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Presentation The condensed consolidated balance sheet as of January 31, 2011, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended January 31, 2011 and 2010, and the condensed consolidated statements of cash flows for the nine months ended January 31, 2011 and 2010 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 January 31, 2011 and for all periods presented have been made. A restatement was made to the historical condensed consolidated statement of cash flows for the nine months ended January 31, 2010. Loans made to franchisees and cash receipts from franchise loans of $88.6 million and $8.5 million, respectively, were previously reported in cash flows from operating activities and are now reported in cash flows from investing activities. "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 condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our April 30, 2010 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of April 30, 2010 or for the year then ended, are derived from our April 30, 2010 Annual Report to Shareholders on Form 10-K.</div></div> </div> 29800000 5890000 5600000 14 <div>                                                                                                                                                (in millions) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                             Fiscal Year 2009                             Fiscal Year 2010                      Fiscal Year 2011   <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                    Q1        Q2        Q3        Q4        Q1        Q2        Q3        Q4        Q1        Q2        Q3      Total</div>                                                                                                                                                 Loan Origination Year:   2005         $   40     $   21     $     1     $     -     $     -     $   15     $     -     $     -     $     6     $     1     $     -     $   84   2006              89         10        111           7           2         57           4         45        100         15         29        469   2007              43         10         85         15           4         11           7           -           3           5           4        187   Total         $  172     $   41     $  197     $   22     $     6     $   83     $   11     $   45     $  109     $   21     $   33     $  740 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">  </div>   </div> 172000000 40000000 43000000 89000000 740000000 84000000 187000000 469000000 41000000 21000000 10000000 10000000 197000000 1000000 85000000 111000000 22000000 15000000 7000000 6000000 4000000 2000000 83000000 15000000 11000000 57000000 11000000 7000000 4000000 45000000 45000000 109000000 6000000 3000000 100000000 21000000 1000000 5000000 15000000 33000000 4000000 29000000 14000000 10000000 2000000 2000000 <div>   <div>8. Borrowings</div> <div>  </div> <div>Borrowings consist of the following:  </div>                                                                                                                                                   (in 000s) <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                            January 31, 2011       January 31, 2010           April 30, 2010</div>   Short-term borrowings:    Commercial paper                                      $           632,566      $           792,594      $                -        HSBC credit facility                                                       -                        882,500                        -                                                                             $           632,566      $         1,675,094      $                -           Long-term borrowings:    Senior Notes, 7.875%, due January 2013       $           599,758      $           599,633      $           599,664    Senior Notes, 5.125%, due October 2014                    399,117                   398,882                   398,941    Other                                                                       54,066                     36,861                     40,227                                                                             1,052,941                1,035,376                1,038,832       Less: Current portion                                                                    (3,583)                    (2,576)                    (3,688)                                                                   $         1,049,358      $         1,032,800      $         1,035,144 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div> </div>   We had commercial paper borrowings of $632.6 million at January 31, 2011, compared to $792.6 million at the same time last year. These borrowings were used to fund our off-season losses and cover our seasonal working capital needs. We also had other short-term borrowings of $882.5 million outstanding at January 31, 2010 to fund our participation interests in RALs. <div> </div>     <div>    At January 31, 2011, we maintained a committed line of credit (CLOC) agreement to support commercial paper issuances, general corporate purposes or for working capital needs. This facility provides funding up to $1.7 billion and matures July 31, 2013. This facility bears interest at an annual rate of LIBOR plus 1.30% to 2.80% or PRIME plus 0.30% to 1.80% (depending on the type of borrowing) and includes an annual facility fee of 0.20% to 0.70% of the committed amounts, based on our credit ratings. Covenants in this facility include: (1) maintenance of a minimum net worth of $650.0 million on the last day of any fiscal quarter; and (2) reduction of the aggregate outstanding principal amount of short-term debt, as defined in the agreement, to $200.0 million or less for thirty consecutive days during the period March 1 to June 30 of each year ("Clean-down requirement"). At January 31, 2011, we were in compliance with these covenants and had net worth of $827.7 million. We had no balance outstanding under the CLOCs at January 31, 2011.</div> HRB Bank is a member of the FHLB of Des Moines, which extends credit to member banks based on eligible collateral. At January 31, 2011, HRB Bank had total FHLB advance capacity of $226.2 million. There was $75.0 million outstanding on this facility, leaving remaining availability of $151.2 million. Mortgage loans held for investment of $381.5 million serve as eligible collateral and are used to determine total capacity. </div> 185000000 -530000 -203000 -142000 -148000 <div> <div> 3. Earnings (Loss) Per Share and Stockholders' Equity   Basic and diluted earnings (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 9.6 million shares for the three months ended January 31, 2010, as the effect would be antidilutive. 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 12.6 million shares for the three and nine months ended January 31, 2011, and 16.8 million shares for the nine months ended January 31, 2010, as the effect would be antidilutive due to the net loss from continuing operations during each period.   <div>      The computations of basic and diluted earnings (loss) per share from continuing operations are as follows:     <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <div>                                                                                                                (in 000s, except per share amounts) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                          Three months ended January 31,           Nine months ended January 31, <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                 2011                    2010                      2011                      2010</div>                                                                                                                                                 Net earnings (loss) from continuing operations    attributable to shareholders              $        (4,375)        $       53,603         $      (238,825)          $    (203,486) Amounts allocated to participating    securities (nonvested shares)                         (148)                    (203)                     (142)                      (530) Net earnings (loss) from continuing operations    attributable to common shareholders $        (4,523)        $       53,400         $      (238,967)          $    (204,016)   Basic weighted average common shares                           305,144                332,999                   310,546                   334,293 Potential dilutive shares                                  -                        1,298                       -                           -                 Dilutive weighted average    common shares                                     305,144                334,297                 310,546                  334,293   Earnings (loss) per share from continuing   operations attributable to common shareholders:    Basic                                            $        (0.01)         $          0.16         $          (0.77)           $        (0.61)    Diluted                                                   (0.01)                     0.16                     (0.77)                     (0.61)</div></div>        The weighted average shares outstanding <a name="OLE_LINK18">for the three and nine months ended</a> January 31, 2011 decreased to 305.1 million and 310.5 million, respectively, from 333.0 million and 334.3 million for the three and nine months ended January 31, 2010, respectively. During the nine months ended January 31, 2011, we purchased and immediately retired 19.0 million shares of our common stock at a cost of $279.9 million. We may continue to repurchase and retire common stock or retire shares held in treasury from time to time in the future. The cost of shares retired during the period was allocated to the components of stockholders' equity as follows:</div>                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyText">  </div> Common stock                                                               $                      190                  Additional paid-in capital                                                                 11,370                  Retained earnings                                                                         268,387                                                                                     $                     279,947 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; margin-left: 0in; border-top: medium none; margin-right: -9.35pt; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2" align="left">  </div>   <div>      During the nine months ended January 31, 2011 and 2010, we issued 1.1 million and 2.2 million shares of common stock, respectively, due to the exercise of stock options, employee stock purchases and vesting of nonvested shares.      During the nine months ended January 31, 2011, we acquired 0.2 million shares of our common stock at an aggregate cost of $3.5 million, and during the nine months ended January 31, 2010, we acquired 0.2 million shares at an aggregate cost of $4.2 million. Shares acquired during these periods represented shares swapped or surrendered to us in connection with the vesting of nonvested shares and the exercise of stock options.      During the nine months ended January 31, 2011, we granted 2.1 million stock options and 0.8 nonvested shares and units in accordance with our stock-based compensation plans. The weighted average fair value of options granted was $2.25 for management options. These awards vest over a four year period with one-fourth vesting each year. Stock-based compensation expense of our continuing operations totaled $4.4 million and $10.6 million for the three and nine months ended January 31, 2011, respectively, and $7.2 million and $19.3 million for the three and nine months ended January 31, 2010, respectively. At January 31, 2011, unrecognized compensation cost for options totaled $5.4 million, and for nonvested shares and units totaled $13.8 million. </div></div> </div> 5400000 0.028 0.013 0.018 0.003 0.007 0.002 75000000 75000000 75000000 75000000 75417000 0.034 0.005 0.029 0.038 0.005 0.033 0.4 0.42 857635000 403751000 453884000 888916000 429039000 459877000 11937000 3256000 8681000 <div> <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent" align="left">                                                                                                                                        (dollars in 000s)</div>                                                                                                                                                                                                                        To Be Well Capitalized                                                                                         For Capital Adequacy       Under Prompt Corrective                                                                       Actual                            Purposes                     Action Provisions    <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">                                                 Amount           Ratio           Amount         Ratio           Amount         Ratio</div>   Total risk-based capital ratio (1)     <a name="OLE_LINK43">$ </a>426,848          36.4%        $   93,864         8.0%        $ 117,330        10.0% Tier 1 risk-based capital ratio (2)      $ 412,139          35.1%                 N/A           N/A        $   70,398         6.0% Tier 1 capital ratio (leverage) (3)     $ 412,139          23.0%        $ 215,244        12.0%        $   89,685         5.0% Tangible equity ratio (4)                $ 412,139          23.0%        $   26,905         1.5%                 n/a           n/a <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  </div>   <a name="OLE_LINK13"> </a><a name="OLE_LINK6">(1)</a>   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. <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 3pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyText" align="left">  </div>    </div> </div> 21000000 50000000 12500000 8900000 1207879000 1207879000 1224672000 1224672000 0.499 8654000 6191000 669786000 672614000 0.137 0.147 330000 1094000 1085456000 26548000 8897000 0.6 -8234000 -7652000 <div> <div class="MetaData"> 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 our allowance for loan losses, potential losses from loan repurchase and indemnity obligations associated with our discontinued mortgage business, contingent losses associated with pending litigation, fair value of reporting units, reserves for uncertain tax positions, credit losses on receivable balances and related matters. We revise our estimates when facts and circumstances dictate. However, future events and their effects cannot be determined with absolute certainty. As such, actual results could differ materially from those estimates.</div> </div> 200000000 381500000 306962000 188891000 188891000 174062000 174062000 -8183000 -3442000 0.51 13800000 -151334000 276743000 -125409000 -315752000 467873000 -152121000 -276743000 276743000 -467873000 467873000 827700000 340113000 296971000 36806000 13828000 30849000 32468000 -1619000 48577000 38538000 10039000 88564000 88564000 90304000 90304000 154201000 154201000 283494000 283494000 0.85 0.01 0.89 0.77 0.23 0.303 0.112 0.415 292655000 401106000 8500000 27492000 27492000 19532000 19532000 <div>   <div> <div> <div> <div> <div> <div> <div> <div> <div> <div> <div> <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                                          2011                                   2010</div>   Balance, beginning of period:    Amount related to repurchase and indemnifications            $           138,415                  $           156,659    Amount related to indemnity agreement dated April 2008                  49,785                                 49,936                                                                                                  188,200                               206,595 Changes:    Provisions                                                                                     -                                         -        Losses on repurchase and indemnifications                                       (7,652)                                (8,234)    Payments under indemnity agreement dated April 2008                    (25,562                                   (103    Balance, end of period:                                                                                                                          Amount related to repurchase and indemnifications                         130,763                               148,425         Amount related to indemnity agreement dated April 2008                  24,223                                 49,833                                                                                     $           154,986                  $           198,258 </div></div></div></div></div></div></div></div></div></div></div></div></div></div> </div> <div>   <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                             2011                                         2010</div>   Balance, beginning of the period                            $            93,535                         $            84,073 Provision                                                                         24,100                                       36,050 Recoveries                                                                            169                                            38 Charge-offs                                                                     (29,928)                                     (22,892) Balance, end of the period                                    $            87,876                         $            97,269        </div> </div> <div>   <div>                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div> Customer relationships (1)                          $               6,733 Non-compete agreements (2)                                      2,766 Attest firm affiliation (3)                                              7,629 Goodwill                                                               27,289 Fixed assets                                                             2,500 Other assets                                                               831 Other liabilities                                                       (1,640) Unfavorable leasehold (2)                                           (5,890 Total purchase price                                 $             40,218 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal"> </div>   (1)    Estimated life of 12 years. (2)    Estimated life of 7 years. (3)  Estimated life of 18 years. Represents the benefits to be received from the Alternative Practice Structure arrangement and affiliation with attest clients.</div> </div> <div> <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                            January 31, 2011       January 31, 2010           April 30, 2010</div>   Short-term borrowings:    Commercial paper                                      $           632,566      $           792,594      $                -        HSBC credit facility                                                       -                        882,500                        -                                                                             $           632,566      $         1,675,094      $                -           Long-term borrowings:    Senior Notes, 7.875%, due January 2013       $           599,758      $           599,633      $           599,664    Senior Notes, 5.125%, due October 2014                    399,117                   398,882                   398,941    Other                                                                       54,066                     36,861                     40,227                                                                             1,052,941                1,035,376                1,038,832       Less: Current portion                                                                    (3,583)                    (2,576)                    (3,688)                                                                   $         1,049,358      $         1,032,800      $         1,035,144 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div> </div> </div> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">Condensed Consolidating Balance Sheets                                                                  (in 000s) </div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                             H&R Block, Inc.         BFC                Other                                    Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Cash & cash equivalents              $          -          $ 1,289,689      $     177,320      $      (1,319)     $   1,465,690 Cash & cash equivalents – restricted         -                     783               35,330                 -                   36,113 Receivables, net                                      27           707,713             663,412                 -              1,371,152 Mortgage loans held for investment          -               513,192                   -                     -                 513,192 Intangible assets and goodwill, net                       -                     -                       1,224,672         -                             1,224,672 Investments in subsidiaries              2,664,240                 -                         19        (2,664,240)                    19 Other assets                                     12,733           365,198             813,966                 -              1,191,897    Total assets                            $ 2,677,000      $ 2,876,575      $   2,914,719      $ (2,665,559)     $   5,802,735   Customer deposits                      $          -          $ 1,856,514      $           -          $      (1,319)     $   1,855,195 Long-term debt                                     -               998,875               50,483                 -              1,049,358 FHLB borrowings                                   -                 75,000                   -                     -                   75,000 Short-term borrowings                           -               632,566                   -                     -                 632,566 Other liabilities                                      160             35,406          1,327,367                 -              1,362,933 Net intercompany advances            1,849,157          (736,295)        (1,112,862)                -                       -    Stockholders' equity                        827,683             14,509          2,649,731        (2,664,240)            827,683    Total liabilities and                                                                                                                                     stockholders' equity               $ 2,677,000      $ 2,876,575      $   2,914,719      $ (2,665,559)     $   5,802,735 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">  </div>   <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                             H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">April 30, 2010                             (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Cash & cash equivalents                  $           -         $    702,021     $ 1,102,135     $          (111)    $   1,804,045 Cash & cash equivalents – restricted               -                 6,160            28,190                 -                 34,350 Receivables, net                                            57          105,192          412,737                 -               517,986 Mortgage loans held for investment, net          -              595,405                -                     -               595,405 Intangible assets and goodwill, net                 -                   -            1,207,879                 -             1,207,879 Investments in subsidiaries                    3,276,597               -                     231        (3,276,597)                231 Other assets                                            19,014          332,782          722,626                 -             1,074,422    Total assets                                 $   3,295,668     $ 1,741,560     $ 3,473,798     $  (3,276,708)    $   5,234,318   Customer deposits                          $           -         $    852,666     $         -          $          (111)    $     852,555 Long-term debt                                           -              998,605            36,539                 -             1,035,144 <a name="OLE_LINK91"> </a><a name="OLE_LINK88">FHLB borrowings                                         -                75,000               -                      -                 75,000</a> Other liabilities                                        48,775          153,154       1,629,060                 -             1,830,989 Net intercompany advances                  1,806,263         (431,696)     (1,374,567)                -                    -     Stockholders' equity                            1,440,630            93,831       3,182,766        (3,276,597)        1,440,630    Total liabilities and                                                                                                                                     stockholders' equity                    $   3,295,668     $ 1,741,560     $ 3,473,798     $  (3,276,708)    $   5,234,318 </div> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">Condensed Consolidating Statements of Cash Flows                                                             (in 000s)</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Nine months ended                       H&R Block, Inc.         BFC               Other                                 Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                             (Guarantor)          (Issuer)         Subsidiaries        Elims               H&R Block</div>                                                                                                                                                 Net cash used in operating activities:  $      (43,026)    $   (725,197)    $   (737,195)    $           -         $  (1,505,418) Cash flows from investing:   Mortgage loans originated for    investment, net                                        -                45,316                -                     -                 45,316   Purchase property & equipment                   -                    -               (51,198)                -                (51,198)   Payments made for business    acquisitions, net                                       -                    -               (50,832)                -                (50,832)   Proceeds from sale of businesses, net                      -                    -                    62,298             -                             62,298   Loans made to franchisees                           -               (90,304)               -                     -                (90,304)   Net intercompany advances                   467,873                -                    -              (467,873)                -      Other, net                                                 -                38,538            10,039                  -                  48,577 Net cash provided by (used in)   investing activities                                467,873             (6,450)          (29,693)          (467,873)            (36,143) Cash flows from financing:                                                                                                   Repayments of short-term borrowings                     -                    (2,654,653)     -                     -                             (2,654,653)   Proceeds from short-term borrowings                     -                    3,286,603       -                     -                             3,286,603   Customer banking deposits                          -           1,003,482                -                  (1,208)        1,002,274   Dividends paid                                   (140,926)               -                    -                     -              (140,926) <a name="OLE_LINK41"> </a><a name="OLE_LINK40">  Repurchase of common stock               (283,494)               -                    -                     -              (283,494)</a>   Proceeds from exercise of    stock options                                          (866)               -                    -                     -                    (866)   Net intercompany advances                         -             (315,752)        (152,121)          467,873                 -      Other, net                                                 439               (365)          (10,136)                 -                 (10,062) Net cash provided by (used in)    financing activities                             (424,847)       1,319,315         (162,257)           466,665         1,198,876 Effects of exchange rates on cash                   -                   -                   4,330                  -                   4,330 Net increase (decrease) in cash                      -              587,668         (924,815)             (1,208)         (338,355) Cash – beginning of period                           -              702,021        1,102,135                 (111)        1,804,045 Cash – end of period                       $           -         $ 1,289,689     $    177,320     $        (1,319)    $   1,465,690 <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 6pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">  </div>   <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Nine months ended                       H&R Block, Inc.         BFC               Other                                 Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2010                             (Guarantor)          (Issuer)         Subsidiaries        Elims               H&R Block</div>                                                                                                                                                 Net cash provided by (used in)    operating activities:                       $       11,590     $ (1,788,487)    $   (872,065)    $           -         $  (2,648,962) Cash flows from investing:   Mortgage loans originated for    investment, net                                        -                56,114                -                     -                 56,114   Purchase property & equipment                   -                    616           (63,858)                -                (63,242)   Payments made for business acquisitions,    net of cash acquired                                 -                    -               (10,828)                -                (10,828)             Proceeds from sale of businesses, net           -                    -                    66,760             -                             66,760   Loans made to franchisees                           -               (88,564)               -                     -                (88,564)   Net intercompany advances                   276,743                -                    -              (276,743)                -      Other, net                                                 -                32,468            (1,619)                  -                  30,849 Net cash provided by (used in)   investing activities                                276,743                634             (9,545)          (276,743)             (8,911) Cash flows from financing:                                                                                                   Repayments of short-term borrowings                     -                    (982,774)        -                     -                             (982,774)   Proceeds from short-term borrowings                     -                    2,657,436       -                     -                             2,657,436   Customer banking deposits                          -           1,366,106                -                    (943)        1,365,163   Dividends paid                                   (151,317)               -                    -                     -              (151,317)   Repurchase of common stock               (154,201)               -                    -                     -              (154,201)   Proceeds from stock options                    15,678                -                    -                     -                 15,678   Net intercompany advances                         -             (151,334)        (125,409)          276,743                 -      Other, net                                              1,507             (9,052)          (21,889)                 -                 (29,434) Net cash provided by (used in)   financing activities                               (288,333)       2,880,382         (147,298)           275,800         2,720,551 Effects of exchange rates on cash                   -                   -                 10,336                  -                  10,336 Net increase (decrease) in cash                      -           1,092,529      (1,018,572)               (943)            73,014 Cash – beginning of period                           -              241,350        1,419,535              (6,222)        1,654,663 Cash – end of period                       $           -         $ 1,333,879     $    400,963     $        (7,165)    $   1,727,677 </div> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">Condensed Consolidating Statements of Operations                                                                  (in 000s)</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Three months ended                 H&R Block, Inc.         BFC                Other                                    Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $     74,103      $     777,379      $          -          $     851,482   Cost of revenues                                  -                118,708             516,455                  -                635,163 Selling, general and administrative                       -                     10,220               225,579           -                             235,799   Total expenses                                    -                128,928             742,034                  -                870,962 Operating income (loss)                         -                 (54,825)              35,345                  -                 (19,480) Other income (expense), net              (17,449)               (521)               2,552             17,449                2,031 Income (loss) from continuing    operations before taxes (benefit)                        (17,449)           (55,346)             37,897             17,449                     (17,449) Income taxes (benefit)                       (13,074)           (26,783)              13,709             13,074              (13,074) Net income (loss) from   continuing operations                       (4,375)           (28,563)              24,188               4,375               (4,375) Net loss from discontinued   operations                                       (8,346)             (8,283)                   (63)              8,346               (8,346) Net income (loss)                       $    (12,721)     $    (36,846)     $       24,125      $     12,721      $      (12,721) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent"><a name="OLE_LINK24"> </a><a name="OLE_LINK7"> </a> </div>                  <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Three months ended                 H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2010                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $     83,291      $     851,581      $          (20)     $     934,852   Cost of revenues                                  -                  86,020             559,799                  (72)            645,747 Selling, general and administrative                       -                     2,881                191,800           (20)                         194,661   Total expenses                                    -                  88,901             751,599                  (92)            840,408 Operating income (loss)                         -                   (5,610)              99,982                   72               94,444 Other income (expense), net               97,451              (1,609)               4,688            (97,523)               3,007 Income (loss) from continuing    operations before taxes (benefit)                       97,451             (7,219)              104,670           (97,451)                   97,451 Income taxes (benefit)                        43,848              (2,721)              46,569            (43,848)              43,848 Net income (loss) from    continuing operations                     53,603              (4,498)              58,101            (53,603)              53,603 Net loss from discontinued   operations                                       (2,968)             (2,968)                 -                    2,968               (2,968) Net income (loss)                       $     50,635      $      (7,466)     $       58,101      $    (50,635)     $       50,635 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">  </div>   <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Nine months ended                  H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $    112,423      $   1,336,422      $           -         $   1,448,845   Cost of revenues                                  -                193,695          1,202,434                  -             1,396,129 Selling, general and administrative                       -                     21,689               440,082           -                             461,771   Total expenses                                    -                215,384          1,642,516                  -             1,857,900 Operating loss                                      -               (102,961)           (306,094)                 -               (409,055) Other income (expense), net            (399,885)              4,751                4,419           399,885                9,170 Loss from continuing operations    before tax benefit                        (399,885)           (98,210)           (301,675)          399,885            (399,885) Income tax benefit                         (161,060)           (42,278)           (118,782)          161,060            (161,060) Net loss from continuing operations                    (238,825)         (55,932)             (182,893)         238,825                   (238,825) Net loss from discontinued   operations                                     (13,626)           (12,617)              (1,009)            13,626              (13,626) Net loss                                    $   (252,451)     $    (68,549)     $    (183,902)     $    252,451      $    (252,451) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">  </div>   <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Nine months ended                  H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2010                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $    127,513      $   1,409,001      $          (76)     $   1,536,438   Cost of revenues                                  -                177,441          1,265,777                  (72)         1,443,146 Selling, general and administrative                       -                     7,836                419,803           (76)                         427,563   Total expenses                                    -                185,277          1,685,580                (148)         1,870,709 Operating loss                                      -                 (57,764)           (276,579)                  72            (334,271) Other income (expense), net            (326,275)             (5,449)              13,517           326,203                7,996 Loss from continuing operations   before tax benefit                          (326,275)           (63,213)           (263,062)          326,275            (326,275) Income tax benefit                         (122,789)           (25,707)             (97,082)          122,789            (122,789) Net loss from continuing operations                    (203,486)         (37,506)             (165,980)         203,486                   (203,486) Net loss from discontinued   operations                                       (8,100)             (8,100)                  -                   8,100               (8,100) Net loss                                    $   (211,586)     $    (45,606)     $    (165,980)     $    211,586      $    (211,586) </div> <div> <div> <div> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Credit Quality Indicators                                        Portfolio Balance</div>   Occupancy status:   Owner occupied                                                $          401,287   Non-owner occupied                                                      195,488                                                                         $          596,775 Documentation level:   Full documentation                                            $          274,116   Limited documentation                                                     35,200   Stated income                                                               238,385   No documentation                                                           49,074                                                                         $          596,775 Internal risk rating:   High                                                                $          161,099   Medium                                                                       213,771   Low                                                                             221,905                                                                         $          596,775  </div></div></div> </div> <div>   <div> <div> <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <div>                                                                                                                (in 000s, except per share amounts) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                          Three months ended January 31,           Nine months ended January 31, <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                 2011                    2010                      2011                      2010</div>                                                                                                                                                 Net earnings (loss) from continuing operations    attributable to shareholders              $        (4,375)        $       53,603         $      (238,825)          $    (203,486) Amounts allocated to participating    securities (nonvested shares)                         (148                    (203                     (142                      (530 Net earnings (loss) from continuing operations    attributable to common shareholders $        (4,523)        $       53,400         $      (238,967)          $    (204,016)   Basic weighted average common shares                           305,144                332,999                   310,546                   334,293 Potential dilutive shares                                  -                        1,298                       -                           -                 Dilutive weighted average    common shares                                     305,144                334,297                 310,546                  334,293   Earnings (loss) per share from continuing   operations attributable to common shareholders:    Basic                                            $        (0.01)         $          0.16         $          (0.77)           $        (0.61)    Diluted                                                   (0.01)                     0.16                     (0.77)                     (0.61)</div></div></div></div></div> </div> <div> <div class="MetaData">                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                             Emerald Advance                       Tax Client                         Loans <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                 Lines of Credit           Receivables - RALs              to Franchisees</div>   Current                                                                       $            674,317           $            4,874            $   85,269 Noncurrent                                                            13,608                            5,856                      131,340                                                             $           687,925            $             10,730            $        216,609</div> </div> <div>   <div> <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                                  January 31, 2011                            April 30, 2010</div>   Impaired loans:   30 - 59 days past due                                         $               1,094                        $                330   60 - 89 days past due                                                         8,490                                      11,851   90+ days past due, non-accrual                                         153,113                                    153,703   TDR loans, accrual                                                           108,075                                    113,471   TDR loans, non-accrual                                                                                       4,358                31,506                                                                                        275,130                                    310,861 Real estate owned (1)                                                            21,841                                      29,252 Total non-performing assets                                  $           296,971                        $          340,113 </div></div>     (1) Includes loans accounted for as in-substance foreclosures of $8.9 million and $12.5 million at January 31, 2011 and April 30, 2010, respectively. </div></div> </div> <div> (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                                             Three months ended January 31,     Nine months ended January 31, <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                                                          2011                 2010                 2011                 2010</div>   Interest income:    Mortgage loans held for investment            $         5,923      $         7,567      $       18,771      $       23,535    Emerald Advance lines of credit                           46,132               36,867               47,590               39,944    Other                                                               4,054                3,912               10,685                9,267                                                                $       56,109       $       48,346       $       77,046       $       72,746 Interest expense:    Borrowings                                             $       22,244      $       19,617      $       63,778      $       57,088    Deposits                                                           2,587                3,340                6,457                7,673    FHLB advances                                                     397                   509                1,189                1,526                                                                $       25,228       $       23,466       $       71,424       $       66,287 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 6pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div> </div> <div>   <div>                                                                                                                                         (dollars in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                         January 31, 2011                                         April 30, 2010</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                             Amount           % of Total                        Amount           % of Total</div>   Adjustable-rate loans                                          $       348,523                        58%           $             411,122            60% Fixed-rate loans                                       248,252                   42%                         272,562                  40%                                                              596,775                 100%                         683,684                100% Unamortized deferred fees and costs               4,293                                                     5,256 Less: Allowance for loan losses                    (87,876)                                                 (93,535)                                                      $      513,192                                          $      595,405</div> </div> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                              Less than 60     60 89 Days          90+ Days                Total                    </div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                           Days Past Due           Past Due           Past Due           Past Due          Current                Total </div>   Purchased from SCC  $     33,484      $       6,647      $    134,503      $    174,634      $ 200,236      $    374,870 All other                          12,146               1,843             18,610             32,599        189,306           221,905                               $     45,630      $       8,490      $    153,113      $    207,233      $ 389,542      $    596,775   </div> <div> <div> <div> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                     Outstanding                      Loan Loss Allowance               % 30+ Days</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                              Principal Balance                   Amount        % of Principal            Past Due </div>   Purchased from SCC                    $           374,870         $       73,900                   19.7%                41.5% All other                                                  221,905                  13,976                    6.3%                11.2%                                                 $           596,775         $       87,876                   14.7%                30.3%  </div></div></div> </div> <div> <div> <div> <div> <div>                                                                                                                           (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                        Portfolio Balance                        Related Allowance</div>   Pooled (less than 60 days past due)                        $          319,424                         $            11,071 Individually (modified)                                                      112,433                                         9,712 Individually (60 days or more past due)                               164,918                                       67,093                                                                         $          596,775                         $            87,876    </div></div></div></div> </div> <div> <div>                                                                                                                                     (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyText">  </div> Common stock                                                               $                      190                  Additional paid-in capital                                                                 11,370                  Retained earnings                                                                         268,387                                                                                     $                     279,947 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; margin-left: 0in; border-top: medium none; margin-right: -9.35pt; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2" align="left">  </div>   <div>      </div></div> </div> <div> <div> Seasonality of Business Our operating revenues are seasonal in nature with peak revenues occurring in the months of January through April. Therefore, results for interim periods are not indicative of results to be expected for the full year.</div> </div> 2.25 14500000 11900000 1 1 113471000 108075000 31506000 4358000 4000000000 2900000000 6300000000 <div> <div> <div> <div> 12. Variable Interests <div> In June 2009, the Financial Accounting Standards Board (FASB) issued revised authoritative guidance associated with the consolidation of variable interest entities (VIEs). The revised guidance replaced the previous quantitative-based assessment for determining whether an enterprise is the primary beneficiary of a VIE and focuses primarily on a qualitative assessment. This assessment requires identifying the enterprise that has (1) the power to direct the activities of the VIE that can most significantly impact the entity's performance; and (2) the obligation to absorb losses and the right to receive benefits from the VIE that could potentially be significant to such entity. The revised guidance also requires that the enterprise continually reassess whether it is the primary beneficiary of a VIE rather than conducting a reassessment only upon the occurrence of specific events. We implemented this guidance on May 1, 2010 and evaluated our financial interests to determine if we had interests in VIEs and if we are the primary beneficiary of the VIE. The following is a description of our financial interests in VIEs which we consider significant or where we are the sponsor. For these VIEs we have determined that we are not the primary beneficiary and, therefore have not consolidated the VIEs. Prior to implementation of this new guidance we did not consolidate these entities.   §McGladrey & Pullen LLP – The administrative services agreement with M&P and compensation arrangements between RSM McGladrey (RSM) and their managing directors represent a variable interest in M&P. These agreements are described more fully in our 2010 Annual Report to Shareholders on Form 10-K. We have concluded that RSM is not the primary beneficiary of M&P and, therefore, we have not consolidated M&P. RSM does not have an equity interest in M&P, nor does it have the power to direct any activities of M&P and does not receive any of its income. We have no assets or liabilities included in our condensed consolidated balance sheets related to our variable interests. We believe RSM's maximum exposure to economic loss, resulting from various agreements with M&P, relates primarily to shared office space from operating leases under the administrative services agreement equal to approximately $112.4 million at January 31, 2011,  and variability in our operating results due to the compensation agreements with RSM managing directors. We do not provide any support that is not contractually required.   §Securitization Trusts – SCC holds an interest in and is the sponsor (issuer) of 56 REMIC Trusts and 14 NIM Trusts (collectively, "Trusts") related to previously originated mortgage loans that were securitized. These Trusts are variable interest entities. The REMIC Trusts hold static pools of sub-prime residential mortgage loans. The NIM Trusts hold beneficial interests in certain REMIC Trusts. The Trusts were designed to collect and pass through to the beneficial interest holders the cash flows of the underlying mortgage loans. The REMIC Trusts were financed with bonds and equity. The NIM Trusts were financed with notes and equity. All bonds and notes are held by third-party investors. Our identification of the primary beneficiary of the Trusts was based on a determination that the servicer of the underlying mortgage loans has the power to direct the most significant activities of the Trusts because the servicer handles all of the loss mitigation activities for the mortgage loans. SCC is not the servicer of the mortgage loans underlying the REMIC Trusts. Therefore, SCC is not the primary beneficiary of the REMIC Trusts because it does not have the power to direct the most significant activities of the REMIC Trusts, which is the servicing of the underlying mortgage loans. SCC does have the exclusive right to appoint a servicer when certain conditions have been met for specific loans related to two of the NIM Trusts. As of January 31, 2011, those conditions have been met for a minority portion of the loans underlying those Trusts. As this right pertains only to a minority of the loans, we have concluded that SCC does not have the power to direct the most significant activities of these two NIM Trusts, as the servicer has the power to direct significant activities over the majority of the mortgage loans. In the remaining NIM Trusts, SCC has a shared right to appoint a servicer under certain conditions. For these NIM Trusts, we have concluded that SCC is not the primary beneficiary because the power to direct the most significant activities, which is the servicing of the underlying mortgage loans, is shared with other unrelated parties. At January 31, 2011, we had no significant assets or liabilities included in our condensed consolidated balance sheets related to SCC's variable interests in the Trusts. We have a liability, as discussed in note 13, and a deferred tax asset recorded in our condensed consolidated balance sheets related to obligations for representations and warranties SCC made in connection with the transfer of mortgage loans, including mortgage loans held by the securitization trusts. We have no remaining exposure to economic loss arising from impairment of SCC's beneficial interest in the Trusts. If SCC receives cash flows in the future as a holder of beneficial interests we would record gains as other income in our income statement. Neither we nor SCC has liquidity arrangements, guarantees or other commitments for the Trusts, nor has any support been provided that was not contractually required.</div></div></div></div> </div>

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<div> <div> <div> <div> <div> <div> <div> <div> 13. Commitments and Contingencies <div> 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 condensed consolidated balance sheets, are as follows:                                                                                                                                                     (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                                          2011                                   2010</div>   Balance, beginning of period                                             $           141,542                  $           146,807 Amounts deferred for new guarantees issued                                      19,376                                 21,139 Revenue recognized on previous deferrals                                          (59,882)                               (58,122) Balance, end of period                                                      $           101,036                  $           109,824 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  </div>   In addition to amounts accrued for our POM guarantee, we had accrued $11.9 million and $14.5 million at January 31, 2011 and April 30, 2010, respectively, related to our standard guarantee which is included with our standard tax preparation services. The following table summarizes certain of our other contractual obligations and commitments:                                                                                                                                                     (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                                              January 31, 2011                       April 30, 2010</div>   Franchise Equity Lines of Credit – undrawn commitment        $             13,828                  $             36,806 Contingent business acquisition obligations                                        25,765                                 20,697 Media advertising purchase obligation                                                 8,897                                 26,548 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; margin-left: 0in; border-top: medium none; margin-right: -9.35pt; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2" align="left">  </div>        We routinely enter into contracts that include embedded indemnifications that have characteristics similar to guarantees. Guarantees and indemnifications of the Company and its subsidiaries include obligations to protect counterparties from losses arising from the following: (1) tax, legal and other risks related to the purchase or disposition of businesses; (2) penalties and interest assessed by federal and state taxing authorities in connection with tax returns prepared for clients; (3) indemnification of our directors and officers; and (4) third-party claims relating to various arrangements in the normal course of business. Typically, there is no stated maximum payment related to these indemnifications, and the terms of the indemnities may vary and in many cases are limited only by the applicable statute of limitations. The likelihood of any claims being asserted against us and the ultimate liability related to any such claims, if any, is difficult to predict. While we cannot provide assurance we will ultimately prevail in the event any such claims are asserted, we believe the fair value of guarantees and indemnifications relating to our continuing operations is not material as of January 31, 2011.   Discontinued Operations SCC, previously known as Option One Mortgage Corporation, ceased originating mortgage loans in December 2007 and, in April 2008, sold its servicing assets and discontinued its remaining operations. The sale of servicing assets did not include the sale of any mortgage loans. In connection with the securitization and sale of loans, SCC made certain representations and warranties, including, but not limited to, representations relating to matters such as ownership of the loan, validity of lien securing the loan, and the loan's compliance with SCC's underwriting criteria. Representations and warranties in whole loan sale transactions to institutional investors included a "knowledge qualifier" which limits SCC liability for borrower fraud to those instances where SCC had knowledge of the fraud at the time the loans were sold. In the event that there is a breach of a representation and warranty and such breach materially and adversely affects the value of a mortgage loan, SCC may be obligated to repurchase a loan or otherwise indemnify certain parties for losses incurred as a result of loan liquidation. Generally, these representations and warranties are not subject to a stated term, but would be subject to statutes of limitation applicable to the contractual provisions. 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, borrower fraud and credit exceptions without sufficient compensating factors. Claims received since May 1, 2008 follows:                                                                                                                                                (in millions) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                             Fiscal Year 2009                             Fiscal Year 2010                      Fiscal Year 2011   <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                    Q1        Q2        Q3        Q4        Q1        Q2        Q3        Q4        Q1        Q2        Q3      Total</div>                                                                                                                                                 Loan Origination Year:   2005         $   40     $   21     $     1     $     -     $     -     $   15     $     -     $     -     $     6     $     1     $     -     $   84   2006              89         10        111           7           2         57           4         45        100         15         29        469   2007              43         10         85         15           4         11           7           -           3           5           4        187   Total         $  172     $   41     $  197     $   22     $     6     $   83     $   11     $   45     $  109     $   21     $   33     $  740 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">  </div>   <div> <div> Note: The table above excludes amounts related to an indemnity agreement dated April 2008, which is discussed below. <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 3pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyText" align="left">  </div>  </div> For those claims determined to be valid, SCC has complied with its obligations by either repurchasing the mortgage loans or REO properties, providing for the reimbursement of losses in connection with liquidated REO properties, or reaching other settlements. SCC has denied approximately 85% of all claims received, excluding resolution reached under other settlements. Counterparties could reassert claims that SCC has denied. Of claims determined to be valid, approximately 23% resulted in loan repurchases, and 77% resulted in indemnification or settlement payments. Losses on loan repurchase, indemnification and settlement payments totaled approximately $88 million for the period May 1, 2008 through January 31, 2011. Loss severity rates on repurchases and indemnification have approximated 60% and SCC has not observed any material trends related to average losses by counterparty. Repurchased loans are considered held for sale and are included in prepaid expenses and other current assets on the condensed consolidated balance sheets. The net balance of all mortgage loans held for sale by SCC was $13.8 million at January 31, 2011. SCC generally has 60 to 120 days to respond to representation and warranty claims and performs a loan-by-loan review of all repurchase claims during this time. SCC has completed its review of all claims, with the exception of claims totaling approximately $14 million, which remained subject to review as of January 31, 2011. Of the claims still subject to review, approximately $2 million are from private-label securitizations related to rescissions of mortgage insurance, and $10 million are from monoline insurers, with the remainder from government sponsored entities. All claims asserted against SCC since May 1, 2008 relate to loans originated during calendar years 2005 through 2007, of which, approximately 89% relate to loans originated in calendar years 2006 and 2007. During calendar year 2005 through 2007, SCC originated approximately $84 billion in loans, of which less than 1% were sold to government sponsored entities. SCC is not subject to loss on loans that have been paid in full, repurchased, or were sold without recourse. The majority of claims asserted since May 1, 2008, which have been determined by SCC to represent a valid breach of its representations and warranties, relate to loans that became delinquent within the first two years following the origination of the mortgage loan. SCC believes the longer a loan performs prior to an event of default, the less likely the default will be related to a breach of a representation and warranty. The balance of loans originated in 2005, 2006 and 2007 which defaulted in the first two years is $4.0 billion, $6.3 billion and $2.9 billion, respectively, at January 31, 2011. SCC estimates losses relating to representation and warranty claims by estimating loan repurchase and indemnification obligations on both known claims and projections of future claims. Projections of future claims are based on an analysis that includes a combination of reviewing repurchase demands and actual defaults and loss severities by counterparty, inquiries from various third-parties, the terms and provisions of related agreements and the historical rate of repurchase and indemnification obligations related to breaches of representations and warranties. SCC's methodology for calculating this liability considers the probability that individual counterparties (whole-loan purchasers, private label securitization trustees and monoline insurers) will assert future claims. SCC has recorded a liability for estimated contingent losses related to representation and warranty claims as of January 31, 2011, of $155.0 million, which represents SCC's best estimate of the probable loss that may occur. This overall liability amount includes $24.2 million that was established under an indemnity agreement dated April 2008 with a specific counterparty in exchange for a full and complete release of such party's ability to assert representation and warranty claims. This indemnity agreement was given as part of obtaining the counterparty's consent to SCC's sale of its mortgage servicing business in 2008. During the current year, payments totaling $25.6 million were made under this agreement. We expect the remaining obligation of $24.2 million to be paid in the fourth quarter of this fiscal year. The recorded liability represents SCC's estimate of losses from future claims where assertion of a claim and a related contingent loss are both deemed probable. Because the rate at which future claims may be deemed valid and loss severity rates may differ significantly from historical experience, SCC is not able to estimate reasonably possible loss outcomes in excess of its current accrual. A 1% increase in both assumed validity rates and loss severities would result in losses above SCC's accrual of approximately $21 million. This sensitivity is hypothetical and is intended to provide an indication of the impact of a change in key assumptions on the representations and warranties liability.  In reality, changes in one assumption may result in changes in other assumptions, which may or may not counteract the sensitivity. While SCC uses the best information available to it in estimating its liability, assessing the likelihood that claims will be asserted in the future and estimating probable losses are inherently difficult to estimate and require considerable management judgment. Although net losses on settled claims since May 1, 2008 have been within initial loss estimates, to the extent that the level of claims asserted, the level of valid claim volumes, the counterparties asserting claims, the nature of claims, or the value of residential home prices differ in the future from current estimates, future losses may be greater than the current estimates and those differences may be significant.   <div> A rollforward of our liability for losses on repurchases for the nine months ended January 31, 2011 and 2010 is as follows: <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                                          2011                                   2010</div>   Balance, beginning of period:    Amount related to repurchase and indemnifications            $           138,415                  $           156,659    Amount related to indemnity agreement dated April 2008                  49,785                                 49,936                                                                                                  188,200                               206,595 Changes:    Provisions                                                                                     -                                         -        Losses on repurchase and indemnifications                                       (7,652)                                (8,234)    Payments under indemnity agreement dated April 2008                    (25,562)                                   (103)    Balance, end of period:                                                                                                                          Amount related to repurchase and indemnifications                         130,763                               148,425         Amount related to indemnity agreement dated April 2008                  24,223                                 49,833                                                                                     $           154,986                  $           198,258 </div></div>   The repurchase liability is included in accounts payable, accrued expenses and other current liabilities on our condensed consolidated balance sheets. There have been no provisions for additional losses included in the income statement since April 30, 2008; however, loss provisions would be recorded net of tax in discontinued operations. </div></div></div></div></div></div></div></div></div></div></div> </div>

<div>                                                                                                                                                       (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                                              January 31, 2011                       April 30, 2010</div>   Franchise Equity Lines of Credit – undrawn commitment        $             13,828                  $             36,806 Contingent business acquisition obligations                                        25,765                                 20,697 Media advertising purchase obligation                                                 8,897                                 26,548 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; margin-left: 0in; border-top: medium none; margin-right: -9.35pt; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2" align="left">  </div>   </div>

0.45

0.15

0.45

0.15

0.01

800000000

431390599

412440599

4314000

4124000

-198861000

51655000

-246967000

-7974000

<div> <div> <a name="OLE_LINK30">Concentrations of Risk</a> Our mortgage loans held for investment include concentrations of loans to borrowers in certain states, which may result in increased exposure to loss as a result of changes in real estate values and underlying economic or market conditions related to a particular geographical location. Approximately 51% of our mortgage loan portfolio consists of loans to borrowers located in the states of Florida, California and New York.</div> </div>

0.63

1443146000

177441000

-72000

1265777000

645747000

86020000

-72000

559799000

1396129000

193695000

1202434000

635163000

118708000

516455000

1870709000

185277000

-148000

1685580000

840408000

88901000

-92000

751599000

1857900000

215384000

1642516000

870962000

128928000

742034000

2576000

3688000

3583000

0.05125

0.07875

2013-07-31

2014-10-01

2013-01-01

146807000

109824000

141542000

101036000

21139000

19376000

<div>                                                                                                                                                     (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                                          2011                                   2010</div>   Balance, beginning of period                                             $           141,542                  $           146,807 Amounts deferred for new guarantees issued                                      19,376                                 21,139 Revenue recognized on previous deferrals                                          (59,882)                               (58,122) Balance, end of period                                                      $           101,036                  $           109,824 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  </div>   </div>

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852555000

852666000

-111000

1855195000

1856514000

-1319000

-0.63

0.15

-0.81

-0.04

-0.63

0.15

-0.81

-0.04

10336000

4330000

199496000

153613000

13800000

231000

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3276597000

231000

19000

-2664240000

2664240000

19000

<div>   <div> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                                      Carrying                                  Estimated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                                      Amount                                 Fair Value</div>   Mortgage loans held for investment                        $            513,192                       $          306,962 IRAs and other time deposits                                               669,786                                   672,614 Long-term borrowings                                                     1,052,941                                 1,085,456 FHLB advances                                                                   75,000                                     75,417</div></div> </div>

<div> <div> 6. Fair Value <a name="OLE_LINK11">We use the following valuation methodologies for assets and liabilities measured at fair value and the general classification of these instruments pursuant to the fair value hierarchy. </a> <div> §Available-for-sale securities – Available-for-sale securities are carried at fair value on a recurring basis. When available, fair value is based on quoted prices in an active market and as such, would be classified as Level 1. If quoted market prices are not available, fair values are estimated using quoted prices of securities with similar characteristics. Available-for-sale securities that we classify as Level 2 include certain agency and non-agency mortgage-backed securities, U.S. states and political subdivisions debt securities and other debt and equity securities. §Real estate owned – REO includes foreclosed properties securing mortgage loans. <a name="jump_exp_29"> </a>Foreclosed assets are adjusted to fair value less costs to sell upon transfer of the loans to <a name="jump_exp_31"> </a>REO. Fair value is generally based on independent market prices or appraised values of the collateral. Subsequent holding period losses and losses arising from the sale of REO are expensed as incurred. REO is included in prepaid expenses and other current assets in the condensed consolidated balance sheets. 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. These loans are classified as Level 3. </div>  The following table presents for each hierarchy level the assets that were remeasured at fair value on both a recurring and non-recurring basis during the nine months ended January 31, 2011 and 2010:                                                                                                                                           (dollars in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                               Total               Level 1                  Level 2                     Level 3</div>   Nine months ended January 31, 2011:   Recurring:    Mortgage-backed securities           $       19,927         $       -                 $    19,927            $          -        Municipal bonds                                    8,740                  -                        8,740                        -       Non-recurring:    REO                                                   19,532                  -                          -                          19,532    Impaired mortgage loans        held for investment                         174,062                  -                          -                        174,062                                                    $     222,261         $       -                 $    28,667            $     193,594   As a percentage of total assets                     3.8%                 -   %                    0.5%                       3.3%   Nine months ended January 31, 2010:   Recurring:    Mortgage-backed securities           $       24,259         $       -                 $    24,259            $          -        Municipal bonds                                    9,966                  -                        9,966                        -       Non-recurring:    REO                                                   27,492                  -                          -                          27,492    Impaired mortgage loans        held for investment                         188,891                  -                          -                        188,891                                                    $     250,608         $       -                 $    34,225            $     216,383   As a percentage of total assets                     3.4%                 -   %                    0.5%                       2.9% <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'times new roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  </div>     There were no changes to the unobservable inputs used in determining the fair values of our level 2 and level 3 financial assets. The following methods were used to determine the fair values of our other financial instruments: §Cash equivalents, accounts receivable, demand deposits, accounts payable, accrued liabilities, commercial paper borrowings and the current portion of long-term debt – The carrying values reported in the balance sheet for these items approximate fair market value due to the relative short-term nature of the respective instruments. §Mortgage loans held for investment – The fair value of mortgage loans held for investment is generally determined using market pricing sources based on origination channel and performance characteristics. §IRAs and other time deposits – The fair value is calculated based on the discounted value of contractual cash flows. §Long-term borrowings and Federal Home Loan Bank (FHLB) borrowings – The fair value of borrowings is based on rates currently available to us for obligations with similar terms and maturities, including current market rates on our Senior Notes.   The carrying amounts and estimated fair values of our financial instruments at January 31, 2011 are as follows:                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                                      Carrying                                  Estimated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                                      Amount                                 Fair Value</div>   Mortgage loans held for investment                        $            513,192                       $          306,962 IRAs and other time deposits                                               669,786                                   672,614 Long-term borrowings                                                     1,052,941                                 1,085,456 FHLB advances                                                                   75,000                                     75,417</div>   </div>

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<div>                                                                                                                                         (dollars in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                               Total               Level 1                  Level 2                     Level 3</div>   Nine months ended January 31, 2011:   Recurring:    Mortgage-backed securities           $       19,927         $       -                 $    19,927            $          -        Municipal bonds                                    8,740                  -                        8,740                        -       Non-recurring:    REO                                                   19,532                  -                          -                          19,532    Impaired mortgage loans        held for investment                         174,062                  -                          -                        174,062                                                    $     222,261         $       -                 $    28,667            $     193,594   As a percentage of total assets                     3.8%                 -   %                    0.5%                       3.3%   Nine months ended January 31, 2010:   Recurring:    Mortgage-backed securities           $       24,259         $       -                 $    24,259            $          -        Municipal bonds                                    9,966                  -                        9,966                        -       Non-recurring:    REO                                                   27,492                  -                          -                          27,492    Impaired mortgage loans        held for investment                         188,891                  -                          -                        188,891                                                    $     250,608         $       -                 $    34,225            $     216,383   As a percentage of total assets                     3.4%                 -   %                    0.5%                       2.9% </div>

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<div> <div> <div> <div> <div> <div> 7. Goodwill and Intangible Assets Changes in the carrying amount of goodwill for the nine months ended January 31, 2011 consist of the following:                                                                                                                                                   <div> (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                              Tax Services             Business Services                              Total</div>   Balance at April 30, 2010:   Goodwill                                         $           453,884            $           403,751            $           857,635   Accumulated impairment losses                         (2,188)                         (15,000)                         (17,188)                                                                    451,696                         388,751                         840,447 Changes:   Acquisitions                                                   14,674                           28,544                           43,218   Disposals and other                                         (8,681)                          (3,256)                         (11,937)   Impairments                                                  (22,700)                             -                               (22,700)   Balance at January 31, 2011:   Goodwill                                                      459,877                         429,039                         888,916   Accumulated impairment losses                        (24,888)                         (15,000)                         (39,888)                                                       $           434,989            <a name="OLE_LINK19"> </a><a name="OLE_LINK4">$</a> 414,039            $           849,028 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  </div></div></div></div>      We test goodwill for impairment annually at the beginning of our fourth quarter, or more frequently if events occur which could, more likely than not, reduce the fair value of a reporting unit's net assets below its carrying value. <div>      The RedGear reporting unit within our Tax Services segment experienced lower than expected settlement product revenues, and as a result, we evaluated this reporting unit's goodwill for impairment at January 31, 2011. The measurement of <a name="jump_exp_12"> </a>impairment <a name="jump_exp_13"> </a>of <a name="jump_exp_14"> </a>goodwill consists of two steps. In the first step, we compared the fair value of this reporting unit, determined using discounted cash flows, to its carrying value. As the results of the first test indicated that the fair value was less than its carrying value, we then performed the second step, which was to determine the implied fair value of its goodwill and to compare that to its carrying value. The second step included hypothetically valuing all of the tangible and intangible assets of this reporting unit. As a result, we recorded an impairment of the reporting unit's goodwill of $22.7 million during the three months ended January 31, 2011, leaving a remaining goodwill balance of approximately $14 million. The impairment is included in selling, general and administrative expenses on the condensed consolidated statements of operations. </div></div></div></div>     <div> Intangible assets consist of the following:                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                    January 31, 2011                                     April 30, 2010</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                Gross                                                   Gross                <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                              Carrying     Accumulated                         Carrying     Accumulated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                              Amount     Amortization         Net            Amount     Amortization         Net</div>   Tax Services:   Customer relationships        $     88,311      $ (38,940)     $ 49,371        $  67,705     $   (33,096)       $  34,609   Noncompete agreements            23,461         (21,859)        1,602             23,062         (21,278)            1,784   Reacquired franchise rights        214,330           (8,983)     205,347           223,773           (6,096)         217,677   Franchise agreements                 19,201           (2,773)      16,428             19,201           (1,813)           17,388   Purchased technology                14,700           (7,941)        6,759             14,500           (6,266)            8,234   Trade name                                1,325             (550)          775               1,325             (400)               925 Business Services:                   Customer relationships              152,082       (126,723)      25,359           145,149       (120,037)           25,112   Noncompete agreements            35,818         (24,001)      11,817             33,052         (22,118)           10,934   Attest firm affiliation                    7,629             (212)        7,417                 -                  -                   -       Trade name – amortizing              2,600           (2,600)         -                    2,600           (2,600)              -       Trade name – non-amortizing                     55,637          (4,868)          50,769         55,637             (4,868)                50,769                                          $    615,094      $ (239,450)  $ 375,644         $ 586,004     $ (218,572)       $ 367,432 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  </div>        Amortization of intangible assets for the three and nine months ended January 31, 2011 was $7.4 and $21.6 million respectively, and $7.1 million and $21.4 million for the three and nine months ended January 31, 2010, respectively. Estimated amortization of intangible assets for fiscal years 2011 through 2015 is $30.7 million, $29.1 million, $24.7 million, $21.1 million and $15.7 million, respectively.      In connection with the acquisition of Caturano, as discussed in note 2, we recorded a liability related to unfavorable operating lease terms in the amount of $5.9 million, which will be amortized over the remaining contractual life of the operating lease. The net balance was $5.6 million at January 31, 2011.</div> </div>

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<div> <div> 9. Income Taxes <div> We file a consolidated federal income tax return in the United States and file tax returns in various state and foreign jurisdictions. The U.S. Federal consolidated tax returns for the years 1999 through 2007 are currently under examination by the Internal Revenue Service, with the 1999-2005 years currently at the appellate level. Federal returns for tax years prior to 1999 are closed by statute. Historically, tax returns in various foreign and state jurisdictions are examined and settled upon completion of the exam. During the nine months ended January 31, 2011, we accrued additional gross interest and penalties of $4.5 million related to our uncertain tax positions. We had gross unrecognized tax benefits of $131.5 million and $129.8 million at January 31, 2011 and April 30, 2010, respectively. The gross unrecognized tax benefits increased $1.7 million in the current year, due to accruals of tax and interest on positions related to prior years. Except as noted below, we have classified the liability for unrecognized tax benefits, including corresponding accrued interest, as long-term at January 31, 2011, and included this amount in other noncurrent liabilities on the condensed consolidated balance sheet. Based upon the expiration of statutes of limitations, payments of tax and other factors in several jurisdictions, we believe it is reasonably possible that the gross amount of reserves for previously unrecognized tax benefits may decrease by approximately $16.5 million within twelve months of January 31, 2011. This portion of our liability for unrecognized tax benefits has been classified as current and is included in accounts payable, accrued expenses and other current liabilities on the condensed consolidated balance sheets. </div></div> </div>

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<div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; margin-left: 0in; border-top: medium none; margin-right: -9.35pt; border-right: medium none; padding-top: 0in;"> <div> 4. Receivables Current receivables consist of the following:                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                               January 31, 2011       January 31, 2010           April 30, 2010</div>   Emerald Advance lines of credit                                 $     674,317            $     667,859            $       57,914 Business Services receivables                                            220,404                   324,085                   326,681 Receivables for tax preparation and related fees                   280,364                   286,732                     45,248 Loans to franchisees                                                                              85,269                     70,706            55,047 Royalties from franchisees                                                 84,049                     82,943                      3,845 RAC fees receivable                                                         51,704                     19,850                        -     Tax client receivables related to RALs                                    4,874                1,109,795                     21,646 Other                                                                             95,732                     91,713                   120,080                                                                                1,496,713                2,653,683                   630,461       Allowance for doubtful accounts                                     (125,561)                   (86,853)                 (112,475)                                                                            $   1,371,152            $   2,566,830            $     517,986 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div>   The decrease in tax client receivables from January 2010 is due to the termination of our contract with HSBC to offer RALs during the current tax season. See additional discussion in note 1. The decrease in Business Services receivables from January 2010 is primarily a result of the change in the administrative services agreement between RSM and McGladrey & Pullen, LLP (M&P) in February 2010. Our allowance for doubtful accounts as of January 31, 2011 consists of the following:                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyText">  </div> Allowance related to:    Emerald Advance lines of credit                                       $             73,645    Tax client receivables related to RALs                                                 -        Loans to franchisees                                                                        -        All other receivables                                                                     51,916                                                                                     $           125,561 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; margin-left: 0in; border-top: medium none; margin-right: -9.35pt; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2" align="left">  </div>   There were no changes to our methodology related to the calculation of our allowance for doubtful accounts during the quarter.</div></div>   </div>

-272562000

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21841000

<div> 5. Mortgage Loans Held for Investment and Related Assets The composition of our mortgage loan portfolio as of January 31, 2011 and April 30, 2010 is as follows:                                                                                                                                           (dollars in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                         January 31, 2011                                         April 30, 2010</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                             Amount           % of Total                        Amount           % of Total</div>   Adjustable-rate loans                                          $       348,523                        58%           $             411,122            60% Fixed-rate loans                                       248,252                   42%                         272,562                  40%                                                              596,775                 100%                         683,684                100% Unamortized deferred fees and costs               4,293                                                     5,256 Less: Allowance for loan losses                    (87,876)                                                 (93,535)                                                      $      513,192                                          $      595,405 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 6pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div>        Activity in the allowance for loan losses for the nine months ended January 31, 2011 and 2010 is as follows:                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                             2011                                         2010</div>   Balance, beginning of the period                            $            93,535                         $            84,073 Provision                                                                         24,100                                       36,050 Recoveries                                                                            169                                            38 Charge-offs                                                                     (29,928)                                     (22,892) Balance, end of the period                                    $            87,876                         $            97,269 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 6pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div>   Our loan loss reserve as a percent of mortgage loans was 14.7% at January 31, 2011 compared to 13.7% at April 30, 2010. <div> <div> When determining our allowance for loan losses, we evaluate loans less than 60 days past due on a pooled basis, while loans we consider impaired (which includes those loans more than 60 days past due or that have been modified) are evaluated individually. The balance of these loans and the related allowance is as follows at January 31, 2011:                                                                                                                                               <div> <div>                                                                                                                           (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                        Portfolio Balance                        Related Allowance</div>   Pooled (less than 60 days past due)                        $          319,424                         $            11,071 Individually (modified)                                                      112,433                                         9,712 Individually (60 days or more past due)                               164,918                                       67,093                                                                         $          596,775                         $            87,876 </div></div> <div> <div> </div></div> <div> <div>  </div> <div> <div> We review the credit quality of our portfolio based on the following criteria: (1) originator, (2) the level of documentation obtained for loan at origination, (3) occupancy status of property at origination, (4) geography, and (5) credit score and loan to value at origination. We specifically evaluate each loan and assign an internal risk rating of high, medium or low to each loan. The risk rating is based upon multiple loan characteristics that correlate to delinquency and loss.  These characteristics include, but are not limited to, the five criteria listed above, plus loan to value. These loan attributes are tested annually against a variety of additional characteristics to ensure the appropriate data is being utilized to determine the level of risk within the portfolio. All criteria are obtained at the time of origination and are only subsequently updated if the loan is refinanced.</div>     Our portfolio includes loans originated by Sand Canyon Corporation (SCC) and purchased by H&R Block Bank (HRB Bank) which constitute approximately 63% of the total loan portfolio at January 31, 2011. We have experienced higher rates of delinquency and have greater exposure to loss with respect to this segment of our loan portfolio. Our remaining loan portfolio totaled $221.9 million and is characteristic of a prime loan portfolio, and we believe subject to a lower loss exposure. Detail of our mortgage loans held for investment and the related allowance at January 31, 2011 is as follows:  </div></div> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                     Outstanding                      Loan Loss Allowance               % 30+ Days</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                              Principal Balance                   Amount        % of Principal            Past Due </div>   Purchased from SCC                    $           374,870         $       73,900                   19.7%                41.5% All other                                                  221,905                  13,976                    6.3%                11.2%                                                 $           596,775         $       87,876                   14.7%                30.3%</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 6pt; text-indent: -9.35pt; margin: 0in 0in 0pt 9.35pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; font-weight: bold; border-right: medium none; padding-top: 0in;" class="MsoBodyText2">  </div> <div>   Detail of the aging of the mortgage loans in our portfolio that are past due as of January 31, 2011 is as follows: <div>                                                                                                                                                   (in 000s) <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                              Less than 60     60 – 89 Days          90+ Days                Total                    </div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                           Days Past Due           Past Due           Past Due           Past Due          Current                Total </div>   Purchased from SCC  $     33,484      $       6,647      $    134,503      $    174,634      $ 200,236      $    374,870 All other                          12,146               1,843             18,610             32,599        189,306           221,905                               $     45,630      $       8,490      $    153,113      $    207,233      $ 389,542      $    596,775</div></div>   Credit quality indicators at January 31, 2011 include the following: <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Credit Quality Indicators                                        Portfolio Balance</div>   Occupancy status:   Owner occupied                                                $          401,287   Non-owner occupied                                                      195,488                                                                         $          596,775 Documentation level:   Full documentation                                            $          274,116   Limited documentation                                                     35,200   Stated income                                                               238,385   No documentation                                                           49,074                                                                         $          596,775 Internal risk rating:   High                                                                $          161,099   Medium                                                                       213,771   Low                                                                             221,905                                                                         $          596,775 </div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 6pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div> <div> In cases where we modify a loan and in so doing grant a concession to a borrower experiencing financial difficulty, the modification is considered a <a name="jump_exp_1"> </a>troubled <a name="jump_exp_2"> </a>debt restructuring (TDR). TDR loans totaled $112.4 million and $145.0 million at January 31, 2011 and April 30, 2010, respectively. The principal balance of non-performing assets as of January 31, 2011 and April 30, 2010 is as follows:   <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                                  January 31, 2011                            April 30, 2010</div>   Impaired loans:   30 - 59 days past due                                         $               1,094                        $                330   60 - 89 days past due                                                         8,490                                      11,851   90+ days past due, non-accrual                                         153,113                                    153,703   TDR loans, accrual                                                           108,075                                    113,471   TDR loans, non-accrual                                                                                       4,358                31,506                                                                                        275,130                                    310,861 Real estate owned (1)                                                            21,841                                      29,252 Total non-performing assets                                  $           296,971                        $          340,113 </div></div>     (1) Includes loans accounted for as in-substance foreclosures of $8.9 million and $12.5 million at January 31, 2011 and April 30, 2010, respectively.        Activity related to our real estate owned (REO) is as follows: <a name="OLE_LINK15">                                                                                                                                                  (in 000s)</a> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                             2011                                         2010</div>   Balance, beginning of the period                            $            29,252                         $            44,533 Additions                                                                         12,931                                       12,689 Sales                                                                              (16,900)                                     (17,528) Writedowns                                                                       (3,442)                                       (8,183) Balance, end of the period                                    $            21,841                         $            31,511 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 6pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div></div></div></div> </div>

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20.7

<div>   <div> <div> <a name="OLE_LINK15">                                                                                                                                                  (in 000s)</a> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; line-height: 10pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">Nine months ended January 31,                                             2011                                         2010</div>   Balance, beginning of the period                            $            29,252                         $            44,533 Additions                                                                         12,931                                       12,689 Sales                                                                              (16,900)                                     (17,528) Writedowns                                                                       (3,442)                                       (8,183) Balance, end of the period                                    $            21,841                         $            31,511  </div></div> </div>

<div> <div class="MetaData"> Financing Receivables and Related Allowances Our financing receivables consist primarily of mortgage loans held for investment, Emerald Advance lines of Credit (EAs), tax client receivables related to refund anticipation loans (RALs) and loans made to franchisees. Policies related to our mortgage loans held for investment and the related allowance are included in our Annual Report on Form 10-K.      The current portion of EAs, tax client receivables and loans made to franchisees is included in accounts receivable, while the noncurrent portion is included in other assets in the condensed consolidated financial statements. These amounts as of January 31, 2011 are as follows: <div class="MetaData">                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                             Emerald Advance                       Tax Client                         Loans <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                 Lines of Credit           Receivables - RALs              to Franchisees</div>   Current                                                                       $            674,317           $            4,874            $   85,269 Noncurrent                                                            13,608                            5,856                      131,340                                                             $           687,925            $             10,730            $        216,609</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div>        Related allowance for doubtful accounts is detailed in note 4.      Emerald Advance lines of credit. Interest income on EAs is calculated using the average daily balance method and is recognized based on the principal amount outstanding until the outstanding balance is paid or becomes delinquent. Loan commitment fees on EAs, net of related expenses, are initially deferred and recognized as revenue over the commitment period, which is typically two months. EAs are placed on non-accrual status as soon as they become delinquent.      We review the credit quality of these receivables based on the year the loans were originated, with different bad debt rates applied to each year. As of January 31, 2011, we had EA receivables of $648.1 million, $12.3 million and $14.7 million which were originated in fiscal years 2011, 2010 and 2009 and prior, respectively. We also had receivables of $12.8 million related to EA receivables of clients who paid off their original EA and qualified to maintain their loan year-round. As of January 31, 2011, $33.2 million of EAs were on non-accrual status. Payments on past due amounts are recorded as a reduction in the receivable balance.      We determine our allowance for these receivables collectively, based on a review of receipts taking into consideration historical experience. These receivables are not specifically identified and charged-off, but are evaluated on a pooled basis. Initial bad debt rates also consider whether the loan was made to a new or repeat client. At the end of each tax season the outstanding balances on these receivables are evaluated based on collections received and expected collections over the upcoming tax season. We adjust our allowance accordingly, with these adjustments reflected as bad debt expense.      Tax client receivables related to RALs. Historically, RALs were offered in our US retail tax offices through a contractual relationship with HSBC Holdings plc (HSBC). We purchased a 49.9% participation interest in all RALs obtained through our retail offices. In December 2010, HSBC terminated its contract with us based on restrictions placed on HSBC by its regulator and RALs are not being offered in our tax offices this tax season. In connection with the contract termination, we obtained the remaining rights to collect on the outstanding balances of RALs originated in years 2006 and later. All tax client receivables outstanding at January 31, 2011 were originated prior to fiscal year 2011 and are past due. We do not accrue interest on these receivables. Payments on past due amounts are recorded as a reduction in the receivable balance.      We review the credit quality of these receivables based on the year the loans were originated, with different bad debt rates applied to each year. As of January 31, 2011, we had tax client receivables of $1.7 million, $2.7 million and $6.4 million which were originated by HSBC in fiscal years 2010, 2009 and 2008 and prior, respectively. These receivables are not specifically identified and charged-off, but are evaluated on a pooled basis. At the end of each tax season the outstanding balances on these receivables are evaluated based on collections received and expected collections over the upcoming tax season. We adjust our allowance accordingly, with these adjustments reflected as bad debt expense. <div>        Loans made to franchisees. Interest income on loans made to franchisees is calculated using the average daily balance method and is recognized based on the principal amount outstanding until the outstanding balance is paid or becomes delinquent. Loans made to franchisees totaled $216.6 million at January 31, 2011, and consisted of $145.4 million in term loans made to finance the purchase of franchises and $71.2 million in revolving lines of credit made to existing franchisees primarily for the purpose of funding their off-season needs. The credit quality of these receivables is determined on a specific franchisee basis, taking into account the franchisee's credit score, their payment history on existing loans and operational amounts due to us, the loan-to-value ratio and debt-to-income ratio. Credit scores, loan-to-value ratio and debt-to-income ratio are obtained at the time of underwriting. Payment history is monitored on a regular basis. We believe all loans to franchisees fall within the same credit quality category. Loans are evaluated for impairment when they become delinquent. Amounts deemed to be uncollectible are written off to bad debt expense and bad debt related to these loans has typically been insignificant. Additionally, the franchise office serves as collateral for the loan. In the event the franchisee is unable to repay the loans, we revoke their franchise rights, write off the remaining balance of the loans and assume control of the office. We had no loans to franchisees past due or on non-accrual status as of January 31, 2011 and we had no allowance for bad debts recorded related to loans to franchisees at January 31, 2011. </div></div> </div>

<div>                                                                                                                                                 (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                             Three months ended January 31,     Nine months ended January 31, <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                          2011                 2010                 2011                 2010</div>   Revenues:                                                                                                                      Tax Services                                             $     672,810      $     747,685      $     875,376      $     944,953   Business Services                                              171,309             178,482             549,445             562,702   Corporate                                                          7,363                8,685               24,024               28,783                                                                $     851,482       $     934,852       $   1,448,845       $   1,536,438 Pretax income (loss):   Tax Services                                             $         4,114      $     131,189      $    (324,865)     $    (212,973)   Business Services                                                 8,587              (11,222)              16,551               (9,727)   Corporate                                                        (30,150)             (22,516)             (91,571)           (103,575)   Income (loss) from continuing operations    before taxes (benefit)                                $      (17,449)     $       97,451      $    (399,885)     $    (326,275)   </div>

431696000

-1806263000

1374567000

736295000

-1849157000

1112862000

982774000

2654653000

34350000

6160000

28190000

36113000

783000

35330000

2658586000

2045447000

1536438000

127513000

-76000

1409001000

934852000

83291000

-20000

851581000

1448845000

112423000

1336422000

851482000

74103000

777379000

1287270000

744327000

1220853000

677295000

<div> <div> 17. Condensed Consolidating Financial Statements Block Financial LLC (BFC) is an indirect, wholly-owned consolidated subsidiary of the Company. BFC is the Issuer and the Company is the Guarantor of the Senior Notes issued on January 11, 2008 and October 26, 2004, our CLOCs and other indebtedness issued from time to time. These condensed consolidating financial statements have been prepared using the equity method of accounting. Earnings of subsidiaries are, therefore, reflected in the Company's investment in subsidiaries account. The elimination entries eliminate investments in subsidiaries, related stockholders' equity and other intercompany balances and transactions. </div>   <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">Condensed Consolidating Statements of Operations                                                                  (in 000s)</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Three months ended                 H&R Block, Inc.         BFC                Other                                    Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $     74,103      $     777,379      $          -          $     851,482   Cost of revenues                                  -                118,708             516,455                  -                635,163 Selling, general and administrative                       -                     10,220               225,579           -                             235,799   Total expenses                                    -                128,928             742,034                  -                870,962 Operating income (loss)                         -                 (54,825)              35,345                  -                 (19,480) Other income (expense), net              (17,449)               (521)               2,552             17,449                2,031 Income (loss) from continuing    operations before taxes (benefit)                        (17,449)           (55,346)             37,897             17,449                     (17,449) Income taxes (benefit)                       (13,074)           (26,783)              13,709             13,074              (13,074) Net income (loss) from   continuing operations                       (4,375)           (28,563)              24,188               4,375               (4,375) Net loss from discontinued   operations                                       (8,346)             (8,283)                   (63)              8,346               (8,346) Net income (loss)                       $    (12,721)     $    (36,846)     $       24,125      $     12,721      $      (12,721) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent"><a name="OLE_LINK24"> </a><a name="OLE_LINK7"> </a> </div>                </div><a name="OLE_LINK24"> </a><a name="OLE_LINK7"> </a></div></div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"><a name="OLE_LINK24"> </a><a name="OLE_LINK7"> </a>               <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Three months ended                 H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2010                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $     83,291      $     851,581      $          (20)     $     934,852   Cost of revenues                                  -                  86,020             559,799                  (72)            645,747 Selling, general and administrative                       -                     2,881                191,800           (20)                         194,661   Total expenses                                    -                  88,901             751,599                  (92)            840,408 Operating income (loss)                         -                   (5,610)              99,982                   72               94,444 Other income (expense), net               97,451              (1,609)               4,688            (97,523)               3,007 Income (loss) from continuing    operations before taxes (benefit)                       97,451             (7,219)              104,670           (97,451)                   97,451 Income taxes (benefit)                        43,848              (2,721)              46,569            (43,848)              43,848 Net income (loss) from    continuing operations                     53,603              (4,498)              58,101            (53,603)              53,603 Net loss from discontinued   operations                                       (2,968)             (2,968)                 -                    2,968               (2,968) Net income (loss)                       $     50,635      $      (7,466)     $       58,101      $    (50,635)     $       50,635</div></div></div></div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent"> </div>                  <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Nine months ended                  H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $    112,423      $   1,336,422      $           -         $   1,448,845   Cost of revenues                                  -                193,695          1,202,434                  -             1,396,129 Selling, general and administrative                       -                     21,689               440,082           -                             461,771   Total expenses                                    -                215,384          1,642,516                  -             1,857,900 Operating loss                                      -               (102,961)           (306,094)                 -               (409,055) Other income (expense), net            (399,885)              4,751                4,419           399,885                9,170 Loss from continuing operations    before tax benefit                        (399,885)           (98,210)           (301,675)          399,885            (399,885) Income tax benefit                         (161,060)           (42,278)           (118,782)          161,060            (161,060) Net loss from continuing operations                    (238,825)         (55,932)             (182,893)         238,825                   (238,825) Net loss from discontinued   operations                                     (13,626)           (12,617)              (1,009)            13,626              (13,626) Net loss                                    $   (252,451)     $    (68,549)     $    (183,902)     $    252,451      $    (252,451)</div> </div></div>               </div></div></div> <div> </div>   <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Ninemonths ended                  H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2010                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Total revenues                           $         -           $    127,513      $   1,409,001      $          (76)     $   1,536,438   Cost of revenues                                  -                177,441          1,265,777                  (72)         1,443,146 Selling, general and administrative                       -                     7,836                419,803           (76)                         427,563   Total expenses                                    -                185,277          1,685,580                (148)         1,870,709 Operating loss                                      -                 (57,764)           (276,579)                  72            (334,271) Other income (expense), net            (326,275)             (5,449)              13,517           326,203                7,996 Loss from continuing operations   before tax benefit                          (326,275)           (63,213)           (263,062)          326,275            (326,275) Income tax benefit                         (122,789)           (25,707)             (97,082)          122,789            (122,789) Net loss from continuing operations                    (203,486)         (37,506)             (165,980)         203,486                   (203,486) Net loss from discontinued   operations                                       (8,100)             (8,100)                  -                   8,100               (8,100) Net loss                                    $   (211,586)     $    (45,606)     $    (165,980)     $    211,586      $    (211,586)</div>                      </div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; text-indent: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent">Condensed Consolidating Balance Sheets                                                                  (in 000s) </div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                             H&R Block, Inc.         BFC                Other                                    Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                         (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Cash & cash equivalents              $          -          $ 1,289,689      $     177,320      $      (1,319)     $   1,465,690 Cash & cash equivalents – restricted         -                     783               35,330                 -                   36,113 Receivables, net                                      27           707,713             663,412                 -              1,371,152 Mortgage loans held for investment          -               513,192                   -                     -                 513,192 Intangible assets and goodwill, net                       -                     -                       1,224,672         -                             1,224,672 Investments in subsidiaries              2,664,240                 -                         19        (2,664,240)                    19 Other assets                                     12,733           365,198             813,966                 -              1,191,897    Total assets                            $ 2,677,000      $ 2,876,575      $   2,914,719      $ (2,665,559)     $   5,802,735   Customer deposits                      $          -          $ 1,856,514      $           -          $      (1,319)     $   1,855,195 Long-term debt                                     -               998,875               50,483                 -              1,049,358 FHLB borrowings                                   -                 75,000                   -                     -                   75,000 Short-term borrowings                           -               632,566                   -                     -                 632,566 Other liabilities                                      160             35,406          1,327,367                 -              1,362,933 Net intercompany advances            1,849,157          (736,295)        (1,112,862)                -                       -    Stockholders' equity                        827,683             14,509          2,649,731        (2,664,240)            827,683    Total liabilities and                                                                                                                                     stockholders' equity               $ 2,677,000      $ 2,876,575      $   2,914,719      $ (2,665,559)     $   5,802,735</div> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> </div></div></div></div></div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                          <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">    H&R Block, Inc.         BFC                Other                                    Consolidated</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">April 30, 2010                             (Guarantor)          (Issuer)          Subsidiaries           Elims               H&R Block</div>                                                                                                                                                 Cash & cash equivalents                  $           -         $    702,021     $ 1,102,135     $          (111)    $   1,804,045 Cash & cash equivalents – restricted               -                 6,160            28,190                 -                 34,350 Receivables, net                                            57          105,192          412,737                 -               517,986 Mortgage loans held for investment, net          -              595,405                -                     -               595,405 Intangible assets and goodwill, net                 -                   -            1,207,879                 -             1,207,879 Investments in subsidiaries                    3,276,597               -                     231        (3,276,597)                231 Other assets                                            19,014          332,782          722,626                 -             1,074,422    Total assets                                 $   3,295,668     $ 1,741,560     $ 3,473,798     $  (3,276,708)    $   5,234,318   Customer deposits                          $           -         $    852,666     $         -          $          (111)    $     852,555 Long-term debt                                           -              998,605            36,539                 -             1,035,144 <a name="OLE_LINK91"> </a><a name="OLE_LINK88">FHLB borrowings                                         -                75,000               -                      -                 75,000</a> Other liabilities                                        48,775          153,154       1,629,060                 -             1,830,989 Net intercompany advances                  1,806,263         (431,696)     (1,374,567)                -                    -     Stockholders' equity                            1,440,630            93,831       3,182,766        (3,276,597)        1,440,630    Total liabilities and                                                                                                                                     stockholders' equity                    $   3,295,668     $ 1,741,560     $ 3,473,798     $  (3,276,708)    $   5,234,318 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">Condensed Consolidating Statements of Cash Flows                                                             (in 000s)</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Nine months ended                       H&R Block, Inc.         BFC               Other                                 Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2011                             (Guarantor)          (Issuer)         Subsidiaries        Elims               H&R Block</div>                                                                                                                                                 Net cash used in operating activities:  $      (43,026)    $   (725,197)    $   (737,195)    $           -         $  (1,505,418) Cash flows from investing:   Mortgage loans originated for    investment, net                                        -                45,316                -                     -                 45,316   Purchase property & equipment                   -                    -               (51,198)                -                (51,198)   Payments made for business    acquisitions, net                                       -                    -               (50,832)                -                (50,832)   Proceeds from sale of businesses, net                      -                    -                    62,298             -                             62,298   Loans made to franchisees                           -               (90,304)               -                     -                (90,304)   Net intercompany advances                   467,873                -                    -              (467,873)                -      Other, net                                                 -                38,538            10,039                  -                  48,577 Net cash provided by (used in)   investing activities                                467,873             (6,450)          (29,693)          (467,873)            (36,143) Cash flows from financing:                                                                                                   Repayments of short-term borrowings                     -                    (2,654,653)     -                     -                             (2,654,653)   Proceeds from short-term borrowings                     -                    3,286,603       -                     -                             3,286,603   Customer banking deposits                          -           1,003,482                -                  (1,208)        1,002,274   Dividends paid                                   (140,926)               -                    -                     -              (140,926) <a name="OLE_LINK41"> </a><a name="OLE_LINK40">  Repurchase of common stock               (283,494)               -                    -                     -              (283,494)</a>   Proceeds from exercise of    stock options                                          (866)               -                    -                     -                    (866)   Net intercompany advances                         -             (315,752)        (152,121)          467,873                 -      Other, net                                                 439               (365)          (10,136)                 -                 (10,062) Net cash provided by (used in)    financing activities                             (424,847)       1,319,315         (162,257)           466,665         1,198,876 Effects of exchange rates on cash                   -                   -                   4,330                  -                   4,330 Net increase (decrease) in cash                      -              587,668         (924,815)             (1,208)         (338,355) Cash – beginning of period                           -              702,021        1,102,135                 (111)        1,804,045 Cash – end of period                       $           -         $ 1,289,689     $    177,320     $        (1,319)    $   1,465,690</div> </div></div></div></div></div>   <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> </div> <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">Nine months ended                       H&R Block, Inc.         BFC               Other                                 Consolidated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">January 31, 2010                             (Guarantor)          (Issuer)         Subsidiaries        Elims               H&R Block</div>                                                                                                                                                 Net cash provided by (used in)    operating activities:                       $       11,590     $ (1,788,487)    $   (872,065)    $           -         $  (2,648,962) Cash flows from investing:   Mortgage loans originated for    investment, net                                        -                56,114                -                     -                 56,114   Purchase property & equipment                   -                    616           (63,858)                -                (63,242)   Payments made for business acquisitions,    net of cash acquired                                 -                    -               (10,828)                -                (10,828)             Proceeds from sale of businesses, net           -                    -                    66,760             -                             66,760   Loans made to franchisees                           -               (88,564)               -                     -                (88,564)   Net intercompany advances                   276,743                -                    -              (276,743)                -      Other, net                                                 -                32,468            (1,619)                  -                  30,849 Net cash provided by (used in)   investing activities                                276,743                634             (9,545)          (276,743)             (8,911) Cash flows from financing:                                                                                                   Repayments of short-term borrowings                     -                    (982,774)        -                     -                             (982,774)   Proceeds from short-term borrowings                     -                    2,657,436       -                     -                             2,657,436   Customer banking deposits                          -           1,366,106                -                    (943)        1,365,163   Dividends paid                                   (151,317)               -                    -                     -              (151,317)   Repurchase of common stock               (154,201)               -                    -                     -              (154,201)   Proceeds from stock options                    15,678                -                    -                     -                 15,678   Net intercompany advances                         -             (151,334)        (125,409)          276,743                 -      Other, net                                              1,507             (9,052)          (21,889)                 -                 (29,434) Net cash provided by (used in)   financing activities                               (288,333)       2,880,382         (147,298)           275,800         2,720,551 Effects of exchange rates on cash                   -                   -                 10,336                  -                  10,336 Net increase (decrease) in cash                      -           1,092,529      (1,018,572)               (943)            73,014 Cash – beginning of period                           -              241,350        1,419,535              (6,222)        1,654,663 Cash – end of period                       $           -         $ 1,333,879     $    400,963     $        (7,165)    $   1,727,677</div></div> </div></div> </div>

<div> <div> <div> <div>                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">As of                                                    January 31, 2011                                     April 30, 2010</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                Gross                                                   Gross                <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                              Carrying     Accumulated                         Carrying     Accumulated <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Arial','sans-serif'; font-size: 9pt; border-top: medium none; border-right: medium none; padding-top: 0in;">                                              Amount     Amortization         Net            Amount     Amortization         Net</div>   Tax Services:   Customer relationships        $     88,311      $ (38,940)     $ 49,371        $  67,705     $   (33,096)       $  34,609   Noncompete agreements            23,461         (21,859)        1,602             23,062         (21,278)            1,784   Reacquired franchise rights        214,330           (8,983)     205,347           223,773           (6,096)         217,677   Franchise agreements                 19,201           (2,773)      16,428             19,201           (1,813)           17,388   Purchased technology                14,700           (7,941)        6,759             14,500           (6,266)            8,234   Trade name                                1,325             (550)          775               1,325             (400)               925 Business Services:                   Customer relationships              152,082       (126,723)      25,359           145,149       (120,037)           25,112   Noncompete agreements            35,818         (24,001)      11,817             33,052         (22,118)           10,934   Attest firm affiliation                    7,629             (212)        7,417                 -                  -                   -       Trade name – amortizing              2,600           (2,600)         -                    2,600           (2,600)              -       Trade name – non-amortizing                     55,637          (4,868)          50,769         55,637             (4,868)                50,769                                          $    615,094      $ (239,450)  $ 375,644         $ 586,004     $ (218,572)       $ 367,432 </div></div></div> </div>

<div> <div> <div> <div> <div>                                                                                                                                                   <div> <div> <div> <div> <div> <div> (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                              Tax Services             Business Services                              Total</div>   Balance at April 30, 2010:   Goodwill                                         $           453,884            $           403,751            $           857,635   Accumulated impairment losses                         (2,188                         (15,000                         (17,188                                                                    451,696                         388,751                         840,447 Changes:   Acquisitions                                                   14,674                           28,544                           43,218   Disposals and other                                         (8,681)                          (3,256)                         (11,937)   Impairments                                                  (22,700                             -                               (22,700   Balance at January 31, 2011:   Goodwill                                                      459,877                         429,039                         888,916   Accumulated impairment losses                        (24,888                         (15,000                         (39,888                                                       $           434,989            <a name="OLE_LINK19"> </a><a name="OLE_LINK4">$</a> 414,039            $           849,028 <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2">  </div></div>     </div></div></div></div></div></div></div></div></div> </div>

<div> <div> 16. Accounting Pronouncements <div> In July 2010 the FASB issued Accounting Standards Update 2010-20, "Disclosures About Credit Quality of Financing Receivables and Allowance for Credit Losses." This guidance requires enhanced disclosures about the allowance for credit losses and the credit quality of financing receivables and would apply to financing receivables held by all creditors. The requirements for period end disclosures are effective beginning with the first interim or annual reporting period ending after December 15, 2010. We have included all required disclosures in notes 1, 4 and 5. The requirements for activity-based disclosures will be adopted as of April 30, 2011. The requirements for TDR disclosures will be adopted when finalized by the FASB.      In October 2009, the FASB issued Accounting Standards Update 2009-13, "Revenue Recognition (Topic 605) – Multiple-Deliverable Revenue Arrangements." This guidance amends the criteria for separating consideration in multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (1) vendor-specific objective evidence; (2) third-party evidence; or (3) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. In addition, this guidance significantly expands required disclosures related to a vendor's multiple-deliverable revenue arrangements. This guidance is effective prospectively for revenue arrangements entered into or materially modified beginning with our fiscal year 2012. We believe this guidance will not have a material effect on our consolidated financial statements. In December 2010, the FASB issued Accounting Standards Update 2010-28, "Intangibles – Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts." The amendments affect reporting units whose carrying amount is zero or negative, and require performance of Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, a reporting unit would consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance. The reporting unit would evaluate if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This guidance is effective beginning with our fiscal year 2012. We believe this guidance will not have a material effect on our consolidated financial statements. In June 2009, the FASB issued guidance, under Topic 860 – Transfers and Servicing. This guidance requires more disclosure about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a qualifying special purpose entity and changes the requirements for derecognizing financial assets. We adopted this guidance as of May 1, 2010 and it did not have a material effect on our consolidated financial statements.  </div></div> </div>

<div> <div> <div> <div> <div> 15. Segment Information Results of our continuing operations by reportable operating segment are as follows:                                                                                                                                                  (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                             Three months ended January 31,     Nine months ended January 31, <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Century Schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                          2011                 2010                 2011                 2010</div>   Revenues:                                                                                                                      Tax Services                                             $     672,810      $     747,685      $     875,376      $     944,953   Business Services                                              171,309             178,482             549,445             562,702   Corporate                                                          7,363                8,685               24,024               28,783                                                                $     851,482      $     934,852      $   1,448,845      $   1,536,438 Pretax income (loss):   Tax Services                                             $       4,114     $     131,189      $    (324,865)     $    (212,973)   Business Services                                                 8,587              (11,222)              16,551               (9,727)   Corporate                                                        (30,150)             (22,516)             (91,571)           (103,575)   Income (loss) from continuing operations    before taxes (benefit)                                $        (17,449)     $       97,451      $    (399,885)     $    (326,275) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; margin-left: 0in; border-top: medium none; margin-right: -9.35pt; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: left; border-left: medium none; padding-bottom: 0in; line-height: 2pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'Times New Roman','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoBodyTextIndent2" align="left">  </div>  </div>  </div></div></div> </div>

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<div> <div>  1. Summary of Significant Accounting Policies <div> <div class="MetaData"> <div> Basis of Presentation The condensed consolidated balance sheet as of January 31, 2011, the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended January 31, 2011 and 2010, and the condensed consolidated statements of cash flows for the nine months ended January 31, 2011 and 2010 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 January 31, 2011 and for all periods presented have been made. A restatement was made to the historical condensed consolidated statement of cash flows for the nine months ended January 31, 2010. Loans made to franchisees and cash receipts from franchise loans of $88.6 million and $8.5 million, respectively, were previously reported in cash flows from operating activities and are now reported in cash flows from investing activities. "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 condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our April 30, 2010 Annual Report to Shareholders on Form 10-K. All amounts presented herein as of April 30, 2010 or for the year then ended, are derived from our April 30, 2010 Annual Report to Shareholders on Form 10-K.</div></div> <div> <div> </div></div>   <div> <div class="MetaData"> 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 our allowance for loan losses, potential losses from loan repurchase and indemnity obligations associated with our discontinued mortgage business, contingent losses associated with pending litigation, fair value of reporting units, reserves for uncertain tax positions, credit losses on receivable balances and related matters. We revise our estimates when facts and circumstances dictate. However, future events and their effects cannot be determined with absolute certainty. As such, actual results could differ materially from those estimates.</div></div>   <div> Seasonality of Business Our operating revenues are seasonal in nature with peak revenues occurring in the months of January through April. Therefore, results for interim periods are not indicative of results to be expected for the full year.</div>     <div> <a name="OLE_LINK30">Concentrations of Risk</a> Our mortgage loans held for investment include concentrations of loans to borrowers in certain states, which may result in increased exposure to loss as a result of changes in real estate values and underlying economic or market conditions related to a particular geographical location. Approximately 51% of our mortgage loan portfolio consists of loans to borrowers located in the states of Florida, California and New York.</div> <a name="OLE_LINK38"> </a>      <div class="MetaData"> Financing Receivables and Related Allowances Our financing receivables consist primarily of mortgage loans held for investment, Emerald Advance lines of Credit (EAs), tax client receivables related to refund anticipation loans (RALs) and loans made to franchisees. Policies related to our mortgage loans held for investment and the related allowance are included in our Annual Report on Form 10-K.      The current portion of EAs, tax client receivables and loans made to franchisees is included in accounts receivable, while the noncurrent portion is included in other assets in the condensed consolidated financial statements. These amounts as of January 31, 2011 are as follows: <div class="MetaData">                                                                                                                                                   (in 000s) <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: windowtext 1pt solid; border-right: medium none; padding-top: 1pt;"> <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                             Emerald Advance                       Tax Client                         Loans <p style="border-bottom: medium none; border-left: medium none; padding-bottom: 0in; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">                                                                 Lines of Credit           Receivables - RALs              to Franchisees</div>   Current                                                                       $            674,317           $            4,874            $   85,269 Noncurrent                                                            13,608                            5,856                      131,340                                                             $           687,925            $             10,730            $        216,609</div> <div style="border-bottom: windowtext 1pt solid; border-left: medium none; padding-bottom: 1pt; padding-left: 0in; padding-right: 0in; border-top: medium none; border-right: medium none; padding-top: 0in;"> <p style="border-bottom: medium none; text-align: justify; border-left: medium none; padding-bottom: 0in; line-height: 4pt; margin: 0in 0in 0pt; padding-left: 0in; padding-right: 0in; font-family: 'century schoolbook','serif'; font-size: 12pt; border-top: medium none; border-right: medium none; padding-top: 0in;" class="MsoNormal">  </div>        Related allowance for doubtful accounts is detailed in note 4.      Emerald Advance lines of credit. Interest income on EAs is calculated using the average daily balance method and is recognized based on the principal amount outstanding until the outstanding balance is paid or becomes delinquent. Loan commitment fees on EAs, net of related expenses, are initially deferred and recognized as revenue over the commitment period, which is typically two months. EAs are placed on non-accrual status as soon as they become delinquent.      We review the credit quality of these receivables based on the year the loans were originated, with different bad debt rates applied to each year. As of January 31, 2011, we had EA receivables of $648.1 million, $12.3 million and $14.7 million which were originated in fiscal years 2011, 2010 and 2009 and prior, respectively. We also had receivables of $12.8 million related to EA receivables of clients who paid off their original EA and qualified to maintain their loan year-round. As of January 31, 2011, $33.2 million of EAs were on non-accrual status. Payments on past due amounts are recorded as a reduction in the receivable balance.      We determine our allowance for these receivables collectively, based on a review of receipts taking into consideration historical experience. These receivables are not specifically identified and charged-off, but are evaluated on a pooled basis. Initial bad debt rates also consider whether the loan was made to a new or repeat client. At the end of each tax season the outstanding balances on these receivables are evaluated based on collections received and expected collections over the upcoming tax season. We adjust our allowance accordingly, with these adjustments reflected as bad debt expense.      Tax client receivables related to RALs. Historically, RALs were offered in our US retail tax offices through a contractual relationship with HSBC Holdings plc (HSBC). We purchased a 49.9% participation interest in all RALs obtained through our retail offices. In December 2010, HSBC terminated its contract with us based on restrictions placed on HSBC by its regulator and RALs are not being offered in our tax offices this tax season. In connection with the contract termination, we obtained the remaining rights to collect on the outstanding balances of RALs originated in years 2006 and later. All tax client receivables outstanding at January 31, 2011 were originated prior to fiscal year 2011 and are past due. We do not accrue interest on these receivables. Payments on past due amounts are recorded as a reduction in the receivable balance.      We review the credit quality of these receivables based on the year the loans were originated, with different bad debt rates applied to each year. As of January 31, 2011, we had tax client receivables of $1.7 million, $2.7 million and $6.4 million which were originated by HSBC in fiscal years 2010, 2009 and 2008 and prior, respectively. These receivables are not specifically identified and charged-off, but are evaluated on a pooled basis. At the end of each tax season the outstanding balances on these receivables are evaluated based on collections received and expected collections over the upcoming tax season. We adjust our allowance accordingly, with these adjustments reflected as bad debt expense. <div>        Loans made to franchisees. Interest income on loans made to franchisees is calculated using the average daily balance method and is recognized based on the principal amount outstanding until the outstanding balance is paid or becomes delinquent. Loans made to franchisees totaled $216.6 million at January 31, 2011, and consisted of $145.4 million in term loans made to finance the purchase of franchises and $71.2 million in revolving lines of credit made to existing franchisees primarily for the purpose of funding their off-season needs. The credit quality of these receivables is determined on a specific franchisee basis, taking into account the franchisee's credit score, their payment history on existing loans and operational amounts due to us, the loan-to-value ratio and debt-to-income ratio. Credit scores, loan-to-value ratio and debt-to-income ratio are obtained at the time of underwriting. Payment history is monitored on a regular basis. We believe all loans to franchisees fall within the same credit quality category. Loans are evaluated for impairment when they become delinquent. Amounts deemed to be uncollectible are written off to bad debt expense and bad debt related to these loans has typically been insignificant. Additionally, the franchise office serves as collateral for the loan. In the event the franchisee is unable to repay the loans, we revoke their franchise rights, write off the remaining balance of the loans and assume control of the office. We had no loans to franchisees past due or on non-accrual status as of January 31, 2011 and we had no allowance for bad debts recorded related to loans to franchisees at January 31, 2011. </div></div></div></div>   </div>

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Estimated life of 7 years. Estimated life of 7 years. Estimated life of 18 years. Represents the benefits to be received from the Alternative Practice Structure arrangement and affiliation with attest clients. Estimated life of 12 years. Estimated life of 12 years. Total risk-based capital divided by risk-weighted assets. Includes loans accounted for as in-substance foreclosures of $8.9 million and $12.5 million at January 31, 2011 and April 30, 2010, respectively. Tangible capital divided by tangible assets. Tier 1 (core) capital divided by adjusted total assets. Tier 1 (core) capital less deduction for low-level recourse and residual interest divided by risk-weighted assets.