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H&R BLOCK TO SPIN OFF REMAINING COMPUSERVE SHARES
Dividend Reduction and Stock Repurchase Plan Announced
FOR RELEASE TUESDAY, JULY 16, 1996
KANSAS CITY, Mo. -- The Board of Directors of H&R
Block, Inc. (NYSE:HRB) today announced three actions associated with
the full separation of CompuServe Corporation
from the company. The Board authorized the:
- spin-off of the remaining 80.1 percent of CompuServe
shares held by H&R Block to H&R Block shareholders;
- reduction of the H&R Block quarterly cash dividend
beginning with the dividend payable in January 1997; and,
- repurchase of up to 10 million H&R Block shares in
the open market over a two-year period following the spin-off of CompuServe.
This authorization will be in addition to the 5 million shares remaining
in a previously authorized repurchase program.
In a separate announcement, CompuServe today said that
flat subscriber growth within on-line services, coupled with continued
investments in the introduction of WOW! and infrastructure improvements,
will result in a projected loss from operations in the range of $.15 to
$.20 per share for the quarter ending July 31, 1996. During May and June
1996, the number of WOW! subscribers increased 44 percent to 91,000, SPRYNET
subscribers increased 14 percent to 152,000, while subscribers of CompuServe
Information Service declined more than one percent to 3.4 million.
The spin-off marks the second step in the company's strategic
program to separate CompuServe and create two independent, publicly traded
businesses better able to take advantage of their unique growth opportunities.
At the time the plans for separation were announced in February 1996, H&R
Block's Board of Directors stated that H&R Block would sell up to 20
percent of CompuServe's stock through an initial public offering (IPO).
The Board also stated that H&R Block would complete the separation
through a tax-free distribution of CompuServe shares within approximately
12 months. More than 18 million CompuServe shares, representing nearly
20 percent of the outstanding, were sold in the IPO, which was completed
April 19, 1996.
"The Board acted decisively today in fulfilling its
commitment to shareholders," said Frank L. Salizzoni, H&R Block's
interim president and chief executive officer. "We decided to spin
off the remaining CompuServe shares in order to provide Block shareholders
with the most direct value possible and to allow both companies maximum
freedom to focus on the strategic issues facing their distinct businesses.
"As a completely independent entity, CompuServe becomes
more flexible and can react more quickly to the challenges of a highly
competitive, rapidly changing industry with tremendous future potential,"
Salizzoni said. "H&R Block benefits by targeting all its energies
on developing new tax and financial services products, expanding its domestic
and international markets, and accelerating its growth momentum."
Just over 74 million shares of CompuServe will be distributed
to H&R Block shareholders, who will receive approximately seven shares
of CompuServe for each 10 shares of H&R Block common stock. The spin-off
is subject to, among other things, shareholder approval at H&R Block's
annual meeting expected to occur in September and the receipt of a favorable
ruling from the Internal Revenue Service regarding the tax-free nature
of the distribution. The company said it expects the separation to be completed
on or about Nov. 1, 1996. The record date and distribution date for the
spin-off of the CompuServe shares will be determined by the Board following
the receipt of shareholder approval.
The Board today also indicated that following the spin-off,
it plans to reduce H&R Block's cash dividend to $.20 per quarter, reflecting
the effect on income of the CompuServe spin-off. The new dividend policy
will take effect beginning with the quarterly cash dividend payable in
January 1997. H&R Block's most recent quarterly cash dividend was $.32
per share paid on July 1, 1996. On June 19, 1996, H&R Block's Board
declared a quarterly cash dividend of $.32 per share payable on Oct. 1,
1996, to shareholders of record on Sept. 1, 1996.
The Board stated the new H&R Block share repurchase
authorization and dividend reduction would become effective only after
the completion of the CompuServe spin-off. According to Salizzoni, the
share buy back will provide additional liquidity to those holders who wish
to sell some or all of their shares, while enabling continuing holders
to benefit both from the ongoing growth of H&R Block as well as from
the fewer shares that will remain outstanding.
Except for historical information contained herein, the
matters set forth in this press release are forward looking statements
subject to risks and uncertainties which could cause actual results to
differ materially. Founded in 1955, H&R
Block, Inc. is a diversified company offering tax and financial services.
H&R Block is the country's largest tax preparation firm, serving 17.4
million taxpayers in nearly 9,700 offices in the United States, Canada,
Australia and 15 other countries and territories in 1996. In the United
States, H&R Block Tax Services,
Inc. handled approximately one in every seven returns filed with the
Internal Revenue Service this past tax season. Block
Financial Corporation, started in 1993, develops and provides technology-driven
financial services.
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