Date: Fri, 19 Dec 1997 03:15:44 GMT Server: Apache/1.1.3 Content-type: text/html H&R Block announces spinoff of CompuServe H&R Block, Inc.
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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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