Discontinued Operations

3 Months Ended

Jul. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

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:

(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	)