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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-06089

H&R Block, Inc.
(Exact name of registrant as specified in its charter)
Missouri44-0607856
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
One H&R Block Way, Kansas City, Missouri 64105
(Address of principal executive offices, including zip code)
(816) 854-3000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, without par valueHRBNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes     No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer            Accelerated filer         Non-accelerated filer           Smaller reporting company  Emerging growth company
    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
The number of shares outstanding of the registrant's Common Stock, without par value, at the close of business on October 29, 2021: 175,629,423 shares.



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Form 10-Q for the Period ended September 30, 2021
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PART I    FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(unaudited, in 000s, except 
per share amounts)
Three months ended September 30,
20212020
REVENUES:
Service revenues$176,977 $382,357 
Royalty, product and other revenues15,647 34,989 
192,624 417,346 
OPERATING EXPENSES:
Costs of revenues241,532 278,107 
Selling, general and administrative125,864 139,992 
Total operating expenses367,396 418,099 
Other income (expense), net284 2,504 
Interest expense on borrowings(22,830)(34,697)
Loss from continuing operations before income taxes (benefit)(197,318)(32,946)
Income taxes (benefit)(47,373)27,964 
Net loss from continuing operations(149,945)(60,910)
Net loss from discontinued operations, net of tax benefits of $495 and $1,392
(1,656)(1,346)
NET LOSS$(151,601)$(62,256)
BASIC AND DILUTED LOSS PER SHARE:
Continuing operations$(0.84)$(0.32)
Discontinued operations(0.01) 
Consolidated$(0.85)$(0.32)
DIVIDENDS DECLARED PER SHARE$0.27 $0.26 
COMPREHENSIVE LOSS:
Net loss$(151,601)$(62,256)
Change in foreign currency translation adjustments(11,177)8,816 
Other comprehensive income (loss)(11,177)8,816 
Comprehensive loss$(162,778)$(53,440)
See accompanying notes to consolidated financial statements.










H&R Block, Inc. |Q1 FY2022 Form 10-Q
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CONSOLIDATED BALANCE SHEETS(unaudited, in 000s, except 
share and per share amounts)
As ofSeptember 30, 2021June 30, 2021
ASSETS
Cash and cash equivalents$891,739 $1,434,381 
Cash and cash equivalents - restricted139,067 149,783 
Receivables, less allowance for credit losses of $74,000 and $77,518
56,829 88,932 
Income taxes receivable338,399 330,872 
Prepaid expenses and other current assets69,714 76,414 
Total current assets1,495,748 2,080,382 
Property and equipment, at cost, less accumulated depreciation and amortization of $857,096 and $842,861
141,006 139,276 
Operating lease right of use assets410,724 445,847 
Intangible assets, net337,451 351,093 
Goodwill749,409 754,521 
Deferred tax assets and income taxes receivable178,946 181,996 
Other noncurrent assets54,743 61,273 
Total assets$3,368,027 $4,014,388 
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses$156,605 $164,269 
Accrued salaries, wages and payroll taxes54,816 168,989 
Accrued income taxes and reserves for uncertain tax positions155,137 238,863 
Operating lease liabilities201,179 214,190 
Deferred revenue and other current liabilities185,232 196,175 
Total current liabilities752,969 982,486 
Long-term debt1,984,512 1,983,719 
Deferred tax liabilities and reserves for uncertain tax positions303,476 301,658 
Operating lease liabilities221,184 244,932 
Deferred revenue and other noncurrent liabilities90,358 113,535 
Total liabilities3,352,499 3,626,330 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $0.01 per share, 800,000,000 shares authorized, shares issued of 209,853,951 and 216,655,616
2,099 2,167 
Additional paid-in capital770,683 779,465 
Accumulated other comprehensive income (loss)(11,089)88 
Retained earnings (deficit)(74,757)286,694 
Less treasury shares, at cost, of 34,342,194 and 34,842,125
(671,408)(680,356)
Total stockholders' equity15,528 388,058 
Total liabilities and stockholders' equity$3,368,027 $4,014,388 
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, in 000s)
Three months ended September 30,20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(151,601)$(62,256)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization35,715 38,237 
Provision1,850  
Deferred taxes(13,547)(480)
Stock-based compensation6,847 7,781 
Changes in assets and liabilities, net of acquisitions:
Receivables35,913 29,016 
Prepaid expenses, other current and noncurrent assets8,610 1,673 
Accounts payable, accrued expenses, salaries, wages and payroll taxes(134,215)(37,546)
Deferred revenue, other current and noncurrent liabilities(27,990)(20,783)
Income tax receivables, accrued income taxes and income tax reserves(72,768)(52,698)
Other, net(1,438)(1,541)
Net cash used in operating activities(312,624)(98,597)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(15,620)(13,386)
Payments made for business acquisitions, net of cash acquired(4,265)(2,538)
Franchise loans funded(4,474)(7,913)
Payments from franchisees2,839 10,744 
Other, net2,067 1,100 
Net cash used in investing activities(19,453)(11,993)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of line of credit borrowings (2,000,000)
Repayments of long-term debt (650,000)
Proceeds from issuance of long-term debt 647,965 
Dividends paid(48,996)(50,044)
Repurchase of common stock, including shares surrendered(165,800)(76,731)
Proceeds from exercise of stock options3,385 1,134 
Other, net(5,911)(19,131)
Net cash used in financing activities(217,322)(2,146,807)
Effects of exchange rate changes on cash(3,959)2,975 
Net decrease in cash and cash equivalents, including restricted balances(553,358)(2,254,422)
Cash, cash equivalents and restricted cash, beginning of period1,584,164 2,769,947 
Cash, cash equivalents and restricted cash, end of period$1,030,806 $515,525 
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid, net of refunds received$38,419 $79,343 
Interest paid on borrowings12,594 34,726 
Accrued purchase of common stock4,785 12,323 
Accrued additions to property and equipment6,273 1,816 
New operating right of use assets and related lease liabilities29,371 21,590 
Accrued dividends payable to common shareholders47,940 50,154 
See accompanying notes to consolidated financial statements.
H&R Block, Inc. | Q1 FY2022 Form 10-Q
3

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`
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(amounts in 000s, except
per share amounts)
Common StockAdditional
Paid-in
Capital
Accumulated Other
Comprehensive
Income (Loss)(1)
Retained
Earnings
(Deficit)
Treasury StockTotal
Stockholders’
Equity
SharesAmountSharesAmount
Balances as of July 1, 2021216,656 $2,167 $779,465 $88 $286,694 (34,842)$(680,356)$388,058 
Net loss    (151,601)  (151,601)
Other comprehensive loss   (11,177)   (11,177)
Stock-based compensation  5,627     5,627 
Stock-based awards exercised or vested  (10,328) (291)705 13,765 3,146 
Acquisition of treasury shares(2)
     (205)(4,817)(4,817)
Repurchase and retirement of common shares(6,802)(68)(4,081) (161,619)  (165,768)
Cash dividends declared - $0.27 per share
    (47,940)  (47,940)
Balances as of September 30, 2021209,854 $2,099 $770,683 $(11,089)$(74,757)(34,342)$(671,408)$15,528 


Common StockAdditional
Paid-in
Capital
Accumulated Other
Comprehensive
Income (Loss)(1)
Retained
Earnings
(Deficit)
Treasury StockTotal
Stockholders’
Equity
SharesAmountSharesAmount
Balances as of July 1, 2020228,207 $2,282 $772,943 $(39,781)$(18,455)(35,478)$(692,187)$24,802 
Net loss— — — — (62,256)— — (62,256)
Other comprehensive income— — — 8,816 — — — 8,816 
Stock-based compensation— — 7,259 — — — — 7,259 
Stock-based awards exercised or vested— — (2,613)— (636)215 4,176 927 
Acquisition of treasury shares(2)
— — — — — (42)(596)(596)
Repurchase and retirement of common shares(5,957)(60)(3,514)— (84,884)— — (88,458)
Cash dividends declared - $0.26 per share
— — — — (50,154)— — (50,154)
Balances as of September 30, 2020222,250 $2,222 $774,075 $(30,965)$(216,385)(35,305)$(688,607)$(159,660)
(1)    The balance of our accumulated other comprehensive income (loss) consists of foreign currency translation adjustments.
(2) Represents shares swapped or surrendered to us in connection with the vesting or exercise of stock-based awards.
See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS             (unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATIONThe consolidated balance sheets as of September 30, 2021 and June 30, 2021, the consolidated statements of operations and comprehensive loss for the three months ended September 30, 2021 and 2020, the consolidated statements of cash flows for the three months ended September 30, 2021 and 2020, and the consolidated statements of stockholders' equity for the three months ended September 30, 2021 and 2020 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 as of September 30, 2021 and 2020 and for all periods presented, have been made.
"H&R Block," "the Company," "we," "our," and "us" are used interchangeably to refer to H&R Block, Inc., to H&R Block, Inc. and its subsidiaries, or to H&R Block, Inc.'s operating subsidiaries, as appropriate to the context.
On June 9, 2021, the Board of Directors approved a change of the Company's fiscal year end from April 30 to June 30. The Company's 2022 fiscal year began on July 1, 2021 and will end on June 30, 2022. As a result of this change, the Company filed a Transition Report on Form 10-Q that included the financial information for the transition period from May 1, 2021 to June 30, 2021 (Transition Period). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our April 30, 2021 Annual Report to Shareholders on Form 10-K and our June 30, 2021 Transition Report filed on Form 10-Q.
MANAGEMENT ESTIMATESThe preparation of financial statements in conformity with GAAP 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 evaluation of contingent losses arising from our discontinued mortgage business, contingent losses associated with pending claims and litigation, reserves for uncertain tax positions, fair value of reporting units, and related matters. Estimates have been prepared based on the best information available as of each balance sheet date. As such, actual results could differ materially from those estimates.
SEASONALITY OF BUSINESS – Our operating revenues are seasonal in nature with peak revenues typically occurring in the months of February through April. Therefore, results for interim periods are not indicative of results to be expected for the full year.
On March 21, 2020, the federal tax filing deadline in the U.S. for individual 2019 tax returns was extended from April 15, 2020 to July 15, 2020, shifting a portion of revenues and expenses from that tax season into the three months ended September 30, 2020.
This extension impacted the typical seasonality of our business and the comparability of our financial results.
DISCONTINUED OPERATIONS – Our discontinued operations include the results of operations of Sand Canyon Corporation, previously known as Option One Mortgage Corporation (including its subsidiaries, collectively, SCC), which exited its mortgage business in fiscal year 2008. See note 9 for additional information on litigation, claims, and other loss contingencies related to our discontinued operations.
H&R Block, Inc. |Q1 FY2022 Form 10-Q
5

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NOTE 2: REVENUE RECOGNITION
The majority of our revenues are from our U.S. tax services business. The following table disaggregates our U.S. tax services revenues by major service line, with revenues from our international tax services businesses and from Wave included as separate lines:
(in 000s)
Three months ended September 30,
20212020
Revenues:
U.S. assisted tax preparation$33,607 $207,167 
U.S. royalties7,358 22,652 
U.S. DIY tax preparation4,061 47,463 
International58,325 58,776 
Refund Transfers1,665 6,113 
Emerald Card®28,258 12,436 
Peace of Mind® Extended Service Plan24,836 27,192 
Tax Identity Shield®5,153 8,994 
Interest and fee income on Emerald AdvanceSM
479 526 
Wave19,137 13,737 
Other9,745 12,290 
Total revenues$192,624 $417,346 
Changes in the balances of deferred revenue and wages for our Peace of Mind® Extended Service Plan (POM) are as follows:
(in 000s)
POMDeferred RevenueDeferred Wages
Three months ended September 30,2021202020212020
Balances as of July 1,$172,759 $167,827 $17,867 $18,707 
Amounts deferred1,492 10,560 7 20 
Amounts recognized on previous deferrals(28,948)(31,652)(2,847)(3,458)
Balances as of September 30,$145,303 $146,735 $15,027 $15,269 
As of September 30, 2021, deferred revenue related to POM was $145.3 million. We expect that $96.5 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following five years.
As of September 30, 2021 and 2020, Tax Identity Shield® (TIS) deferred revenue was $23.5 million and $21.7 million, respectively. Deferred revenue related to TIS was $28.3 million and $28.8 million as of June 30, 2021 and June 30, 2020, respectively. All deferred revenue related to TIS will be recognized by April 30, 2022.
NOTE 3: EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY
EARNINGS PER SHARE – Basic and diluted earnings (loss) per share is computed using the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Per share amounts are computed by dividing net income (loss) from continuing operations attributable to common shareholders by the weighted average shares outstanding during each period. Diluted earnings per share excludes the impact of shares of common stock issuable upon the lapse of certain restrictions or the exercise of options to purchase 5.3 million shares and 5.1 million shares for the three months ended September 30, 2021 and
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2020, respectively, as the effect would be antidilutive due to the net loss from continuing operations during the periods.
The computations of basic and diluted earnings (loss) per share from continuing operations are as follows:
(in 000s, except per share amounts)
Three months ended September 30,
20212020
Net loss from continuing operations attributable to shareholders$(149,945)$(60,910)
Amounts allocated to participating securities(239)(207)
Net loss from continuing operations attributable to common shareholders$(150,184)$(61,117)
Basic weighted average common shares178,099 192,314 
Potential dilutive shares  
Dilutive weighted average common shares178,099 192,314 
Loss per share from continuing operations attributable to common shareholders:
Basic$(0.84)$(0.32)
Diluted(0.84)(0.32)
The decrease in the weighted average shares outstanding is due to share repurchases completed in the current and prior fiscal years.
STOCK-BASED COMPENSATION – During the three months ended September 30, 2021, we granted 1.4 million shares under our stock-based compensation plan. We granted awards of 0.2 million shares under our stock-based compensation plans during the three months ended September 30, 2020. The increase in shares granted compared to the prior year is a result of the change in timing of grants due to the change in our fiscal year. Stock-based compensation expense of our continuing operations totaled $6.8 million for the three months ended September 30, 2021 and $7.8 million for the three months ended September 30, 2020. As of September 30, 2021, unrecognized compensation cost for stock options totaled $0.6 million, and for nonvested shares and units totaled $61.7 million.
NOTE 4: RECEIVABLES
Receivables, net of their related allowance, consist of the following:
(in 000s)
As ofSeptember 30, 2021June 30, 2021
Short-termLong-termShort-termLong-term
Loans to franchisees$12,409 $27,348 $9,497 $28,026 
Receivables for U.S. assisted and DIY tax preparation and related fees10,234 3,793 41,900 3,793 
H&R Block Instant RefundTM receivables
681 92 2,357 159 
H&R Block Emerald Advance® lines of credit
5,742 5,982 8,248 8,089 
Software receivables from retailers1,045  2,910  
Royalties and other receivables from franchisees3,703 151 6,167 178 
Wave payment processing receivables2,930  2,187  
Other20,085 1,218 15,666 1,350 
Total$56,829 $38,584 $88,932 $41,595 
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Balances presented above as short-term are included in receivables, while the long-term portions are included in other noncurrent assets in the consolidated balance sheets.
LOANS TO FRANCHISEES Franchisee loan balances consist of term loans made primarily to finance the purchase of franchises and revolving lines of credit primarily for the purpose of funding working capital needs. As of September 30, 2021 and June 30, 2021 loans with a principal balance of $0.5 million and $0.2 million, respectively, were more than 90 days past due. We had no loans to franchisees on non-accrual status.
H&R BLOCK INSTANT REFUNDTM PROGRAM H&R Block Instant RefundTM amounts are generally received from the Canada Revenue Agency within 60 days of filing the client's return, with the remaining balance collectible from the client.
We review the credit quality of our Instant Refund receivables based on pools, which are segregated by the tax return year of origination, with older years being deemed more unlikely to be repaid. Current balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, by tax return year of origination, as of September 30, 2021 are as follows:
(in 000s)
Tax return year of origination:BalanceNon-Accrual
2020$1,921 $1,157 
2019 and prior435 435 
2,356 $1,592 
Allowance(1,583)
Net balance$773 
H&R BLOCK EMERALD ADVANCE® LINES OF CREDIT We review the credit quality of our purchased participation interests in Emerald AdvanceSM (EA) receivables based on pools, which are segregated by the fiscal year of origination, with older years being deemed more unlikely to be repaid. Balances and amounts on non-accrual status and classified as impaired, or more than 60 days past due, as of September 30, 2021, by fiscal year of origination, are as follows:
(in 000s)
Fiscal year of origination:BalanceNon-Accrual
2021$23,638 $23,638 
2020 and prior1,361 1,361 
Revolving loans14,429 12,462 
39,428 $37,461 
Allowance(27,704)
Net balance$11,724 
ALLOWANCE FOR CREDIT LOSSES Activity in the allowance for credit losses for our EA and all other short-term and long-term receivables for the three months ended September 30, 2021 and 2020 is as follows:
(in 000s)
EAsAll OtherTotal
Balances as of July 1, 2021$27,704 $60,272 $87,976 
Provision 1,850 1,850 
Charge-offs, recoveries and other (3,583)(3,583)
Balances as of September 30, 2021$27,704 $58,539 $86,243 
Balances as of July 1, 2020$32,034 $52,166 $84,200 
Provision(2,709)2,709  
Charge-offs, recoveries and other (835)(835)
Balances as of September 30, 2020$29,325 $54,040 $83,365 
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NOTE 5: GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the three months ended September 30, 2021 are as follows:
(in 000s)
GoodwillAccumulated Impairment LossesNet
Balances as of July 1, 2021$892,818 $(138,297)$754,521 
Acquisitions2,375  2,375 
Disposals and foreign currency changes, net(7,487) (7,487)
Impairments   
Balances as of September 30, 2021$887,706 $(138,297)$749,409 
We test goodwill for impairment annually as of February 1, or more frequently if events occur or circumstances change which would, more likely than not, reduce the fair value of a reporting unit below its carrying value.
Components of intangible assets are as follows:
(in 000s)
Gross
Carrying
Amount
Accumulated
Amortization
Net
As of September 30, 2021:
Reacquired franchise rights$371,793 $(186,227)$185,566 
Customer relationships318,038 (261,471)56,567 
Internally-developed software163,027 (124,308)38,719 
Noncompete agreements41,270 (36,270)5,000 
Franchise agreements19,201 (16,428)2,773 
Purchased technology122,700 (78,369)44,331 
Trade name5,800 (1,305)4,495 
$1,041,829 $(704,378)$337,451 
As of June 30, 2021:
Reacquired franchise rights$370,405 $(182,366)$188,039 
Customer relationships316,547 (255,294)61,253 
Internally-developed software160,315 (119,460)40,855 
Noncompete agreements41,228 (35,802)5,426 
Franchise agreements19,201 (16,108)3,093 
Purchased technology122,700 (74,913)47,787 
Trade name5,800 (1,160)4,640 
$1,036,196 $(685,103)$351,093 
We made payments to acquire businesses totaling $4.3 million and $2.5 million during the three months ended September 30, 2021 and 2020, respectively. The amounts and weighted-average lives of intangible assets acquired
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during the three months ended September 30, 2021, including amounts capitalized related to internally-developed software, are as follows:
(dollars in 000s)
AmountWeighted-Average life (in years)
Internally-developed software$2,816 3
Customer relationships1,889 5
Reacquired franchise rights1,464 4
Noncompete agreements62 5
Total$6,231 4
Amortization of intangible assets for the three months ended September 30, 2021 was $19.8 million compared to $19.9 million for the three months ended September 30, 2020. Estimated amortization of intangible assets for fiscal years ending June 30, 2022, 2023, 2024, 2025 and 2026 is $73.0 million, $55.8 million, $36.4 million, $18.8 million and $13.3 million, respectively.
NOTE 6: LONG-TERM DEBT
The components of long-term debt are as follows:
(in 000s)
As ofSeptember 30, 2021June 30, 2021
Senior Notes, 5.500%, due November 2022
$500,000 $500,000 
Senior Notes, 5.250%, due October 2025
350,000 350,000 
Senior Notes, 2.500%, due July 2028
500,000 500,000 
Senior Notes, 3.875%, due August 2030
650,000 650,000 
Debt issuance costs and discounts