H&R Block, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated November 30, 2011, details the completion of a significant asset disposition by H&R Block, Inc. The filing reports the finalization of the sale of the Company's RSM McGladrey operations to McGladrey & Pullen LLP (M&P) and its subsidiary.
Key Financial Metrics and Transaction Details
The transaction resulted in the following financial outcomes for H&R Block:
- Total Proceeds: Approximately $575 million.
- Cash Proceeds at Closing: $487 million (inclusive of $12 million of cash on the RSM closing balance sheet).
- Deferred Consideration: A note with a principal amount of $54 million.
- Expected Additional Cash: Approximately $34 million (including working capital adjustments), expected by December 31, 2011.
- Employee Distributions: Approximately $74 million distributed to RSM employees participating in a deferred compensation plan.
- Liabilities: M&P assumed substantially all liabilities of the RSM McGladrey operations, including contingent payments and lease obligations.
The filing does not provide specific revenue, profit, or margin figures for the Company's ongoing operations, as this report focuses solely on the asset disposition.
Material Changes and Terminations
Upon closing, the Company terminated its relationship and various agreements with M&P. Consequently, H&R Block ceased operating together with M&P or participating in the RSM McGladrey operations, except as required under the Merger Agreement. The alternative practice structure, where RSM provided tax/consulting services and M&P provided audit services, was dissolved.
The final purchase price of $575 million differs from the previously disclosed $610 million (August 24, 2011 filing) primarily due to approximately $35 million in cash transferred by RSM to the Company prior to closing.
Outlook, Risks, and Contingencies
Proceeds from the sale are subject to further post-closing adjustments. The Company has undertaken to indemnify M&P for certain litigation matters and obligations related primarily to previously sold RSM subsidiaries. Unaudited pro forma financial information regarding the transaction is available in Exhibit 99.1.
Key Facts for Investor Verification
- Verify the final adjusted purchase price after all post-closing working capital adjustments are finalized.
- Review the specific terms of the indemnification obligations regarding litigation and previously sold subsidiaries.
- Confirm the receipt of the $34 million expected cash payment by December 31, 2011.
- Analyze the Unaudited Pro Forma Financial Information (Exhibit 99.1) to understand the impact of the divestiture on the Company's consolidated financial position.