||||||
All other | 25,328 | 26,841 | 25,425 | |||||||||
$ | 155,615 | $ | 174,396 | $ | 159,361 | |||||||
Interest income on impaired loans: | ||||||||||||
Purchased from SCC | $ | 848 | $ | 1,011 | $ | 3,825 | ||||||
All other | 73 | 82 | 305 | |||||||||
$ | 921 | $ | 1,093 | $ | 4,130 | |||||||
Interest income on impaired loans recognized on a cash basis on non-accrual status: | ||||||||||||
Purchased from SCC | $ | 820 | $ | 994 | $ | 3,746 | ||||||
All other | 73 | 73 | 279 | |||||||||
$ | 893 | $ | 1,067 | $ | 4,025 | |||||||
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Balance, beginning of the period | $ | 13,968 | $ | 14,972 | ||||
Additions | 2,100 | 3,074 | ||||||
Sales | (1,664 | ) | (1,801 | ) | ||||
Impairments | (487 | ) | (788 | ) | ||||
Balance, end of the period | $ | 13,917 | $ | 15,457 | ||||
12 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s) | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses (1) | Fair Value | |||||||||||||
As of July 31, 2013: | ||||||||||||||||
Long-term: | ||||||||||||||||
Mortgage-backed securities | $ | 489,401 | $ | 3,825 | $ | (10,623 | ) | $ | 482,603 | |||||||
Municipal bonds | 4,164 | 266 | — | 4,430 | ||||||||||||
$ | 493,565 | $ | 4,091 | $ | (10,623 | ) | $ | 487,033 | ||||||||
As of July 31, 2012: | ||||||||||||||||
Short-term: | ||||||||||||||||
Municipal bonds | $ | 1,006 | $ | 20 | $ | — | $ | 1,026 | ||||||||
Long-term: | ||||||||||||||||
Mortgage-backed securities | 370,318 | 5,898 | (78 | ) | 376,138 | |||||||||||
Municipal bonds | 4,221 | 406 | — | 4,627 | ||||||||||||
374,539 | 6,304 | (78 | ) | 380,765 | ||||||||||||
$ | 375,545 | $ | 6,324 | $ | (78 | ) | $ | 381,791 | ||||||||
As of April 30, 2013 | ||||||||||||||||
Long-term: | ||||||||||||||||
Mortgage-backed securities | $ | 476,450 | $ | 6,592 | $ | (664 | ) | $ | 482,378 | |||||||
Municipal bonds | 4,178 | 320 | — | 4,498 | ||||||||||||
$ | 480,628 | $ | 6,912 | $ | (664 | ) | $ | 486,876 | ||||||||
(1) | As of July 31, 2013 and April 30, 2013, we had no securities that had been in a continuous loss position for more than twelve months. As of July 31, 2012, mortgage-backed securities with a cost of $7.9 million and gross unrealized losses of $5 thousand had been in a continuous loss position for more than twelve months. |
(in 000s) | ||||||||
Amortized Cost | Fair Value | |||||||
Maturing in: | ||||||||
Two to five years | $ | 4,164 | $ | 4,430 | ||||
Beyond | 489,401 | 482,603 | ||||||
$ | 493,565 | $ | 487,033 | |||||
H&R Block Q1 FY2014 Form 10-Q | 13 |
(in 000s) | ||||||||||||
Goodwill | Accumulated Impairment Losses | Net | ||||||||||
Balances as of April 30, 2013 | $ | 467,079 | $ | (32,297 | ) | $ | 434,782 | |||||
Acquisitions | 2,155 | — | 2,155 | |||||||||
Disposals and foreign currency changes, net | (1,270 | ) | — | (1,270 | ) | |||||||
Impairments | — | — | — | |||||||||
Balances as of July 31, 2013 | $ | 467,964 | $ | (32,297 | ) | $ | 435,667 | |||||
Balances as of April 30, 2012 | $ | 459,863 | $ | (32,297 | ) | $ | 427,566 | |||||
Acquisitions | 3,651 | — | 3,651 | |||||||||
Disposals and foreign currency changes, net | (116 | ) | — | (116 | ) | |||||||
Impairments | — | — | — | |||||||||
Balances as of July 31, 2012 | $ | 463,398 | $ | (32,297 | ) | $ | 431,101 | |||||
14 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s) | ||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||
As of July 31, 2013: | ||||||||||||
Reacquired franchise rights | $ | 214,330 | $ | (19,235 | ) | $ | 195,095 | |||||
Customer relationships | 100,688 | (51,007 | ) | 49,681 | ||||||||
Internally-developed software | 93,739 | (74,572 | ) | 19,167 | ||||||||
Noncompete agreements | 23,024 | (21,789 | ) | 1,235 | ||||||||
Franchise agreements | 19,201 | (5,974 | ) | 13,227 | ||||||||
Purchased technology | 14,800 | (12,750 | ) | 2,050 | ||||||||
Trade name | 300 | (300 | ) | — | ||||||||
$ | 466,082 | $ | (185,627 | ) | $ | 280,455 | ||||||
As of July 31, 2012: | ||||||||||||
Reacquired franchise rights | $ | 214,330 | $ | (15,113 | ) | $ | 199,217 | |||||
Customer relationships | 89,839 | (48,298 | ) | 41,541 | ||||||||
Internally-developed software | 105,648 | (94,240 | ) | 11,408 | ||||||||
Noncompete agreements | 22,225 | (21,443 | ) | 782 | ||||||||
Franchise agreements | 19,201 | (4,694 | ) | 14,507 | ||||||||
Purchased technology | 14,700 | (11,080 | ) | 3,620 | ||||||||
Trade name | 1,300 | (842 | ) | 458 | ||||||||
$ | 467,243 | $ | (195,710 | ) | $ | 271,533 | ||||||
As of April 30, 2013 | ||||||||||||
Reacquired franchise rights | $ | 214,330 | $ | (18,204 | ) | $ | 196,126 | |||||
Customer relationships | 100,719 | (48,733 | ) | 51,986 | ||||||||
Internally-developed software | 91,745 | (72,764 | ) | 18,981 | ||||||||
Noncompete agreements | 23,058 | (21,728 | ) | 1,330 | ||||||||
Franchise agreements | 19,201 | (5,654 | ) | 13,547 | ||||||||
Purchased technology | 14,800 | (12,331 | ) | 2,469 | ||||||||
Trade name | 300 | (300 | ) | — | ||||||||
$ | 464,153 | $ | (179,714 | ) | $ | 284,439 | ||||||
▪ | Level 1 - inputs to the valuation are quoted prices in an active market for identical assets. |
▪ | Level 2 - inputs to the valuation include quoted prices for similar assets in active markets utilizing a third-party pricing service to determine fair value. |
▪ | Level 3 - valuation is based on significant inputs that are unobservable in the market and our own estimates of assumptions that we believe market participants would use in pricing the asset. |
H&R Block Q1 FY2014 Form 10-Q | 15 |
(dollars in 000s) | ||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Gains (losses) | ||||||||||||||||
As of July 31, 2013: | ||||||||||||||||||||
Mortgage–backed securities | $ | 482,603 | $ | — | $ | 482,603 | $ | — | $ | (6,798 | ) | |||||||||
Municipal bonds | 4,430 | — | 4,430 | — | 266 | |||||||||||||||
Mortgage loans held for sale | 7,608 | — | — | 7,608 | (2,916 | ) | ||||||||||||||
$ | 494,641 | $ | — | $ | 487,033 | $ | 7,608 | $ | (9,448 | ) | ||||||||||
As a percentage of total assets | 13.1 | % | — | % | 12.9 | % | 0.2 | % | ||||||||||||
As of July 31, 2012: | ||||||||||||||||||||
Mortgage–backed securities | $ | 376,138 | $ | — | $ | 376,138 | $ | — | $ | 5,820 | ||||||||||
Municipal bonds | 5,653 | — | 5,653 | — | 426 | |||||||||||||||
$ | 381,791 | $ | — | $ | 381,791 | $ | — | $ | 6,246 | |||||||||||
As a percentage of total assets | 10.6 | % | — | % | 10.6 | % | — | % | ||||||||||||
16 | H&R Block Q1 FY2014 Form 10-Q |
(dollars in 000s) | ||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Losses | ||||||||||||||||
As of July 31, 2013: | ||||||||||||||||||||
REO | $ | 14,752 | $ | — | $ | — | $ | 14,752 | $ | (353 | ) | |||||||||
Impaired mortgage loans held for investment | 76,699 | — | — | 76,699 | (1,390 | ) | ||||||||||||||
$ | 91,451 | $ | — | $ | — | $ | 91,451 | $ | (1,743 | ) | ||||||||||
As a percentage of total assets | 2.4 | % | — | — | 2.4 | % | ||||||||||||||
As of July 31, 2012: | ||||||||||||||||||||
REO | $ | 16,384 | $ | — | $ | — | $ | 16,384 | $ | (261 | ) | |||||||||
Impaired mortgage loans held for investment | 93,666 | — | — | 93,666 | (4,337 | ) | ||||||||||||||
$ | 110,050 | $ | — | $ | — | $ | 110,050 | $ | (4,598 | ) | ||||||||||
As a percentage of total assets | 3.1 | % | — | — | 3.1 | % | ||||||||||||||
▪ | Real estate owned - REO includes foreclosed properties securing mortgage loans. Foreclosed assets are recorded at estimated fair value, generally based on independent market prices or appraised values of the collateral, less costs to sell upon foreclosure. The assets are remeasured quarterly based on independent appraisals or broker price opinions. Subsequent holding period gains and losses arising from the sale of REO are reported when realized. Because our REO is valued based on significant inputs that are unobservable in the market and our own estimates of assumptions that we believe market participants would use in pricing the asset, these assets are classified as Level 3. |
▪ | Impaired mortgage loans held for investment - The fair value of impaired mortgage loans held for investment is generally based on the net present value of discounted cash flows for TDR loans or the appraised value of the underlying collateral for all other loans. Impaired and TDR loans are required to be evaluated at least annually, based on HRB Bank's Loan Policy. Impaired loans are typically remeasured every nine months, while TDRs are evaluated quarterly. These loans are classified as Level 3. |
(in 000s) | ||||||||||
Fair Value at July 31, 2013 | Valuation Technique | Unobservable Input | Range (Weighted Average) | |||||||
REO | $ | 13,917 | Third party pricing | Cost to list/sell Loss severity | 5% – 57%(5%) 0% – 100%(48%) | |||||
Impaired mortgage loans held for investment – non TDRs | $ | 81,322 | Collateral- based | Cost to list/sell Time to sell (months) Collateral depreciation Loss severity | 0% – 134%(8%) 24(24) (120%) – 100%(46%) 0% – 100%(59%) | |||||
Impaired mortgage loans held for investment – TDRs | $ | 45,270 | Discounted cash flow | Aged default performance Loss severity | 29% – 51%(39%) 0% – 21%(5%) |
H&R Block Q1 FY2014 Form 10-Q | 17 |
(in 000s) | ||||||||||||||||||||||||
As of | July 31, 2013 | July 31, 2012 | April 30, 2013 | |||||||||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,163,876 | $ | 1,163,876 | $ | 939,871 | $ | 939,871 | $ | 1,747,584 | $ | 1,747,584 | ||||||||||||
Cash and cash equivalents – restricted | 55,477 | 55,477 | 43,109 | 43,109 | 117,837 | 117,837 | ||||||||||||||||||
Receivables, net – short–term | 121,309 | 124,218 | 116,357 | 116,357 | 206,835 | 206,810 | ||||||||||||||||||
Mortgage loans held for sale | 7,608 | 7,608 | — | — | — | — | ||||||||||||||||||
Mortgage loans held for investment, net | 309,681 | 194,882 | 386,759 | 238,658 | 338,789 | 210,858 | ||||||||||||||||||
Investments in AFS securities | 487,033 | 487,033 | 381,791 | 381,791 | 486,876 | 486,876 | ||||||||||||||||||
Receivables, net – long–term | 127,855 | 132,589 | 128,930 | 128,930 | 125,048 | 134,283 | ||||||||||||||||||
Note receivable (including interest) | 61,561 | 68,973 | 56,917 | 62,748 | 60,352 | 69,472 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Deposits | 759,745 | 760,449 | 653,681 | 653,382 | 938,331 | 934,019 | ||||||||||||||||||
Long–term borrowings | 906,632 | 931,300 | 1,009,634 | 1,037,169 | 906,680 | 964,630 | ||||||||||||||||||
Contingent consideration payments | 10,766 | 10,766 | 7,090 | 7,090 | 11,277 | 11,277 | ||||||||||||||||||
▪ | Cash and cash equivalents, including restricted - Fair value approximates the carrying amount (Level 1). |
▪ | Receivables - short-term - For short-term balances with the exception of credit card receivables, the carrying values reported in the balance sheet approximate fair market value due to the relative short-term nature of the respective instruments (Level 1). The fair value of credit card balances is determined using market pricing sources based on projected future cash flows of the pooled assets and performance characteristics (Level 3). |
▪ | Mortgage loans held for sale and mortgage loans held for investment, net - The fair value of mortgage loans is determined using market pricing sources based on projected future cash flows of each individual asset, and loan characteristics including channel and performance characteristics (Level 3). |
▪ | Investments in available-for-sale securities - We use a third-party pricing service to determine fair value. The service's pricing model is based on market data and utilizes available trade, bid and other market information for similar securities (Level 2). |
▪ | Receivables - long-term - The carrying values for the long-term portion of loans to franchisees approximate fair market value due to the variable interest rates (Level 1). Long-term EA receivables are carried at net realizable value which approximates fair value (Level 3). Net realizable value is determined based on historical collection rates. The fair value of credit card balances is determined using market pricing sources based on projected future cash flows of the pooled assets and performance characteristics (Level 3). |
▪ | Note receivable - The fair value of the long-term note receivable from M&P assumes no prepayment and is determined using market pricing sources for similar instruments based on projected future cash flows (Level 3). |
▪ | Deposits - The fair value of deposits with no stated maturity such as non-interest-bearing demand deposits, checking, money market and savings accounts is equal to the amount payable on demand (Level 1). The fair value of IRAs and other time deposits is estimated by discounting the future cash flows using the rates currently offered by HRB Bank for products with similar remaining maturities (Level 3). |
18 | H&R Block Q1 FY2014 Form 10-Q |
▪ | Long-term debt - The fair value of borrowings is based on rates currently available to us for obligations with similar terms and maturities, including current market yields on our Senior Notes (Level 3). |
▪ | Contingent consideration payments - Fair value approximates the carrying amount (Level 3). |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Interest income: | ||||||||
Mortgage loans, net | $ | 3,542 | $ | 4,417 | ||||
Loans to franchisees | 2,289 | 2,355 | ||||||
AFS securities | 2,341 | 1,639 | ||||||
Credit cards | 1,228 | — | ||||||
Other | 1,797 | 1,462 | ||||||
$ | 11,197 | $ | 9,873 | |||||
Interest expense: | ||||||||
Borrowings | $ | 13,803 | $ | 20,754 | ||||
Deposits | 643 | 1,323 | ||||||
$ | 14,446 | $ | 22,077 | |||||
H&R Block Q1 FY2014 Form 10-Q | 19 |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Balance, beginning of the period | $ | 146,286 | $ | 141,080 | ||||
Amounts deferred for new guarantees issued | 737 | 573 | ||||||
Revenue recognized on previous deferrals | (27,826 | ) | (26,983 | ) | ||||
Balance, end of the period | $ | 119,197 | $ | 114,670 | ||||
20 | H&R Block Q1 FY2014 Form 10-Q |
H&R Block Q1 FY2014 Form 10-Q | 21 |
22 | H&R Block Q1 FY2014 Form 10-Q |
H&R Block Q1 FY2014 Form 10-Q | 23 |
24 | H&R Block Q1 FY2014 Form 10-Q |
H&R Block Q1 FY2014 Form 10-Q | 25 |
NOTE 13: | LOSS CONTINGENCIES ARISING FROM REPRESENTATIONS AND WARRANTIES OF OUR DISCONTINUED MORTGAGE OPERATIONS |
26 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Balance, beginning of the period | $ | 158,765 | $ | 130,018 | ||||
Provisions | — | — | ||||||
Payments | — | (753 | ) | |||||
Balance, end of the period | $ | 158,765 | $ | 129,265 | ||||
H&R Block Q1 FY2014 Form 10-Q | 27 |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Revenues | $ | — | $ | — | ||||
Pretax income (loss) from operations: | ||||||||
RSM and related businesses | $ | (1,228 | ) | $ | 528 | |||
Mortgage | (1,898 | ) | (3,463 | ) | ||||
(3,126 | ) | (2,935 | ) | |||||
Income tax benefit | (1,209 | ) | (1,144 | ) | ||||
Net loss from discontinued operations | $ | (1,917 | ) | $ | (1,791 | ) | ||
(dollars in 000s) | ||||||||||||||||||||||
Actual | Minimum Capital Requirement | Minimum to be Well Capitalized | ||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||
As of June 30, 2013: | ||||||||||||||||||||||
Total risk-based capital ratio (1) | $ | 508,667 | 132.5 | % | $ | 30,701 | 8.0 | % | $ | 38,376 | 10.0 | % | ||||||||||
Tier 1 risk-based capital ratio (2) | 503,536 | 131.2 | % | N/A | N/A | 23,026 | 6.0 | % | ||||||||||||||
Tier 1 capital ratio (leverage) (3) | 503,536 | 36.9 | % | 163,620 | 12.0 | % | (5) | 68,175 | 5.0 | % | ||||||||||||
Tangible equity ratio (4) | 503,536 | 36.9 | % | 20,453 | 1.5 | % | N/A | N/A | ||||||||||||||
As of June 30, 2012: | ||||||||||||||||||||||
Total risk-based capital ratio (1) | $ | 461,856 | 123.8 | % | $ | 29,856 | 8.0 | % | $ | 37,321 | 10.0 | % | ||||||||||
Tier 1 risk-based capital ratio (2) | 456,945 | 122.4 | % | N/A | N/A | 22,392 | 6.0 | % | ||||||||||||||
Tier 1 capital ratio (leverage) (3) | 456,945 | 38.7 | % | 47,227 | 12.0 | % | (5) | 59,034 | 5.0 | % | ||||||||||||
Tangible equity ratio (4) | 456,945 | 38.7 | % | 17,710 | 1.5 | % | N/A | N/A | ||||||||||||||
As of March 31, 2013: | ||||||||||||||||||||||
Total risk-based capital ratio (1) | $ | 506,734 | 131.6 | % | $ | 30,806 | 8.0 | % | $ | 38,508 | 10.0 | % | ||||||||||
Tier 1 risk-based capital ratio (2) | 501,731 | 130.3 | % | N/A | N/A | 23,105 | 6.0 | % | ||||||||||||||
Tier 1 capital ratio (leverage) (3) | 501,731 | 25.5 | % | 236,315 | 12.0 | % | (5) | 98,464 | 5.0 | % | ||||||||||||
Tangible equity ratio (4) | 501,731 | 25.5 | % | 29,539 | 1.5 | % | N/A | N/A |
(1) | Total risk-based capital divided by risk-weighted assets. |
(2) | Tier 1 (core) capital less deduction for low-level recourse and residual interest divided by risk-weighted assets. |
(3) | Tier 1 (core) capital divided by adjusted total assets. |
(4) | Tangible capital divided by tangible assets. |
(5) | Effective April 5, 2012, the minimum capital requirement was changed to 4% by the OCC, although HRB Bank plans to maintain a minimum of 12.0% leverage capital at the end of each calendar quarter. |
28 | H&R Block Q1 FY2014 Form 10-Q |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
REVENUES : | ||||||||
Tax Services | $ | 121,691 | $ | 90,253 | ||||
Corporate and eliminations | 5,504 | 6,236 | ||||||
$ | 127,195 | $ | 96,489 | |||||
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES : | ||||||||
Tax Services | $ | (144,394 | ) | $ | (140,905 | ) | ||
Corporate and eliminations | (40,100 | ) | (28,364 | ) | ||||
$ | (184,494 | ) | $ | (169,269 | ) | |||
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS | (in 000s) | |||||||||||||||||||
Three months ended July 31, 2013 | H&R Block, Inc. (Guarantor) | Block Financial (Issuer) | Other Subsidiaries | Eliminations | Consolidated H&R Block | |||||||||||||||
Total revenues | $ | — | $ | 27,215 | $ | 100,136 | $ | (156 | ) | $ | 127,195 | |||||||||
Cost of revenues | — | 39,359 | 170,850 | (156 | ) | 210,053 | ||||||||||||||
Selling, general and administrative | — | 14,038 | 82,659 | — | 96,697 | |||||||||||||||
Total expenses | — | 53,397 | 253,509 | (156 | ) | 306,750 | ||||||||||||||
Operating loss | — | (26,182 | ) | (153,373 | ) | — | (179,555 | ) | ||||||||||||
Other income (expense), net | (184,494 | ) | 44 | (4,983 | ) | 184,494 | (4,939 | ) | ||||||||||||
Loss from continuing operations before tax benefit | (184,494 | ) | (26,138 | ) | (158,356 | ) | 184,494 | (184,494 | ) | |||||||||||
Income tax benefit | (71,224 | ) | (9,398 | ) | (61,826 | ) | 71,224 | (71,224 | ) | |||||||||||
Net loss from continuing operations | (113,270 | ) | (16,740 | ) | (96,530 | ) | 113,270 | (113,270 | ) | |||||||||||
Net loss from discontinued operations | (1,917 | ) | (1,163 | ) | (754 | ) | 1,917 | (1,917 | ) | |||||||||||
Net loss | (115,187 | ) | (17,903 | ) | (97,284 | ) | 115,187 | (115,187 | ) | |||||||||||
Other comprehensive loss | (10,807 | ) | (7,724 | ) | (3,083 | ) | 10,807 | (10,807 | ) | |||||||||||
Comprehensive loss | $ | (125,994 | ) | $ | (25,627 | ) | $ | (100,367 | ) | $ | 125,994 | $ | (125,994 | ) | ||||||
H&R Block Q1 FY2014 Form 10-Q | 29 |
Three months ended July 31, 2012 | H&R Block, Inc. (Guarantor) | Block Financial (Issuer) | Other Subsidiaries | Eliminations | Consolidated H&R Block | |||||||||||||||
Total revenues | $ | — | $ | 21,929 | $ | 74,616 | $ | (56 | ) | $ | 96,489 | |||||||||
Cost of revenues | — | 34,942 | 158,538 | (56 | ) | 193,424 | ||||||||||||||
Selling, general and administrative | — | 7,640 | 67,838 | — | 75,478 | |||||||||||||||
Total expenses | — | 42,582 | 226,376 | (56 | ) | 268,902 | ||||||||||||||
Operating loss | — | (20,653 | ) | (151,760 | ) | — | (172,413 | ) | ||||||||||||
Other income (expense), net | (169,269 | ) | 1,324 | 1,820 | 169,269 | 3,144 | ||||||||||||||
Loss from continuing operations before tax benefit | (169,269 | ) | (19,329 | ) | (149,940 | ) | 169,269 | (169,269 | ) | |||||||||||
Income tax benefit | (63,619 | ) | (8,255 | ) | (55,364 | ) | 63,619 | (63,619 | ) | |||||||||||
Net loss from continuing operations | (105,650 | ) | (11,074 | ) | (94,576 | ) | 105,650 | (105,650 | ) | |||||||||||
Net income (loss) from discontinued operations | (1,791 | ) | (2,111 | ) | 320 | 1,791 | (1,791 | ) | ||||||||||||
Net loss | (107,441 | ) | (13,185 | ) | (94,256 | ) | 107,441 | (107,441 | ) | |||||||||||
Other comprehensive income (loss) | (4,795 | ) | 135 | (4,930 | ) | 4,795 | (4,795 | ) | ||||||||||||
Comprehensive loss | $ | (112,236 | ) | $ | (13,050 | ) | $ | (99,186 | ) | $ | 112,236 | $ | (112,236 | ) | ||||||
CONDENSED CONSOLIDATING BALANCE SHEETS | (in 000s) | |||||||||||||||||||
As of July 31, 2013 | H&R Block, Inc. (Guarantor) | Block Financial (Issuer) | Other Subsidiaries | Eliminations | Consolidated H&R Block | |||||||||||||||
Cash & cash equivalents | $ | — | $ | 439,100 | $ | 728,246 | $ | (3,470 | ) | $ | 1,163,876 | |||||||||
Cash & cash equivalents — restricted | — | 12,290 | 43,187 | — | 55,477 | |||||||||||||||
Receivables, net | 460 | 94,932 | 25,917 | — | 121,309 | |||||||||||||||
Mortgage loans held for investment, net | — | 309,681 | — | — | 309,681 | |||||||||||||||
Intangible assets and goodwill, net | — | — | 716,122 | — | 716,122 | |||||||||||||||
Investments in subsidiaries | 3,274,648 | 330 | 1,564 | (3,274,648 | ) | 1,894 | ||||||||||||||
Amounts due from affiliates | — | 409,794 | 2,176,279 | (2,586,073 | ) | — | ||||||||||||||
Other assets | 6,976 | 651,998 | 735,555 | — | 1,394,529 | |||||||||||||||
Total assets | $ | 3,282,084 | $ | 1,918,125 | $ | 4,426,870 | $ | (5,864,191 | ) | $ | 3,762,888 | |||||||||
Customer deposits | $ | — | $ | 761,399 | $ | — | $ | (3,470 | ) | $ | 757,929 | |||||||||
Long-term debt | — | 897,107 | 9,525 | — | 906,632 | |||||||||||||||
Other liabilities | 490 | 238,678 | 753,844 | — | 993,012 | |||||||||||||||
Amounts due to affiliates | 2,176,279 | — | 409,794 | (2,586,073 | ) | — | ||||||||||||||
Stockholders’ equity | 1,105,315 | 20,941 | 3,253,707 | (3,274,648 | ) | 1,105,315 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 3,282,084 | $ | 1,918,125 | $ | 4,426,870 | $ | (5,864,191 | ) | $ | 3,762,888 | |||||||||
30 | H&R Block Q1 FY2014 Form 10-Q |
As of July 31, 2012 | H&R Block, Inc. (Guarantor) | Block Financial (Issuer) | Other Subsidiaries | Eliminations | Consolidated H&R Block | |||||||||||||||
Cash & cash equivalents | $ | — | $ | 342,859 | $ | 598,336 | $ | (1,324 | ) | $ | 939,871 | |||||||||
Cash & cash equivalents — restricted | — | 859 | 42,250 | — | 43,109 | |||||||||||||||
Receivables, net | — | 91,335 | 25,022 | — | 116,357 | |||||||||||||||
Mortgage loans held for investment, net | — | 386,759 | — | — | 386,759 | |||||||||||||||
Intangible assets and goodwill, net | — | — | 702,634 | — | 702,634 | |||||||||||||||
Investments in subsidiaries | 957,349 | — | 641 | (957,349 | ) | 641 | ||||||||||||||
Amounts due from affiliates (1) | 110 | — | 225,104 | (225,214 | ) | — | ||||||||||||||
Other assets | 7,734 | 940,226 | 456,946 | — | 1,404,906 | |||||||||||||||
Total assets | $ | 965,193 | $ | 1,762,038 | $ | 2,050,933 | $ | (1,183,887 | ) | $ | 3,594,277 | |||||||||
Customer deposits | $ | — | $ | 649,702 | $ | — | $ | (1,324 | ) | $ | 648,378 | |||||||||
Long-term debt | — | 999,415 | 10,219 | — | 1,009,634 | |||||||||||||||
Other liabilities | 248 | 232,997 | 857,347 | — | 1,090,592 | |||||||||||||||
Amounts due to affiliates (1) | 119,272 | 105,832 | 110 | (225,214 | ) | — | ||||||||||||||
Stockholders’ equity | 845,673 | (225,908 | ) | 1,183,257 | (957,349 | ) | 845,673 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 965,193 | $ | 1,762,038 | $ | 2,050,933 | $ | (1,183,887 | ) | $ | 3,594,277 | |||||||||
(1) | Amounts have been restated to conform to the current period presentation, including the presentation of income tax receivables settled with affiliates and the presentation of intercompany receivables and payables gross, rather than net. |
As of April 30, 2013 | H&R Block, Inc. (Guarantor) | Block Financial (Issuer) | Other Subsidiaries | Eliminations | Consolidated H&R Block | |||||||||||||||
Cash & cash equivalents | $ | — | $ | 558,110 | $ | 1,192,197 | $ | (2,723 | ) | $ | 1,747,584 | |||||||||
Cash & cash equivalents — restricted | — | 75,096 | 42,741 | — | 117,837 | |||||||||||||||
Receivables, net | 769 | 99,844 | 106,222 | — | 206,835 | |||||||||||||||
Mortgage loans held for investment, net | — | 338,789 | — | — | 338,789 | |||||||||||||||
Intangible assets and goodwill, net | — | — | 719,221 | — | 719,221 | |||||||||||||||
Investments in subsidiaries | 3,444,442 | 473 | — | (3,444,442 | ) | 473 | ||||||||||||||
Amounts due from affiliates | — | 410,590 | 2,189,625 | (2,600,215 | ) | — | ||||||||||||||
Other assets | 8,390 | 645,166 | 753,484 | — | 1,407,040 | |||||||||||||||
Total assets | $ | 3,453,601 | $ | 2,128,068 | $ | 5,003,490 | $ | (6,047,380 | ) | $ | 4,537,779 | |||||||||
Customer deposits | $ | — | $ | 939,187 | $ | — | $ | (2,723 | ) | $ | 936,464 | |||||||||
Long-term debt | — | 896,978 | 9,702 | — | 906,680 | |||||||||||||||
Other liabilities | 429 | 245,862 | 1,184,797 | — | 1,431,088 | |||||||||||||||
Amounts due to affiliates | 2,189,625 | — | 410,590 | (2,600,215 | ) | — | ||||||||||||||
Stockholders’ equity | 1,263,547 | 46,041 | 3,398,401 | (3,444,442 | ) | 1,263,547 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 3,453,601 | $ | 2,128,068 | $ | 5,003,490 | $ | (6,047,380 | ) | $ | 4,537,779 | |||||||||
H&R Block Q1 FY2014 Form 10-Q | 31 |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS | (in 000s) | |||||||||||||||||||
Three months ended July 31, 2013 | H&R Block, Inc. (Guarantor) | Block Financial (Issuer) | Other Subsidiaries | Eliminations | Consolidated H&R Block | |||||||||||||||
Net cash provided by (used in) operating activities: | $ | 1,784 | $ | 53,801 | $ | (374,327 | ) | $ | — | $ | (318,742 | ) | ||||||||
Cash flows from investing: | ||||||||||||||||||||
Purchases of AFS securities | — | (45,158 | ) | — | — | (45,158 | ) | |||||||||||||
Maturities and payments received on AFS securities | — | 32,061 | — | — | 32,061 | |||||||||||||||
Mortgage loans held for investment, net | — | 11,707 | — | — | 11,707 | |||||||||||||||
Purchases of property & equipment | — | — | (34,386 | ) | — | (34,386 | ) | |||||||||||||
Loans made to franchisees | — | (6,657 | ) | — | — | (6,657 | ) | |||||||||||||
Repayments from franchisees | — | 7,164 | — | — | 7,164 | |||||||||||||||
Intercompany advances (payments) | 35,014 | — | — | (35,014 | ) | — | ||||||||||||||
Other, net | — | 5,501 | 678 | — | 6,179 | |||||||||||||||
Net cash provided by (used in) investing activities | 35,014 | 4,618 | (33,708 | ) | (35,014 | ) | (29,090 | ) | ||||||||||||
Cash flows from financing: | ||||||||||||||||||||
Customer banking deposits, net | — | (178,617 | ) | — | (747 | ) | (179,364 | ) | ||||||||||||
Dividends paid | (54,550 | ) | — | — | — | (54,550 | ) | |||||||||||||
Repurchase of common stock | (4,201 | ) | — | — | — | (4,201 | ) | |||||||||||||
Proceeds from stock options | 21,953 | — | — | — | 21,953 | |||||||||||||||
Intercompany advances (payments) | — | 1,188 | (36,202 | ) | 35,014 | — | ||||||||||||||
Other, net | — | — | (13,093 | ) | — | (13,093 | ) | |||||||||||||
Net cash used in financing activities | (36,798 | ) | (177,429 | ) | (49,295 | ) | 34,267 | (229,255 | ) | |||||||||||
Effects of exchange rates on cash | — | — | (6,621 | ) | — | (6,621 | ) | |||||||||||||
Net decrease in cash | — | (119,010 | ) | (463,951 | ) | (747 | ) | (583,708 | ) | |||||||||||
Cash – beginning of the period | — | 558,110 | 1,192,197 | (2,723 | ) | 1,747,584 | ||||||||||||||
Cash – end of the period | $ | — | $ | 439,100 | $ | 728,246 | $ | (3,470 | ) | $ | 1,163,876 | |||||||||
32 | H&R Block Q1 FY2014 Form 10-Q |
Three months ended July 31, 2012 | H&R Block, Inc. (Guarantor) | Block Financial (Issuer) | Other Subsidiaries | Eliminations | Consolidated H&R Block | |||||||||||||||
Net cash used in operating activities: | $ | (20,577 | ) | $ | (42,793 | ) | $ | (309,770 | ) | $ | — | $ | (373,140 | ) | ||||||
Cash flows from investing: | ||||||||||||||||||||
Purchases of AFS securities | — | (28,990 | ) | — | — | (28,990 | ) | |||||||||||||
Maturities and payments received on AFS securities | — | 21,112 | 17 | — | 21,129 | |||||||||||||||
Mortgage loans held for investment, net | — | 12,652 | — | — | 12,652 | |||||||||||||||
Purchases of property & equipment | — | (31 | ) | (13,242 | ) | — | (13,273 | ) | ||||||||||||
Loans made to franchisees | — | (5,062 | ) | — | — | (5,062 | ) | |||||||||||||
Repayments from franchisees | — | 5,154 | — | — | 5,154 | |||||||||||||||
Net intercompany advances | 413,392 | — | — | (413,392 | ) | — | ||||||||||||||
Other, net | — | 1,654 | 21 | — | 1,675 | |||||||||||||||
Net cash provided by (used in) investing activities | 413,392 | 6,489 | (13,204 | ) | (413,392 | ) | (6,715 | ) | ||||||||||||
Cash flows from financing: | ||||||||||||||||||||
Repayments of other borrowings | — | — | (30,831 | ) | — | (30,831 | ) | |||||||||||||
Customer banking deposits, net | — | (179,038 | ) | — | (481 | ) | (179,519 | ) | ||||||||||||
Dividends paid | (54,201 | ) | — | — | — | (54,201 | ) | |||||||||||||
Repurchase of common stock | (339,088 | ) | — | — | — | (339,088 | ) | |||||||||||||
Proceeds from stock options | 468 | — | — | — | 468 | |||||||||||||||
Net intercompany advances | — | 42,908 | (456,300 | ) | 413,392 | — | ||||||||||||||
Other, net | 6 | 146 | (20,091 | ) | — | (19,939 | ) | |||||||||||||
Net cash used in financing activities | (392,815 | ) | (135,984 | ) | (507,222 | ) | 412,911 | (623,110 | ) | |||||||||||
Effects of exchange rates on cash | — | — | (1,498 | ) | — | (1,498 | ) | |||||||||||||
Net decrease in cash | — | (172,288 | ) | (831,694 | ) | (481 | ) | (1,004,463 | ) | |||||||||||
Cash – beginning of the period | — | 515,147 | 1,430,030 | (843 | ) | 1,944,334 | ||||||||||||||
Cash – end of the period | $ | — | $ | 342,859 | $ | 598,336 | $ | (1,324 | ) | $ | 939,871 | |||||||||
H&R Block Q1 FY2014 Form 10-Q | 33 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
▪ | Revenues for the current quarter were $127.2 million, up 31.8% from the prior year, primarily as a result of the timing of early-season revenues for our Australian tax operations which we expect will largely reverse by the end (October) of the Australian tax season. |
▪ | Pretax losses totaled $184.5 million, or 9.0% worse than the prior year, primarily due to accrued costs directly associated with the P&A Transaction and the write-down of mortgage loans held for sale, each as described below. Lower interest expense was offset by foreign currency losses, increased litigation costs/settlements, and increases in other loss reserves. |
▪ | In connection with the P&A Agreement, we incurred certain fees for professional advisors and accrued employee termination benefits totaling $7.5 million during the three months ended July 31, 2013. In addition, indirectly related to the P&A Transaction, we wrote-down to fair value certain mortgage loans we intend to sell, resulting in a $2.9 million provision during the three months ended July 31, 2013. |
34 | H&R Block Q1 FY2014 Form 10-Q |
Consolidated Results of Operations Data | (in 000s, except per share amounts) | |||||||
Three months ended July 31, | 2013 | 2012 | ||||||
REVENUES: | ||||||||
Tax Services | $ | 121,691 | $ | 90,253 | ||||
Corporate and eliminations | 5,504 | 6,236 | ||||||
$ | 127,195 | $ | 96,489 | |||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES: | ||||||||
Tax Services | $ | (144,394 | ) | $ | (140,905 | ) | ||
Corporate and eliminations | (40,100 | ) | (28,364 | ) | ||||
(184,494 | ) | (169,269 | ) | |||||
Income tax benefit | (71,224 | ) | (63,619 | ) | ||||
Net loss from continuing operations | (113,270 | ) | (105,650 | ) | ||||
Net loss from discontinued operations | (1,917 | ) | (1,791 | ) | ||||
NET LOSS | $ | (115,187 | ) | $ | (107,441 | ) | ||
BASIC AND DILUTED LOSS PER SHARE: | ||||||||
Continuing operations | $ | (0.42 | ) | $ | (0.38 | ) | ||
Discontinued operations | — | (0.01 | ) | |||||
Consolidated | $ | (0.42 | ) | $ | (0.39 | ) | ||
EBITDA FROM CONTINUING OPERATIONS (1) | $ | (147,174 | ) | $ | (126,641 | ) | ||
EBITDA FROM CONTINUING OPERATIONS - ADJUSTED (1) | (138,672 | ) | (129,214 | ) | ||||
(1) | See “Non-GAAP Financial Information” at the end of this item for a reconciliation of non-GAAP measures. |
H&R Block Q1 FY2014 Form 10-Q | 35 |
Tax Services – Financial Results | (dollars in 000s) | |||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Tax preparation fees: | ||||||||
U.S. | $ | 22,026 | $ | 18,835 | ||||
International | 32,094 | 14,058 | ||||||
54,120 | 32,893 | |||||||
Royalties | 6,562 | 5,851 | ||||||
Fees from Emerald Card | 14,611 | 12,056 | ||||||
Fees from Peace of Mind® guarantees | 27,826 | 26,983 | ||||||
Other | 18,572 | 12,470 | ||||||
Total revenues | 121,691 | 90,253 | ||||||
Compensation and benefits: | ||||||||
Field wages | 39,904 | 32,408 | ||||||
Other wages | 34,735 | 34,367 | ||||||
Benefits and other compensation | 15,937 | 14,774 | ||||||
90,576 | 81,549 | |||||||
Occupancy and equipment | 78,550 | 79,851 | ||||||
Marketing and advertising | 7,017 | 7,452 | ||||||
Depreciation and amortization | 22,802 | 20,471 | ||||||
Other | 67,140 | 41,835 | ||||||
Total expenses | 266,085 | 231,158 | ||||||
Pretax loss | $ | (144,394 | ) | $ | (140,905 | ) | ||
36 | H&R Block Q1 FY2014 Form 10-Q |
Corporate – Operating Results | (in 000s) | |||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Interest income on mortgage loans held for investment | $ | 3,542 | $ | 4,417 | ||||
Other | 1,962 | 1,819 | ||||||
Total revenues | 5,504 | 6,236 | ||||||
Interest expense | 13,424 | 20,668 | ||||||
Provision for loan losses | 7,603 | 4,000 | ||||||
Other, net | 24,577 | 9,932 | ||||||
Total expense | 45,604 | 34,600 | ||||||
Pretax loss | $ | (40,100 | ) | $ | (28,364 | ) | ||
H&R Block Q1 FY2014 Form 10-Q | 37 |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | (318,742 | ) | $ | (373,140 | ) | ||
Investing activities | (29,090 | ) | (6,715 | ) | ||||
Financing activities | (229,255 | ) | (623,110 | ) | ||||
Effects of exchange rates on cash | (6,621 | ) | (1,498 | ) | ||||
Net change in cash and cash equivalents | $ | (583,708 | ) | $ | (1,004,463 | ) | ||
38 | H&R Block Q1 FY2014 Form 10-Q |
Short-term | Long-term | Outlook | ||||
Moody’s | P-2 | Baa2 | Negative | |||
S&P | A-2 | BBB | Negative |
H&R Block Q1 FY2014 Form 10-Q | 39 |
▪ | 4.5% CET1 to risk-weighted assets |
▪ | 6.0% Tier 1 capital to risk-weighted assets |
▪ | 8.0% Total capital to risk-weighted assets |
40 | H&R Block Q1 FY2014 Form 10-Q |
▪ | We exclude from our non-GAAP financial measures litigation charges we incur and favorable reserve adjustments. This does not include legal defense costs. |
▪ | We exclude from our non-GAAP financial measures non-cash charges to adjust the carrying values of goodwill, intangible assets, other long-lived assets and investments to their estimated fair values. |
▪ | We exclude from our non-GAAP financial measures severance and other restructuring charges in connection with the termination of personnel, closure of facilities and related costs. |
▪ | We exclude from our non-GAAP financial measures the gains and losses on business dispositions, including investment banking, legal and accounting fees. |
▪ | We exclude from our non-GAAP financial measures the gains and losses on extinguishment of debt. |
H&R Block Q1 FY2014 Form 10-Q | 41 |
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Net income from continuing operations - reported | $ | (113,270 | ) | $ | (105,650 | ) | ||
Add back: | ||||||||
Income taxes | (71,224 | ) | (63,619 | ) | ||||
Interest expense | 14,446 | 22,077 | ||||||
Depreciation and amortization | 22,874 | 20,551 | ||||||
(33,904 | ) | (20,991 | ) | |||||
EBITDA from continuing operations | (147,174 | ) | (126,641 | ) | ||||
Adjustments: | ||||||||
Loss contingencies - litigation | 373 | (2,302 | ) | |||||
Severance | 1,105 | (501 | ) | |||||
Professional fees related to pending HRB Bank transaction | 7,024 | — | ||||||
Loss on sales of tax offices | — | 230 | ||||||
8,502 | (2,573 | ) | ||||||
Adjusted EBITDA from continuing operations | $ | (138,672 | ) | $ | (129,214 | ) | ||
(in 000s) | ||||||||
Three months ended July 31, | 2013 | 2012 | ||||||
Pretax income from continuing operations - reported | $ | (184,494 | ) | $ | (169,269 | ) | ||
Adjustments: | ||||||||
Loss contingencies - litigation | 373 | (2,302 | ) | |||||
Severance | 1,105 | (501 | ) | |||||
Professional fees related to pending HRB Bank transaction | 7,024 | — | ||||||
Loss on sales of tax offices | — | 230 | ||||||
8,502 | (2,573 | ) | ||||||
Pretax income from continuing operations - adjusted | $ | (175,992 | ) | $ | (171,842 | ) | ||
42 | H&R Block Q1 FY2014 Form 10-Q |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
H&R Block Q1 FY2014 Form 10-Q | 43 |
(in 000s, except per share amounts) | ||||||||||||||
Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | Maximum Dollar Value of Shares that May be Purchased Under the Plans or Programs (2) | |||||||||||
May 1 – May 31 | 3 | $ | 27.93 | — | $ | 857,504 | ||||||||
June 1 – June 30 | 147 | $ | 27.80 | — | $ | 857,504 | ||||||||
July 1 – July 31 | 1 | $ | 28.14 | — | $ | 857,504 |
(1) | We purchased approximately 151 thousand shares in connection with funding employee income tax withholding obligations arising upon the lapse of restrictions on restricted shares and restricted share units. |
(2) | In June 2008, our Board of Directors approved an authorization to purchase up to $2.0 billion of our common stock through June 2012. In June 2012, our Board of Directors extended this authorization through June 2015. |
44 | H&R Block Q1 FY2014 Form 10-Q |
32.1 | Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | Certification by Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. |
H&R Block Q1 FY2014 Form 10-Q | 45 |
H&R BLOCK, INC. |
/s/ William C. Cobb |
William C. Cobb |
President and Chief Executive Officer |
September 5, 2013 |
/s/ Gregory J. Macfarlane |
Gregory J. Macfarlane |
Chief Financial Officer |
September 5, 2013 |
/s/ Jeffrey T. Brown |
Jeffrey T. Brown |
Chief Accounting and Risk Officer |
September 5, 2013 |
46 | H&R Block Q1 FY2014 Form 10-Q |
Date: | September 5, 2013 | /s/ William C. Cobb | |
William C. Cobb | |||
Chief Executive Officer H&R Block, Inc. |
Date: | September 5, 2013 | /s/ Gregory J. Macfarlane | |
Gregory J. Macfarlane | |||
Chief Financial Officer H&R Block, Inc. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ William C. Cobb |
William C. Cobb Chief Executive Officer H&R Block, Inc. |
September 5, 2013 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Gregory J. Macfarlane |
Gregory J. Macfarlane Chief Financial Officer H&R Block, Inc. |
September 5, 2013 |
Discontinued Operations (Income (Loss) From Discontinued Operations) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Revenues | $ 0 | $ 0 |
Pretax income (loss) from operations | (3,126) | (2,935) |
Income taxes (benefit) | (1,209) | (1,144) |
Net income (loss) from discontinued operations | (1,917) | (1,791) |
RSM And Related Businesses
|
||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Pretax income (loss) from operations | (1,228) | 528 |
Mortgage
|
||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Pretax income (loss) from operations | $ (1,898) | $ (3,463) |
Regulatory Capital Requirements Of HRB Bank (HRB Bank's Regulatory Capital Requirements) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2013
|
Jun. 30, 2013
|
Mar. 31, 2013
|
Jun. 30, 2012
|
Apr. 05, 2012
|
||||||||||||||
Banking and Thrift [Abstract] | ||||||||||||||||||
Total risk-based capital ratio, Amount | $ 508,667 | [1] | $ 506,734 | [1] | $ 461,856 | [1] | ||||||||||||
Total risk-based capital ratio | 132.50% | [1] | 131.60% | [1] | 123.80% | [1] | ||||||||||||
Total risk-based capital ratio, Minimum Capital Requirement, Amount | 30,701 | [1] | 30,806 | [1] | 29,856 | [1] | ||||||||||||
Total risk-based capital ratio, Minimum Capital Requirement, Ratio | 8.00% | [1] | 8.00% | [1] | 8.00% | [1] | ||||||||||||
Total risk-based capital ratio, Minimum to be Well Capitalized, Amount | 38,376 | [1] | 38,508 | [1] | 37,321 | [1] | ||||||||||||
Total risk-based capital ratio, Minimum to be Well Capitalized, Ratio | 10.00% | [1] | 10.00% | [1] | 10.00% | [1] | ||||||||||||
Tier 1 risk-based capital ratio, Amount | 503,536 | [2] | 501,731 | [2] | 456,945 | [2] | ||||||||||||
Tier 1 risk-based capital ratio | 131.20% | [2] | 130.30% | [2] | 122.40% | [2] | ||||||||||||
Tier 1 risk-based capital ratio, Minimum to be Well Capitalized, Amount | 23,026 | [2] | 23,105 | [2] | 22,392 | [2] | ||||||||||||
Tier 1 risk-based capital ratio, Minimum to be Well Capitalized, Ratio | 6.00% | [2] | 6.00% | [2] | 6.00% | [2] | ||||||||||||
Tier 1 capital ratio (leverage), Amount | 503,536 | [3] | 501,731 | [3] | 456,945 | [3] | ||||||||||||
Tier 1 capital ratio (leverage) | 36.90% | [3] | 25.50% | [3] | 38.70% | [3] | ||||||||||||
Tier 1 capital ratio (leverage), Minimum Capital Requirement, Amount | 163,620 | [3] | 236,315 | [3] | 47,227 | [3] | ||||||||||||
Tier 1 capital ratio (leverage), Minimum Capital Requirement, Ratio | 12.00% | [3],[4] | 12.00% | [3],[4] | 12.00% | [3] | 4.00% | |||||||||||
Tier 1 capital ratio (leverage), Minimum to be Well Capitalized, Amount | 68,175 | [3] | 98,464 | [3] | 59,034 | [3] | ||||||||||||
Tier 1 capital ratio (leverage), Minimum to be Well Capitalized, Ratio | 5.00% | [3] | 5.00% | [3] | 5.00% | [3] | ||||||||||||
Tangible equity ratio, Amount | 503,536 | [5] | 501,731 | [5] | 456,945 | [5] | ||||||||||||
Tangible equity ratio | 36.90% | [5] | 25.50% | [5] | 38.70% | [5] | ||||||||||||
Tangible equity ratio, Minimum Capital Requirement, Amount | $ 20,453 | [5] | $ 29,539 | [5] | $ 17,710 | [5] | ||||||||||||
Tangible equity ratio, Minimum Capital Requirement, Ratio | 1.50% | [5] | 1.50% | [5] | 1.50% | [5] | ||||||||||||
Minimum leverage capital per calendar quarter | 12.00% | |||||||||||||||||
|
Commitments And Contingencies
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
|
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments And Contingencies | COMMITMENTS AND CONTINGENCIES Changes in deferred revenue balances related to our Peace of Mind (POM) program, the current portion of which is included in accounts payable, accrued expenses and other current liabilities and the long-term portion of which is included in other noncurrent liabilities in the consolidated balance sheets, are as follows:
In addition to amounts accrued for our POM guarantee, we had accrued $15.7 million, $15.5 million and $18.0 million as of July 31, 2013 and 2012 and April 30, 2013, respectively, related to estimated losses under our standard guarantee which is included with our standard tax preparation services. The current portion of this liability is included in accounts payable, accrued expenses and other current liabilities and the long-term portion is included in other noncurrent liabilities in the consolidated balance sheets. We have accrued estimated contingent consideration payments totaling $10.8 million, $7.1 million and $11.3 million as of July 31, 2013 and 2012 and April 30, 2013, respectively, related to recent acquisitions, with the short-term amount recorded in accounts payable, accrued expenses and deposits and the long-term portion included in other noncurrent liabilities. Estimates of contingent payments are typically based on expected financial performance of the acquired business and economic conditions at the time of acquisition. Should actual results differ materially from our assumptions, future payments made will differ from the above estimate and any differences will be recorded in our results from continuing operations. We have contractual commitments to fund certain franchisees requesting revolving lines of credit. Our total obligation under these lines of credit was $91.5 million at July 31, 2013, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $45.5 million. We have contractual commitments to fund our credit card customers on their approved revolving lines of credit. Our total obligation under the credit card agreements was $27.4 million at July 31, 2013, and net of amounts outstanding, our remaining commitment to fund totaled $3.5 million. We maintain compensating balances with certain financial institutions that are creditors in our $1.5 billion unsecured committed line of credit governed by a Credit and Guarantee Agreement (2012 CLOC), which are not legally restricted as to withdrawal. These balances totaled $210.0 million as of July 31, 2013. We may enter into contracts that include embedded indemnifications that have characteristics similar to guarantees. Typically, these indemnifications do not provide a stated maximum exposure and the terms of the indemnities may vary, in many cases limited only by the applicable statute of limitations. Accruals for these obligations have been established when appropriate. Historically, payments made under these types of contractual arrangements have not been material. See notes 12 and 13 to the consolidated financial statements for additional discussion regarding guarantees and indemnifications. We evaluated our financial interests in variable interest entities (VIEs) as of July 31, 2013 and determined that there have been no significant changes related to those financial interests. LOSS CONTINGENCIES ARISING FROM REPRESENTATIONS AND WARRANTIES OF OUR DISCONTINUED MORTGAGE OPERATIONS SCC ceased originating mortgage loans in December 2007 and, in April 2008, sold its servicing assets and discontinued its remaining operations. Mortgage loans originated by SCC were sold either as whole loans to single third-party buyers or in the form of RMBSs. In connection with the sale of loans and/or RMBSs, SCC made certain representations and warranties. These representations and warranties varied based on the nature of the transaction and the buyer's or insurer's requirements, but generally pertained to the ownership of the loan, the validity of the lien securing the loan, borrower fraud, the loan's compliance with the criteria for inclusion in the transaction, including compliance with SCC's underwriting standards or loan criteria established by the buyer, ability to deliver required documentation, and compliance with applicable laws. Representations and warranties related to borrower fraud in whole loan sale transactions to institutional investors, which represented approximately 68% of the disposal of loans originated in calendar years 2005, 2006 and 2007, included a “knowledge qualifier” limiting SCC's liability to those instances where SCC had knowledge of the fraud at the time the loans were sold. Representations and warranties made in other sale transactions effectively did not include a knowledge qualifier as to borrower fraud. SCC believes it would have an obligation to repurchase a loan or indemnify certain parties with respect to a claim for a breach of a representation and warranty only if such breach materially and adversely affects the value of the mortgage loan, or a securitization insurer's or certificate holder's interest in the mortgage loan, and the mortgage loan has not been liquidated, although there is limited and conflicting case law on the liquidated loan defense issue. Such claims together with any settlement arrangements related to these losses are collectively referred to as “representation and warranty claims.” Representation and warranty claims received by SCC have primarily related to alleged breaches of representations and warranties related to a loan's compliance with the underwriting standards established by SCC at origination and borrower fraud for loans originated in calendar years 2006 and 2007. SCC has received $2.1 billion in claims since May 1, 2008, of which $190 million were received in fiscal year 2013 and $1.1 billion in fiscal year 2012. SCC received new claims totaling $68.6 million during the three months ended July 31, 2013, the majority of which were received from parties with whom SCC has tolling agreements. These tolling agreements toll the running of any applicable statute of limitations related to potential lawsuits regarding representation and warranty claims and other claims against SCC. Claims totaling approximately $71.7 million remained subject to review as of July 31, 2013, of which, approximately $1.9 million represent a reassertion of previously denied claims. SETTLEMENT ACTIONS - SCC has entered into tolling agreements with the counterparties that initiated a significant majority of the asserted claims received by SCC. Beginning in the fourth quarter of fiscal year 2013 and continuing into the first quarter of fiscal year 2014, SCC has been engaged in discussions with these counterparties regarding the bulk settlement of previously denied and potential future claims. Based on settlement discussions with these counterparties, SCC believes a bulk settlement approach, rather than the loan-by-loan resolution process, will be needed to resolve all of the representation and warranty and other claims that are the subject of these discussions. In the event that current efforts to settle are not successful, SCC believes claim volumes may increase or litigation may result. SCC continues to engage in a loan-by-loan review of new requests for repurchase. SCC has and will continue to vigorously contest any request for repurchase when it has concluded that a valid basis for repurchase does not exist. SCC's decision whether to engage in bulk settlement discussions is based on factors that vary by counterparty or type of counterparty and include the considerations used by SCC in determining its loss estimate, described below under "Liability for Estimated Contingent Losses." LIABILITY FOR ESTIMATED CONTINGENT LOSSES - SCC records a liability for losses related to representation and warranty claims when those losses are believed to be both probable and reasonably estimable. Development of loss estimates is subjective, subject to a high degree of management judgment, and estimates may vary significantly period to period. SCC's loss estimate as of July 31, 2013 considers the experience gained through discussions with counterparties, and an assessment of, among other things, historical claim results, threatened claims, terms and provisions of related agreements, counterparty willingness to pursue a settlement, legal standing of counterparties to provide a comprehensive settlement, the potential pro-rata realization of the claims as compared to all similar claims and other relevant facts and circumstances when developing its estimate of probable loss. The estimate is based on the best information currently available, significant management judgment, and a number of factors, including developments in case law and those factors mentioned above, that are subject to change. Changes in any one of these factors could significantly impact the estimate. The liability is included in accounts payable, accrued expenses and other current liabilities on the consolidated balance sheets. A rollforward of SCC's accrued liability for these loss contingencies is as follows:
SCC is taking the legal position, where appropriate, for both contractual representation and warranty claims and similar claims in litigation, that a valid representation and warranty claim cannot be made with respect to a mortgage loan that has been liquidated. There is limited and conflicting case law on this issue. These decisions are from lower courts, are inconsistent in their analysis and receptivity to this defense, and are subject to appeal. It is anticipated that the liquidated mortgage loan defense will be the subject of future judicial decisions. Until the validity of the liquidated loan defense is further clarified by the courts or other developments occur, SCC's estimated accrual for representation and warranty will not take this defense into account. ESTIMATED RANGE OF POSSIBLE LOSS - SCC believes it is reasonably possible that future representation and warranty losses may vary from amounts recorded for these exposures. SCC currently estimates that the range of reasonably possible loss could be up to $30 million in excess of amounts accrued. This estimated range is based on currently available information, significant judgment and a number of assumptions that are subject to change. The actual loss that may be incurred could be more or less than our accrual or the estimate of reasonably possible losses. INDEMNIFICATION OBLIGATIONS - As described more fully in note 12, losses may also be incurred with respect to various indemnification claims by underwriters and depositors in securitization transactions in which SCC participated. Losses from these indemnification claims are frequently not subject to a stated term or limit. We have not concluded that a loss related to any of these indemnification claims is probable; however, there can be no assurances as to the outcome or impact of these indemnification claims on our consolidated financial position, results of operations and cash flows. The accrued liability described above totaling $158.8 million does not include accrued losses, if any, which may arise from these indemnification claims. |
Mortgage Loans Held For Investment And Related Assets (Schedule Of Portfolio Balance And Related Allowance) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
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Apr. 30, 2013
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Jul. 31, 2012
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Portfolio Balance | $ 322,454 | $ 350,235 | $ 405,670 |
Related Allowance | 15,514 | 14,314 | 22,185 |
Pooled (less than 60 days past due)
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Portfolio Balance | 186,082 | 207,319 | 238,999 |
Related Allowance | 5,734 | 5,628 | 7,701 |
Individually (TDRs)
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Portfolio Balance | 50,136 | 55,061 | 67,587 |
Related Allowance | 4,866 | 4,924 | 6,931 |
Individually (60 days or more past due)
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Portfolio Balance | 86,236 | 87,855 | 99,084 |
Related Allowance | $ 4,914 | $ 3,762 | $ 7,553 |
Receivables
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Jul. 31, 2013
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Accounts, Notes, Loans and Financing Receivable, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables | RECEIVABLES Short-term receivables consist of the following:
The short-term portion of Emerald Advance lines of credit (EAs), loans made to franchisees, CashBack balances and credit card balances is included in receivables, while the long-term portion is included in other assets in the consolidated balance sheets. These amounts are as follows:
EAs - We review the credit quality of our EA receivables based on pools, which are segregated by the year of origination, with older years being deemed more unlikely to be repaid. These amounts as of July 31, 2013, by year of origination, are as follows:
As of July 31, 2013 and 2012 and April 30, 2013, $26.8 million, $30.3 million and $30.0 million of EAs were on non-accrual status and classified as impaired, or more than 60 days past due, respectively. Loans to Franchisees - Loans made to franchisees as of July 31, 2013 and 2012 and April 30, 2013, consisted of $124.2 million, $129.3 million and $121.2 million, respectively, in term loans made primarily to finance the purchase of franchises and $46.0 million, $44.0 million and $47.3 million, respectively, in revolving lines of credit primarily for the purpose of funding off-season working capital needs. As of July 31, 2013 and 2012 and April 30, 2013, loans with a principal amount of $2.5 million, $0.5 million and $0.1 million, respectively, were more than 30 days past due, however we had no loans to franchisees on non-accrual status. Canadian CashBack Program - During the tax season our Canadian operations advance refunds due to certain clients from the Canada Revenue Agency for a fee (the CashBack program). Refunds advanced under the CashBack program are not subject to credit approval, therefore the primary indicator of credit quality is the age of the receivable amount. CashBack amounts are generally received within 60 days of filing the client's return. As of July 31, 2013 and 2012 and April 30, 2013, $0.8 million, $2.6 million and $1.8 million of CashBack balances were more than 60 days old, respectively. Credit Cards - We utilize a four-tier underwriting approach at origination. Each of the four tiers, with Tier 4 representing the most risk, is comprised of a combination of FICO scores ranging from 521 to 680, generic and custom credit bureau based risk scores and client attributes. The criteria in the tiers are not subsequently updated. The population also includes certain clients which are “un-scorable.” Although we utilize the borrower's credit score for underwriting, we do not consider the credit score to be a primary measure of credit quality, since it tends to be a lagging indicator. Credit card receivable balances as of July 31, 2013, by credit tier, are as follows:
An aging of our credit card receivable balances as of July 31, 2013 is as follows :
As of July 31, 2013 and April 30, 2013, a total of $1.1 million and $2.1 million in unamortized deferred fees and costs were capitalized related to our credit card balances, respectively. Long-Term Note Receivable - We have a long-term note receivable in the amount of $54.0 million due from McGladrey & Pullen LLP (M&P) related to the sale of RSM McGladrey, Inc. (RSM) in November 2011. This note is unsecured and bears interest at a rate of 8.0%, with all principal and accrued interest due in May 2017. As of July 31, 2013, there is no allowance recorded related to this note. We continue to monitor publicly available information relevant to the financial condition of M&P to assess future collectibility. This note is included in other assets on the consolidated balance sheet, with a total of $61.6 million, $56.9 million and $60.4 million in principal and accrued interest recorded as of July 31, 2013 and 2012 and April 30, 2013, respectively. Allowance for Doubtful Accounts - Activity in the allowance for doubtful accounts for our short-term and long-term receivables for the three months ended July 31, 2013 and 2012 is as follows:
There were no changes to our methodology related to the calculation of our allowance for doubtful accounts during fiscal year 2014. |
Summary Of Significant Accounting Policies (Policy)
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3 Months Ended |
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Jul. 31, 2013
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Summary Of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation - The consolidated balance sheets as of July 31, 2013 and 2012, the consolidated statements of operations and comprehensive income (loss) for the three months ended July 31, 2013 and 2012, and the condensed consolidated statements of cash flows for the three months ended July 31, 2013 and 2012 have been prepared by the Company, without audit. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows at July 31, 2013 and 2012 and for all periods presented have been made. See note 14 for discussion of our presentation of discontinued operations. “H&R Block,” “the Company,” “we,” “our” and “us” are used interchangeably to refer to H&R Block, Inc. or to H&R Block, Inc. and its subsidiaries, as appropriate to the context. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our April 30, 2013 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of April 30, 2013 or for the year then ended, are derived from our April 30, 2013 Annual Report to Shareholders on Form 10-K. |
Management Estimates | Management Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, assumptions and judgments are applied in the determination of contingent losses arising from our discontinued mortgage business, contingent losses associated with pending claims and litigation, allowance for loan losses, valuation allowances based on future taxable income, reserves for uncertain tax positions and related matters. Estimates have been prepared on the basis of the most current and best information available as of each balance sheet date. As such, actual results could differ materially from those estimates. |
Recently Issued or Newly Adopted Accounting Standards | Recently Issued or Newly Adopted Accounting Standards - In February 2013, the Financial Accounting Standards Board issued guidance which expands disclosure requirements for other comprehensive income. The guidance requires the reporting of the effect of the reclassification of items out of accumulated other comprehensive income on each affected net income line item. The guidance is effective for interim and annual periods beginning on or after December 15, 2012 and is to be applied prospectively. This guidance, which we adopted as of May 1, 2013, did not have a material impact on our financial statements, as we had no reclassifications of items out of accumulated other comprehensive income for the first quarter of fiscal 2014. |
Fair Value Measurement (Quantitative Information About Level 3 Fair Value Measurements) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||
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Apr. 30, 2013
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Jul. 31, 2012
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Apr. 30, 2012
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Jul. 31, 2013
Third Party Pricing
REO
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Jul. 31, 2013
Third Party Pricing
Minimum
REO
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Jul. 31, 2013
Third Party Pricing
Maximum
REO
|
Jul. 31, 2013
Third Party Pricing
Weighted Average
REO
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Jul. 31, 2013
Collateral-Based
Impaired Mortgage Loans Held For Investment - Non TDRs
|
Jul. 31, 2013
Collateral-Based
Impaired Mortgage Loans Held For Investment - TDRs
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Jul. 31, 2013
Collateral-Based
Minimum
Impaired Mortgage Loans Held For Investment - Non TDRs
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Jul. 31, 2013
Collateral-Based
Maximum
Impaired Mortgage Loans Held For Investment - Non TDRs
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Jul. 31, 2013
Collateral-Based
Weighted Average
Impaired Mortgage Loans Held For Investment - Non TDRs
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Jul. 31, 2013
Discounted Cash Flow
Impaired Mortgage Loans Held For Investment - Non TDRs
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Jul. 31, 2013
Discounted Cash Flow
Minimum
Impaired Mortgage Loans Held For Investment - TDRs
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Jul. 31, 2013
Discounted Cash Flow
Maximum
Impaired Mortgage Loans Held For Investment - TDRs
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Jul. 31, 2013
Discounted Cash Flow
Weighted Average
Impaired Mortgage Loans Held For Investment - TDRs
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Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||||||||||||
Mortgage Loans on Real Estate | $ 13,968 | $ 15,457 | $ 14,972 | $ 13,917 | ||||||||||||
Fair value | $ 45,270 | $ 81,322 | ||||||||||||||
Cost to list/sell | 5.00% | 57.00% | 5.00% | 0.00% | 134.00% | 8.00% | ||||||||||
Loss severity | 0.00% | 100.00% | 48.00% | 0.00% | 100.00% | 59.00% | 0.00% | 21.00% | 5.00% | |||||||
Time to sell (in months) | 24 months | 24 months | ||||||||||||||
Collateral depreciation | (120.00%) | 100.00% | 46.00% | |||||||||||||
Aged default performance | 29.00% | 51.00% | 39.00% |
Litigation And Related Contingencies
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Litigation And Related Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Litigation And Related Contingencies | LITIGATION AND RELATED CONTINGENCIES We are a defendant in a large number of litigation matters, arising both in the ordinary course of business and otherwise, including as described below. The matters described below are not all of the lawsuits to which we are subject. In some of the matters, very large or indeterminate amounts, including punitive damages, are sought. U.S. jurisdictions permit considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. We believe that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value due to this variability in pleadings and our experience in litigating or resolving through settlement numerous claims over an extended period of time. The outcome of a litigation matter and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. In addition to litigation matters, we are also subject to other claims and regulatory investigations arising out of our business activities, including as described below. We accrue liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been accrued for a number of the matters noted below. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, we accrue the minimum amount in the range. For such matters where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, no accrual has been made. It is possible that litigation and regulatory matters could require us to pay damages or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated at July 31, 2013. While the potential future liabilities could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known, we do not believe any such liabilities are likely to have a material effect on our consolidated financial position, results of operations and cash flows. As of July 31, 2013 and 2012 and April 30, 2013, we accrued liabilities of $12.5 million, $44.4 million and $11.9 million, respectively. The decline in the balance from the prior year is primarily due to payments made during fiscal year 2013. For some matters where a liability has not been accrued, we are able to estimate a reasonably possible range of loss. For those matters, and for matters where a liability has been accrued, as of July 31, 2013, we estimate the aggregate range of reasonably possible losses in excess of amounts accrued to be approximately $0 to $56 million, of which approximately 52% relates to our discontinued operations. For other matters, we are not currently able to estimate the reasonably possible loss or range of loss. We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, we review relevant information with respect to litigation and related contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. LITIGATION AND OTHER CLAIMS, INCLUDING INDEMNIFICATION CLAIMS, PERTAINING TO DISCONTINUED MORTGAGE OPERATIONS – Although SCC ceased its mortgage loan origination activities in December 2007 and sold its loan servicing business in April 2008, SCC and the Company have been, remain, or may in the future be subject to regulatory investigations, claims, including indemnification claims, and lawsuits pertaining to SCC's mortgage business activities that occurred prior to such termination and sale. These investigations, claims and lawsuits include actions by regulators, third party indemnitees including depositors and underwriters, individual plaintiffs, and cases in which plaintiffs seek to represent a class of others alleged to be similarly situated. Among other things, these investigations, claims and lawsuits allege discriminatory or unfair and deceptive loan origination and servicing practices, fraud and other common law torts, rights to indemnification and violations of securities laws, the Truth in Lending Act (TILA), Equal Credit Opportunity Act and the Fair Housing Act. Given the impact of the financial crisis on the non-prime mortgage environment, the aggregate number of these investigations, claims and lawsuits has increased over time and is expected to continue to remain elevated. The amounts claimed in these investigations, claims and lawsuits are substantial in some instances, and the ultimate resulting liability is difficult to predict and thus in many cases cannot be reasonably estimated. In the event of unfavorable outcomes, the amounts that may be required to be paid in the discharge of liabilities or settlements could be substantial and could have a material impact on our consolidated financial position, results of operations and cash flows. Certain of these matters are described in more detail below. On December 9, 2009, a putative class action lawsuit was filed in the United States District Court for the Central District of California against SCC and H&R Block, Inc. styled Jeanne Drake, et al. v. Option One Mortgage Corp., et al. (Case No. SACV09-1450 CJC). Plaintiffs allege breach of contract, promissory fraud, intentional interference with contractual relations, wrongful withholding of wages and unfair business practices in connection with not paying severance benefits to employees when their employment transitioned to American Home Mortgage Servicing, Inc. (now known as Homeward Residential, Inc. (Homeward)) in connection with the sale of certain assets and operations of SCC. Plaintiffs seek to recover severance benefits of approximately $8 million, interest and attorney’s fees, in addition to penalties and punitive damages on certain claims. On September 2, 2011, the court granted summary judgment in favor of the defendants on all claims. Plaintiffs filed an appeal, which remains pending. We have not concluded that a loss related to this matter is probable nor have we established a loss contingency related to this matter. We believe SCC has meritorious defenses to the claims in this case and intend to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. On October 15, 2010, the Federal Home Loan Bank of Chicago (FHLB-Chicago) filed a lawsuit in the Circuit Court of Cook County, Illinois (Case No. 10CH45033) styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation, et al. against multiple defendants, including various SCC-related entities, H&R Block, Inc. and other entities, arising out of FHLB-Chicago’s purchase of residential mortgage-backed securities (RMBSs). The plaintiff seeks rescission and damages under state securities law and for common law negligent misrepresentation in connection with its purchase of two securities collateralized by loans originated and securitized by SCC. These two securities had a total initial principal amount of approximately $50 million, of which approximately $39 million remains outstanding. The plaintiff agreed to voluntarily dismiss H&R Block, Inc. from the suit. The remaining defendants, including SCC, filed motions to dismiss, which the court denied. Defendants moved for leave to appeal and the circuit court denied the motion. We have not concluded that a loss related to this matter is probable nor have we accrued a liability related to this matter. We believe SCC has meritorious defenses to the claims in this case and intends to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. On February 22, 2012, a lawsuit was filed by SCC against Homeward in the Supreme Court of the State of New York, County of New York, styled Sand Canyon Corporation v. American Home Mortgage Servicing, Inc. (Index No. 650504/2012), alleging breach of contract and breach of the implied covenant of good faith and fair dealing in connection with the Cooperation Agreement entered into with SCC in connection with SCC’s sale of its mortgage loan servicing business to the defendant in 2008. SCC is seeking relief to, among other things, require the defendant to provide loan files only by the method prescribed in applicable agreements. The court denied the defendant's motion to dismiss and an appellate court affirmed. Discovery is proceeding. On May 31, 2012, a lawsuit was filed by Homeward in the Supreme Court of the State of New York, County of New York, against SCC styled Homeward Residential, Inc. v. Sand Canyon Corporation (Index No. 651885/2012). SCC removed the case to the United States District Court for the Southern District of New York on June 28, 2012 (Case No. 12-cv-5067). Plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-2 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract, anticipatory breach, indemnity and declaratory judgment in connection with alleged losses incurred as a result of the breach of representations and warranties relating to loans sold to the trust and representation and warranties related to SCC. Plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses, as well as a repurchase of all loans due to alleged misrepresentations by SCC as to itself and representations given as to the loans' compliance with its underwriting standards and the value of underlying real estate. SCC filed a motion to dismiss. Plaintiff thereafter filed an amended complaint. SCC intends to file an additional motion to dismiss. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter. We believe SCC has meritorious defenses to the claims in this case and intends to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. On September 28, 2012, a second lawsuit was filed by Homeward in the District Court for the Southern District of New York against SCC styled Homeward Residential, Inc. v. Sand Canyon Corporation (Case No. 12-cv-7319). Plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2006-3 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract and indemnity in connection with losses allegedly incurred as a result of the breach of representations and warranties relating to 96 loans sold to the trust. Plaintiff seeks specific performance of alleged repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses. SCC filed a motion to dismiss. Plaintiff thereafter filed an amended complaint. SCC intends to file an additional motion to dismiss. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter. We believe SCC has meritorious defenses to the claims in this case and intends to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. On April 5, 2013, a third lawsuit was filed by Homeward in the District Court for the Southern District of New York against SCC. The suit, styled Homeward Residential, Inc. v. Sand Canyon Corporation (Case No. 13-cv-2107), was filed as a related matter to the second Homeward suit mentioned above. In this third lawsuit, Plaintiff, in its capacity as the master servicer for Option One Mortgage Loan Trust 2007-4 and for the benefit of the trustee and the certificate holders of such trust, asserts claims for breach of contract and indemnity in connection with alleged losses incurred as a result of the breach of representations and warranties relating to 159 loans sold to the trust. Plaintiff seeks specific performance of repurchase obligations or damages to compensate the trust and its certificate holders for alleged actual and anticipated losses. SCC filed a motion to dismiss, which remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter. We believe SCC has meritorious defenses to the claims in this case and intends to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. On March 29, 2013, MGRID, LLC filed a Summons with Notice against Merrill Lynch and Sand Canyon Corporation (MGRID LLC v. Merrill Lynch Mortgage Lending Inc., 651140/2013, New York State Supreme Court (Manhattan)) seeking more than $309 million in damages for alleged breaches of representations and warranties related to Merrill Lynch Mortgage Investors Trust Series 2007-HE-2. The Trust contains more than 5,000 mortgage loans of which Sand Canyon originated approximately 28% of the original principal balance of these loans. The Notice alleges that Merrill Lynch and Sand Canyon breached representations and warranties made about certain of the mortgage loans and that both have failed to repurchase loans that violated the representations and warranties. The Notice also names Citibank N.A., as trustee, for failure to bring an enforcement action against Merrill and Sand Canyon. We have not concluded that a loss related to this matter is probable, nor have we accrued a liability related to this matter. We believe SCC has meritorious defenses to the claims in this case and intends to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. Underwriters and depositors are, or have been, involved in multiple lawsuits related to securitization transactions in which SCC participated. These lawsuits allege or alleged a variety of claims, including violations of federal and state securities law and common law fraud, based on alleged materially inaccurate or misleading disclosures. Based on information currently available to SCC, it believes that the 17 lawsuits in which SCC received notice of a claim for indemnification involve original investments of approximately $14 billion. The outstanding principal amount of these investments is approximately $4 billion. Because SCC is not party to these lawsuits (with the exception of the Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation case discussed above) and does not have control of this litigation, SCC does not have precise information about the amount of damages or other remedies being asserted or the defenses to the claims in such lawsuits. Additional lawsuits against the underwriters or depositors may be filed in the future, and SCC may receive additional notices of claims for indemnification from underwriters or depositors with respect to existing or new lawsuits. We have not concluded that a loss related to any of these indemnification claims is probable, nor have we accrued a liability related to any of these claims. We believe SCC has meritorious defenses to these indemnification claims and intends to defend them vigorously, but there can be no assurance as to their outcome or their impact on our consolidated financial position, results of operations and cash flows. On April 3, 2012, the Nevada Attorney General issued a subpoena to SCC indicating it was conducting an investigation concerning “the alleged commission of a practice declared to be unlawful under the Nevada Deceptive Trade Practices Act.” No complaint has been filed to date. SCC plans to continue to cooperate with the Nevada Attorney General. EMPLOYMENT-RELATED CLAIMS AND LITIGATION – On January 25, 2010, a wage and hour class action lawsuit was filed against us in the United States District Court for the Western District of Missouri styled Barbara Petroski, et al. v. H&R Block Eastern Enterprises, Inc., et al., (Case No. 10-00075-CV-W-DW). The plaintiffs generally allege failure to compensate tax professionals nationwide for training that is required to be eligible for rehire the following tax season, and seek compensatory damages, liquidated damages, statutory penalties, pre-judgment interest, attorneys' fees and costs. A conditional class was certified under the Fair Labor Standards Act in March 2011 (consisting of tax professionals nationwide who worked in company-owned offices and who were not compensated for such training on or after April 15, 2007). Two classes were also certified under state laws in California and New York (consisting of tax professionals who worked in company-owned offices in California and New York and who were not compensated for such training on or after March 4, 2006 and on or after March 4, 2004, respectively). We filed a motion to decertify the classes, along with a motion for summary judgment on all claims. On April 8, 2013, the court granted summary judgment in our favor on all claims. The plaintiffs filed an appeal, which remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a loss contingency related to this matter. We believe we have meritorious defenses to the claims in this matter and intend to defend them vigorously, but there can be no assurances as to the outcome of the matter or its impact on our consolidated financial position, results of operations and cash flows. RAL AND RAC LITIGATION – A series of putative class action lawsuits were filed against us in various federal courts beginning on November 17, 2011 concerning the RAL and RAC products. The plaintiffs generally allege we engaged in unfair, deceptive or fraudulent acts in violation of various state consumer protection laws by facilitating RALs that were accompanied by allegedly inaccurate TILA disclosures, and by offering RACs without any TILA disclosures. Certain plaintiffs also allege violation of disclosure requirements of various state statutes expressly governing RALs and provisions of those statutes prohibiting tax preparers from charging or retaining certain fees. Collectively, the plaintiffs seek to represent clients who purchased RAL or RAC products in up to forty-two states and the District of Columbia during timeframes ranging from 2007 to the present. The plaintiffs seek equitable relief, disgorgement of profits, compensatory and statutory damages, restitution, civil penalties, attorneys' fees and costs. These cases were consolidated by the Judicial Panel on Multidistrict Litigation into a single proceeding in the United States District Court for the Northern District of Illinois for coordinated pretrial proceedings, styled IN RE: H&R Block Refund Anticipation Loan Litigation (MDL No. 2373). We filed a motion to compel arbitration, which remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a loss contingency related to this matter. We believe we have meritorious defenses to the claims in these cases and intend to defend the cases vigorously, but there can be no assurances as to the outcome of these cases or their impact on our consolidated financial position, results of operations and cash flows. COMPLIANCE FEE LITIGATION – On April 16, 2012, a putative class action lawsuit was filed against us in the Circuit Court of Jackson County, Missouri styled Manuel H. Lopez III v. H&R Block, Inc., et al. (Case # 1216CV12290) concerning a compliance fee charged to retail tax clients in the 2011 and 2012 tax seasons. The plaintiff seeks to represent all Missouri citizens who were charged the compliance fee, and asserts claims of violation of the Missouri Merchandising Practices Act, money had and received, and unjust enrichment. We filed a motion to compel arbitration of the 2011 claims. The court denied the motion. We filed an appeal, which remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a loss contingency related to this matter. We believe we have meritorious defenses to the claims in this case and intend to defend the case vigorously, but there can be no assurances as to the outcome of the case or its impact on our consolidated financial position, results of operations and cash flows. On April 19, 2012, a putative class action lawsuit was filed against us in the United States District Court for the Western District of Missouri styled Ronald Perras v. H&R Block, Inc., et al. (Case No. 4:12-cv-00450-DGK) concerning a compliance fee charged to retail tax clients in the 2011 and 2012 tax seasons. The plaintiff seeks to represent all persons nationwide (excluding citizens of Missouri) who were charged the compliance fee, and asserts claims of violation of various state consumer laws, money had and received, and unjust enrichment. We filed a motion to compel arbitration of the 2011 claims, which remains pending. We have not concluded that a loss related to this matter is probable, nor have we accrued a loss contingency related to this matter. We believe we have meritorious defenses to the claims in this case and intend to defend the case vigorously, but there can be no assurances as to the outcome of the case or its impact on our consolidated financial position, results of operations and cash flows. FORM 8863 LITIGATION - A series of putative class action lawsuits were filed against us in various federal courts and one state court beginning on March 13, 2013 (including, by way of example, Danielle Pooley v. H&R Block, Inc., No. 1:13-cv-01549-JBS-KMW (D.N.J. Mar. 13, 2013); Arthur Green and Amy Hamilton v. H&R Block, Inc., et al., No. 4:13-cv-11206 (E.D. Mich. Mar. 19, 2013); Juan Ortega v. H&R Block, Inc., et al., No. 2:13-cv-02023-MMM-RZ (C.D. Cal. Mar. 20, 2013); and Nikki R. Nevill v. H&R Block, Inc., et al., No. 1316-CV07264 (Jackson Cnty., Mo. Cir. Ct. Mar. 21, 2013)). Taken together, the plaintiffs in these actions purport to represent certain clients nationwide who filed Form 8863 during tax season 2013 through an H&R Block office or using H&R Block At Home® online tax services or tax preparation software, and allege breach of contract, negligence and violation of state consumer laws in connection with transmission of the form. The plaintiffs seek damages, pre-judgment interest, attorneys' fees and costs. We filed motions to compel arbitration in certain of the cases, which remain pending. In July 2013, we filed a petition requesting the Judicial Panel on Multidistrict Litigation to consolidate the federal cases for coordinated pretrial proceedings. A hearing on that petition is set for September 26, 2013. In August 2013, the plaintiff in the state court action voluntarily dismissed her case without prejudice. We have not concluded that a loss related to these lawsuits is probable, nor have we accrued a liability related to these lawsuits. We believe we have meritorious defenses to the claims in these cases and intend to defend the cases vigorously, but there can be no assurances as to the outcome of these cases or their impact on our consolidated financial position, results of operations and cash flows. EXPRESS IRA LITIGATION – On January 2, 2008, the Mississippi Attorney General in the Chancery Court of Hinds County, Mississippi First Judicial District (Case No. G 2008 6 S 2) filed a lawsuit regarding our former Express IRA product that is styled Jim Hood, Attorney for the State of Mississippi v. H&R Block, Inc., H&R Block Financial Advisors, Inc., et al. The complaint alleges fraudulent business practices, deceptive acts and practices, common law fraud and breach of fiduciary duty with respect to the sale of the product in Mississippi and seeks equitable relief, disgorgement of profits, damages and restitution, civil penalties and punitive damages. We believe we have meritorious defenses to the claims in this case and intend to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. Although we sold H&R Block Financial Advisors, Inc. (HRBFA) effective November 1, 2008, we remain responsible for any liabilities relating to the Express IRA litigation, among other things, through an indemnification agreement. A portion of our accrual is related to these indemnity obligations. LITIGATION AND CLAIMS PERTAINING TO THE DISCONTINUED OPERATIONS OF RSM MCGLADREY – On April 17, 2009, a shareholder derivative complaint was filed by Brian Menezes, derivatively and on behalf of nominal defendant International Textile Group, Inc. against McGladrey Capital Markets LLC (MCM) in the Court of Common Pleas, Greenville County, South Carolina (C.A. No. 2009-CP-23-3346) styled Brian P. Menezes, Derivatively on Behalf of Nominal Defendant, International Textile Group, Inc. (f/k/a Safety Components International, Inc.) v. McGladrey Capital Markets, LLC (f/k/a RSM EquiCo Capital Markets, LLC), et al. Plaintiffs filed an amended complaint in October 2011 styled In re International Textile Group Merger Litigation, adding a putative class action claim. Plaintiffs allege claims of aiding and abetting, civil conspiracy, gross negligence and breach of fiduciary duty against MCM in connection with a fairness opinion MCM provided to the Special Committee of Safety Components International, Inc. (SCI) in 2006 regarding the merger between International Textile Group, Inc. and SCI. Plaintiffs seek actual and punitive damages, pre-judgment interest, attorneys' fees and costs. On February 8, 2012, the court dismissed plaintiffs' civil conspiracy claim against all defendants. A class was certified on the remaining claims on November 20, 2012. The court granted summary judgment in favor of MCM on June 3, 2013 on the breach of fiduciary duty claim. A trial date is set for September 9, 2013 on the remaining claims. A portion of our loss contingency accrual is related to this lawsuit for the amount of loss that we consider probable and reasonably estimable. We believe we have meritorious defenses to the claims in this case and intend to defend the case vigorously, but there can be no assurances as to its outcome or its impact on our consolidated financial position, results of operations and cash flows. In connection with the sale of RSM and MCM, we indemnified the buyers against certain litigation matters. The indemnities are not subject to a stated term or limit. A portion of our accrual is related to these indemnity obligations. OTHER – We are from time to time a party to investigations, claims and lawsuits not discussed herein arising out of our business operations. These investigations, claims and lawsuits may include actions by state attorneys general, other state regulators, federal regulators, individual plaintiffs, and cases in which plaintiffs seek to represent a class of others similarly situated. We believe we have meritorious defenses to each of these investigations, claims and lawsuits, and we are defending or intend to defend them vigorously. The amounts claimed in these matters are substantial in some instances; however, the ultimate liability with respect to such matters is difficult to predict. In the event of an unfavorable outcome, the amounts we may be required to pay in the discharge of liabilities or settlements could have a material impact on our consolidated financial position, results of operations and cash flows. We are also a party to claims and lawsuits that we consider to be ordinary, routine litigation incidental to our business, including, but not limited to, claims and lawsuits concerning the preparation of customers' income tax returns, the fees charged customers for various services and products, relationships with franchisees, intellectual property disputes, marketing and other competitor disputes, employment matters and contract disputes (Other Claims). While we cannot provide assurance that we will ultimately prevail in each instance, we believe the amount, if any, we are required to pay in the discharge from liabilities in, or settlements of, these Other Claims will not have a material impact on our consolidated financial position, results of operations and cash flows. The liability is included in accounts payable, accrued expenses and other current liabilities on the consolidated balance sheets. A rollforward of SCC's accrued liability for these loss contingencies is as follows:
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Mortgage Loans Held For Investment And Related Assets (Narrative) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Jul. 31, 2013
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Jul. 31, 2012
|
Apr. 30, 2013
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Allowance as Percent of Principal | 4.80% | 5.50% | 4.10% |
Mortgage loans held for sale | $ 7,608 | $ 0 | $ 0 |
Percentage of mortgage loan portfolio consisting of borrowers from Florida, California, New York, and Wisconsin | 59.00% | ||
Minimum Credit Score
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|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Loan-to-value at origination in order to have internal risk rating of medium | 80.00% | ||
Minimum credit score to be given internal risk rating of low | 700 | ||
Maximum Credit Score
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Loan-to-value at origination in order to have internal risk rating of medium | 80.00% | ||
Maximum credit score to be given internal risk rating of medium | 700 | ||
Maximum [Member]
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Allowance for Credit Losses, Period at Which Collectively Evaluated for Impairment | 60 days | ||
Minimum [Member]
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Allowance for Credit Losses, Period at Which Indivudally Evaluated for Impairment | 60 days |
Condensed Consolidating Financial Statements Condensed Consolidating Financial Statements (Income Statement) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
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Condensed Financial Statements, Captions [Line Items] | ||
Total revenues | $ 127,195 | $ 96,489 |
Cost of revenues | 210,053 | 193,424 |
Selling, general and administrative | 96,697 | 75,478 |
Total expenses | 306,750 | 268,902 |
Operating loss | (179,555) | (172,413) |
Other income (expense), net | (4,939) | 3,144 |
Loss from continuing operations before income tax benefit | (184,494) | (169,269) |
Income tax benefit | (71,224) | (63,619) |
Net loss from continuing operations | (113,270) | (105,650) |
Net loss from discontinued operations | (1,917) | (1,791) |
NET LOSS | (115,187) | (107,441) |
Other comprehensive income (loss) | (10,807) | (4,795) |
Comprehensive loss | (125,994) | (112,236) |
Block Financial Issuer [Member]
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Condensed Financial Statements, Captions [Line Items] | ||
Total revenues | 27,215 | 21,929 |
Cost of revenues | 39,359 | 34,942 |
Selling, general and administrative | 14,038 | 7,640 |
Total expenses | 53,397 | 42,582 |
Operating loss | (26,182) | (20,653) |
Other income (expense), net | 44 | 1,324 |
Loss from continuing operations before income tax benefit | (26,138) | (19,329) |
Income tax benefit | (9,398) | (8,255) |
Net loss from continuing operations | (16,740) | (11,074) |
Net loss from discontinued operations | (1,163) | (2,111) |
NET LOSS | (17,903) | (13,185) |
Other comprehensive income (loss) | (7,724) | 135 |
Comprehensive loss | (25,627) | (13,050) |
Subsidiaries [Member]
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Condensed Financial Statements, Captions [Line Items] | ||
Total revenues | 100,136 | 74,616 |
Cost of revenues | 170,850 | 158,538 |
Selling, general and administrative | 82,659 | 67,838 |
Total expenses | 253,509 | 226,376 |
Operating loss | (153,373) | (151,760) |
Other income (expense), net | (4,983) | 1,820 |
Loss from continuing operations before income tax benefit | (158,356) | (149,940) |
Income tax benefit | (61,826) | (55,364) |
Net loss from continuing operations | (96,530) | (94,576) |
Net loss from discontinued operations | (754) | 320 |
NET LOSS | (97,284) | (94,256) |
Other comprehensive income (loss) | (3,083) | (4,930) |
Comprehensive loss | (100,367) | (99,186) |
Intersegment Elimination [Member]
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Condensed Financial Statements, Captions [Line Items] | ||
Total revenues | (156) | (56) |
Cost of revenues | (156) | (56) |
Selling, general and administrative | ||
Total expenses | (156) | (56) |
Operating loss | ||
Other income (expense), net | 184,494 | 169,269 |
Loss from continuing operations before income tax benefit | 184,494 | 169,269 |
Income tax benefit | 71,224 | 63,619 |
Net loss from continuing operations | 113,270 | 105,650 |
Net loss from discontinued operations | 1,917 | 1,791 |
NET LOSS | 115,187 | 107,441 |
Other comprehensive income (loss) | 10,807 | 4,795 |
Comprehensive loss | 125,994 | 112,236 |
Parent Company [Member]
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Condensed Financial Statements, Captions [Line Items] | ||
Total revenues | ||
Cost of revenues | ||
Selling, general and administrative | ||
Total expenses | ||
Operating loss | ||
Other income (expense), net | (184,494) | (169,269) |
Loss from continuing operations before income tax benefit | (184,494) | (169,269) |
Income tax benefit | (71,224) | (63,619) |
Net loss from continuing operations | (113,270) | (105,650) |
Net loss from discontinued operations | (1,917) | (1,791) |
NET LOSS | (115,187) | (107,441) |
Other comprehensive income (loss) | (10,807) | (4,795) |
Comprehensive loss | $ (125,994) | $ (112,236) |
Mortgage Loans Held For Investment And Related Assets (Schedule Of Non-Accrual Loans) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
|
Apr. 30, 2013
|
Jul. 31, 2012
|
---|---|---|---|
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Loans receivable recorded investment non-accrual status | $ 83,600 | $ 85,233 | $ 97,717 |
Financing receivable modifications to recorded investments | 3,747 | 4,221 | 3,907 |
Total non-accrual loans | 87,347 | 89,454 | 101,624 |
Purchased From SCC
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Loans receivable recorded investment non-accrual status | 68,740 | 70,327 | 81,539 |
Financing receivable modifications to recorded investments | 3,247 | 3,719 | 3,398 |
All Other
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Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Loans receivable recorded investment non-accrual status | 14,860 | 14,906 | 16,178 |
Financing receivable modifications to recorded investments | $ 500 | $ 502 | $ 509 |
H&R Block Bank (Details) (HRB Bank [Member], USD $)
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3 Months Ended | |
---|---|---|
Jul. 31, 2013
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Jul. 11, 2013
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HRB Bank [Member]
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Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Customer deposits | $ 759,745,000 | $ 938,331,000 |
Business exit costs | $ 7,500,000 |
Investments (Tables)
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Jul. 31, 2013
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost And Fair Value Of Securities Available-For-Sale | The amortized cost and fair value of securities classified as available-for-sale (AFS) are summarized below:
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Contractual Maturities Of AFS Debt Securities At Varying Dates Over The Next 30 Years | Contractual maturities of AFS debt securities at July 31, 2013, occur at varying dates over the next 30 years, and are set forth in the table below.
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Receivables (Tables)
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Jul. 31, 2013
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Accounts, Notes, Loans and Financing Receivable, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Short-Term Receivables | Short-term receivables consist of the following:
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Schedule Of Loans Receivable | The short-term portion of Emerald Advance lines of credit (EAs), loans made to franchisees, CashBack balances and credit card balances is included in receivables, while the long-term portion is included in other assets in the consolidated balance sheets. These amounts are as follows:
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Schedule Of Receivables Based On Year Of Origination | These amounts as of July 31, 2013, by year of origination, are as follows:
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Credit Card Receivables by Risk Tier | Credit card receivable balances as of July 31, 2013, by credit tier, are as follows:
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Credit Card Receivables, Aging Schedule | An aging of our credit card receivable balances as of July 31, 2013 is as follows :
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Schedule Of Activity In The Allowance For Doubtful Accounts | Activity in the allowance for doubtful accounts for our short-term and long-term receivables for the three months ended July 31, 2013 and 2012 is as follows:
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Receivables (Schedule Of Activity In The Allowance For Doubtful Accounts) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
|
Allowance for Doubtful Accounts [Roll Forward] | ||
Beginning balance | $ 57,703 | $ 44,589 |
Provision | 3,059 | 297 |
Charge-offs | (3,884) | (1,409) |
Ending balance | 56,878 | 43,477 |
Emerald Advance lines of credit
|
||
Allowance for Doubtful Accounts [Roll Forward] | ||
Beginning balance | 7,390 | 6,200 |
Provision | 0 | 0 |
Charge-offs | 0 | 0 |
Ending balance | 7,390 | 6,200 |
Loans to franchisees
|
||
Allowance for Doubtful Accounts [Roll Forward] | ||
Beginning balance | 0 | 0 |
Provision | 0 | 0 |
Charge-offs | 0 | 0 |
Ending balance | 0 | 0 |
Receivables for tax preparation and related fees
|
||
Allowance for Doubtful Accounts [Roll Forward] | ||
Beginning balance | 2,769 | 2,279 |
Provision | 158 | 225 |
Charge-offs | (673) | (972) |
Ending balance | 2,254 | 1,532 |
Royalties from franchisees
|
||
Allowance for Doubtful Accounts [Roll Forward] | ||
Beginning balance | 7,304 | 0 |
Provision | 2,367 | 0 |
Charge-offs | (2,523) | 0 |
Ending balance | 7,148 | 0 |
All Other
|
||
Allowance for Doubtful Accounts [Roll Forward] | ||
Beginning balance | 40,240 | 36,110 |
Provision | 534 | 72 |
Charge-offs | (688) | (437) |
Ending balance | $ 40,086 | $ 35,745 |
Discontinued Operations (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Results of our discontinued operations are as follows:
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Receivables (Narrative) (Details) (USD $)
|
3 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||||||||||||||||
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Jul. 31, 2013
|
Apr. 30, 2013
|
Jul. 31, 2012
|
Jul. 31, 2013
Loans to franchisees
|
Apr. 30, 2013
Loans to franchisees
|
Jul. 31, 2012
Loans to franchisees
|
Jul. 31, 2013
Emerald Advance lines of credit
|
Apr. 30, 2013
Emerald Advance lines of credit
|
Jul. 31, 2012
Emerald Advance lines of credit
|
Jul. 31, 2013
Term Loans
|
Apr. 30, 2013
Term Loans
|
Jul. 31, 2012
Term Loans
|
Jul. 31, 2013
Revolving Lines Of Credit
|
Apr. 30, 2013
Revolving Lines Of Credit
|
Jul. 31, 2012
Revolving Lines Of Credit
|
Jul. 31, 2013
Receivables for tax preparation and related fees
|
Apr. 30, 2013
Receivables for tax preparation and related fees
|
Jul. 31, 2012
Receivables for tax preparation and related fees
|
Jul. 31, 2013
Royalties from franchisees
|
Apr. 30, 2013
Royalties from franchisees
|
Jul. 31, 2012
Royalties from franchisees
|
Jul. 31, 2013
McGladrey & Pullen LLP
|
Apr. 30, 2013
McGladrey & Pullen LLP
|
Jul. 31, 2012
McGladrey & Pullen LLP
|
Jul. 31, 2013
Consumer Credit Card Financing Receivable [Member]
|
Apr. 30, 2013
Consumer Credit Card Financing Receivable [Member]
|
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Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||||||||||||||||
Non-accrual status loans | $ 26,800,000 | $ 30,000,000 | $ 30,300,000 | |||||||||||||||||||||||
Impaired non-accrual status term, days | 60 days | |||||||||||||||||||||||||
Receivables, net | 170,160,000 | 168,460,000 | 173,269,000 | 29,555,000 | 33,037,000 | 35,904,000 | 124,200,000 | 121,200,000 | 129,300,000 | 46,000,000 | 47,300,000 | 44,000,000 | 2,412,000 | 47,658,000 | 6,601,000 | 22,755,000 | 23,271,000 | 0 | ||||||||
Financing Receivable, Recorded Investment, Past Due | 2,500,000 | 100,000 | 500,000 | |||||||||||||||||||||||
Short-term | 800,000 | 1,800,000 | 2,600,000 | |||||||||||||||||||||||
Unamortized Deferred Fees, Capitalized | 1,100,000 | 2,100,000 | ||||||||||||||||||||||||
Note receivable, discontinued operation | 54,000,000 | |||||||||||||||||||||||||
Long-term note, interest rate | 8.00% | |||||||||||||||||||||||||
Total Portfolio | $ 322,454,000 | $ 350,235,000 | $ 405,670,000 | $ 61,561,000 | $ 60,352,000 | $ 56,900,000 |
Investments (Amortized Cost And Fair Value Of Securities Available-For-Sale) (Details) (USD $)
|
Jul. 31, 2013
|
Apr. 30, 2013
|
Jul. 31, 2012
|
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Schedule of Available-for-sale Securities [Line Items] | ||||||||
Investments in available-for-sale securities, Amortized Cost | $ 493,565,000 | $ 480,628,000 | $ 375,545,000 | |||||
Gross Unrealized Gains | 4,091,000 | 6,912,000 | 6,324,000 | |||||
Gross Unrealized Losses | (10,623,000) | [1] | (664,000) | [1] | (78,000) | [1] | ||
Investments in available-for-sale securities, Fair Value | 487,033,000 | 486,876,000 | 381,791,000 | |||||
Mortgage-Backed Securities
|
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Schedule of Available-for-sale Securities [Line Items] | ||||||||
Mortgage-backed securities, cost | 7,900,000 | |||||||
Mortgage-backed securities, gross unrealized loss | 5,000 | |||||||
Short-Term | Municipal Bonds
|
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Schedule of Available-for-sale Securities [Line Items] | ||||||||
Investments in available-for-sale securities, Amortized Cost | 1,006,000 | |||||||
Gross Unrealized Gains | 20,000 | |||||||
Gross Unrealized Losses | 0 | [1] | ||||||
Investments in available-for-sale securities, Fair Value | 1,026,000 | |||||||
Long-Term
|
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Schedule of Available-for-sale Securities [Line Items] | ||||||||
Investments in available-for-sale securities, Amortized Cost | 374,539,000 | |||||||
Gross Unrealized Gains | 6,304,000 | |||||||
Gross Unrealized Losses | (78,000) | [1] | ||||||
Investments in available-for-sale securities, Fair Value | 380,765,000 | |||||||
Long-Term | Mortgage-Backed Securities
|
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Schedule of Available-for-sale Securities [Line Items] | ||||||||
Investments in available-for-sale securities, Amortized Cost | 489,401,000 | 476,450,000 | 370,318,000 | |||||
Gross Unrealized Gains | 3,825,000 | 6,592,000 | 5,898,000 | |||||
Gross Unrealized Losses | (10,623,000) | [1] | (664,000) | [1] | (78,000) | [1] | ||
Investments in available-for-sale securities, Fair Value | 482,603,000 | 482,378,000 | 376,138,000 | |||||
Long-Term | Municipal Bonds
|
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Schedule of Available-for-sale Securities [Line Items] | ||||||||
Investments in available-for-sale securities, Amortized Cost | 4,164,000 | 4,178,000 | 4,221,000 | |||||
Gross Unrealized Gains | 266,000 | 320,000 | 406,000 | |||||
Gross Unrealized Losses | 0 | [1] | 0 | [1] | 0 | [1] | ||
Investments in available-for-sale securities, Fair Value | $ 4,430,000 | $ 4,498,000 | $ 4,627,000 | |||||
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Interest Income And Interest Expense (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
|
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Interest Income And Interest Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Interest Income And Expense Of Continuing Operations | The following table shows the components of interest income and expense:
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Goodwill And Intangible Assets (Schedule Of Intangible Assets) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
|
Apr. 30, 2013
|
Jul. 31, 2012
|
---|---|---|---|
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | $ 466,082 | $ 464,153 | $ 467,243 |
Accumulated Amortization | (185,627) | (179,714) | (195,710) |
Net | 280,455 | 284,439 | 271,533 |
Tax Services
|
|||
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | 93,739 | 91,745 | 105,648 |
Accumulated Amortization | (74,572) | (72,764) | (94,240) |
Net | 19,167 | 18,981 | 11,408 |
Tax Services | Reacquired Franchise Rights
|
|||
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | 214,330 | 214,330 | 214,330 |
Accumulated Amortization | (19,235) | (18,204) | (15,113) |
Net | 195,095 | 196,126 | 199,217 |
Tax Services | Customer Relationships
|
|||
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | 100,688 | 100,719 | 89,839 |
Accumulated Amortization | (51,007) | (48,733) | (48,298) |
Net | 49,681 | 51,986 | 41,541 |
Tax Services | Noncompete Agreements
|
|||
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | 23,024 | 23,058 | 22,225 |
Accumulated Amortization | (21,789) | (21,728) | (21,443) |
Net | 1,235 | 1,330 | 782 |
Tax Services | Franchise Agreements
|
|||
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | 19,201 | 19,201 | 19,201 |
Accumulated Amortization | (5,974) | (5,654) | (4,694) |
Net | 13,227 | 13,547 | 14,507 |
Tax Services | Purchased Technology
|
|||
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | 14,800 | 14,800 | 14,700 |
Accumulated Amortization | (12,750) | (12,331) | (11,080) |
Net | 2,050 | 2,469 | 3,620 |
Tax Services | Trade Name
|
|||
Goodwill and Intangible Assets [Line Items] | |||
Gross Carrying Amount | 300 | 300 | 1,300 |
Accumulated Amortization | (300) | (300) | (842) |
Net | $ 0 | $ 0 | $ 458 |
Commitments And Contingencies (Schedule Of Deferred Revenue Related To The Peace Of Mind Program) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
|
Movement in Deferred Revenue [Roll Forward] | ||
Balance, beginning of the period | $ 146,286 | $ 141,080 |
Amounts deferred for new guarantees issued | 737 | 573 |
Revenue recognized on previous deferrals | (27,826) | (26,983) |
Balance, end of the period | $ 119,197 | $ 114,670 |
Goodwill And Intangible Assets (Schedule Of Goodwill) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
|
Goodwill [Roll Forward] | ||
Goodwill before impairment losses, beginning balance | $ 467,079 | $ 459,863 |
Accumulated impairment losses, beginning balance | (32,297) | (32,297) |
Goodwill, beginning balance | 434,782 | 427,566 |
Acquisitions | 2,155 | 3,651 |
Disposals and foreign currency changes, net | (1,270) | (116) |
Impairments | 0 | 0 |
Goodwill before impairment losses, ending balance | 467,964 | 463,398 |
Accumulated impairment losses, ending balance | (32,297) | (32,297) |
Goodwill, ending balance | $ 435,667 | $ 431,101 |
Receivables (Schedule Of Receivables Based On Year Of Origination) (Details) (Emerald Advance lines of credit, USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
|
---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Receivables, Net | $ 29,555 |
Year Of Origination 2013
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Receivables, Net | 8,657 |
Year Of Origination 2012
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Receivables, Net | 1,177 |
Year Of Origination 2011
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Receivables, Net | 2,083 |
Year Of Origination 2010 And Prior
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Receivables, Net | 6,297 |
Revolving Loans
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
Receivables, Net | $ 11,341 |
Income Taxes (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |||
---|---|---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
Apr. 30, 2013
|
Sep. 04, 2013
Subsequent Event [Member]
|
|
Operating Loss Carryforwards [Line Items] | ||||
Income Tax Examination, Liability (Refund) Adjustment from Settlement with Taxing Authority | $ 100 | |||
Unrecognized tax benefits that would impact effective tax rate | 145.3 | 208.0 | 146.4 | |
Unrecognized Tax Benefits, Period Increase (Decrease) | (1.1) | 1.6 | ||
Effect of anticipated settlements of audit issues and expiring statutes of limitations | 33 | |||
Unrecognized Tax Benefits, Decreases Resulting from Settlements with Taxing Authorities | 15.5 | |||
Effective Income Tax Rate, Continuing Operations | 38.60% | 37.60% | ||
Net Discreet Tax Expense (Benefit) | 0.2 | 2.7 | ||
Discreet Tax Reconciliation, Difference in Income Tax Reserve Compared to Prior Period | 4.4 | |||
Discreet Tax Reconciliation, Decrease in State Interest Receivable as Compared to Prior Period | $ 1.9 | |||
Effective Income Tax Rate, Continuing Operations, Change in Rate | 1.00% |
Loss Per Share and Stockholders' Equity (Tables)
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations Of Basic And Diluted Earnings Per Share | The computations of basic and diluted earnings per share from continuing operations are as follows:
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Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
|
Statement of Cash Flows [Abstract] | ||
NET CASH USED IN OPERATING ACTIVITIES | $ (318,742) | $ (373,140) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of available-for-sale securities | (45,158) | (28,990) |
Maturities of and payments received on available-for-sale securities | 32,061 | 21,129 |
Principal payments on mortgage loans held for investment, net | 11,707 | 12,652 |
Purchases of property and equipment | (34,386) | (13,273) |
Franchise loans: | ||
Loans funded | (6,657) | (5,062) |
Payments received | 7,164 | 5,154 |
Other, net | 6,179 | 1,675 |
Net cash provided by (used in) investing activities | (29,090) | (6,715) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repayments of Long-term Debt | 0 | (30,831) |
Customer banking deposits, net | (179,364) | (179,519) |
Dividends paid | (54,550) | (54,201) |
Repurchase of common stock, including shares surrendered | (4,201) | (339,088) |
Proceeds from exercise of stock options | 21,953 | 468 |
Other, net | (13,093) | (19,939) |
Net cash used in financing activities | (229,255) | (623,110) |
Effects of exchange rates on cash | (6,621) | (1,498) |
Net decrease in cash and cash equivalents | (583,708) | (1,004,463) |
Cash and cash equivalents at beginning of the period | 1,747,584 | 1,944,334 |
Cash and cash equivalents at end of the period | 1,163,876 | 939,871 |
SUPPLEMENTARY CASH FLOW DATA: | ||
Income taxes paid, net of refunds received | 106,467 | 19,747 |
Interest paid on borrowings | 15,883 | 13,494 |
Interest paid on deposits | 640 | 1,336 |
Transfers of foreclosed loans to other assets | 2,100 | 3,074 |
Accrued additions to property and equipment | 8,048 | 7,107 |
Transfer of mortgage loans held for investment to held for sale | $ 7,608 | $ 0 |
H&R Block Bank H&R Block Bank
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
H&R Block Bank | H&R BLOCK BANK On July 11, 2013, H&R Block Bank (HRB Bank) and Block Financial LLC (Block Financial) entered into a definitive Purchase and Assumption Agreement (P&A Agreement) with Republic Bank & Trust Company (Republic Bank). Pursuant to the P&A Agreement, HRB Bank will, among other matters, transfer all of its deposit liabilities, ($759.7 million if the closing were effective July 31, 2013) to Republic Bank with a cash payment of approximately the same amount, subject to several conditions, including the finalization of various operating agreements and regulatory approval (P&A Transaction). If the respective parties receive regulatory approval on or before September 30, 2013, this transaction will have a closing date of not later than November 15, 2013. If regulatory approval is received after September 30, 2013 but on or before March 31, 2014, this transaction will have a closing date between April 30, 2014 and June 18, 2014. Simultaneously with any closing, HRB Bank will convert into a national banking association, merge with and into Block Financial, surrender its bank charter, and cease to operate as a separate legal entity. At that time, H&R Block, Inc. and Block Financial would no longer be savings and loan holding companies subject to regulatory oversight of the Federal Reserve or related regulatory capital requirements. Prior to entering into this agreement, Republic Bank filed an application with its regulators to convert to a national bank charter which is being processed concurrently with the review of the transaction between H&R Block and Republic Bank. We have received indications that additional time is needed for Republic Bank’s regulators to process their applications. We, therefore, expect to continue offering our financial products and services to our clients through HRB Bank for the 2014 tax season. We plan to continue to offer financial products and services to our clients subsequent to HRB Bank ceasing operations and we are currently negotiating additional agreements with Republic Bank, including a Joint Marketing Master Services Agreement (MSA Agreement) and a related Receivables Participation Agreement (RPA Agreement), under which Republic Bank will serve as the bank offering H&R Block-branded financial services and products, and we will service and administer such financial services and products for Republic Bank. We incurred certain fees for professional advisors and accrued employee termination benefits in connection with this pending transaction. Those costs totaled $7.5 million for the quarter ended July 31, 2013. The obligations of the parties to complete the P&A Transaction are subject to the fulfillment of numerous conditions including regulatory approval and agreement upon, execution and delivery of the MSA Agreement and the RPA Agreement. We cannot be certain when or if these conditions will be satisfied, and therefore we cannot predict the timing or the likelihood of completing the P&A Transaction and ceasing to be regulated as an SLHC. DISCONTINUED OPERATIONS Discontinued operations consist of our former Business Services segment and SCC. We sold or ceased to operate all businesses within our former Business Services segment in fiscal year 2012. SCC exited its mortgage business in fiscal year 2008. Results of our discontinued operations are as follows:
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Investments
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | INVESTMENTS AVAILABLE-FOR-SALE – The amortized cost and fair value of securities classified as available-for-sale (AFS) are summarized below:
We did not sell any AFS securities during the three months ended July 31, 2013 and 2012. We did not record any other-than-temporary impairments of AFS securities during the three months ended July 31, 2013 and 2012. Contractual maturities of AFS debt securities at July 31, 2013, occur at varying dates over the next 30 years, and are set forth in the table below.
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Litigation And Related Contingencies (Details) (USD $)
|
3 Months Ended | 0 Months Ended | 0 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2013
|
Apr. 30, 2013
|
Apr. 05, 2013
loan
|
Jul. 31, 2012
|
Jul. 31, 2013
Investigations, Legal Claims And Lawsuits
|
Jul. 31, 2013
Minimum
Investigations, Legal Claims And Lawsuits
|
Jul. 31, 2013
Maximum
Investigations, Legal Claims And Lawsuits
|
Jul. 31, 2013
Jeanne Drake, et al. v. Option One Mortgage Corp., et al [Member]
|
Jul. 31, 2013
ederal Home Loan Bank of Chicago v. Bank of America Funding Corporation, et al [Member]
Pending Litigation [Member]
|
Oct. 15, 2010
ederal Home Loan Bank of Chicago v. Bank of America Funding Corporation, et al [Member]
Pending Litigation [Member]
|
Mar. 29, 2013
MGRID LLC v. Merrill Lynch Mortgage Lending Inc [Member]
loan
|
Apr. 30, 2013
MGRID LLC v. Merrill Lynch Mortgage Lending Inc [Member]
lawsuit
|
Apr. 30, 2013
MGRID LLC v. Merrill Lynch Mortgage Lending Inc [Member]
SCC [Member]
|
Apr. 30, 2013
MGRID LLC v. Merrill Lynch Mortgage Lending Inc [Member]
SCC [Member]
Claims with Knowledge of Outstanding Principal Amount [Member]
|
Mar. 29, 2013
MGRID LLC v. Merrill Lynch Mortgage Lending Inc [Member]
Sand Canyon [Member]
|
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Loss Contingencies [Line Items] | |||||||||||||||
Accrued obligations under indemnifications | $ 12,500,000 | $ 11,900,000 | $ 44,400,000 | ||||||||||||
Liability for legal claims | 0 | 56,000,000 | |||||||||||||
Percentage of losses related to discontinued operations | 52.00% | ||||||||||||||
Claims for severance benefits | 8,000,000 | ||||||||||||||
Initial principal on loans securitized | 50,000,000 | ||||||||||||||
Principal outstanding on loans securitized | 39,000,000 | ||||||||||||||
Loans Sold To Trust, With Claims of Breach of Contract and Indemnity | 159 | ||||||||||||||
Loss Contingency, Damages Sought, Value | 309,000,000 | ||||||||||||||
Number of Loans Contained by Trust | 5,000 | ||||||||||||||
Percentage of Loans Originated by Sand Canyon | 28.00% | ||||||||||||||
Number Of Lawsuits | 17 | ||||||||||||||
Estimated Litigation Liability | $ 14,000,000,000 | $ 4,000,000,000 |
Loss Per Share and Stockholders' Equity
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | PER SHARE AND STOCKHOLDERS' EQUITY Basic and diluted loss per share is computed using the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Per share amounts are computed by dividing net income from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period. The dilutive effect of potential common shares is included in diluted earnings per share except in those periods with a loss from continuing operations. Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain restrictions or the exercise of options to purchase 6.3 million shares and 9.2 million shares for the three months ended July 31, 2013 and 2012, respectively, as the effect would be antidilutive due to the net loss from continuing operations during those periods. The computations of basic and diluted earnings per share from continuing operations are as follows:
The weighted average shares outstanding for the three months ended July 31, 2013 decreased to 273.1 million from 277.2 million for the three months ended July 31, 2012, primarily due to share repurchases completed during fiscal year 2013. During the three months ended July 31, 2012, we purchased and immediately retired 21.3 million shares of our common stock at a cost of $315.0 million. During the three months ended July 31, 2013, we acquired 0.2 million shares of our common stock at an aggregate cost of $4.2 million. These shares represent shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards. During the three months ended July 31, 2012, we acquired 0.1 million shares at an aggregate cost of $1.6 million for similar purposes. During the three months ended July 31, 2013 and 2012, we issued 1.4 million and 0.3 million shares of common stock, respectively, due to the vesting or exercise of stock-based awards. During the three months ended July 31, 2013, we granted 0.8 million nonvested units under our stock-based compensation plans. Nonvested units granted generally either vest over a three year period with one-third vesting each year or cliff vest at the end of a three-year period. Stock-based compensation expense of our continuing operations totaled $4.6 million and $2.4 million for the three months ended July 31, 2013 and 2012, respectively. As of July 31, 2013, unrecognized compensation cost for options totaled $2.7 million, and for nonvested shares and units totaled $39.2 million. |
Receivables (Schedule Of Short-Term Receivables) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
|
Apr. 30, 2013
|
Jul. 31, 2012
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Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | $ 173,915 | $ 257,234 | $ 159,834 |
Allowance for doubtful accounts | (52,606) | (50,399) | (43,477) |
Receivables, net | 121,309 | 206,835 | 116,357 |
Loans to franchisees
|
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Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | 64,041 | 65,413 | 60,459 |
Canadian CashBack receivables
|
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Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | 37,547 | 49,356 | 35,194 |
Receivables for tax preparation and related fees
|
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Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | 2,412 | 47,658 | 6,601 |
Emerald Advance lines of credit
|
|||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | 22,649 | 23,218 | 24,215 |
Credit cards
|
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Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | 4,070 | 10,722 | 2,096 |
Royalties from franchisees
|
|||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | 7,309 | 7,733 | 0 |
Other
|
|||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Receivables, gross | $ 35,887 | $ 53,134 | $ 31,269 |
Mortgage Loans Held For Investment And Related Assets (Tables)
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Mortgage Loans Held For Investment And Related Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Mortgage Loan Portfolio | The composition of our mortgage loan portfolio is as follows:
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Schedule Of Allowance For Loan Losses | Activity in the allowance for loan losses for the three months ended July 31, 2013 and 2012 is as follows:
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Schedule Of Portfolio Balance And Related Allowance | The balance of these loans and the related allowance is as follows:
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Schedule Of Mortgage Loans Held For Investment And The Related Allowance | Detail of our mortgage loans held for investment and the related allowance as of July 31, 2013 is as follows:
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Schedule Of Credit Quality Indicators | Credit quality indicators as of July 31, 2013 include the following:
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Schedule Of Past Due Mortgage Loans | Detail of the aging of the mortgage loans in our portfolio as of July 31, 2013 is as follows:
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Schedule Of Non-Accrual Loans | Information related to our non-accrual loans is as follows:
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Information Related To Impaired Loans | Information related to impaired loans is as follows:
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Schedule Of Allowance For Impaired Loans | Information related to the allowance for impaired loans is as follows:
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Information Related To Activities Of Non-Performing Assets | Information related to activities of our non-performing assets is as follows:
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Schedule Of Real Estate Owned | Activity related to our real estate owned (REO) is as follows:
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Commitments And Contingencies (Tables)
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Deferred Revenue Related To The Peace Of Mind Program | Changes in deferred revenue balances related to our Peace of Mind (POM) program, the current portion of which is included in accounts payable, accrued expenses and other current liabilities and the long-term portion of which is included in other noncurrent liabilities in the consolidated balance sheets, are as follows:
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Commitments And Contingencies (Narrative) (Details) (USD $)
|
Jul. 31, 2013
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Apr. 30, 2013
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Jul. 31, 2012
|
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Commitments And Contingencies [Line Items] | |||
Standard guarantee accrual amount | $ 15,700,000 | $ 18,000,000 | $ 15,500,000 |
Contingent business acquisition obligations | 10,766,000 | 11,277,000 | |
Lines of credit, total obligation | 91,500,000 | ||
Remaining franchise equity lines of credit-undrawn commitment | 45,500,000 | ||
Maximum funding by facility | 1,500,000,000 | ||
Financing Receivables, Line of Credit Facility, Compensating Balances | 210,000,000 | ||
Royalties from franchisees
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Commitments And Contingencies [Line Items] | |||
Financing Receivable, Line of Credit Facility, Total Obligation | 27,400,000 | ||
Financing Receivable, Line of Credit Facility, Remaining Commitment to Fund | 3,500,000 | ||
Level 3
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Commitments And Contingencies [Line Items] | |||
Contingent business acquisition obligations | $ 7,090,000 |
Condensed Consolidating Financial Statements Condensed Consolidating Financial Statements (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Condensed Consolidating Statement of Cash Flows [Text Block] |
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Schedule Of Condensed Consolidating Statement Of Operations [Table Text Block] |
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Schedule Of Condensed Consolidating Balance Sheet [Table Text Block] |
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Interest Income And Interest Expense (Schedule Of Interest Income And Expense Of Continuing Operations) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
|
Schedule Of Interest Income And Expense [Line Items] | ||
Interest Income | $ 11,197 | $ 9,873 |
Interest expense | 14,446 | 22,077 |
Mortgage Loans, Net
|
||
Schedule Of Interest Income And Expense [Line Items] | ||
Interest Income | 3,542 | 4,417 |
Loans to franchisees
|
||
Schedule Of Interest Income And Expense [Line Items] | ||
Interest Income | 2,289 | 2,355 |
AFS Securities
|
||
Schedule Of Interest Income And Expense [Line Items] | ||
Interest Income | 2,341 | 1,639 |
Credit cards
|
||
Schedule Of Interest Income And Expense [Line Items] | ||
Interest Income | 1,228 | 0 |
Other
|
||
Schedule Of Interest Income And Expense [Line Items] | ||
Interest Income | 1,797 | 1,462 |
Borrowings
|
||
Schedule Of Interest Income And Expense [Line Items] | ||
Interest expense | 13,803 | 20,754 |
Deposits
|
||
Schedule Of Interest Income And Expense [Line Items] | ||
Interest expense | $ 643 | $ 1,323 |
Mortgage Loans Held For Investment And Related Assets (Schedule Of Credit Quality Indicators) (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
|
Apr. 30, 2013
|
Jul. 31, 2012
|
---|---|---|---|
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | $ 322,454 | $ 350,235 | $ 405,670 |
Occupancy Status, Owner Occupied
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 223,423 | ||
Occupancy Status, Non-Owner Occupied
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 99,031 | ||
Documentation Level, Full Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 162,052 | ||
Documentation Level, Limited Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 20,201 | ||
Documentation Level, Stated Income
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 116,438 | ||
Documentation Level, No Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 23,763 | ||
Internal Risk Rating, High
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 56,475 | ||
Internal Risk Rating, Medium
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 127,076 | ||
Internal Risk Rating, Low
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 138,903 | ||
Purchased From SCC
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 183,551 | ||
Purchased From SCC | Occupancy Status, Owner Occupied
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 134,582 | ||
Purchased From SCC | Occupancy Status, Non-Owner Occupied
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 48,969 | ||
Purchased From SCC | Documentation Level, Full Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 60,826 | ||
Purchased From SCC | Documentation Level, Limited Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 6,069 | ||
Purchased From SCC | Documentation Level, Stated Income
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 101,995 | ||
Purchased From SCC | Documentation Level, No Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 14,661 | ||
Purchased From SCC | Internal Risk Rating, High
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 56,475 | ||
Purchased From SCC | Internal Risk Rating, Medium
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 127,076 | ||
Purchased From SCC | Internal Risk Rating, Low
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | |||
All Other
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 138,903 | ||
All Other | Occupancy Status, Owner Occupied
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 88,841 | ||
All Other | Occupancy Status, Non-Owner Occupied
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 50,062 | ||
All Other | Documentation Level, Full Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 101,226 | ||
All Other | Documentation Level, Limited Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 14,132 | ||
All Other | Documentation Level, Stated Income
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 14,443 | ||
All Other | Documentation Level, No Documentation
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | 9,102 | ||
All Other | Internal Risk Rating, High
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | |||
All Other | Internal Risk Rating, Medium
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | |||
All Other | Internal Risk Rating, Low
|
|||
Mortgage Loans Held For Investment And Related Assets [Line Items] | |||
Total Portfolio | $ 138,903 |