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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: April 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number: 1-6089
H&R BLOCK, INC.
(Exact name of registrant as specified in its charter)
Missouri 44-0607856
(State or other jurisdiction of (I.R.S. Employer Identifi-
incorporation or organization) cation Number)
4410 Main Street, Kansas City, Missouri 64111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816)753-6900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, without par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of Class)
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-
affiliates of the registrant, computed by reference to the price
at which the stock was sold on June 1, 1995, was $3,593,515,157.
Number of shares of registrant's Common Stock, without par value,
outstanding on June 1, 1995: 104,876,724.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain specified portions of the registrant's annual report to
security holders for the fiscal year ended April 30, 1995, are
incorporated herein by reference in response to Part I, Item 1,
and Part II, Items 5 through 8, inclusive, and certain specified
portions of the registrant's definitive proxy statement to be
filed within 120 days after April 30, 1995, are incorporated
herein by reference in response to Part III, Items 10 through 13,
inclusive.
PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
H&R Block, Inc. is a diversified services corporation that
was organized in 1955 under the laws of the State of Missouri
(the "Company"). It is the parent corporation in a two-tier
holding company structure following a 1993 corporate
restructuring. The second-tier holding company is H&R Block
Group, Inc., a Delaware corporation and the direct owner of all
of the shares of the Company's primary operating subsidiary
corporations. Such primary operating subsidiaries consist of
CompuServe Incorporated, H&R Block Tax Services, Inc., and Block
Financial Corporation. Developments within each of these
segments of the Company during fiscal year 1995 are described in
the section below entitled "Description of Business."
During the year ended April 30, 1995, the Company was not
involved in any bankruptcy, receivership or similar proceedings
or any material reclassifications, mergers or consolidations and
the Company did not acquire or dispose of any material amount of
assets otherwise than in the ordinary course of business.
On April 4, 1995, the Company acquired SPRY, Inc., a private
Washington corporation and a provider of Internet access
applications for the office, home and publishing markets
("SPRY"). The transaction involved the acquisition by a wholly-
owned subsidiary of the Company of all of the outstanding SPRY
common and preferred stock in exchange for 401,768 shares of the
Company's Delayed Convertible Preferred Stock valued at $54.2
million and cash, including acquisition expenses, of $41.8
million. Additionally, management stock options for 98,900
shares of SPRY common stock were converted to stock options for
51,828 shares of the Company's Delayed Convertible Preferred
Stock, valued at approximately $5.6 million. The acquisition was
accounted for as a purchase and the Company recorded a charge to
earnings of $83.5 million for purchased research and development
in connection with the acquisition. Following the end of fiscal
year 1995, the Company contributed the stock of SPRY to H&R Block
Group, Inc.
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Each of the shares of Delayed Convertible Preferred Stock,
without par value, issued by the Company in connection with the
acquisition of SPRY, is convertible on or after April 5, 1998,
into four shares of Common Stock of the Company, subject to
adjustment in certain events. The holders of the shares of
Delayed Convertible Preferred Stock are not entitled to receive
dividends and such shares have no voting rights associated
therewith.
SPRY has become the Internet Services Division of CompuServe
Incorporated, although it remains a separate legal entity at this
time. Such Division is described in the portion of the section
below entitled "Description of Business" pertaining to CompuServe
Incorporated.
After the close of fiscal year 1995, the Company sold MECA
Software, Inc. ("MECA"), a Delaware corporation involved in
developing, publishing and marketing personal productivity
software products, to Bank of America, N.T. & S.A., and
NationsBank, N.A. (Carolinas) for $35 million, subject to certain
closing adjustments. MECA's primary product is Managing Your
Money (trademark), computer software designed to assist
individuals in managing personal finances. The Company has
retained ownership of the TaxCut (trademark) and Small Business
Attorney (trademark) software products.
On April 12, 1995, Thomas M. Bloch submitted his resignation
as President and Chief Executive Officer of the Company,
effective August 31, 1995, in order to pursue a number of non-
business alternatives. A search committee consisting of three
members of the Board of Directors was appointed to assist in the
process of selecting a new Chief Executive Officer of the
Company.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The information required by Item 101(b) of Regulation S-K
relating to financial information about industry segments is
contained in the Notes to Consolidated Financial Statements in
the Company's annual report to security holders for the fiscal
year ended April 30, 1995, and is hereby incorporated by
reference.
NUMBER OF EMPLOYEES
The Company, including its subsidiaries, has approximately
3,900 regular full-time employees. The highest number of persons
employed by the Company during the fiscal year ended April 30,
1995, including seasonal employees, was approximately 91,000.
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DESCRIPTION OF BUSINESS
COMPUSERVE INCORPORATED ("COMPUSERVE")
GENERALLY. The Company's computer services segment is
comprised of CompuServe Incorporated, its subsidiaries and SPRY,
Inc. CompuServe, the information services and computer
communications subsidiary based in Columbus, Ohio, operates
through three major divisions - CompuServe Information Services,
CompuServe Network Services and CompuServe Internet Services
(SPRY). CompuServe became a wholly-owned subsidiary of the
Company in May 1980 and is presently a wholly-owned subsidiary of
H&R Block Group, Inc. From its origins as a computer time-
sharing firm, CompuServe has become a leading provider of
computer-based information and communications services to
businesses and individual owners of personal computers. In
addition, the acquisition of SPRY in April 1995 was designed to
place CompuServe at the forefront of the Internet industry.
CompuServe's largest division is its Information Services
Division. The CompuServe Information Service, the online service
for personal computer owners, provides subscribers with access to
data services and interactive communication through the use of
networked mainframes, servers and personal computers. The world-
wide customer base of the online services operated by CompuServe
and its international licensee and distributors grew to
approximately 3.2 million subscribers at the end of fiscal year
1995, compared to approximately 1.9 million at the end of the
previous year. Exclusive of such licensee and distributors, the
customer base at fiscal year end was approximately 2.1 million,
an increase of 55% over the number of subscribers at the end of
fiscal year 1994. Of the 2.1 million subscribers, more than
300,000 are located in Europe, an increase from approximately
100,000 European subscribers at the end of fiscal year 1994.
CompuServe has licensed its core technology and network model
relating to its online service into Japan. The Japanese licensee
operates its own online service based on the CompuServe
technology and model, and pays CompuServe royalties. CompuServe
also has arrangements with various distributors in Japan,
Australia, Mexico and other parts of the world whose main
function is to generate customers for the CompuServe Information
Service. While such overseas customers enter into contracts with
CompuServe, they generally initiate their connection with the
CompuServe Information Service through the distributors'
telecommunications networks. CompuServe pays royalties to such
distributors for the business that they generate and the
associated support services that they provide to CompuServe
members in the countries in which they operate.
Among the many services accessible through CompuServe's
information system are online shopping services, stock market
related services and airline reservation services. Customers can
also play computer games, conduct research, send and receive
messages, access the Internet and exchange helpful tips about
computer use through special interest bulletin boards called
"Forums" simply by connecting their personal computers to an
ordinary telephone line.
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Through its Information Services Division, CompuServe has
also developed a wide range of business services that enable
companies to link their employees with the information needed to
conduct business. The services include electronic mail, internal
corporate information systems for diverse applications, and a
host of business-related databases. Electronic mail and other
communications systems provided by CompuServe allow business
users flexible, two-way access to information in operating areas
such as sales, marketing, investment research and information
management. Through the use of these systems, suppliers and
customers are able to access information easily and securely
through personal computers and computer terminals.
The Internet Services Division of CompuServe is a leader in
the Internet commercialization industry. This Division resulted
from the Company's acquisition in April 1995 of SPRY, Inc., the
Seattle-based developer of Internet access systems. SPRY's
skills in the development of Internet access software and in
offering Internet business solutions are being combined with
CompuServe's skills in the online and network industries to form
a source for consumer Internet access, online content
development, software development, online information design,
Web server integration, network access and security management.
The Internet Services Division produces "Internet In A Box" and
"Mosaic In A Box," two popular products for consumers and
businesses that provide access to the Internet through Windows
computer formats.
CompuServe's Network Services Division provides the
infrastructure that supports the CompuServe Information Service
and CompuServe Internet Services, as well as value-added packet
data network, frame relay and local area network services to
corporations and many other diverse organizations. CompuServe's
highly sophisticated and efficient telecommunications network
links CompuServe subscribers and system users to each other, to
CompuServe's central computer facilities or to other computer
centers and data bases distributed across the country and around
the world. By the end of fiscal year 1995, CompuServe had
more than 430 points-of-presence worldwide and more than
42,000 dial ports through which members and customers connect to
CompuServe's network and services.
The Network Services Division offers its customers a fast and
reliable data communications system that can be customized to
meet their particular requirements. The number of clients of the
Network Services Division totalled 750 at the end of fiscal year
1995, an increase from the 586 clients at the end of fiscal year
1994. Major products of the Division include X.25, RLA (remote
LAN access) and FRAME-Net (trademark) frame relay services.
One of the many applications for which the CompuServe network
is utilized by its customers relates to point-of-sale
transactions. CompuServe is a leading provider of value-added
telecommunications services for point-of-sale authorization of
credit card purchases. Using the CompuServe network, a merchant
can pass a customer's card through a computer terminal and
determine almost instantly whether the card is valid.
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Early in fiscal year 1995, CompuServe disposed of CompuServe
Data Technologies, a division that marketed database management
software, and Collier-Jackson, Inc., a subsidiary of CompuServe
that marketed newspaper management and financial software.
Following the end of fiscal year 1995, Robert J. Massey,
formerly Executive Vice President, Network Services Division, was
elected President and Chief Executive Officer of CompuServe.
Mr. Massey succeeded Maurice A. Cox, Jr., who resigned in order
to form a venture capital investment company in Ohio.
SERVICE MARKS, TRADEMARKS, PATENTS OR COPYRIGHTS. CompuServe
claims ownership of the following trademarks and service marks
registered on the principal register of the United States Patent
and Trademark Office:
CompuServe B Protocol
The Electronic Mall WINCIM
B+ Protocol FRAME-Net
Forum The Source
CB Simulator Alumni Advantage
CompuServe Information Manager MacNav
InfoPlex
CompuServe also owns or claims numerous unregistered service
marks or trademarks.
CompuServe will receive its first patent in fiscal year 1996.
The patent will cover technology CompuServe invented for
seamlessly switching computer transactions among the various
servers and mainframe computers that CompuServe operates.
CompuServe presently holds no other patents on its technology,
although several are presently pending. CompuServe is licensed
by others to use various software programs and technology which
it uses in various ways in its business.
COMPETITIVE CONDITIONS. The online information, Internet
commercialization and value-added network services businesses are
highly competitive and consist of a large number of companies.
In terms of subscriber base, CompuServe is one of the largest
providers of worldwide online information services. CompuServe
has two significant competitors in the United States in the
online information services industry, as well as numerous smaller
competitors. In addition, several large U.S. companies have
entered the online information services marketplace, or are about
to enter such marketplace. Principal methods of competition in
the online industry are price, content, ease of use and customer
service.
The value-added network services industry is highly
fragmented and no single supplier can be considered to occupy a
dominant position in the industry. CompuServe's Internet
Services Division competes with many Internet access providers,
most of which operate in limited geographic areas. The Internet
Services Division also competes with software and publishing
companies that develop Internet applications and online content.
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H&R BLOCK TAX SERVICES, INC. ("TAX SERVICES")
GENERALLY. The income tax return preparation and related
services segment is the original core business of the Company.
The services of this segment are provided to the public through a
system of offices operated by Tax Services or by others to whom
Tax Services has granted franchises. References in this section
to "Tax Services" include H&R Block Tax Services, Inc., and its
subsidiaries involved in the income tax return preparation
business, and references in this section to "H&R Block" include
both Tax Services and its franchisees.
Tax Services provides income tax return preparation services,
electronic filing services and other services relating to income
tax return preparation in many parts of the world. For U.S.
returns, H&R Block offers a refund anticipation loan service in
conjunction with its electronic filing service. H&R Block also
markets its knowledge of how to prepare income tax returns
through its income tax training schools. These schools teach
taxpayers how to prepare their own income tax returns, as well as
provide Tax Services with a source of trained income tax return
preparers. During the 1995 fiscal year, 118,316 students
enrolled in H&R Block's basic and advanced income tax courses,
compared to 133,458 students during fiscal year 1994.
TAXPAYERS SERVED. H&R Block served 17,060,000 taxpayers
worldwide during fiscal year 1995, a decrease from the 18,107,000
taxpayers served in fiscal year 1994. "Taxpayers served"
includes taxpayers for whom H&R Block prepared income tax returns
as well as taxpayers for whom Block provided only electronic
filing services.
The decrease in the number of taxpayers served by H&R Block
in fiscal year 1995 primarily related to H&R Block's electronic
filing and refund anticipation loan ("RAL") services. Under the
1995 RAL program, Tax Services' electronic filing customers who
meet certain eligibility criteria are offered the opportunity to
apply for loans from Beneficial National Bank in amounts based
upon the customer's anticipated federal income tax refunds.
Income tax return information is simultaneously transmitted by
H&R Block to the Internal Revenue Service and the lending bank.
Within a few days after the date of filing, a check in the amount
of the loan, less the bank's transaction fee and H&R Block's tax
return preparation fee and electronic filing fee, is received by
the RAL customer. The Internal Revenue Service ("IRS") then
directly deposits the participating customer's actual federal
income tax refund into a designated account at the bank in order
for the loan to be repaid.
Prior to the 1995 tax season, the IRS used a Direct Deposit
Indicator ("DDI") to notify the electronic filer after receiving
the taxpayer's electronically filed tax return that the
taxpayer's request for direct deposit of the refund would be
honored. The bank offering the RAL relied on the DDI to minimize
loan losses and the DDI, therefore, enabled such bank to make
RALs under relatively favorable terms to taxpayers. In October
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1994, the IRS announced that it was eliminating the DDI for the
1995 tax season in an effort to curb fraudulent tax refund
claims. During the 1995 tax season, the IRS made further changes
to its electronic return processing systems and procedures to
crack down on taxpayer fraud believed to be associated with the
earned income tax credit ("EITC") claimed on returns. These
changes resulted in delays in the IRS's issuance of refunds
associated with the EITC. In reaction to the IRS changes, more
stringent criteria were adopted in the loan approval process, the
bank's transaction fee increased in many cases and, during much
of the tax season, RALs were not made available on the portion of
a refund amount attributable to the EITC. Consequently, fewer
customers chose to apply for RALs and have their returns
electronically filed. H&R Block experienced a 21% decline in
fiscal year 1995 in the number of returns filed electronically.
TAX RETURN PREPARATION. During the 1995 income tax filing
season (January 3 through April 30), H&R Block offices prepared
approximately 15,059,000 individual United States and Canadian
income tax returns, compared to the preparation of 15,181,000
such returns in fiscal year 1994. About 12,918,000 of the
returns prepared in fiscal 1995 were United States returns,
constituting 12% of an Internal Revenue Service estimate of total
U.S. individual income tax returns filed during that time period.
Tax Services and its franchisees prepared approximately 2,141,000
Canadian returns filed with Revenue Canada during the 1995 income
tax filing season, compared with 2,144,000 Canadian returns
prepared in the previous year. H&R Block also prepares U.S.
income tax returns in other countries and Australian tax returns
in Australia. The returns prepared at offices in countries
outside of the United States and Canada constituted 2.6% of the
total returns prepared by H&R Block in the last fiscal year. The
following table shows the approximate number of income tax
returns prepared at H&R Block offices in the United States and
Canada during the last five tax filing seasons:
Tax Season Ended April 30
(in thousands)
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1991 1992 1993 1994 1995
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Returns prepared
(U.S. and Canada) 14,589 15,179 15,189 15,181 15,059
During the tax season, most H&R Block offices are open from
9:00 a.m. to 9:00 p.m. weekdays and from 9:00 a.m. to 5:00 p.m.
Saturdays and Sundays. Office hours are often extended during
peak periods. Most tax preparation business is transacted on a
cash basis. The procedures of Tax Services have been developed
so that a customer's tax return is prepared in his or her
presence, in most instances in less than one hour, on the basis
of information furnished by the customer. In all company-owned
offices and most franchised offices, tax returns are prepared
with the assistance of a computer. After the customer's return
has been initially prepared, he or she is advised of the amount
of his or her tax due or refund. The return, however, is
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retained and reviewed for theoretical accuracy. After completion
of this review and after copies of the return have been made, the
return is presented to the customer for signature and filing.
These post-preparation procedures must be modified somewhat for
customers who desire to have their returns electronically filed
(see "Electronic Filing," below). If an H&R Block preparer makes
an error in the preparation of a customer's tax return that
results in the assessment of any interest or penalties on
additional taxes due, while H&R Block does not assume the
liability for the additional taxes, it guarantees payment of the
interest and penalties.
EXECUTIVE TAX SERVICE. In addition to its regular offices,
H&R Block offers tax return preparation services at Executive Tax
Service offices in the United States and Canada. Appealing to
taxpayers with more complicated returns, Executive Tax Service
stresses the convenience of appointments, year-round tax service
from the same preparer and private office interviews. The number
of Executive Tax Service offices increased from 515 in fiscal
year 1994 to 528 in 1995. In fiscal 1995, the number of
Executive Tax Service clients increased to approximately 552,800,
compared to approximately 513,700 in 1994. Tax Services plans to
continue to expand the Executive Tax Service segment of its tax
return preparation business.
ELECTRONIC FILING. Electronic filing reduces the amount of
time required for a taxpayer to receive a federal tax refund and
provides assurance to the client that the return, as filed with
the Internal Revenue Service, is mathematically accurate. If the
customer desires, he or she may have his or her refund deposited
by the Treasury Department directly into his or her account at a
financial institution designated by the customer. As reported
above under "Taxpayers Served," eligible electronic filing
customers may also apply for refund anticipation loans at Tax
Services' offices through Beneficial National Bank. Tax Services
and its franchisees filed approximately 5,941,000 tax returns
electronically in 1995, compared to 7,559,000 in fiscal 1994.
Approximately 2,325,000 refund anticipation loans were processed
in 1995 by H&R Block, compared to 5,554,000 in 1994.
In 1995, H&R Block offered a service to transmit state income
tax returns electronically to state tax authorities in 28 states
(compared to 18 states in fiscal 1994) and plans to continue to
expand this program as more states make this filing alternative
available to their taxpayers. H&R Block also offered the
electronic filing of U.S. income tax returns at offices located
in Europe and the electronic filing of Australian and Canadian
income tax returns at its offices in Australia and Canada,
respectively.
CASH BACK. In Canada, the Company and its franchisees offer
a refund discount ("Cash Back") program to their customers. The
procedures which H&R Block must follow in conducting the program
are specified by Canadian law. In accordance with current
Canadian regulations, if a customer's tax return indicates that
such customer is entitled to a tax refund, a check is issued by
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H&R Block to the customer for an amount which is equal to the sum
of (1) 85% of that portion of the anticipated refund which is
less than or equal to $300 and (2) 95% of that portion of the
refund in excess of $300. The customer assigns to H&R Block the
full amount of the tax refund to be issued by Revenue Canada.
The refund check is then sent by Revenue Canada directly to H&R
Block and deposited by H&R Block in its bank account. In
accordance with the law, the discount is deemed to include both
the tax return preparation fee and the fee for tax refund
discounting. This program is financed by short-term borrowing.
The number of returns discounted under the Cash Back program
decreased from 663,951 in fiscal year 1994 to 638,203 in fiscal
year 1995.
OWNED AND FRANCHISED OFFICES. Most H&R Block offices are
similar in appearance and usually contain the same type of
furniture and equipment, in accordance with the specifications of
Tax Services. Free-standing offices are generally located in
business and shopping centers of large metropolitan areas and in
the central business areas of smaller communities. All offices
are open during the tax season. During the balance of the year
only a limited number of offices are open, but through telephone
listings, H&R Block personnel are available to provide service to
customers throughout the entire year.
In fiscal year 1995, H&R Block also operated 954 offices in
department stores, including 777 offices in Sears, Roebuck & Co.
stores operated as "Sears Income Tax Service by H&R Block."
During the 1995 tax season, the Sears' facilities constituted
approximately 8.0% of the tax office locations of H&R Block. Tax
Services has entered into a new license agreement with Sears
under which Tax Services will continue to operate in Sears
locations throughout the United States. Such license agreement
expires on December 31, 2004. Tax Services believes its
relations with Sears to be excellent and that both parties to the
license arrangement view the operations thereunder to date as
satisfactory.
On April 15, 1995, there were 9,703 H&R Block offices in
operation principally in all 50 states, the District of Columbia,
Canada, Australia and Europe, compared to 9,577 offices in
operation on April 15, 1994. Of the 9,703 offices, 4,660 were
owned and operated by Tax Services and 5,043 were owned and
operated by independent franchisees. Of such franchised offices,
3,435 were owned and operated by "satellite" franchisees of Tax
Services (described below), 919 were owned and operated by
"major" franchisees (described below) and 689 were owned and
operated by satellite franchisees of major franchisees. From
time to time, Tax Services has acquired the operations of
existing franchisees and it will continue to do so if future
conditions warrant such acquisitions and satisfactory terms can
be negotiated.
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Two types of franchises have principally been granted by the
tax services segment of the Company. "Major" franchisees entered
into agreements with the Company (primarily in the Company's
early years) covering larger cities and counties and providing
for the payment of franchise royalties based upon a percentage of
gross revenues of their offices. Under the agreements, the
Company granted to each franchisee the right to the use of the
name "H&R Block" and provided a Policy and Procedure Manual and
other supervisory services. Tax Services offers to sell
furniture, signs, advertising materials, office equipment and
supplies to major franchisees. Each major franchisee selects and
trains the employees for his or her office or offices. Since
March 1993, HRB Royalty, Inc., a wholly-owned subsidiary of Tax
Services, has served as the franchisor under the major franchise
agreements.
In smaller localities, Tax Services has granted what it terms
"satellite" franchises. A satellite franchisee receives from Tax
Services signs, designated equipment, specialized forms, local
advertising, initial training, and supervisory services and,
consequently, pays Tax Services a higher percentage of his or her
gross tax return preparation and related service revenues as a
franchise royalty than do major franchisees. Many of the
satellite franchises of Tax Services are located in cities with
populations of 15,000 or less. Some major franchisees also grant
satellite franchises in their respective areas.
It has always been the policy of Tax Services to grant
tax return preparation franchises to qualified persons without an
initial franchise fee; however, the policy of Tax Services is to
require a deposit to secure compliance with franchise contracts.
SEASONALITY OF BUSINESS. Since most of the customers of Tax
Services file their tax returns during the period from January
through April of each year, substantially all of Tax Services'
revenues from income tax return preparation, related services and
franchise royalties are received during this period. As a
result, Tax Services operates at a loss through the first nine
months of its fiscal year. Historically, such losses primarily
reflect payroll of year-round personnel, training of income tax
preparers, rental and furnishing of tax offices, and other costs
and expenses relating to preparation for the following tax
season.
SERVICE MARKS AND TRADEMARKS. HRB Royalty, Inc., a Delaware
corporation and a wholly-owned subsidiary of Tax Services, claims
ownership of the following service marks registered on the
principal register of the United States Patent and Trademark
Office:
H&R Block in Two Distinct Designs
The Income Tax People
H&R Block Income Tax and Design
Income Tax Saver
Executive (when used in connection with the
preparation of income tax returns for others)
Rapid Refund H&R Block and Design
Accufile
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In addition, HRB Royalty, Inc., claims ownership of the
following unregistered service marks and trademarks:
America's Largest Tax Service
Nation's Largest Tax Service
Tax Services has a license to use the trade names, service
marks and trademarks of HRB Royalty, Inc., in the conduct of the
business of Tax Services.
COMPETITIVE CONDITIONS. The tax return preparation and
electronic filing business is highly competitive. Tax Services
considers its primary source of tax return preparation
competition to be the individual who prepares his own tax return.
In addition, there are a substantial number of tax return
preparation firms. Many of these firms and many firms not
otherwise in the tax return preparation business are involved in
providing electronic filing and refund anticipation loan services
to the public. Commercial tax return preparers and electronic
filers are highly competitive with regard to price, service and
reputation for quality. Tax Services believes that in terms of
the number of offices and tax returns prepared it is the largest
tax return preparation firm in the United States. Tax Services
also believes that in terms of the number of offices and tax
returns electronically filed in fiscal year 1995, it is the
largest provider of electronic filing services in the United
States.
BLOCK FINANCIAL CORPORATION ("BFC")
GENERALLY. Block Financial Corporation, a Delaware
corporation and a subsidiary of H&R Block Group, Inc., was
incorporated in May 1992 and such corporation and its
subsidiaries are involved in the following businesses:
(1) financial services delivered by technology and financial
service delivery technology; and
(2) financial services associated with H&R Block Tax
Services, Inc.
BFC is developing technology that will deliver financial
services online through existing commercial online services, the
Internet or directly through leased networks. Such services
could include home banking, electronic bill payment and/or
discount brokerage services. BFC expects to focus its future
efforts on the development of these technology products.
During fiscal year 1995, the operations of Legal Knowledge
Systems, Inc., the developer of TaxCut (trademark) personal
income tax return preparation software, were combined with BFC.
Following the end of fiscal year 1995, BFC sold MECA Software,
Inc., the publisher of the Managing Your Money (trademark)
personal finance software. BFC's software business will continue
to develop and market TaxCut (trademark), as well as market its
Small Business Attorney (trademark) software product. Content
associated with these software products are expected to form the
basis for future online services.
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In excess of 108,000 credit cards were issued by the end of
fiscal year 1995 under a co-branding agreement between BFC and
Columbus Bank and Trust Company, Columbus, Georgia. A majority
of BFC's credit card portfolio consists of CompuServe gold cards.
During fiscal year 1995, BFC introduced the Conductor service on
CompuServe, a national online electronic credit card statement
that provides the cardholder with access to transaction records
and credit availability and the ability to download transactions
into a personal financial software program. BFC owns an
industrial loan company chartered in the State of Utah and has
applied for FDIC insurance. Upon receiving such insurance, the
industrial loan company may become a direct issuer of bank cards.
The decision by the Internal Revenue Service to eliminate the
Direct Deposit Indicator in connection with refund anticipation
loans (see the subsection entitled "Taxpayers Served" under "H&R
Block Tax Services, Inc.," above), resulted in the decision by
BFC not to invest in refund anticipation loans ("RALs") during
the 1995 tax season. In 1993 and 1994, BFC purchased interests
in a trust to which certain RALs made by Mellon Bank (DE)
National Association to H&R Block tax customers in the United
States were sold.
Franchise Partner, Inc., a subsidiary of BFC, offers to
franchisees of either H&R Block Tax Services, Inc. or one of its
subsidiary corporations lines of credit with reasonable interest
rates under a program designed to better enable the franchisees
to refinance existing business debt, expand or renovate offices
or meet off-season cash flow needs. A franchise equity line of
credit is secured by the franchise itself.
During fiscal year 1995, BFC provided property and casualty
insurance coverage to franchisees of the Tax Services segment
through Companion Insurance, Ltd., a captive insurance company
domiciled in Bermuda. At May 1, 1995, the operations of such
entity were transferred to H&R Block Tax Services, Inc.
COMPETITIVE CONDITIONS. The financial services, software,
credit card and lending businesses are highly competitive and
consist of a large number of companies. No single supplier can
be considered to occupy a dominant position in any of the
businesses in which BFC competes.
<PAGE>
ITEM 2. PROPERTIES.
The executive offices of both the Company and H&R Block Tax
Services, Inc., are located at 4410 Main Street, Kansas City,
Missouri, in a three-story building owned by Tax Services that
was constructed in 1963 and expanded in 1965, 1973 and 1981. The
building is again being expanded, with the completion of a new
four-story addition expected during fiscal year 1996. Most other
offices of Tax Services (except those in department stores) are
operated in premises held under short-term leases providing fixed
monthly rentals, usually with renewal options.
CompuServe's executive offices are located in an office
complex in Columbus, Ohio, owned by CompuServe. CompuServe also
owns and occupies two other buildings in the Columbus area.
Construction of a new multi-building corporate facility in the
Columbus area is underway and CompuServe plans to take occupancy
during fiscal year 1996. CompuServe leases office space in other
buildings in the Columbus area and in a number of other locations
in the United States and Europe. CompuServe owns SC30M computer
systems purchased from Systems Concepts, Inc., and has assembled
several SC-30 and SC-40 processors on-site via an agreement with
such firm. CompuServe also owns central processors manufactured
by Digital Equipment Corporation and located in its two main
computer centers.
The executive offices of Block Financial Corporation are
located in leased offices at 4435 Main Street, Kansas City,
Missouri.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending by or against
the Company or any of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders,
through the solicitation of proxies or otherwise, during the
fourth quarter of the fiscal year ended April 30, 1995.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The names, ages and principal occupations (for the past five
years) of the executive officers of the Company, each of whom has
been elected to serve at the discretion of the Board of Directors
of the Company, are:
NAME AND AGE OFFICE(S)
- -------------------- ---------------------------
Henry W. Bloch (72) Chairman of the Board since
August 1992; Chairman of the
Board and Chief Executive
Officer from August 1989
through July 1992; Member of
the Board of Directors since
1955.
<PAGE>
Thomas M. Bloch (41) President and Chief Executive
Officer since August 1992;
President and Chief Operating
Officer from August 1989
through July 1992; Member of
the Board of Directors since
1983. See Note 1.
William P. Anderson (46) Senior Vice President and
Chief Financial Officer since
September 1994; Vice
President, Corporate
Development and Chief
Financial Officer from August
1992 until September 1994;
Vice President, Corporate
Development from December 1991
until August 1992; See Note 2.
Robert L. Arnold (52) Vice President and Director of
Internal Audit since February
1986.
Ozzie Wenich (52) Vice President, Finance and
Treasurer since October 1994;
Vice President, Corporate
Controller and Treasurer from
March 1994 until October 1994;
Vice President and Corporate
Controller from September 1985
until March 1994.
Note 1: On April 12, 1995, Mr. Thomas Bloch announced his
resignation as President and Chief Executive Officer,
effective August 31, 1995.
Note 2: Mr. Anderson was a partner in KPMG Peat Marwick,
accounting firm, from 1984 until December 1991, in
Atlanta, Georgia, serving in various capacities,
including responsibility for the firm's national
corporate finance consulting practice.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
The information called for by this item is contained in the
Company's annual report to security holders for the fiscal year
ended April 30, 1995, under the heading "Common Stock Data," and
is hereby incorporated by reference. The Company's Common Stock
is traded principally on the New York Stock Exchange. The
Company's Common Stock is also traded on the Pacific Stock
Exchange. On June 12, 1995, there were 37,514 stockholders of
the Company.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by this item is contained in the
Company's annual report to security holders for the fiscal year
ended April 30, 1995, under the heading "Selected Financial
Data," and is hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information called for by this item is contained in the
Company's annual report to security holders for the fiscal year
ended April 30, 1995, under the headings "Management's Discussion
and Analysis of Results of Operations" and "Management's
Discussion and Analysis of Liquidity and Capital Resources," and
is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by this item and listed at Item
14(a)1 is contained in the Company's annual report to security
holders for the fiscal year ended April 30, 1995, and is hereby
incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There has been no change in the registrant's accountants
during the two most recent fiscal years or any subsequent interim
time period.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this item is contained in the
Company's definitive proxy statement to be filed pursuant to
Regulation 14A not later than 120 days after April 30, 1995, in
the section titled "Election of Directors" and in Item 4a of
Part I of this report, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this item is contained in the
Company's definitive proxy statement to be filed pursuant to
Regulation 14A not later than 120 days after April 30, 1995, in
the sections entitled "Directors' Meetings, Compensation and
Committees" and "Compensation of Executive Officers," and is
incorporated herein by reference, except that information
contained in the section entitled "Compensation of Executive
Officers" under the subtitles "Performance Graph" and
"Compensation Committee Report on Executive Compensation" is not
incorporated herein by reference and is not to be deemed "filed"
as part of this filing.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by this item is contained in the
Company's definitive proxy statement to be filed pursuant to
Regulation 14A not later than 120 days after April 30, 1995, in
the section titled "Election of Directors" and in the section
titled "Information Regarding Security Holders," and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this item is contained in the
Company's definitive proxy statement to be filed pursuant to
Regulation 14A not later than 120 days after April 30, 1995, in
the section titled "Election of Directors," and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of
H&R Block, Inc., and subsidiaries are incorporated by
reference from the Company's annual report to
security holders for the year ended April 30, 1995:
PAGE
----
Consolidated Statements of Earnings 19
Consolidated Balance Sheets 20
Consolidated Statements of Cash Flows 21
Notes to Consolidated Financial Statements 22
Quarterly Financial Data 27
Independent Auditors' Report 29
2. FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report
Schedule VIII - Valuation and Qualifying Accounts
Schedules not filed herewith are either not
applicable, the information is not material or the
information is set forth in the financial statements
or notes thereto.
3. EXHIBITS
3(a) Restated Articles of Incorporation of H&R
Block, Inc., as amended, filed as Exhibit 4(a)
to the Company's quarterly report on Form 10-Q
for the quarter ended October 31, 1991, are
incorporated herein by reference.
<PAGE>
3(b) Bylaws of H&R Block, Inc., as amended.
4(a) Conformed copy of Rights Agreement dated as of
July 14, 1988 between H&R Block, Inc., and
Centerre Trust Company of St. Louis, filed on
August 9, 1993 as Exhibit 4(c) to the
Company's Registration Statement on Form S-8
(File No. 33-67170), is incorporated herein by
reference.
4(b) Copy of Amendment to Rights Agreement dated as
of May 9, 1990 between H&R Block, Inc. and
Boatmen's Trust Company.
4(c) Copy of Second Amendment to Rights Agreement
dated September 11, 1991 between H&R Block,
Inc. and Boatmen's Trust Company.
4(d) Copy of Third Amendment to Rights Agreement
dated May 10, 1995 between H&R Block, Inc. and
Boatmen's Trust Company.
4(e) Form of Certificate of Designation,
Preferences and Rights of Participating
Preferred Stock of H&R Block, Inc.
4(f) Form of Certificate of Designation,
Preferences and Rights of Delayed Convertible
Preferred Stock of H&R Block, Inc.
10(a) The Company's 1984 Long-Term Executive
Compensation Plan, as amended (terminated as
of September 8, 1993, except with respect to
awards then outstanding thereunder), filed as
Exhibit 28(a) to the Company's quarterly
report on Form 10-Q for the quarter ended
October 31, 1991, is incorporated herein by
reference.
10(b) The Company's 1993 Long-Term Executive
Compensation Plan, filed as Exhibit 10 to the
Company's quarterly report on Form 10-Q for
the quarter ended October 31, 1993, is
incorporated herein by reference.
10(c) The H&R Block Long-Term Performance Program,
as amended, filed as Exhibit 10(c) to the
Company's annual report on Form 10-K for the
fiscal year ended April 30, 1994, is
incorporated herein by reference.
10(d) The H&R Block Deferred Compensation Plan for
Directors, as amended, filed as Exhibit 10 to
the Company's quarterly report on Form 10-Q
for the quarter ended July 31, 1994, is
incorporated herein by reference.
<PAGE>
10(e) The H&R Block Deferred Compensation Plan for
Executives, as amended (Amendments 1 through
5), filed as Exhibit 10(e) to the Company's
annual report on Form 10-K for the fiscal year
ended April 30, 1994, is incorporated herein
by reference.
10(f) The H&R Block Supplemental Deferred
Compensation Plan for Executives, filed as
Exhibit 10(f) to the Company's annual report
on Form 10-K for the fiscal year ended April
30, 1994, is incorporated herein by reference.
10(g) Amendment No. 1 to The H&R Block Supplemental
Deferred Compensation Plan for Executives,
filed as Exhibit 10(a) to the Company's
quarterly report on Form 10-Q for the quarter
ended October 31, 1994, is incorporated herein
by reference.
10(h) The Amended and Restated H&R Block, Inc.
Retirement Plan for Non-Employee Directors.
10(i) The Company's 1989 Stock Option Plan for
Outside Directors, as amended, filed as
Exhibit 28(b) to the Company's quarterly
report on Form 10-Q for the quarter ended
October 31, 1991, is incorporated herein by
reference.
10(j) Employment Agreement between HRB Management,
Inc. and William F. Evans, filed as
Exhibit 10(b) to the Company's quarterly
report on Form 10-Q for the quarter ended
October 31, 1994, is incorporated herein by
reference.
11 Statement re Computation of Per Share
Earnings.
13 Those portions of the annual report to
security holders for the fiscal year ended
April 30, 1995 which are expressly
incorporated by reference in this filing.
21 Subsidiaries of the Company.
23 The consent of Deloitte & Touche LLP,
Certified Public Accountants, is located
immediately after the signature pages
contained in this filing.
27 Financial Data Schedule.
<PAGE>
(b) Reports on Form 8-K.
The Company did not file any current reports on Form 8-K
during the fourth quarter of the year ended April 30,
1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
H&R BLOCK, INC.
June 21, 1995 By/s/ Thomas M. Bloch
--------------------------
Thomas M. Bloch, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
SIGNATURE TITLE
- ------------------------ -------------------------
/s/ Thomas M. Bloch President, Chief
- ------------------------ Executive Officer and
Thomas M. Bloch Director (principal
executive officer)
/s/ G. Kenneth Baum Director
- ------------------------
G. Kenneth Baum
/s/ Henry W. Bloch Director
- ------------------------
Henry W. Bloch
/s/ Robert E. Davis Director
- ------------------------
Robert E. Davis
/s/ Donna R. Ecton Director
- ------------------------
Donna R. Ecton
<PAGE>
/s/ Henry F. Frigon Director
- ------------------------
Henry F. Frigon
/s/ Roger W. Hale Director
- ------------------------
Roger W. Hale
(Signed as to each on June 21, 1995)
SIGNATURE TITLE
- ------------------------ ------------------------
/s/ Marvin L. Rich Director
- ------------------------
Marvin L. Rich
/s/ Frank L. Salizzoni Director
- ------------------------
Frank L. Salizzoni
/s/ Morton I. Sosland Director
- ------------------------
Morton I. Sosland
/s/ William P. Anderson Senior Vice President
- ------------------------ and Chief Financial
William P. Anderson Officer (principal
financial officer)
/s/ Ozzie Wenich Vice President, Finance
- ------------------------ and Treasurer (principal
Ozzie Wenich accounting officer)
(Signed as to each on June 21, 1995)
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective
Amendment No. 4 to Registration Statement No. 33-185 of H&R
Block, Inc. and subsidiaries (relating to shares of Common Stock
issued under the 1984 Long-Term Executive Compensation Plan) on
Form S-8, Registration Statement No. 33-33889 of H&R Block, Inc.
and subsidiaries (relating to shares of Common Stock issuable
under the 1989 Stock Option Plan for Outside Directors) on Form
S-8 and Registration Statement No. 33-54985 of H&R Block, Inc.
and subsidiaries (relating to shares of Common Stock issued under
the 1993 Long-Term Executive Compensation Plan) on Form S-8 of
our reports dated June 20, 1995, appearing in and incorporated by
reference in this Annual Report on Form 10-K of H&R Block, Inc.
and subsidiaries for the year ended April 30, 1995.
/s/ Deloitte & Touche LLP
- -------------------------
Kansas City, Missouri
July 28, 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
H&R Block, Inc.
Kansas City, Missouri
We have audited the consolidated financial statements of H&R
Block, Inc. and subsidiaries as of April 30, 1995 and 1994 and
for each of the three years in the period ended April 30, 1995,
and have issued our report thereon dated June 20, 1995; such
consolidated financial statements and report are included in your
1995 Annual Report to Stockholders and are incorporated herein by
reference. Our audits also included the financial statement
schedule of H&R Block, Inc. and subsidiaries, listed in Item 14.
This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
- -------------------------
Kansas City, Missouri
June 20, 1995
<PAGE>
<TABLE>
H&R BLOCK, INC.
AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED APRIL 30, 1995, 1994 AND 1993
<CAPTION>
Additions
-----------------------
Charged
Balance to Costs Charged Balance
Beginning and to at End
Description of Period Expenses Other Deductions of Period
---------------------- --------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts-deducted from
accounts receivable in
the balance sheet
1995 $12,744,000 $13,619,000 $ - $19,089,000 $ 7,274,000
=========== =========== ======== =========== ===========
1994 $12,000,000 $24,977,000 $ - $24,233,000 $12,744,000
=========== =========== ======== =========== ===========
1993 $ 7,292,000 $13,962,000 $ - $ 9,254,000 $12,000,000
=========== =========== ======== =========== ===========
</TABLE>
<PAGE>
Exhibit 3(b)
As amended through
September 6, 1989
AMENDED AND RESTATED
BYLAWS
OF
H & R BLOCK, INC.
OFFICES
1. OFFICES. The corporation shall maintain a
registered office in the State of Missouri, and shall have a
resident agent in charge thereof. The location of the registered
office and name of the resident agent shall be designated in the
Articles of Incorporation, or by resolution of the board of
directors, on file in the appropriate offices of the State of
Missouri. The corporation may maintain offices at such other
places within or without the State of Missouri as the board of
directors shall designate.
SEAL
2. SEAL. The corporation shall have a corporate seal
inscribed with the name of the corporation and the words
"Corporate Seal - Missouri". The form of the seal may be altered
at pleasure and shall be used by causing it or a facsimile
thereof to be impressed, affixed, reproduced or otherwise used.
SHAREHOLDERS' MEETINGS
3. PLACE OF MEETINGS. All meetings of the
shareholders shall be held at the principal office of the
corporation in Missouri, except such meetings as the board of
directors (to the extent permissible by law) expressly determines
shall be held elsewhere, in which case such meetings may be held
at such other place or places, within or without the State of
Missouri, as the board of directors shall have determined.
4. ANNUAL MEETING. (a) DATE AND TIME. The annual
meeting of shareholders shall be held on the first Wednesday in
September of each year, if not a legal holiday, and if a legal
holiday, then on the first business day following, at 9:00 a.m.,
or on such other date as the board of directors may specify, when
directors shall be elected and such other business transacted as
may be properly brought before the meeting.
<PAGE>
(b) BUSINESS CONDUCTED. At an annual meeting of the
shareholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought
before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the board, otherwise properly brought before the
meeting by or at the direction of the board, or otherwise
properly brought before the meeting by a shareholder. In
addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to
the secretary. To be timely, such notice must be delivered to or
mailed and received at the principal executive offices of the
corporation not less than 50 days nor more than 75 days prior to
the meeting; provided, however, that if fewer than 65 days'
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business
on the 15th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure
was made. A shareholder's notice to the secretary shall set
forth as to each matter the shareholder proposes to bring before
the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of the shareholder proposing such business,
(iii) the class and number of shares of the corporation that are
beneficially owned by the shareholder, and (iv) any material
interest of the shareholder in such business.
Notwithstanding anything in the bylaws to the contrary,
no business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this section 4(b);
provided, however, that nothing in this section 4(b) shall be
deemed to preclude discussion by any shareholder of any business
properly brought before the annual meeting in accordance with
said procedure.
The chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was
not properly brought before the meeting in accordance with the
provisions of this section 4(b), and if he should so determine,
he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
5. SPECIAL MEETINGS. Special meetings of the
shareholders may be called at any time by the chairman of the
board or by the president, or at any time upon the written
request of a majority of the board of directors, or upon the
written request of the holders of not less than 80% of the stock
of the corporation entitled to vote in an election of directors.
Each call for a special meeting of the shareholders shall state
the time, the day, the place and the purpose or purposes of such
meeting and shall be in writing, signed by the persons making the
same and delivered to the secretary. No business shall be
transacted at a special meeting other than such as is included in
the purposes stated in the call.
<PAGE>
6. CONDUCT OF ANNUAL AND SPECIAL MEETINGS. The
chairman of the board, or in his absence the president, shall
preside as the chairman of the meeting at all meetings of the
shareholders. The chairman of the meeting shall be vested with
the power and authority to (i) maintain control of and conduct an
orderly meeting; (ii) exclude any shareholder from the meeting
for failing or refusing to comply with any of the procedural
standards or rules or conduct or any reasonable request of the
chairman; and (iii) appoint inspectors of elections, prescribing
their duties, and administer any oath that may be required under
Missouri law.
7. NOTICES. Written or printed notice of each meeting
of the shareholders, whether annual or special, stating the
place, date and time thereof and in case of a special meeting,
the purpose or purposes thereof shall be delivered or mailed to
each shareholder entitled to vote thereat, not less than ten nor
more than fifty days prior to the meeting, unless, as to a
particular matter, other or further notice is required by law, in
which case such other or further notice shall be given. Any
notice of a shareholders' meeting sent by mail shall be deemed to
be delivered when deposited in the United States mail with
postage prepaid thereon, addressed to the shareholder at his
address as it appears on the books of the corporation.
8. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of these bylaws, the Articles of
Incorporation of the corporation, or of any law, a waiver
thereof, if not expressly prohibited by law, in writing signed by
the person or persons entitled to such notice, shall be deemed
the equivalent to the giving of such notice.
9. QUORUM. Except as otherwise may be provided by
law, by the Articles of Incorporation of the corporation or by
these bylaws, the holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or by
proxy, shall be required for and shall constitute a quorum at all
meetings of the shareholders for the transaction of business.
Every decision of a majority in amount of shares of such quorum
shall be valid as a corporate act, except in those specific
instances in which a larger vote is required by law or by the
Articles of Incorporation. If a quorum be not present at any
meeting, the shareholders entitled to vote thereat, present in
person or by proxy, shall have power to adjourn the meeting to a
specified date not longer than 90 days after such adjournment
without notice other than announcement at the meeting, until the
requisite amount of voting shares shall be present. At such
adjourned meeting at which the requisite amount of voting shares
shall be represented any business may be transacted which might
have been transacted at the meeting as originally notified.
10. PROXIES. At any meeting of the shareholders,
every shareholder having the right to vote shall be entitled to
vote in person or by proxy appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than
eleven months prior to said meeting unless said instrument
provides that it shall be valid for a longer period.
<PAGE>
11. VOTING. Each shareholder shall have one vote for
each share of stock having voting power registered in his name on
the books of the corporation and except where the transfer books
of the corporation shall have been closed or a date shall have
been fixed as a record date for the determination of its
shareholders entitled to vote, no share of stock shall be voted
at any election for directors which shall have been transferred
on the books of the corporation within fifty days preceding such
election of directors.
Shareholders shall have no right to vote cumulatively
for the election of directors.
A shareholder holding stock in a fiduciary capacity
shall be entitled to vote the shares so held, and a shareholder
whose stock is pledged shall be entitled to vote unless, in the
transfer by the pledgor on the books of the corporation, he shall
have expressly empowered the pledgee to vote thereon, in which
case only the pledgee or his proxy may represent said stock and
vote thereon.
12. SHAREHOLDERS' LISTS. A complete list of the
shareholders entitled to vote at every election of directors,
arranged in alphabetical order, with the address of and the
number of voting shares held by each shareholder, shall be
prepared by the officer having charge of the stock books of the
corporation and for at least ten days prior to the date of the
election shall be open at the place where the election is to be
held, during the usual hours for business, to the examination of
any shareholder and shall be produced and kept open at the place
of the election during the whole time thereof to the inspection
of any shareholder present. The original or duplicate stock
ledger shall be the only evidence as to who are shareholders
entitled to examine such lists, or the books of the corporation,
or to vote in person or by proxy, at such election. Failure to
comply with the foregoing shall not affect the validity of any
action taken at any such meeting.
13. RECORDS. The corporation shall maintain such
books and records as shall be dictated by good business practice
and by law. The books and records of the corporation may be kept
at any one or more offices of the corporation within or without
the State of Missouri, except that the original or duplicate
stock ledger containing the names and addresses of the
shareholders, and the number of shares held by them, shall be
kept at the registered office of the corporation in Missouri.
Every shareholder shall have a right to examine, in person, or by
agent or attorney, at any reasonable time, for any reasonable
purpose, the bylaws, stock register, books of account, and
records of the proceedings of the shareholders and directors, and
to make copies of or extracts from them.
<PAGE>
DIRECTORS
14. NUMBER AND POWERS OF THE BOARD. The property and
business of this corporation shall be managed by a board of
directors, and the number of directors to constitute the board
shall be not less than nine nor more than fifteen, the exact
number to be fixed by a resolution adopted by the affirmative
vote of a majority of the whole board of directors, but shall be
twelve until and unless so fixed. Directors need not be
shareholders. In addition to the powers and authorities by these
bylaws expressly conferred upon the board of directors, the board
may exercise all such powers of the corporation and do or cause
to be done all such lawful acts and things as are not prohibited,
or required to be exercised or done by the shareholders only.
15. INCUMBENCY OF DIRECTORS. (a) ELECTION AND TERM
OF OFFICE. The directors of the corporation shall be divided
into three classes: Class I, Class II and Class III. Membership
in such classes shall be as nearly equal as possible and any
increase or decrease in the number of directors shall be
apportioned by the board of directors among the classes to
maintain the number of directors in each class as nearly equal as
possible. At each annual meeting of shareholders, directors
shall be elected to succeed those whose terms then expire and to
fill any vacancies and newly created directorships not previously
filled by the board. Newly elected directors shall belong to the
same class as the directors they succeed or, with respect to
newly created directorships, to the respective classes to which
such directorships are assigned by the board of directors. The
term of office of each director shall begin immediately after his
election and, except as set forth in the Articles of
Incorporation as to the terms of office of the initial directors
in each class, the directors in each class shall hold office
until the third succeeding annual meeting of shareholders after
the regular election of directors of that class or until their
successors are elected and qualified and subject to prior death,
resignation, retirement or removal from office of a director. No
decrease in the number of directors constituting the board of
directors shall reduce the term of any incumbent director.
(b) REMOVAL. The entire board of directors of the
corporation may be removed at any time but only by the
affirmative vote of the holders of 80% or more of the outstanding
shares of each class of stock of the corporation entitled to
elect one or more directors at a meeting of the shareholders
called for such purpose.
16. VACANCIES. Any newly created directorship
resulting from an increase in the number of directors, and any
vacancy occurring on the board of directors through death,
resignation, disqualification, disability or any other cause, may
be filled by vote of a majority of the surviving or remaining
directors then in office, although less than a quorum, or by a
sole remaining director. Any director so elected to fill a
vacancy shall hold office for the unexpired portion of the term
of the director whose place shall be vacated and until the
election and qualification of his successor.
<PAGE>
17. MEETINGS OF THE NEWLY ELECTED BOARD OF DIRECTORS -
NOTICE. The first meeting of each newly elected board, which
shall be deemed the annual meeting of the board, shall be held on
the same day as the annual meeting of shareholders, as soon
thereafter as practicable, at such time and place, either within
or without the State of Missouri, as shall be designated by the
president. No notice of such meeting shall be necessary to the
continuing or newly elected directors in order legally to
constitute the meeting, provided that a majority of the whole
board shall be present; or the members of the board may meet at
such place and time as shall be fixed by the consent in writing
of all of the directors.
18. NOTICE. (a) REGULAR MEETINGS. Regular meetings
of the board of directors may be held without notice at such
place or places, within or without the State of Missouri, and at
such time or times, as the board of directors may from time to
time fix by resolution adopted by the whole board. Any business
may be transacted at a regular meeting.
(b) SPECIAL MEETINGS. Special meetings of the board
of directors may be called by the chairman, the president or any
two directors. Notice thereof stating the place, date and hour
of the meeting shall be given to each director either by mail not
less than 48 hours before the date of the meeting, by telephone
or telegram on 24 hours' notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or
appropriate in the circumstances. The place may be within or
without the State of Missouri as designated in the notice. The
"call" and the "notice" of any such meeting shall be deemed
synonymous.
19. QUORUM. At all meetings of the board of directors
a majority of the whole board shall, unless a greater number as
to any particular matter is required by statute, by the Articles
of Incorporation or by these bylaws, constitute a quorum for the
transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall
be the act of the board of directors. Less than a quorum may
adjourn the meeting successively until a quorum is present, and
no notice of adjournment shall be required.
The foregoing provisions relating to a quorum for the
transaction of business shall not be affected by the fact that
one or more of the directors have or may have interests in any
matter to come before a meeting of the board, which interests are
or might be adverse to the interests of this corporation. Any
such interested director or directors shall at all times be
considered as present for the purpose of determining whether or
not a quorum exists, provided such director or directors are in
attendance and do not waive the right to vote.
<PAGE>
20. NOMINATIONS FOR ELECTION AS DIRECTORS. Only
persons who are nominated in accordance with the following
procedures shall be eligible for election as directors.
Nominations of persons for election to the board of directors may
be made at a meeting of shareholders (i) by or at the direction
of the board of directors by any nominating committee or person
appointed by the board or (ii) by any shareholder of the
corporation entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in this
section 20. Such nominations, other than those made by or at the
direction of the board, shall be made pursuant to timely notice
in writing to the secretary.
To be timely, a shareholder's notice shall be delivered
to or mailed and received at the principal executive offices of
the corporation not less than 50 days nor more than 75 days prior
to the meeting; provided, however, that if fewer than 65 days'
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be
timely must be received not later than the close of business on
the 15th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made.
Such shareholder's notice to the secretary shall set forth (a) as
to each person whom the shareholder proposes to nominate for
election or reelection as a director, such person's name, age,
business address, residence address, and principal occupation or
employment, the class and number of shares of capital stock of
the corporation that are beneficially owned by such person, and
any other information relating to such person that is required to
be disclosed in solicitations for proxies for election of
directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended; and (b) as to the shareholder
giving the notice, such shareholder's name and record address and
the class and number of shares of capital stock of the
corporation that are beneficially owned by such shareholder. The
corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the
corporation to determine the eligibility of such proposed nominee
to serve as a director of the corporation. No person shall be
eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth herein.
The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination
was not made in accordance with the foregoing procedure, and if
he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
21. DIRECTORS' ACTION WITHOUT MEETING. If all the
directors severally or collectively consent in writing to any
action to be taken by the directors, such consents shall have the
same force and effect as a unanimous vote of the directors at a
meeting duly held. The secretary shall file such consents with
the minutes of the meetings of the board of directors.
<PAGE>
22. WAIVER. Any notice provided or required to be
given to the directors may be waived in writing by any of them,
whether before, at, or after the time stated therein. Attendance
of a director at any meeting shall constitute a waiver of notice
of such meeting except where he attends for the express purpose
of objecting to the transaction of any business thereat because
the meeting is not lawfully called or convened.
23. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in
the right of the corporation, by reason of the fact that he is or
was a director or officer of the corporation, or is or was
serving at the request of the corporation, as a director or
officer of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
The corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including
attorneys' fees, and amounts paid in settlement actually and
reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the
best interests of the corporation; except that no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which
the action or suit was brought determines upon application that,
despite the adjudication of liability and in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses which the court shall
deem proper.
<PAGE>
To the extent that a director or officer of the
corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in the
first two unnumbered paragraphs of this section 23, or in defense
of any claim, issue or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the action, suit or
proceeding.
Any indemnification under the first two unnumbered
paragraphs of this section 23, unless ordered by a court, shall
be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director or
officer is proper in the circumstances because he has met the
applicable standard of conduct set forth in this section 23. The
determination shall be made by the board of directors by a
majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding, or if such a quorum is
not obtainable, or even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or by the shareholders.
Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in
advance of the final disposition of the action, suit or
proceeding as authorized by the board of directors in the
specific case upon receipt of an undertaking by or on behalf of
the director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by
the corporation as authorized in this section 23.
The indemnification provided by this section 23 shall
not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled either under the Articles
of Incorporation or bylaws or any agreement, vote of shareholders
or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
The corporation shall have the power to give any
further indemnity, in addition to the indemnity authorized or
contemplated under other subsections of this section 23, to any
person who is or was a director or officer or to any person who
is or was serving at the request of the corporation as a director
or officer of another corporation, partnership, joint venture,
trust or other enterprise, provided such further indemnity is
either (i) authorized, directed or provided for in the Articles
of Incorporation of the corporation or any duly adopted amendment
thereof or (ii) authorized, directed or provided for in any bylaw
or agreement of the corporation which has been adopted by a vote
of the shareholders of the corporation, and provided further that
no such indemnity shall indemnify any person from or on account
of such person's conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful
<PAGE>
misconduct. Upon adoption of this bylaw by the shareholders of
the corporation, the corporation may enter into indemnification
agreements with each director who is in office on the date of
such adoption and, by vote of or resolution adopted by a majority
of a quorum of disinterested directors, with each director who is
thereafter elected a director of the corporation. The
corporation may enter into indemnification agreements with each
officer of the corporation whom the board of directors, by vote
of a majority of a quorum of disinterested directors, authorizes
or may, by resolution adopted by a vote of a majority of a quorum
of disinterested directors, authorize indemnification of any
officer to the same extent as provided in such indemnification
agreement, subject to the same exception as provided therein and
such additional exception as may be set forth in such resolution.
Such indemnification agreements shall be substantially in the
form attached as Annex I to the bylaws.
The corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not
the corporation would have the power to indemnify him against
such liability under the provisions of this section 23.
For the purpose of this section 23, references to "the
corporation" include all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director or
officer of such a constituent corporation or is or was serving at
the request of such constituent corporation as a director or
officer of another corporation, partnership, joint venture, trust
or other enterprise shall stand in the same position under the
provisions of this section 23 with respect to the resulting or
surviving corporation as he would if he had served the resulting
or surviving corporation in the same capacity.
For purposes of this section 23, the term "other
enterprise" shall include employee benefit plans; the term
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and the term "serving at the
request of the corporation" shall include any service as a
director or officer of the corporation which imposes duties on,
or involves services by, such director or officer with respect to
an employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section 23.
<PAGE>
24. INTERESTS OF DIRECTORS. In case the corporation
enters into contracts or transacts business with one or more of
its directors, or with any firm of which one or more of its
directors are members or with any other corporation or
association of which one or more of its directors are members,
shareholders, directors or officers, such transaction or
transactions shall not be invalidated or in any way affected by
the fact that such director or directors have or may have
interests therein which are or might be adverse to the interests
of this corporation; provided that such contract or transaction
is entered into in good faith and authorized or ratified on
behalf of this corporation by the board of directors or by a
person or persons (other than the contracting person) having
authority to do so, and if the directors or other person or
persons so authorizing or ratifying shall then be aware of the
interest of such contracting person. In any case in which any
transaction described in this section 24 is under consideration
by the board of directors, the board may, upon the affirmative
vote of a majority of the whole board, exclude from its presence
while its deliberations with respect to such transaction are in
progress any director deemed by such majority to have an interest
in such transaction.
25. COMMITTEES. (a) EXECUTIVE COMMITTEE. The board
of directors may, by resolution or resolutions passed by a
majority of the whole board, designate an executive committee,
such committee to consist of two or more directors of the
corporation, which committee, to the extent provided in said
resolution or resolutions, shall have and may exercise all of the
authority of the board of directors in the management of the
corporation. The executive committee shall keep regular minutes
of its proceedings and the same shall be recorded in the minute
book of the corporation. The secretary or an assistant secretary
of the corporation may act as secretary for the committee if the
committee so requests.
(b) AUDIT COMMITTEE. The corporation shall maintain
an audit committee consisting of at least three directors. No
member of the audit committee shall be an employee of the
corporation. The audit committee shall use reasonable efforts to
effect the establishment and maintenance by the corporation of
adequate financial reporting and audit procedures. The audit
committee shall annually review and confirm management's proposal
for the selection of the corporation's independent public
accounting firm and, following completion of such firm's audit
examination of the corporation's consolidated financial
statements, review with such firm and corporation management,
such matters in connection with the audit as deemed necessary and
desirable by the audit committee. The audit committee shall have
such additional duties, responsibilities, functions and powers as
may be delegated to it by the board of directors of the
corporation. The audit committee shall be empowered to retain,
at the expense of the corporation, independent expert(s) if it
deems this to be necessary.
<PAGE>
(c) OTHER COMMITTEES. The board of directors may
also, by resolution or resolutions passed by a majority of the
whole board, designate other committees, with such persons,
powers and duties as it deems appropriate and as are not
inconsistent with law.
26. COMPENSATION OF DIRECTORS AND COMMITTEE MEMBERS.
By resolution duly adopted by a majority of the board of
directors, directors and members shall be entitled to receive
reasonable annual compensation for services rendered to the
corporation as such, and a fixed sum and expenses of attendance,
if any, may be allowed for attendance at each regular or special
meeting of the board or committee; provided that nothing herein
contained shall be construed to preclude any director or
committee member from serving the corporation in any other
capacity and receiving compensation therefor.
OFFICERS
27. (a) ELECTED OFFICERS. The following officers of
the corporation shall be chosen or appointed by election by the
board of directors, and shall be deemed elected officers: a
president, a secretary, and a treasurer; also, if the board
desires, a chairman of the board, a vice chairman of the board,
one or more vice presidents, one or more assistant secretaries
and one or more assistant treasurers. The chairman of the board
and the vice chairman of the board shall be deemed executive
officers of the corporation, and shall be vested with such
powers, duties, and authority as the board of directors may from
time to time determine and as may be set forth in these bylaws.
Any two or more of such offices may be held by the same
person, except the offices of chairman of the board and vice
chairman of the board, president and vice president, and the
offices of president and secretary.
An elected officer shall be deemed qualified when he
enters upon the duties of the office to which he has been elected
and furnishes any bond required by the board; but the board may
also require of such person his written acceptance and promise
faithfully to discharge the duties of such office.
(b) ELECTION OF OFFICERS. The board of directors at
each annual meeting thereof shall elect a president from among
their own number. They shall also elect at such time a secretary
and a treasurer, who need not be directors. The board then, or
from time to time, may elect a chairman of the board, a vice
chairman of the board and such vice presidents, assistant
secretaries and assistant treasurers as it may deem advisable or
necessary.
(c) TERM OF OFFICE. Each elected officer of the
corporation shall hold his office for the term for which he was
elected, or until he resigns or is removed by the board,
whichever first occurs.
<PAGE>
(d) APPOINTMENT OF OFFICERS AND AGENTS - TERMS OF
OFFICE. The board from time to time may also appoint such other
officers and agents for the corporation as it shall deem
necessary or advisable. All appointed officers and agents shall
hold their respective positions at the pleasure of the board or
for such terms as the board may specify, and they shall exercise
such powers and perform such duties as shall be determined from
time to time by the board, or by an elected officer empowered by
the board to make such determinations.
28. REMOVAL. Any officer or agent elected or
appointed by the board of directors, and any employee, may be
removed or discharged by the board whenever in its judgment the
best interests of the corporation would be served thereby, but
such removal shall be without a prejudice to the contract rights,
if any, of the person so removed.
29. SALARIES AND COMPENSATION. Salaries and
compensation of all elected officers of the corporation shall be
fixed, increased or decreased by the board of directors, but this
power, except as to the salary or compensation of the chairman of
the board, the vice chairman of the board and the president, may,
unless prohibited by law, be delegated by the board to the
chairman of the board, the vice chairman of the board, the
president or a committee. Salaries and compensation of all other
appointed officers, agents, and employees of the corporation may
be fixed, increased or decreased by the board of directors, but
until action is taken with respect thereto by the board of
directors, the same may be fixed, increased or decreased by the
chairman of the board, by the president or by such other officer
or officers as may be empowered by the board of directors to do
so.
30. DELEGATION OF AUTHORITY TO HIRE, DISCHARGE, ETC.
The board from time to time may delegate to the chairman of the
board, the vice chairman of the board, the president or other
officer or executive employee of the corporation, authority to
hire, discharge, and fix and modify the duties, salary or other
compensation of employees of the corporation under their
jurisdiction, and the board may delegate to such officer or
executive employee similar authority with respect to obtaining
and retaining for the corporation the services of attorneys,
accountants and other experts.
31. THE CHAIRMAN OF THE BOARD, THE VICE CHAIRMAN OF
THE BOARD AND THE PRESIDENT. The chairman of the board or the
president shall be elected by the board of directors to be the
chief executive officer of the corporation and the chief
executive officer shall have general and active management of the
business of the corporation and shall carry into effect all
directions and resolutions of the board. The chairman of the
board, the vice chairman of the board and the president shall be
vested with such powers, duties, and authority as the board of
directors may from time to time determine and as may be set forth
in these bylaws. Except as otherwise provided for in these
bylaws, the chairman of the board, or in his absence the
president, shall preside at all meetings of the shareholders of
the corporation and at all meetings of the board of directors.
<PAGE>
The chairman of the board, vice chairman of the board
or president may execute all bonds, notes, debentures, mortgages,
and other contracts requiring a seal, under the seal of the
corporation and may cause the seal to be affixed thereto, and all
other instruments for and in the name of the corporation, except
that if by law such instruments are required to be executed only
by the president, he shall execute them.
The chairman of the board, vice chairman of the board
or president, when authorized so to do by the board, may execute
powers of attorney from, for, and in the name of the corporation,
to such proper person or persons as he may deem fit, in order
that thereby the business of the corporation may be furthered or
action taken as may be deemed by him necessary or advisable in
furtherance of the interests of the corporation.
The chairman of the board, vice chairman of the board
or president, except as may be otherwise directed by the board,
shall attend meetings of shareholders of other corporations to
represent this corporation thereat and to vote or take action
with respect to the shares of any such corporation owned by this
corporation in such manner as he shall deem to be for the
interests of the corporation or as may be directed by the board.
The chief executive officer shall, unless the board
otherwise provides, be an ex officio member of all standing board
committees.
The chairman of the board, vice chairman of the board
or president shall have such other or further duties and
authority as may be prescribed elsewhere in these bylaws or from
time to time by the board of directors.
32. VICE PRESIDENTS. The vice presidents in the order
of their seniority shall, in the absence, disability or inability
to act of the chairman of the board, the vice chairman of the
board and the president, perform the duties and exercise the
powers of the chairman of the board, the vice chairman of the
board and the president, and shall perform such other duties as
the board of directors shall from time to time prescribe.
33. THE SECRETARY AND ASSISTANT SECRETARIES. The
secretary shall attend all sessions of the board and except as
otherwise provided for in these bylaws, all meetings of the
shareholders, and shall record or cause to be recorded all votes
taken and the minutes of all proceedings in a minute book of the
corporation to be kept for that purpose. He shall perform like
duties for the executive and other standing committees when
requested by the board or such committee to do so.
His shall be the principal responsibility to give, or
cause to be given, notice of all meetings of the shareholders and
of the board of directors, but this shall not lessen the
authority of others to give such notice as is authorized
elsewhere in these bylaws.
<PAGE>
He shall see that all books, records, lists and
information, or duplicates, required to be maintained at the
registered or home office of the corporation in Missouri, or
elsewhere, are so maintained.
He shall keep in safe custody the seal of the
corporation, and when duly authorized to do so shall affix the
same to any instrument requiring it, and when so affixed, he
shall attest the same by his signature.
He shall perform such other duties and have such other
authority as may be prescribed elsewhere in these bylaws or from
time to time by the board of directors, the chairman of the board
or the president, under whose direct supervision he shall be.
He shall have the general duties, powers and
responsibilities of a secretary of a corporation.
The assistant secretaries, in the order of their
seniority, in the absence, disability or inability to act of the
secretary, shall perform the duties and exercise the powers of
the secretary, and shall perform such other duties as the board
may from time to time prescribe.
34. THE TREASURER AND ASSISTANT TREASURERS. The
treasurer shall have the responsibility for the safekeeping of
the funds and securities of the corporation, and shall keep or
cause to be kept, full and accurate accounts of receipts and
disbursements in books belonging to the corporation. He shall
keep, or cause to be kept, all other books of account and
accounting records of the corporation, and shall deposit or cause
to be deposited all monies and other valuable effects in the name
and to the credit of the corporation in such depositories as may
be designated by the board of directors.
He shall disburse, or permit to be disbursed, the funds
of the corporation as may be ordered, or authorized generally, by
the board, and shall render to the chief executive officers of
the corporation and the directors whenever they may require it,
an account of all his transactions as treasurer and of those
under his jurisdiction, and of the financial condition of the
corporation.
He shall perform such other duties and shall have such
other responsibility and authority as may be prescribed elsewhere
in these bylaws or from time to time by the board of directors.
He shall have the general duties, powers and
responsibility of a treasurer of a corporation, and shall be the
chief financial and accounting officer of the corporation.
The assistant treasurers in the order of their
seniority shall, in the absence, disability or inability to act
of the treasurer, perform the duties and exercise the powers of
the treasurer, and shall perform such other duties as the board
of directors shall from time to time prescribe.
<PAGE>
35. DUTIES OF OFFICERS MAY BE DELEGATED. If any
officer of the corporation be absent or unable to act, or for any
other reason that the board may deem sufficient, the board may
delegate, for the time being, some or all of the functions,
duties, powers and responsibilities of any officer to any other
officer, or to any other agent or employee of the corporation or
other responsible person, provided a majority of the whole board
concurs therein.
SHARES OF STOCK
36. CERTIFICATES OF STOCK. The certificates for
shares of stock of the corporation shall be numbered, shall be in
such form as may be prescribed by the board of directors in
conformity with law, and shall be entered into the stock books of
the corporation as they are issued, and such entries shall show
the name and address of the person, firm, partnership,
corporation or association to whom each certificate is issued.
Each certificate shall have printed, typed or written thereon the
name of the person, firm, partnership, corporation or association
to whom it is issued, and number of shares represented thereby
and shall be signed by the president or a vice president, and the
treasurer or an assistant treasurer or the secretary or an
assistant secretary of the corporation, and sealed with the seal
of the corporation, which seal may be facsimile, engraved or
printed. If the corporation has a registrar, a transfer agent,
or a transfer clerk who actually signs such certificates, the
signatures of any of the other officers above mentioned may be
facsimile, engraved or printed. In case any such officer who has
signed or whose facsimile signature has been placed upon any such
certificate shall have ceased to be such officer before such
certificate is issued, such certificate may nevertheless be
issued by the corporation with the same effect as if such officer
were an officer at the date of its issue.
37. TRANSFERS OF SHARES - TRANSFER AGENT - REGISTRAR.
Transfers of shares of stock shall be made on the books of the
corporation only by the person named in the stock certificate or
by his attorney lawfully constituted in writing, and upon
surrender of the certificate therefor. The stock record books
and other transfer records shall be in the possession of the
secretary or of a transfer agent or clerk of the corporation.
The corporation by resolution of the board may from time to time
appoint a transfer agent and if desired a registrar, under such
arrangements and upon such terms and conditions as the board of
directors deems advisable; but until and unless the board
appoints some other person, firm, or corporation as its transfer
agent (and upon the revocation of any such appointment,
thereafter until a new appointment is similarly made) the
secretary shall be the transfer agent or clerk of the
corporation, without the necessity of any formal action of the
board of directors and the secretary shall perform all of the
duties thereof.
<PAGE>
38. LOST CERTIFICATE. In the case of the loss or
destruction of any outstanding certificate for shares of stock of
the corporation, the corporation may issue a duplicate
certificate (plainly marked "duplicate"), in its place, provided
the registered owner thereof or his legal representatives furnish
due proof of loss thereof by affidavit, and (if required by the
board of directors, in its discretion) furnish a bond in such
amount and form and with such surety as may be prescribed by the
board. In addition, the board of directors may make any other
requirements which it deems advisable.
39. CLOSING OF TRANSFER BOOKS. The board of directors
shall have power to close the stock transfer books of the
corporation for a period not exceeding fifty days preceding the
date of any meeting of the shareholders, or the date for payment
of any dividend, or the date for the allotment of rights, or any
effective date or change or conversion or exchange of capital
stock; provided, however, that in lieu of closing the stock
transfer books as aforesaid, the board of directors may fix in
advance a date, not exceeding fifty days preceding the effective
date of any of the above enumerated transactions, as a record
date; and in either case such shareholders and only such
shareholders as shall be shareholders of record on the date of
closing the transfer books, or on the record date so fixed, shall
be entitled to receive notice of any such transaction or to
participate in any such transactions notwithstanding any transfer
of any share on the books of the corporation after the date of
closing the transfer books or such record date so fixed.
GENERAL
40. DIVIDENDS. Dividends upon the shares of stock of
the corporation, subject to any applicable provisions of the
Articles of Incorporation and of any applicable laws or statutes
may be declared by the board of directors at any regular or
special meeting. Dividends may be paid in cash, in property or
in shares of its stock and to the extent and in the manner
provided by law out of any available earned surplus or earnings
of the corporation. Liquidating dividends or dividends
representing a distribution of paid-in surplus or a return of
capital shall be made only when and in the manner permitted by
law.
41. CREATION OF RESERVES. Before the payment of any
dividends, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the board
of directors from time to time, in their absolute discretion,
think proper as a reserve fund or funds, to meet contingencies,
or for equalizing dividends, or for repairing, or maintaining any
property of the corporation, or for such other purposes as the
board of directors shall think conducive to the interests of the
corporation, and the board of directors may abolish any such
reserve in the manner in which it was created.
<PAGE>
42. FIXING OF CAPITAL, TRANSFERS OF SURPLUS. Except
as may be specifically otherwise provided in the Articles of
Incorporation, the board of directors is expressly empowered to
exercise all authority conferred upon it or the corporation by
any law or statute, and in conformity therewith, relative to:
(i) The determination of what part of
the consideration received for shares of the
corporation shall be capital;
(ii) Increasing or reducing capital;
(iii) Transferring surplus to capital
or capital to surplus;
(iv) Allocating capital to shares of a
particular class of stock;
(v) The consideration to be received by
the corporation for its shares; and
(vi) All similar or related matters;
provided that any concurrent action or consent by or of the
corporation and its shareholders required to be taken or given
pursuant to law, shall be duly taken or given in connection
therewith.
43. CHECKS, NOTES AND MORTGAGES. All checks, drafts,
or other instruments for the payment, disbursement, or transfer
of monies or funds of the corporation may be signed in its behalf
by the treasurer of the corporation, unless otherwise provided by
the board of directors. All notes of the corporation and any
mortgages or other forms of security given to secure the payment
of the same may be signed by the president who may cause to be
affixed the corporate seal attested by the secretary or assistant
secretary. The board of directors by resolution adopted by a
majority of the whole board from time to time may authorize any
officer or officers or other responsible person or persons to
execute any of the foregoing instruments for and in behalf of the
corporation.
44. FISCAL YEAR. The board of directors may fix and
from time to time change the fiscal year of the corporation. In
the absence of action by the board of directors, the fiscal year
shall end each year on the same date which the officers of the
corporation elect for the close of its first fiscal period.
45. TRANSACTIONS WITH RELATED PERSONS. The
affirmative vote of not less than 80% of the outstanding shares
of the corporation entitled to vote in an election of directors
shall be required for the approval or authorization of any
business transaction with a related person as set forth in the
Articles of Incorporation in the manner provided therein.
<PAGE>
46. DIRECTOR'S DUTIES; CONSIDERATION OF TENDER OFFERS.
The board of directors shall have broad discretion and authority
in considering and evaluating tender offers for the stock of this
corporation. Directors shall not be liable for breach of their
fiduciary duty to the shareholders merely because the board votes
to accept an offer that is not the highest price per share,
provided, that the directors act in good faith in considering
collateral nonprice factors and the impact on constituencies
other than the shareholders (i.e., effect on employees, corporate
existence, corporate creditors, the community, etc.) and do not
act in willful disregard of their duties to the shareholders or
with a purpose, direct or indirect, to perpetuate themselves in
office as directors of the corporation.
47. AMENDMENT OF BYLAWS. (a) BY DIRECTORS. The
board of directors may make, alter, amend, change, add to or
repeal these bylaws, or any provision thereof, at any time.
(b) BY SHAREHOLDERS. These bylaws may be amended,
modified, altered, or repealed by the shareholders, in whole or
in part, only at the annual meeting of shareholders or at the
special meeting of shareholders called for such purpose, only
upon the affirmative vote of the holders of not less than 80% of
the outstanding shares of stock of this corporation entitled to
vote generally in the election of directors, provided that an
affirmative vote of a majority of the votes entitled to be cast
shall be sufficient to approve any such amendment, modification,
alteration or repeal that has been adopted by a vote of 80% of
the members of the board of directors.
<PAGE>
ANNEX I
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made this day of ,
------ ---------------
1986, between H & R Block, Inc., a Missouri corporation (the
"Company"), and (the "Director").
--------------------------
WITNESSETH THAT:
WHEREAS, the Director is a member of the Board of
Directors of the Company and in such capacity is performing a
valuable service for the Company; and
WHEREAS, under the authority of Section 351.355 of the
Missouri Revised Statutes of 1978, as amended to date (the "State
Statute"), bylaws have been adopted that provide for the
indemnification of the officers, directors, agents and employees
of the Company to a greater extent than provided for by
Subsections 1 through 3 of such State Statute; and
WHEREAS, the bylaws of the Company and the State
Statute specifically provide that they are not exclusive, and
thereby contemplate that contracts may be entered into between
the Company and the members of its Board of Directors with
respect to indemnification of such directors; and
WHEREAS, in accordance with the authorization provided
by Subsection 7 of the State Statute, the Company has purchased
and presently maintains a policy or policies of Directors or
Officers Liability Insurance ("D & O Insurance"), covering
certain liabilities that may be incurred by its directors and
officers in the performance of their services for the Company;
and
WHEREAS, recent developments with respect to the terms
and availability of D & O Insurance and with respect to the
application, amendment and enforcement of statutory and bylaw
indemnification provisions generally have raised questions
concerning the adequacy and reliability of the protection
afforded to directors thereby; and
WHEREAS, in order to resolve such questions and thereby
induce the Director to serve and continue to serve as a member of
the Board of Directors of the Company, the Company has determined
and agreed to enter into this Agreement with the Director;
NOW, THEREFORE, in consideration of the Director's
service and continued service as a director of the Company after
the date hereof, the parties hereto agree as follows:
<PAGE>
1. INDEMNITY OF THE DIRECTOR. Subject only to the
exclusions set forth in Section 3 hereof, the Company hereby
agrees as follows:
(a) To hold harmless and indemnify the Director
against any and all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by the Director in connection with any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(including an action by or in the right of the Company or any
action accruing prior to the execution of the Agreement) to which
the Director is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that the
Director is, was or at any time becomes a director, officer,
employee or agent of the Company, or is or was serving or at any
time serves at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; and
(b) Otherwise to hold harmless and indemnify the
Director to the fullest extent as may be provided to the Director
by the Company under the nonexclusivity provisions of Section
23 of the Bylaws and Subsection 6 of the State Statute.
(c) To pay the Director, or such person or entity as
the Director may designate, on a continuing and current basis
(and in any event not later than ten business days following
receipt by the Company of the Director's request for
reimbursement) all expenses (including attorneys' fees), costs,
fines, etc., incurred by or levied upon the Director in
connection with any action, suit or proceeding that may be
indemnifiable under the provisions of this Agreement.
2. MAINTENANCE OF INSURANCE AND SELF INSURANCE. (a)
The Company represents that it presently has in force and effect
policies of D & O Insurance with insurance companies and in
amounts as follows (the "Insurance Policies"):
INSURER AMOUNT COMPANY CONTRIBUTION
------------- ----------- --------------------
National Union $10,000,000 $500,000
Unless notification is given to the Director pursuant to the
provisions of Section 2(b) hereof, the Company hereby agrees
that, so long as the Director continues to serve as a director of
the Company (or shall continue at the request of the Company to
serve as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise) and thereafter so long as the Director is subject to
any possible claim or threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative by
reason of the fact that the Director was a director of the
Company (or served in any of said other capacities), the Company
will purchase and maintain in effect for the benefit of the
<PAGE>
Director one or more valid, binding and enforceable policy or
policies of D & O Insurance providing, in all respects, coverage
at least comparable to that presently provided pursuant to the
Insurance Policies. For purposes of this Agreement, any policy
or policies of D & O Insurance purchased to maintain such
coverage shall be deemed to be the Insurance Policies.
(b) The Company shall not be required to maintain said
Insurance Policies in effect, provided, however, that the Company
notifies the Director in writing within five business days after
the making of the decision to not renew or replace the Insurance
Policies, or any portion of the coverage previously provided by
the Insurance Policies.
(c) The maintenance of such insurance shall not
diminish, relieve or replace the Company's liability for
indemnification under the provisions of the State Statute, the
Company's bylaws (the "Bylaws") or this Agreement. The
Director's claim for reimbursement in advance of final
disposition of an action, suit or proceeding of expenses which
may be indemnifiable under the provisions of the State Statute,
Bylaws or this Agreement and payable in advance of final
disposition of an action pursuant to Subsection 6 of the State
Statute, Section 23 of the Bylaws, or Section 1(c) of this
Agreement shall not be denied on the basis that such amount may
or will be covered by the Insurance Policies, if such payments
from the insurance company will not be made to the Director
within ten business days of such Director's claim for
reimbursement.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. The Company
shall be entitled to reimbursement from the Director for all
monies paid to him or her as indemnification pursuant to this
Agreement under the following circumstances:
(a) to the extent of any costs or expenses the
Director is actually reimbursed pursuant to any Insurance
Policies purchased and maintained by the Company pursuant to
Section 2 hereof;
(b) if it is determined by a final judgment or other
final adjudication by a court of competent jurisdiction
considering the question of indemnification of the Director that
such payment of indemnification is or would be in violation of
applicable law;
(c) on account of any suit in which judgment is
rendered against the Director for an accounting of profits made
from the purchase and sale or sale and purchase by the Director
of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto;
(d) if the Director's conduct is finally adjudged by a
court of competent jurisdiction to have been knowingly
fraudulent, deliberately dishonest or to constitute willful
misconduct; or
<PAGE>
(e) if it is finally determined by a court of
competent jurisdiction considering the question that the
Director's decision to employ independent legal counsel, pursuant
to Section 5(b)(ii) hereof, was not based on a "reasonable"
conclusion that there was a conflict of interest between the
Company and the Director.
4. CONTINUATION OF INDEMNITY. All agreements and
obligations of the Company contained herein shall continue during
the period the Director is a director, officer, employee or agent
of the Company (or is or was serving at the request of the
Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise) and shall continue thereafter so long as the Director
is subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that the Director was a
director of the Company or serving in any other capacity referred
to herein.
5. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after
receipt by the Director of notice of the commencement of any
action, suit or proceeding, the Director will, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof; the
failure to promptly notify the Company will not relieve the
Company from any liability that it may have to the Director
hereunder, except to the extent the Company is prejudiced in its
defense of such claim as a result of such failure. Unless
otherwise requested by the Board, written notification shall not
be necessary if the Director informs a majority of the Board of
the commencement of any such action, or, independent of such
notification by the Director, a majority of the Board has reason
to believe such action has been initiated or threatened. With
respect to any such action, suit or proceeding as to which the
Director notifies (or is deemed to have notified) the Company of
the commencement thereof:
(a) The Company will be entitled to participate
therein at its own expense;
(b) Except as otherwise provided below, to the extent
that it may wish, the Company, jointly with any other
indemnifying party similarly notified, will be entitled to assume
the defense thereof with counsel reasonably satisfactory to the
Director. Subject to the provision below, after notice from the
Company to the Director of its election so to assume the defense
thereof, the Company will not be liable to the Director under
this Agreement for any legal or other expenses subsequently
incurred by the Director in connection with the defense thereof
other than reasonable costs of investigation or as otherwise
provided below. The Director shall have the right to employ his
or her own counsel in such action, suit or proceeding, but the
fees and expenses of such counsel incurred after notice from the
Company of its assumption of the defense thereof shall be at the
expense of the Director unless (i) the employment of counsel by
<PAGE>
the Director has been authorized by the Company, (ii) the
Director reasonably concludes that there may be a conflict of
interest between the Company and the Director in the conduct of
the defense of such action and that such conflict may lead to
exposure for the director not otherwise indemnifiable under the
provisions of this Agreement and notifies the Company of such
conclusion and decision to employ separate counsel, or (iii) the
Company fails to employ counsel to assume the defense of such
action, in each case the fees and expenses of counsel shall be at
the expense of the Company. The Company shall not be entitled to
assume the defense of any action, suit or proceeding brought by
or on behalf of the Company or as to which the Director
reasonably makes the conclusion provided for in (ii) above; and
(c) The Company shall not be liable to indemnify the
Director under this Agreement for any amounts paid in settlement
of any action or claim effected without its written consent. The
company shall not settle any action or claim in any manner which
would impose any penalty or limitation on the Director without
the Director's written consent. Neither the Company nor the
Director will unreasonably withhold their consent to any proposed
settlement.
6. REPAYMENT OF EXPENSES. The Director agrees that he
or she will reimburse the Company for all reasonable expenses
paid by the Company in defending any civil or criminal action,
suit or proceeding against him or her in the event and only to
the extent that it is ultimately determined by a court of
competent jurisdiction considering the question that the Director
is not entitled to be indemnified by the Company for such
expenses under the provisions of the State Statute, the Bylaws,
this Agreement or otherwise.
7. ENFORCEMENT. (a) The Company expressly confirms
and agrees that it has entered into this Agreement and assumed
the obligations imposed on the Company hereby in order to induce
the Director to continue as a director of the Company, and
acknowledges that the Director is relying upon this Agreement in
continuing in such capacity.
(b) In the event the Director is required to bring any
action to enforce rights or to collect monies due under this
Agreement and is successful in such action, the Company shall
reimburse the Director for all of the Director's reasonable fees
and expenses (including attorney's fees) in bringing and pursuing
such action.
8. SEPARABILITY. Each of the provisions of this
Agreement is a separate and distinct agreement and independent of
the others, so that if any provision hereof shall be held to be
invalid or unenforceable for any reason, such invalidity of
unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
<PAGE>
9. MISCELLANEOUS. (a) This Agreement shall be
interpreted and enforced in accordance with the laws of the State
of Missouri.
(b) This Agreement shall be binding upon the Director
and upon the Company, its successors and assigns, and shall inure
to the benefit of the Director, his or her heirs, personal
representatives and assigns and to the benefit of the Company,
its successors and assigns.
(c) No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on and as of the day and year first above written.
H & R BLOCK, INC.
By
----------------------
By
----------------------
-----------------, the
Director
<PAGE>
Exhibit 4(b)
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT ("Amendment") to Rights Agreement dated
as of May 9, 1990 between H & R Block, Inc. a Missouri
corporation (the "Company"), and Boatmen's Trust Company
(formerly Centerre Trust Company of St. Louis) (the "Rights
Agent").
PREMISES
A. The Company and the Rights Agent have previously
executed and delivered a Rights Agreement dated July 14, 1988
(the "Rights Agreement").
B. The Company now wishes to amend certain provisions
of the Rights Agreement as provided herein.
AGREEMENTS
In consideration of the premises and the mutual
agreements set forth in the Rights Agreement and this Amendment,
the Company and the Rights Agent hereby agree as follows:
1. Section 1(a) of the Rights Agreement is hereby
amended by deleting the percentage "20%" each time such
percentage is used in such Section and substituting in place
thereof the percentage "10%".
2. Section 3(a) of the Rights Agreement is hereby
amended by deleting the words "tenth day" on the third line of
such Section and substituting in place thereof the words "tenth
Business Day".
3. Section 23(a) of the Rights Agreement is hereby
amended by adding the following sentence at the end of such
Section:
"The Company may, at its option, pay the Redemption
Price in cash, shares of Common Stock (based on the
"current market price", as defined in Section 11(f)
hereof, of the Common Stock at the time of redemption)
or any other form of consideration deemed appropriate by
the Board of Directors."
4. The Rights Agreement is hereby amended by
renumbering Sections 24 through 32 as Sections 25 through 33 and
by adding the following new Section 24:
"Section 24. EXCHANGE. (a) The Board of Directors
of the Company may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant
to the provisions of Section 7(e) hereof) for Common
<PAGE>
Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring
after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of
the Company or any such Subsidiary, or any entity
holding Common Stock for or pursuant to the terms of any
such plan), together with all Affiliates and Associates
of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any
Rights pursuant to paragraph (a) of this Section 24 and
without any further action and without any notice, the
right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall
be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange;
PROVIDED, HOWEVER, that the failure to give, or any
defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by
which the exchange of the Common Stock for Rights will
be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become
void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24,
the Company, at its option, may substitute common stock
equivalents (as such term is defined in Section 11(c)
hereof) for some or all of the Common Stock exchangeable
for Rights.
(d) In the event that there shall not be sufficient
Common Stock or common stock equivalents available to
permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall take
all such action as may be necessary to authorize
additional Common Stock or common stock equivalents for
issuance upon exchange of the Rights.
<PAGE>
(e) The Company shall not be required to issue
fractions of shares of Common Stock or to distribute
certificates which evidence fractional shares of Common
Stock. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders
of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be
issuable an amount in cash equal to the same fraction of
the current market value of a whole share of Common
Stock. For the purposes of this paragraph (e), the
current market value of a whole share of Common Stock
shall be the closing price of a share of Common Stock
(as determined pursuant to the second sentence of
Section 11(f)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section
24."
5. Section 29 of the Rights Agreement (Section 30
giving effect to the amendment set forth in Section 4 hereof) is
hereby amended by adding the following sentence at the end of
such Section:
"Without limiting the foregoing, if any provision
requiring that a determination be made by less than the
entire Board of Directors (or at a time or with the
concurrence of a group of directors consisting of less
than the entire Board of Directors) is held by a court
of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall
then be made by the Board of Directors in accordance
with applicable law and the Company's Articles of
Incorporation and Bylaws."
6. The Rights Agreement is hereby amended by
substituting the new Exhibit B attached hereto as Exhibit 1 in
place of the Exhibit B attached to the original Rights Agreement.
7. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same
instrument. Terms not defined herein shall, unless the context
otherwise requires, have the meanings assigned to such terms in
the Rights Agreement.
8. If any provision of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the provisions of this
Amendment and the Rights Agreement shall remain in full force and
effect and shall not be affected, impaired or invalidated
thereby, and the provisions of the Rights Agreement amended by
the provisions of this Amendment which were so held to be
invalid, void or unenforceable shall, without further deed or
action, be reinstated as part of the Rights Agreement and shall
be in full force and effect as if such invalidated, voided or
unenforceable provisions had never been effected by this
Amendment.
<PAGE>
9. Except as expressly set forth in this Amendment, the
Rights Agreement shall remain in full force and effect and shall
otherwise be unaffected hereby. This Amendment shall be
effective immediately as of the date and year first above
written.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the date
and year first above written.
H & R BLOCK, INC.
By /s/ Donald W. Ayers
--------------------------
Donald W. Ayers
Attest:
By /s/ William T. Ross
---------------------
William T. Ross
Secretary
BOATMEN'S TRUST COMPANY
By /s/ H. E. Bradford
--------------------------
H. E. Bradford
Attest:
By /s/
----------------------
Assistant Secretary
<PAGE>
Exhibit 4(c)
SECOND AMENDMENT TO RIGHTS AGREEMENT
THIS SECOND AMENDMENT TO RIGHTS AGREEMENT ("Amendment")
dated September 11, 1991 between H & R Block, Inc. a Missouri
corporation (the "Company"), and Boatmen's Trust Company
(formerly Centerre Trust Company of St. Louis) (the "Rights
Agent").
PREMISES
A. The Company and the Rights Agent have previously
executed and delivered a Rights Agreement dated July 14, 1988
(the "Rights Agreement"), and an Amendment to Rights Agreement
dated as of May 9, 1990.
B. Section 26 of the Rights Agreement provides that the
Company may from time to time supplement or amend the Rights
Agreement in order to cure any ambiguity contained therein.
C. The Company now wishes to amend certain provisions
of the Rights Agreement as provided herein in order to clarify
certain adjustments to be made as a result of a stock split
involving the Company's common stock.
AGREEMENTS
In consideration of the premises and the mutual
agreements set forth in the Rights Agreement and this Amendment,
the Company and the Rights Agent hereby agree as follows:
1. Section 11(p) of the Rights Agreement is hereby
amended by adding the following clause (z) at the end of the
first sentence of such Section:
"and (z) the Purchase Price in effect at the time
of the record date for such dividend or of the effective
date of such subdivision, combination or consolidation
shall be proportionately adjusted by multiplying such
Purchase Price by the fraction described in clause (x)
above."
2. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same
instrument. Terms not defined herein shall, unless the context
otherwise requires, have the meanings assigned to such terms in
the Rights Agreement.
3. If any provision of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the provisions of this
Amendment and the Rights Agreement shall remain in full force and
effect and shall not be affected, impaired or invalidated
thereby, and the provisions of the Rights Agreement amended by
<PAGE>
the provisions of this Amendment which were so held to be
invalid, void or unenforceable shall, without further deed or
action, be reinstated as part of the Rights Agreement and shall
be in full force and effect as if such invalidated, voided or
unenforceable provisions had never been effected by this
Amendment.
4. Except as expressly set forth in this Amendment, the
Rights Amendment shall remain in full force and effect and shall
otherwise be unaffected hereby. This Amendment shall be
effective immediately as of the date and year first above
written.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the date
and year first above written.
H & R BLOCK, INC.
By /s/ Henry W. Bloch
--------------------------
Henry W. Bloch
Attest:
By /s/ James H. Ingraham
-----------------------
James H. Ingraham
Secretary
BOATMEN'S TRUST COMPANY
By /s/ H. E. Bradford
--------------------------
H. E. Bradford
Attest:
By /s/
----------------------
Assistant Secretary
<PAGE>
Exhibit 4(d)
THIRD AMENDMENT TO RIGHTS AGREEMENT
THIS THIRD AMENDMENT ("Amendment") TO RIGHTS AGREEMENT
dated May 10, 1995 between H & R Block, Inc. a Missouri
corporation (the "Company"), and Boatmen's Trust Company
(formerly Centerre Trust Company of St. Louis) (the "Rights
Agent").
PREMISES
A. The Company and the Rights Agent have previously
executed and delivered a Rights Agreement dated July 14, 1988, an
Amendment to Rights Agreement dated May 9, 1990, and an Amendment
to Rights Agreement dated September 11, 1991 (as amended, the
"Rights Agreement").
B. The Company now wishes to further amend certain
provisions of the Rights Agreement as provided herein.
AGREEMENTS
In consideration of the premises and the mutual
agreements set forth in the Rights Agreement and this Amendment,
the Company and the Rights Agent hereby agree as follows:
1. Section 1(b) of the Rights Agreement is hereby
amended by adding the following sentence at the end of such
Section:
"Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that a
Person who would otherwise be an "Acquiring Person" as
defined pursuant hereto has become such inadvertently
and without any intention of changing or influencing
control of the Company, and such Person divests as
promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an
"Acquiring Person" as defined pursuant hereto, then such
Person shall not be deemed an "Acquiring Person" for any
purposes of this Agreement."
2. Section 1(c) of the Rights Agreement is hereby
amended by deleting subsection (i) in its entirety and
substituting in place thereof the following subsection (i):
"(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly,
beneficially owns as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange
Act as in effect on the date hereof."
<PAGE>
3. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same
instrument. Terms not defined herein shall, unless the context
otherwise requires, have the meanings assigned to such terms in
the Rights Agreement.
4. If any provision of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the provisions of this
Amendment and the Rights Agreement shall remain in full force and
effect and shall not be affected, impaired or invalidated
thereby, and the provisions of the Rights Agreement amended by
the provisions of this Amendment which were so held to be
invalid, void or unenforceable shall, without further deed or
action, be reinstated as part of the Rights Agreement and shall
be in full force and effect as if such invalidated, voided or
unenforceable provisions had never been effected by this
Amendment.
5. Except as expressly set forth in this Amendment, the
Rights Agreement shall remain in full force and effect and shall
otherwise be unaffected hereby. This Amendment shall be
effective immediately as of the date and year first above
written.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and attested, all as of the date
and year first above written.
H & R BLOCK, INC.
By /s/ Thomas M. Bloch
--------------------------
Thomas M. Bloch
Attest:
By /s/ James H. Ingraham
-----------------------
James H. Ingraham
Secretary
BOATMEN'S TRUST COMPANY
By /s/ H. E. Bradford
--------------------------
H. E. Bradford
Attest:
By /s/
----------------------
Assistant Secretary
<PAGE>
Exhibit 4(e)
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF PARTICIPATING PREFERRED STOCK
of
H & R BLOCK, INC.
I, Henry W. Bloch, the President of H & R Block, Inc., a
corporation organized and existing under The General and Business
Corporation Law of the State of Missouri, in accordance with the
provisions of Section 351.180.7 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board
of Directors by the Articles of Incorporation, as amended, of the
Company, the said Board of Directors on July 14, 1988, adopted
the following resolution creating a series of six hundred
thousand (600,000) shares of voting Preferred Stock designated as
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the
Board of Directors of the Company in accordance with the
provisions of its Articles of Incorporation, as amended, a series
of voting Preferred Stock of the Company be and it is hereby
created, and that the designation and amount thereof and the
powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as
follows:
Section 1. DESIGNATION AND AMOUNT. There shall be a
series of the voting preferred stock of the Company which shall
be designated as "Participating Preferred Stock," without par
value, and the number of shares constituting such series shall be
600,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Participating Preferred
Stock to a number less than that of the shares then outstanding
plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding
securities issued by the Company.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares
of any series of preferred stock of the Company ranking prior and
superior to the Participating Preferred Stock with respect to
dividends, the holders of shares of Participating Preferred
Stock, in preference to the holders of shares of Common Stock,
without par value (the "Common Stock"), of the Company and of any
other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available
for the purpose, quarterly dividends payable in cash on the first
<PAGE>
day of January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of
Participating Preferred Stock, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for adjustment hereinafter set forth,
100 times the aggregate per share amount of all cash dividends
and 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Participating Preferred
Stock. In the event the Company shall at any time after July 25,
1988 (the "Rights Declaration Date") declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Participating
Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
(b) The Company shall declare a dividend or
distribution on the Participating Preferred Stock as provided in
paragraph (a) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $1.00 per share on the Participating
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative
on outstanding shares of Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue
of such shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Participating
Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid
<PAGE>
dividends shall not bear interest. Dividends paid on the shares
of Participating Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders
of shares of Participating Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which
record date shall be not more than sixty days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of
Participating Preferred Stock shall have the following voting
rights:
(a) Each share of Participating Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submitted
to a vote of the stockholders of the Company.
(b) Except as otherwise provided herein, in the
Company's Articles of Incorporation or by law, the holders of
shares of Participating Preferred Stock, the holders of shares of
Common Stock, and the holders of shares of any other capital
stock of the Company having general voting rights, shall vote
together as one class on all matters submitted to a vote of
stockholders of the Company.
(c) Except as otherwise set forth herein or in the
Company's Articles of Incorporation, and except as otherwise
provided by law, holders of Participating Preferred Stock shall
have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not
declared, on shares of Participating Preferred Stock outstanding
shall have been paid in full, the Company shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Participating
Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution
or winding up) with the Participating Preferred Stock,
except dividends paid ratably on the Participating
<PAGE>
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares
are then entitled;
(iii) except as permitted in Section 4(a)(iv)
below, redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution
or winding up) with the Participating Preferred Stock,
provided that the Company may at any time redeem,
purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Company
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Participating Preferred
Stock, or any shares of stock ranking on a parity with
the Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of
Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment
among the respective series or classes.
(b) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under
paragraph (a) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of
Participating Preferred Stock purchased or otherwise acquired by
the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. The Company
shall cause all such shares upon their cancellation to be
authorized but unissued shares of Preferred Stock which may be
reissued as part of a new series of Preferred Stock to be created
by resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Company, no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the
Participating Preferred Stock unless, prior thereto, the holders
of shares of Participating Preferred Stock shall have received
per share, the greater of $100.00 or 100 times the payment made
per share of Common Stock, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not
<PAGE>
declared, to the date of such payment (the "Liquidation
Preference"). Following the payment of the full amount of the
Liquidation Preference, no additional distributions shall be made
to the holders of shares of Participating Preferred Stock,
unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock dividends,
and subdivisions, combinations and consolidations with respect to
the Common Stock) (such number in clause (ii) being referred to
as the "Adjustment Number"). Following the payment of the full
amount of the Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Participating Preferred
Stock and Common Stock, respectively, holders of Participating
Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Participating Preferred Stock and Common
Stock, on a per share basis, respectively.
(b) In the event there are not sufficient assets
available to permit payment in full of the Liquidation Preference
and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Participating
Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to
their respective liquidation preferences. In the event there are
not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(c) In the event the Company shall at any time after
the Rights Declaration Date declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise then by payment of
a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the
Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that are
outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the
Company shall enter into any consolidation, merger, combination
or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of
Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which
<PAGE>
or for which each share of Common Stock is exchanged or changed.
In the event the Company shall at any time after the Rights
Declaration Date declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
exchange or change of shares of Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that are
outstanding immediately prior to such event.
Section 8. REDEMPTION. The shares of Participating
Preferred Stock shall not be redeemable.
Section 9. RANKING. The Participation Preferred Stock
shall rank junior to all other series of the Company's Preferred
Stock as to the payment of dividends and the distribution of
assets, unless the terms of any such series shall provide
otherwise.
Section 10. AMENDMENT. The Articles of Incorporation
of the Company shall not be further amended in any manner which
would materially alter or change the powers, preferences or
special rights of the Participating Preferred Stock so as to
affect them adversely without the affirmative vote of the holders
of a majority or more of the outstanding shares of Participating
Preferred Stock voting separately as a class.
Section 11. FRACTIONAL SHARES. Participating Preferred
Stock may be issued in fractions of a share which shall entitled
the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Participating Preferred Stock.
IN WITNESS WHEREOF, I have executed and subscribed this
Certificate and do affirm and acknowledge the foregoing as true
under the penalties of perjury this 26th day of July, 1988.
H & R Block, Inc.
By /s/ Henry W. Bloch
--------------------------
Henry W. Bloch, President
<PAGE>
FILED AND CERTIFICATE
ISSUED
JUL 27 1988
/s/ Roy D. Blunt
Corporation Dept. SECRETARY OF STATE
STATE OF MISSOURI )
) ss.
CITY OF KANSAS CITY )
On this 26th day of July, 1988, before me, Henry W.
Bloch, a Notary Public in and for the State of Missouri,
personally appeared Henry W. Bloch, President of H & R Block,
Inc., known to me to be the person who executed the foregoing
Certificate of Designation and acknowledged to me that he
executed the same pursuant to authority given by the Board of
Directors of such corporation as their free and voluntary act,
and as the free and voluntary act and deed of such corporation,
for the uses and purposes therein set forth.
/s/ Tina M. Cummings
----------------------------
Tina M. Cummings
Notary Public
My commission expires:
TINA M. CUMMINGS
Notary Public - State of Missouri
Commissioned in Jackson County
My Commission Expires May 5, 1991
FILED
JUL 27 1988
/s/ Roy D. Blunt
Secretary of State
<PAGE>
Exhibit 4(f)
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF DELAYED CONVERTIBLE PREFERRED STOCK
OF
H & R BLOCK, INC.
Pursuant to the provisions of Section 351.180.7 of The
General and Business Corporation Law of Missouri, the
undersigned, Thomas M. Bloch, President, and James H. Ingraham,
Secretary, of H & R Block, Inc., a Missouri corporation, hereby
certifies as follows:
FIRST: Pursuant to the authority conferred upon the
Board of Directors in Article Three of the Amended and Restated
Articles of Incorporation of this Corporation, the Corporation is
authorized to issue 6,000,000 shares of Preferred Stock, without
par value (the "Preferred Stock"), in series, and the Board of
Directors of the Corporation is expressly authorized to fix, to
the extent permitted by the laws of the State of Missouri and
such Article Three, the powers, designations, preferences and
relative, participating, optional and other special rights of
each such series, and the qualifications, limitations and
restrictions thereof.
SECOND: The Board of Directors of the Corporation on
July 14, 1988, created a series of Six Hundred Thousand (600,000)
shares of voting Preferred Stock designated as Participating
Preferred Stock. The number of shares of Preferred Stock
authorized and unissued immediately prior to the adoption of the
following resolution is 6,000,000.
THIRD: The Board of Directors of this Corporation on
March 8, 1995, adopted the following resolution creating a series
of Five Hundred Thousand (500,000) shares of non-voting Preferred
Stock designated as "Delayed Convertible Preferred Stock", and
fixing the powers, designations, preferences and relative,
participating, optional and other special rights of the "Delayed
Convertible Preferred Stock", and the qualifications, limitations
and restrictions thereof:
"RESOLVED, Pursuant to Article Three of the Amended and
Restated Articles of Incorporation of this Corporation, the Board
of Directors hereby provides for and authorizes the issuance of a
series of Preferred Stock to consist of Five Hundred Thousand
(500,000) shares and to be designated as "Delayed Convertible
Preferred Stock", and hereby fixes the powers, designation,
preferences and relative, participating, optional and other
special rights of the "Delayed Convertible Preferred Stock", and
the qualifications, limitations and restrictions thereof, as
follows:
<PAGE>
1. DESIGNATION AND AMOUNT. There shall be a
series of non-voting Preferred Stock, the designation
of which shall be Delayed Convertible Preferred Stock
(the "Delayed Convertible Preferred Stock"), without
par value, and the number of authorized shares
constituting such series shall be 500,000. Each share
of Delayed Convertible Preferred Stock shall rank
equally in all respects.
2. VOTING RIGHTS. The holders of Delayed
Convertible Preferred Stock shall have no voting power
whatsoever, and no holder of Delayed Convertible
Preferred Stock shall vote on or otherwise participate
in any proceedings in which actions shall be taken by
the Corporation or the shareholders thereof or be
entitled to notification as to any meeting of the
Board of Directors or the shareholders.
3. DIVIDENDS. The holders of Delayed Convertible
Preferred Stock shall not be entitled to receive any
dividends payable in cash, property or securities.
4. LIMITATION OF TRANSFERABILITY. Any shares of
Delayed Convertible Preferred Stock issued hereunder
shall not be transferred, assigned, pledged, or
hypothecated in any way by the holders of such shares
except upon death by will or the laws of descent and
distribution, provided, however, that the Corporation
shall have the right to repurchase any such shares in
the event that the holder thereof shall cease to be
employed by the Corporation or any of the
Corporation's affiliates for certain reasons (not
including death, disability or termination by the
Corporation or any of the Corporation's affiliates
without cause) prior to the Convertibility Date, as
provided in the Stock Purchase Agreement executed in
connection with the Merger (as such terms are defined
in the Agreement and Plan of Merger dated March 10,
1995 by and among the Corporation, CompuServe
Incorporated, SI Acquisition Corp., SPRY, Inc. and
David Pool, such agreement, the "Merger Agreement").
5. CONVERSION PRIVILEGE. The holders of the
Delayed Convertible Preferred Stock shall have the
right to convert such Delayed Convertible Preferred
Stock on and subject to the following terms and
conditions:
(a) Effective the date beginning three
years and one day after the Effective Time of
the Merger (as defined in the Merger
Agreement), at the option of the holder of
each share of Delayed Convertible Preferred
Stock, shall be convertible into four fully
paid and nonassessable shares of Common Stock
of the Corporation, subject to adjustment as
hereinafter provided (the "Conversion
Ratio").
<PAGE>
(b) In order to exercise the conversion
right, the holder of any shares of Delayed
Convertible Preferred Stock to be converted
shall surrender, the certificate or
certificates representing such shares for
conversion to an agent designated by the
Corporation (the "Agent"), and shall give
written notice to such Agent that the holder
elects to convert such shares of Delayed
Convertible Preferred Stock. Such notice
shall also state whether any shares of
Delayed Convertible Preferred Stock
represented by the tendered certificate or
certificates, if any, are not to be
converted. Any certificate for Common Stock
issuable upon conversion of Delayed
Convertible Preferred Stock, together with
any certificate for Delayed Convertible
Preferred Stock representing the number of
unconverted shares, if any ("balance
certificate") shall be issued in the same
name as the record holder of the certificate
for Delayed Convertible Stock tendered for
conversion. Certificates for Common Stock
and any balance certificates shall not be
issued unless the certificate for Delayed
Convertible Preferred Stock tendered for
conversion is duly endorsed by, or
accompanied by instruments of transfer in
form satisfactory to the Agent duly executed
by, the record holder or his duly authorized
attorney.
(c) As soon as practicable after the
receipt of the certificates representing the
shares surrendered for conversion,
accompanied by the notice required by
subsection (b), the Corporation shall cause
to be issued and delivered to the record
holder of the shares so surrendered for
conversion, a certificate or certificates for
the number of full shares of Common Stock
issuable upon the conversion of such shares
of Delayed Convertible Preferred Stock and a
balance certificate, if any. Such conversion
shall be deemed to have been effected on the
date on which the Agent shall have received
such certificates representing shares of
Delayed Convertible Preferred Stock.
(d) The Corporation shall not be required
to issue fractional shares of Delayed
Convertible Preferred Stock or of Common
Stock or scrip upon conversion of shares of
Delayed Convertible Preferred Stock. If
certificates representing more than one share
<PAGE>
of Delayed Convertible Preferred Stock shall
be surrendered for conversion at one time by
the same holder, the number of all shares
issuable by the Corporation upon conversion
thereof shall be computed on the basis of the
aggregate number of shares of Delayed
Convertible Preferred Stock surrendered for
conversion.
(e) In case the Corporation shall (i)
declare a dividend, or make a distribution on
shares of its Common Stock, in shares of its
Common Stock, (ii) subdivide its outstanding
shares of Common Stock into a greater number
of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or
(iv) make any other change affecting the
Common Stock as a class without receipt of
consideration, the Conversion Ratio shall be
adjusted to the extent necessary to prevent
dilution or enlargement of the conversion
rights granted to the holders of the Delayed
Convertible Preferred Stock hereunder.
(f) In case the Corporation shall merge or
consolidate with another corporation or
entity whereupon the Corporation shall not be
the surviving entity thereof, the Delayed
Convertible Preferred Stock shall become
convertible into the type and number of
shares of the surviving entity or property
(including cash) in the same manner as the
Common Stock of the Corporation but otherwise
subject to the same terms and conditions
provided herein.
(g) The Corporation shall at all times
provide, free from preemptive rights, out of
its authorized but unissued shares, or out of
shares held in its treasury, shares of Common
Stock into which the outstanding shares of
Delayed Convertible Preferred Stock are then
convertible sufficient to provide for the
conversion thereof. If any shares of Common
Stock to be provided for the purpose of
conversion of Delayed Convertible Preferred
Stock require registration with or approval
of any governmental authority under any
federal or state law, before such shares may
be validly issued upon conversion, then the
Corporation covenants that it will in good
faith and as expeditiously as possible
endeavor to secure such registration or
approval as the case may be. The Corporation
covenants that all shares of Common Stock
<PAGE>
which may be issued upon conversion of the
Delayed Convertible Preferred Stock will be
upon the issuance thereof be fully paid and
nonassessable and free from all taxes, liens
and charges with respect to the issue
thereof.
6. DISSOLUTION, LIQUIDATION OR WINDING-UP. In
the event of any dissolution, liquidation or winding-
up of the Corporation, whether voluntary or
involuntary, the holders of all of the shares of
Delayed Convertible Preferred Stock then outstanding
shall be entitled to share ratably with the holders of
all of the shares of Common Stock then outstanding in
the assets of the Corporation remaining after any
distribution or payments are made to the Participating
Preferred Stock or any other class or series of stock
of the Corporation with preference over the Common
Stock. Neither the consolidation nor merger of the
Corporation into or with any other corporation, nor
the sale or transfer by the Corporation of all or any
part of its assets, nor the reduction of the capital
stock of the Corporation, shall be deemed to be a
liquidation, dissolution or winding-up of the
Corporation within the meaning of any of the
provisions of this paragraph.
"FURTHER RESOLVED, that the proper officers of the
Corporation be, and each of them hereby is, authorized and
directed to file a Certificate of Designation with the Missouri
Secretary of State and to take all other actions necessary or
desirable, in their sole discretion, to effect the purposes and
intent of the foregoing resolution."
IN WITNESS WHEREOF, the undersigned Corporation has
caused this Certificate to be executed by its President and
Secretary and affixed the seal of the Corporation this 16th day
of March, 1995.
H & R Block, Inc.
By: /s/ Thomas M. Bloch
----------------------------
Thomas M. Bloch, President
By: /s/ James H. Ingraham
----------------------------
James H. Ingraham, Secretary
<PAGE>
(Corporate Seal)
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
I, Philip Alan Reicher, a Notary Public, do hereby
certify that on this 16th day of March, 1995, personally appeared
Thomas M. Bloch, who, being by me first duly sworn, declared that
he is the President of H & R Block, Inc., that he signed the
foregoing certificate as President of the Corporation, and that
the statements therein contained are true.
/s/ Philip Alan Reicher
--------------------------------
Notary Public
My appointment or commission expires 8/7/97.
(NOTARIAL SEAL)
"NOTARY SEAL"
Philip Alan Reicher, Notary Public
Jackson County, State of Missouri
My Commission Expires 8/7/97
FILED AND CERTIFICATE
ISSUED
MAR 17 1995
/s/ Rebecca McDowell Cook
SECRETARY OF STATE
<PAGE>
Exhibit 10(h)
H & R BLOCK, INC.
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
(Adopted March 2, 1988 and amended
and restated June 29, 1988)
The Retirement Plan (the "Plan") for Non-Employee
Directors of H & R Block, Inc. (the "Company") is adopted
effective March 1, 1988.
1. PURPOSES. The purposes of the Retirement Plan for
Non-Employee Directors of H & R Block, Inc. are to provide
incentives and rewards to Non-Employee Directors, to assist the
Company in attracting and retaining Non-Employee Directors with
experience and ability, and to provide for the orderly retirement
of Non-Employee Directors.
2. STATEMENT OF RETIREMENT POLICY. It shall be the
policy of the Company that a Non-Employee Director of the Company
shall be retired as of the Annual Meeting of Shareholders of the
Company next following the date on which the Director attains the
age of 72 years.
3. ELIGIBILITY FOR BENEFITS. A Director shall be
eligible for benefits under this Plan if and only if he satisfies
the criteria of Section 3(a) or 3(b) of the Plan.
(a) (i) The Director shall have been retired as a
Director of the Company as of either (A) the Annual Meeting of
Shareholders of the Company next following the date on which such
Director attains the age of 72 years, or (B) the meeting of the
Board of Directors at which the Board determines that the
Director has suffered a permanent and total disability as defined
in Section 22(e)(3) of the Internal Revenue Code, or any
corresponding provision of succeeding law;
(ii) as of the date of his retirement, he shall
have continuously served as a Director of the Company for a
period of not less than 5 years; and
(iii) he shall not at any time have been an
employee of the Company or any of its direct or indirect
subsidiaries.
(b) (i) The Director shall have been a Director of
the Company prior to a change in control of the Company (as
defined in Section 10 of this Plan) and shall have ceased to be a
Director of the Company for any reason whatsoever within one year
after a change in control of the Company (as defined in Section
10 of this Plan); and
<PAGE>
(ii) he shall not any time have been an employee
of the Company or any of its direct or indirect subsidiaries.
If a Director does not meet the eligibility criteria of
Section 3(a) or 3(b) of this Plan, then he shall not be entitled
to any benefit whatsoever under this Plan.
4. BENEFIT AMOUNT. The annual benefit under this Plan
shall be an amount equal to the largest annual director's fees
(excluding meeting fees or other special fees) paid by the
Company at any time during the year preceding the date on which
the Director retires or ceases to be a Director of the Company.
The annual benefit shall be payable for the term set forth in
Section 5 of this Plan.
5. PAYMENT OF BENEFIT. (a) In the case of a retirement
by a Director under the circumstances described in Section 3(a),
the benefit shall be payable in quarter-annual installments,
commencing 90 days following the date of the Director's
retirement and continuing quarterly thereafter for the life of
the Director.
(b) In the case of a Director ceasing to be a
Director under the circumstances described in Section 3(b), the
benefit shall be payable in quarter-annual installments,
commencing 90 days after the Director ceases to be a Director of
the Company and continuing quarterly thereafter for a term equal
to the shortest of the following: (i) the term during which the
Director served as a Director of the Company, (ii) the life of
the Director, or (iii) if the benefit payable hereunder would
otherwise constitute a "parachute payment," the longest term
during which the aggregate "present value" of the payments
hereunder would be less than three times the Director's "base
amount". For purposes of this Section 5(b)(iii), the terms
"parachute payment," "present value" and "base amount" shall have
the meanings set forth in Sections 280G(b)(2)(A), 280G(d)(4) and
280G(b)(3) of the Internal Revenue Code, or any corresponding
provision of succeeding law.
6. EFFECT OF DEATH. The Director shall be entitled to
the full quarter-annual installment of his benefit for the
quarter in which he dies, which shall be paid to his Estate.
Except for such installment, the benefits paid hereunder shall
automatically terminate upon the death of the Director, and no
benefits shall be paid to any other person.
7. NO ASSIGNMENT. No right or interest in or to
benefits under this Plan shall be assignable or transferrable or
shall be subject to any lien, obligation or liability of any
Director or any other person.
8. ADMINISTRATION. This Plan shall be administered by
the Vice President-Finance of the Company or such other officer
of the Company as may be designated by the Chief Executive
Officer of the Company. The Plan Administrator's decisions
regarding interpretation and application of the Plan shall be
<PAGE>
binding on all parties. The costs and expenses of administering
the Plan shall be borne by the Company. The Company shall not be
required to establish any special or separate fund or to make any
other segregation of assets to assure the payment of any benefit
under the Plan.
9. DISCRETION TO AMEND OR TERMINATE. (a) This Plan
shall remain in effect until and unless terminated by the Board
of Directors of the Company.
(b) Except as provided in Section 9(c) of this Plan,
the Board of Directors reserves the right, in its sole and
absolute discretion, to alter, amend, suspend or terminate this
Plan at any time. In any such event, no Director then serving on
the Board of Directors shall have any vested right or interest in
any benefit whatsoever which might have otherwise been paid under
this Plan; provided, however, that any former Director receiving
or entitled to receive benefits under this Plan at the time of
any such event shall not be affected and such former Director
shall receive his benefit during his lifetime.
(c) If a change in control of the Company (as
defined in Section 10 of this Plan) occurs, then each and every
Director who is a Director on the day immediately preceding the
change in control of the Company (as defined in Section 10 of
this Plan) shall be 100% vested in all benefits payable under
this Plan and the Board of Directors shall not have the right or
power to alter, amend, suspend or terminate this Plan in any way
which would reduce, eliminate, defer or otherwise adversely
affect the benefits payable to such Directors.
10. CHANGE IN CONTROL OF THE COMPANY.
(a) "Change in control of the Company" means (i) a
tender offer, stock purchase or series of stock purchases which
result in any Person becoming the beneficial owner (as defined on
June 1, 1983, in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")) of 15% or more of the outstanding
shares of the Company entitled to vote for the election of
directors, or (ii) the election of a member or members of the
Board of Directors of the Company who was or were not nominated
to serve as a director or directors by the Board of Directors or
the Nominating Committee of the Board of Directors of the
Company, unless at least two-thirds of the Company's Continuing
Directors vote to approve such tender offer, stock purchase,
series of stock purchases or election.
(b) "Person" means and any individual, corporation,
partnership or other person or entity, and its Affiliates and
Associates (as defined on June 1, 1983, in Rule 12b-2 under the
Exchange Act).
<PAGE>
(c) "Continuing Director" means (i) any member of
the Board of Directors of the Company who was nominated to serve
as a director by the Board of Directors or the Nominating
Committee of the Board of Directors of the Company, and (ii) and
other member of the Board of Directors whose election was
approved by a vote of a majority of the Continuing Directors.
11. NO FURTHER OBLIGATION. Nothing in this Plan is
intended or shall be construed to impose upon the Company any
obligation whatsoever to continue any Director as a Director of
the Company or to nominate any Director for election or
reelection as a Director of the Company.
<PAGE>
Exhibit 11
<TABLE>
CALCULATION OF PRIMARY EARNINGS PER SHARE
<CAPTION>
Year Ended April 30,
-------------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings $107,259,000 $200,528,000 $180,705,000
============ ============ ============
Weighted average number of shares outstanding -
primary: Weighted average number of common
shares outstanding 105,029,000 105,882,000 106,579,000
Dilutive effect of stock options after
application of treasury stock method 708,000 887,000 1,065,000
Dilutive effect of Convertible Preferred
Stock 134,000 - -
----------- ----------- -----------
Weighted average number of shares outstanding 105,871,000 106,769,000 107,644,000
=========== =========== ===========
Earnings per share:
Primary $1.01 $1.88 $1.68
===== ===== =====
</TABLE>
<PAGE>
Exhibit 11
<TABLE>
CALCULATION OF FULLY DILUTED EARNINGS PER SHARE
<CAPTION>
Year Ended April 30,
-------------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings $107,259,000 $200,528,000 $180,705,000
============ ============ ============
Weighted average number of shares outstanding -
fully diluted: Shares used in calculating
primary earnings per share 105,871,000 106,769,000 107,644,000
Additional effect of stock options after
application of treasury stock method 155,000 203,000 -
----------- ----------- -----------
Weighted average number of shares outstanding 106,026,000 106,972,000 107,644,000
=========== =========== ===========
Earnings per share:
Fully diluted $1.01 $1.87 $1.68
===== ===== =====
</TABLE>
<PAGE>
EXHIBIT 13
<TABLE>
COMMON STOCK DATA
<CAPTION>
Stock Price Cash Dividend
High Low Paid per Share
------ ------ --------------
<S> <C> <C> <C>
1994 FISCAL YEAR:
Quarter ended 7/31/93 37 1/2 31 7/8 .25
Quarter ended 10/31/93 41 1/2 35 3/4 .28
Quarter ended 1/31/94 44 1/2 37 5/8 .28
Quarter ended 4/30/94 48 3/4 41 3/4 .28
1995 FISCAL YEAR:
Quarter ended 7/31/94 44 5/8 37 1/2 .28
Quarter ended 10/31/94 47 1/2 39 .31 1/4
Quarter ended 1/31/95 44 3/4 33 .31 1/4
Quarter ended 4/30/95 46 5/8 34 3/4 .31 1/4
<FN>
Traded on the New York Stock Exchange; Ticker Symbol: HRB
</FN>
</TABLE>
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
In thousands, except per share amounts and number of shareholders
<CAPTION>
Year Ended April 30
----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR:
Total revenues $1,360,318 $1,238,677 $1,074,263 $986,109 $ 925,262
Net earnings from continuing operations
before charge for purchased research
and development $ 190,767 $ 189,067 $ 171,017 $153,744 $ 131,255
Net earnings from continuing operations<F1> $ 107,259 $ 163,995 $ 171,017 $153,744 $ 131,255
Net earnings<F1> $ 107,259 $ 200,528 $ 180,705 $162,253 $ 140,108
AT YEAR END:
Total assets $1,078,038 $1,074,704 $1,005,834 $962,664 $1,035,781
Cash and marketable securities $ 444,981 $ 620,091 $ 439,526 $391,386 $ 354,916
Stockholders' equity $ 685,865 $ 707,875 $ 650,488 $613,713 $ 573,589
Shares outstanding 104,863 106,149 106,355 106,598 106,487
Number of shareholders 38,053 35,514 33,457 31,520 25,328
MEASUREMENTS:
Per share of common stock:
Net earnings from continuing operations
before charge for purchased research
and development $1.80 $1.77 $1.59 $1.41 $1.22
Net earnings from continuing operations<F1> $1.01 $1.54 $1.59 $1.41 $1.22
Net earnings<F1> $1.01 $1.88 $1.68 $1.49 $1.31
Cash dividends declared $1.21 3/4 $1.09 $ .97 $ .85 1/2 $ .74 1/2
Net tangible book value $5.79 $6.03 $4.93 $4.61 $4.28
Return on total revenues<F2> 14.0% 15.3% 15.9% 15.6% 14.2%
Return on beginning stockholders' equity 15.2% 30.8% 29.4% 28.3% 27.8%
<FN>
<F1>Fiscal 1995 and 1994 include charges to earnings of $83,508 ($.79 per share) and $25,072 ($.24 per share),
respectively, for purchased research and development in connection with acquisitions which are not deductible
for income tax purposes. See notes to consolidated financial statements.
<F2>Before charge for purchased research and development.
</FN>
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
SIGNIFICANT ITEMS
Fiscal 1995 results were affected by two significant items: the actions
taken by the Internal Revenue Service (IRS) beginning in late October to
reduce taxpayer fraud and a charge to earnings for purchased research and
development in connection with the acquisition in April of SPRY, Inc., a
leading provider of Internet products.
On October 26, 1994, the IRS announced that it would eliminate the Direct
Deposit Indicator (DDI) as a result of concerns relating to fraudulent tax
refund claims. Previously, the IRS used the DDI to notify the electronic
filer after receiving the taxpayer's electronically filed tax return that
the direct deposit of the refund would be honored. The DDI was a key
element of the Refund Anticipation Loan (RAL) program because it minimized
loan losses and thus encouraged participating financial institutions to
make RALs under relatively favorable terms to taxpayers. RALs are loans
made by financial institutions that are expected to be retired by an
income tax refund. In addition to the removal of the DDI, the IRS
instituted other changes during the tax season to curb fraud in the tax
system. As a result of these IRS changes, more stringent criteria were
adopted in the loan approval process and the cost to the consumer
increased. These changes resulted in a 21% decline in the number of
returns filed electronically and a 50% decline in the number of RALs
processed by company-owned and franchised offices. Due to these changes,
the Company's Tax Services segment experienced a decline in revenues for
the first time in its forty-year history, and only the second decline in
pretax earnings.
On April 4, 1995, the Company acquired SPRY, Inc. in exchange for H&R
Block, Inc. Convertible Preferred Stock valued at $54.2 million, and cash,
including acquisition expenses, of $41.8 million. In addition, outstanding
options for SPRY, Inc. common stock were converted into options for
Convertible Preferred Stock valued at $5.6 million. In connection with the
acquisition, the Company recorded a charge to earnings of $83.5 million,
or $.79 per share, for purchased research and development.
Fiscal 1994 results were affected by the following significant
transactions: the sale of the Company's wholly-owned subsidiary, Interim
Services Inc., through an initial public offering and the acquisition of
MECA Software, Inc. The Company's net earnings for the year included a net
gain of $27.3 million, or $.26 per share, from the sale of Interim and a
charge to earnings of $25.1 million, or $.24 per share, for purchased
research and development related to the acquisition of MECA Software, Inc.
Interim's results are reflected as discontinued operations, and all
amounts for prior periods have been similarly reported. Interim's
operations in fiscal 1994 contributed $.09 per share up to the date of
sale compared to $.09 per share for the entire previous year.
CONSOLIDATED RESULTS
Consolidated revenues increased 9.8% from $1.239 billion last year to a
record $1.360 billion. Consolidated revenues were $1.074 billion in 1993.
Consolidated net earnings decreased 46.5% from $200.5 million in 1994 to
$107.3 million. Consolidated net earnings in 1993 were $180.7 million. Net
earnings per share decreased to $1.01 from $1.88 in 1994 and $1.68 in
1993. However, exclusive of the charges for purchased research and
development and discontinued operations, net earnings per share increased
to $1.80 from $1.77 in 1994 and $1.59 in 1993.
<PAGE>
Additional information on each of the Company's operating segments
follows:
COMPUTER SERVICES
Revenues increased 35.6% from $429.9 million last year to $582.8 million
this year. Revenues in 1993 were $315.4 million. The increase each year
over the preceding year was due to growth in Information and Network
Services' revenues. The Information Services' worldwide customer base of
the company and its affiliates grew to approximately 3.2 million in 1995,
compared with 1.9 million in 1994 and 1.2 million in 1993. Domestically,
the customer base grew 55% to 2.1 million. Network Services' customers
increased to 750 compared with 586 in 1994 and 484 in 1993.
Pretax earnings increased 46.7% from $102.3 million in 1994 to $150.1
million. Pretax earnings in 1993 were $74.0 million. The pretax margin was
25.8% this year, compared to 23.8% in 1994 and 23.5% in 1993. The record
results were attributable primarily to the continued strong performances
of the Information and Network Services divisions. The increase in margins
each year over the preceding year resulted mainly from the exceptional
increases in revenues that outpaced expenses, a significant portion of
which are not directly associated with revenues.
TAX SERVICES
Revenues decreased 3.4% from $755.5 million in 1994 to $729.7 million. The
decrease in revenues in 1995 was due primarily to a 31.1% decline in
electronic filing fees and a 49.5% decline in RAL license fees received
from participating financial institutions. The decreases resulted from IRS
actions discussed earlier. Tax return preparation fees increased 5.7% to a
record $517.0 million in 1995. Revenues in 1994 increased 3.0% to $755.5
million from $733.4 million in 1993. The increase in 1994 resulted
primarily from greater tax preparation fees, electronic filing fees,
franchise royalties and RAL bank fees.
Pretax earnings decreased 25.7% from $198.7 million in 1994 to $147.7
million. Pretax earnings in 1993 were $191.3 million. The decrease this
year resulted from the decline in electronic filing revenues and greater
expenses associated with changes in the electronic filing program. Pretax
earnings as a percent of revenues was 20.2% this year, compared to 26.3%
in 1994 and 26.1% in 1993.
FINANCIAL SERVICES
Revenues decreased 23.1% from $51.0 million last year to $39.2 million.
Revenues in 1993 were $25.4 million. This segment incurred a pretax loss
of $5.8 million this year compared with pretax earnings of $8.7 million in
1994 and $10.1 million in 1993. The decline in revenues and pretax
earnings compared to last year resulted primarily from the decision not to
make investments in RALs due to the IRS changes that increased the RAL
credit risk.
INVESTMENT INCOME
Investment income increased 55.4% from $15.3 million in 1994 to $23.7
million. Investment income in 1993 was $15.0 million. Investment income in
1995 included gains of $4.9 million from the sale of securities during the
fourth quarter. Exclusive of such gains, investment income increased 23.4%
over last year and resulted primarily from more funds being available for
investment this year, including the proceeds from the sale of Interim
Services Inc. received in the fourth quarter of fiscal 1994.
<PAGE>
CORPORATE & ADMINISTRATIVE EXPENSES
The corporate and administrative pretax loss decreased 27.0% from $16.7
million in 1994 to $12.2 million. The pretax loss in 1993 was $14.6
million. The decrease in 1995 compared to 1994 resulted from the
allocation of certain employee benefit expenses to operating segments and
reduced discretionary corporate expenses related to community welfare. The
increase in 1994 compared with 1993 resulted from higher legal and
employee benefits expenses and lower miscellaneous income.
INCOME TAX EXPENSE
The effective tax rate increased to 51.2%, compared to 42.1% in 1994 and
38.0% in 1993. The increase in 1995 compared to 1994 resulted from a
charge for purchased research and development that is not deductible for
income tax purposes. The increase in 1994 compared to 1993 resulted from a
one percent increase in the federal income tax rate and a charge for
purchased research and development.
EFFECTS OF INFLATION
The effects of inflation on the Company's operations were not significant
during 1995, 1994 or 1993.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remains strong, with cash and marketable
securities of $445.0 million at April 30, 1995, compared to $620.1 million
and $439.5 million at the end of 1994 and 1993, respectively. The
significant increase in cash and marketable securities in 1994 as compared
to 1993 was due to the net proceeds from the sale of Interim Services Inc.
of $188.5 million, and from the repayment of the term loan from Interim of
$30.0 million. This repayment was partially offset by a reduction in
borrowing compared to 1993. Stockholders' equity at April 30, 1995, 1994
and 1993 was $685.9 million, $707.9 million and $650.5 million,
respectively.
The Company maintains lines of credit to support short-term borrowing
facilities in the United States and Canada. The balance of these lines
fluctuates according to the amount of borrowing outstanding during each
respective year. Prior to 1995, Block Financial Corporation (BFC) used
borrowings to purchase an interest in a trust to which certain Refund
Anticipation Loans (RALs) made by Mellon Bank (DE) National Association
were sold. BFC purchased an interest of just under 50% in those RALs
subject to its agreement with Mellon. BFC financed these purchases through
short-term borrowing in the third and fourth quarters of fiscal years 1994
and 1993. Canadian borrowings are used each year to purchase refunds due
Tax Services' clients. Clients assign to the company the full tax refund
to be issued by Revenue Canada. Maturities of short-term borrowing range
from 30 to 90 days. Net accounts receivable at April 30, 1995 and 1994
include amounts due from Revenue Canada of $16.4 million and $28.5
million, respectively. Collections occur substantially in the last month
of the fiscal year and the first quarter of the subsequent fiscal year.
The Company also maintains a year-round $100 million line of credit to
primarily support the funding of credit card receivables by BFC. At April
30, 1995, net credit card receivables amounted to $122.5 million, and
commercial paper outstanding amounted to $49.4 million.
The Company has historically generated sufficient funds to provide for the
off-season working capital needs of the tax services segment, which
experiences losses for the period May through December, capital
investments, the operating and expansion needs of its subsidiaries, cash
for acquisitions and the maintenance of a strong dividend policy.
Management believes that the Company will continue to generate sufficient
funds internally to finance its investment program and normal working
capital requirements. However, the Company will continue to use short-term
financing in the United States to finance temporary liquidity needs and
various financial activities conducted by BFC, and in Canada to finance
the Canadian refund discount program.
The Company announced in December 1993 its intention to repurchase from
time to time up to ten million of its shares on the open market. During
1995, the Company repurchased 2.9 million shares at an aggregate cost of
$114.9 million. Other than the possible repurchase of additional shares of
the Company's common stock, there are no material commitments for capital
investments as of April 30, 1995.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
Amounts in thousands, except per share amounts
<CAPTION>
Year Ended April 30
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Service revenues $1,233,815 $1,118,566 $ 956,534
Royalties 92,436 96,766 92,529
Investment income 23,703 15,256 15,038
Other income 10,364 8,089 10,162
---------- ---------- ----------
1,360,318 1,238,677 1,074,263
---------- ---------- ----------
EXPENSES:
Employee compensation and benefits 442,504 404,367 369,476
Occupancy and equipment 295,528 242,391 203,350
Marketing and advertising 84,905 60,783 47,118
Supplies, freight and postage 71,542 60,182 53,470
Other 162,335 162,698 124,955
Purchased research and development 83,508 25,072 -
---------- ---------- ----------
1,140,322 955,493 798,369
---------- ---------- ----------
Earnings from continuing operations before taxes on earnings 219,996 283,184 275,894
Taxes on earnings 112,737 119,189 104,877
---------- ---------- ----------
NET EARNINGS FROM CONTINUING OPERATIONS 107,259 163,995 171,017
Net earnings from discontinued operations (less applicable taxes of $8,706
and $9,688) - 9,268 9,688
Net gain on sale of discontinued operations (less applicable taxes of $16,711) - 27,265 -
---------- ---------- ----------
NET EARNINGS $ 107,259 $ 200,528 $ 180,705
========== ========== ==========
EARNINGS PER SHARE FROM CONTINUING OPERATIONS $1.01 $1.54 $1.59
===== ===== =====
EARNINGS PER SHARE $1.01 $1.88 $1.68
===== ===== =====
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Amounts in thousands, except share data
<CAPTION>
April 30, April 30,
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (including certificates of deposit of $25,781 and $23,519) $ 90,248 $ 41,343
Marketable securities 263,239 473,043
Receivables, less allowance for doubtful accounts of $7,274 and $12,744 260,198 165,858
Prepaid expenses 21,823 19,551
---------- ----------
Total current assets 635,508 699,795
INVESTMENTS AND OTHER ASSETS:
Investments in marketable securities 91,494 105,705
Excess of cost over fair value of net tangible assets acquired,
less accumulated amortization of $46,770 and $43,429 78,205 67,679
Other 45,383 36,301
---------- ----------
215,082 209,685
PROPERTY AND EQUIPMENT, at cost less accumulated
depreciation and amortization of $227,056 and $192,481 227,448 165,224
---------- ----------
$1,078,038 $1,074,704
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 49,421 $ -
Accounts payable, accrued expenses and deposits 145,909 160,592
Accrued salaries, wages and payroll taxes 71,281 55,195
Accrued taxes on earnings 92,100 120,425
---------- ----------
Total current liabilities 358,711 336,212
OTHER NONCURRENT LIABILITIES 33,462 30,617
STOCKHOLDERS' EQUITY:
Common stock, no par, stated value $.01 per share:
authorized 200,000,000 shares 1,089 1,089
Convertible preferred stock, no par, stated value
$.01 per share: authorized 500,000 shares 4 -
Additional paid-in capital 140,578 90,552
Retained earnings 700,423 719,724
---------- ----------
842,094 811,365
Less cost of common stock in treasury 156,229 103,490
---------- ----------
685,865 707,875
---------- ----------
$1,078,038 $1,074,704
========== ==========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in thousands
<CAPTION>
Year Ended April 30
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 107,259 $ 200,528 $ 180,705
Adjustments to reconcile net earnings to net cash provided:
Depreciation and amortization 67,684 57,117 54,698
Provision for deferred taxes on earnings 3,440 (2,735) (2,915)
Gain on sale of subsidiaries (2,796) (27,265) -
Purchased research and development 83,508 25,072 -
Net (gain) loss on sales of marketable securities (6,664) (307) 123
Other noncurrent liabilities 2,845 5,197 4,276
Changes in assets and liabilities net of effects of purchase and
disposition of subsidiaries:
Receivables (87,995) 2,284 43,171
Prepaid expenses (1,735) (412) (4,619)
Net assets of discontinued operations - (17,370) -
Accounts payable, accrued expenses and deposits (24,994) 31,000 56,593
Accrued salaries, wages and payroll taxes 15,722 14,659 (6,672)
Accrued taxes on earnings (31,911) (300) 19,278
---------- ---------- ----------
Net cash provided by operating activities 124,363 287,468 344,638
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (1,904,653) (1,522,609) (1,198,102)
Maturities of marketable securities 1,837,584 891,299 626,315
Sales of marketable securities 299,702 448,978 553,465
Purchases of property and equipment, net (123,337) (83,744) (71,921)
Excess of cost over fair value of net tangible assets acquired, net of cash acquired (47,773) (46,570) (10,981)
Proceeds from sale of subsidiaries 5,195 188,500 -
Proceeds from term loan to former subsidiary - 30,000 -
Other, net (5,856) (24,198) (13,241)
---------- ---------- ----------
Net cash provided by (used in) investing activities 60,862 (118,344) (114,465)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable (1,856,873) (2,435,254) (1,717,226)
Proceeds from issuance of notes payable 1,906,294 2,398,087 1,653,061
Dividends paid (128,838) (115,451) (103,462)
Payments to acquire treasury shares (114,900) (68,899) (94,763)
Proceeds from stock options exercised 57,997 50,319 62,158
---------- ---------- ----------
Net cash used in financing activities (136,320) (171,198) (200,232)
---------- ---------- ----------
Net increase (decrease) in cash 48,905 (2,074) 29,941
Cash at beginning of the year 41,343 43,417 13,476
---------- ---------- ----------
Cash at end of the year $ 90,248 $ 41,343 $ 43,417
========== ========== ==========
<PAGE>
<CAPTION>
Year Ended April 30
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
(continued)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid $ 141,062 $ 131,124 $ 98,202
Interest paid 4,064 4,169 5,933
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except share data
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its subsidiaries, all of which are
wholly-owned. All material intercompany transactions and balances have
been eliminated.
RECLASSIFICATIONS: Prior year amounts have been reclassified to conform to
the 1995 presentation.
MARKETABLE SECURITIES: On May 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." This Statement addresses the reporting for
debt and equity securities by requiring such investments to be classified
in held-to-maturity, available-for-sale or trading categories. All
marketable debt and equity securities were classified as
available-for-sale securities on the date of adoption, and are carried at
market value, based on quoted prices, with unrealized gains and losses
included in stockholders' equity. The adoption of the Statement resulted in
an increase in stockholders' equity of $5,526, net of taxes. In accordance
with the Statement, prior years' financial statements have not been
restated.
For marketable securities held at April 30, 1994, municipal bonds and
notes are stated at amortized cost, marketable equity securities are
stated at the lower of aggregate cost or market value and other
investments are stated at cost.
The cost of marketable securities sold is determined on the specific
identification method and realized gains and losses are reflected in
earnings.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of the Company's
foreign branches and subsidiaries are translated into U.S. dollars at
exchange rates prevailing at the end of the year. Revenue and expense
transactions are translated at the average of exchange rates in effect
during the period. Translation gains and losses are recorded directly to
stockholders' equity.
EXCESS OF COST OVER FAIR VALUE OF NET TANGIBLE ASSETS ACQUIRED: The excess
of cost of purchased subsidiaries, operating offices and franchises over
the fair value of net tangible assets acquired is being amortized over
periods of up to 40 years on a straight-line basis.
DEPRECIATION AND AMORTIZATION: Buildings and equipment are depreciated
over the estimated useful lives of the assets using the straight-line
method. Leasehold improvements are amortized over the period of the
respective lease using the straight-line method.
REVENUE RECOGNITION: Service revenues are recorded in the period in which
the service is performed. The Company records franchise royalties, based
upon the contractual percentages of franchise revenues, in the period in
which the franchise provides the service.
<PAGE>
NOTES PAYABLE: The Company uses short-term borrowings to finance temporary
liquidity needs and various financial activities conducted by its
subsidiaries. The weighted average interest rate of notes payable at
April 30, 1995 was 6.1%.
TAXES ON EARNINGS: The Company and its subsidiaries file a consolidated
federal income tax return on a calendar year basis. Therefore, the current
liability for taxes on earnings recorded in the balance sheet at each
year-end consists principally of taxes on earnings for the period January
1 to April 30 of the respective year. Deferred taxes, which are not
material, are provided for temporary differences between financial and tax
reporting, which consist principally of amortization of accounting method
changes (for tax purposes), differences between accrual and cash basis
accounting, deferred compensation and depreciation.
Prior to May 1, 1993, taxes on earnings were determined under Accounting
Principles Board Opinion Number 11, whereby the income tax provision was
calculated using the deferred method. Effective May 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which provides for the recognition of
deferred tax assets and liabilities for the tax consequences of temporary
differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. The cumulative effect of the
change in method as of May 1, 1993 was not material.
EARNINGS PER SHARE: Earnings per share are computed based on the weighted
average number of common and common equivalent shares outstanding during
the respective years (105,871,000 in 1995, 106,769,000 in 1994 and
107,644,000 in 1993). Earnings per share assuming full dilution have not
been shown as there would be no material dilution.
CONSOLIDATED STATEMENTS OF CASH FLOWS: For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash.
DISCLOSURE REGARDING FINANCIAL INSTRUMENTS: The carrying values reported
in the balance sheet for certificates of deposit, receivables, notes
payable, accrued liabilities and accrued taxes on earnings approximate
fair market value due to the relatively short-term nature of the
respective instruments.
MARKETABLE SECURITIES
The amortized cost and market value of marketable securities at April 30,
1995 and 1994 are summarized below:
<PAGE>
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------- --------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
-------- ------ ------ -------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT:
Municipal bonds and notes $ 88,894 $ 310 $ 94 $ 89,110 $238,092 $ 266 $ 100 $238,258
U.S. Government obligations 52,091 48 - 52,139 - - - -
Other equity investments 49,100 - - 49,100 118,263 5 - 118,268
Other debt investments 72,830 61 1 72,890 116,688 4 - 116,692
-------- ------ ------ -------- -------- ------- ------ --------
262,915 419 95 263,239 473,043 275 100 473,218
-------- ------ ------ -------- -------- ------- ------ --------
NONCURRENT:
Municipal bonds 82,702 1,676 1,325 83,053 92,154 3,176 1,316 94,014
Preferred stock 2,737 245 131 3,018 1,511 415 131 1,795
Common stock 1,511 396 115 1,625 7,479 7,287 - 14,766
Other equity investments 3,488 - 692 2,796 4,561 - 649 3,912
Other debt investments 999 3 - 1,002 - - - -
-------- ------ ------ -------- -------- ------- ------ --------
91,437 2,320 2,263 91,494 105,705 10,878 2,096 114,487
-------- ------ ------ -------- -------- ------- ------ --------
$354,352 $2,739 $2,358 $354,733 $578,748 $11,153 $2,196 $587,705
======== ====== ====== ======== ======== ======= ====== ========
</TABLE>
All marketable securities at April 30, 1995 are classified as available-for-
sale. Proceeds from the sales of available-for-sale securities were $299,702,
$448,978 and $553,465 during 1995, 1994 and 1993, respectively. Gross
realized gains on those sales during 1995, 1994 and 1993 were $7,014, $393 and
$24, respectively; gross realized losses were $350, $86 and $147, respectively.
Contractual maturities of available-for-sale debt securities at April 30, 1995
are presented below. Since expected maturities differ from contractual
maturities due to the issuers' rights to prepay certain obligations or the
seller's rights to call certain obligations, the first call date, put date or
auction date for municipal bonds and notes is considered the contractual
maturity date.
Amortized Market
Cost Value
-------- --------
Within one year $213,815 $214,139
After one year through five years 36,184 37,444
After five years through ten years 47,517 46,611
-------- --------
$297,516 $298,194
======== ========
<PAGE>
PROPERTY AND EQUIPMENT
A summary of property and equipment follows:
<TABLE>
<CAPTION>
April 30
---------------------
1995 1994
-------- --------
<S> <C> <C>
Land $ 7,116 $ 6,060
Buildings 50,625 30,027
Equipment 367,420 293,573
Leasehold improvements 29,343 28,045
-------- --------
454,504 357,705
Less accumulated depreciation and amortization 227,056 192,481
-------- --------
$227,448 $165,224
======== ========
</TABLE>
Depreciation and amortization expense for 1995, 1994 and 1993 amount
to $62,809, $52,091, $43,522, respectively.
OTHER NONCURRENT LIABILITIES
The Company has a deferred compensation plan which permits directors and
certain management employees to defer portions of their compensation and
earn interest on the deferred amounts. The salaries, together with Company
matching of deferred salaries, have been accrued, and the only expenses
related to this plan are the Company match and the interest on the
deferred amounts, which are not material to the financial statements.
Included in Other Noncurrent Liabilities is $27,029 at the end of 1995 and
$22,854 at the end of 1994 to reflect the liability under this plan. The
Company purchased whole-life insurance contracts on the related directors
and employees to recover distributions made or to be made under the plan
and has recorded the cash surrender value of the policies in Other Assets.
If all the assumptions regarding mortality, interest rates, policy
dividends and other factors are realized, the Company will ultimately
realize its full investment plus a factor for the use of its money.
STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity during the three years ended
April 30, 1995 are summarized below:
<PAGE>
<TABLE>
<CAPTION>
Convertible
Common stock preferred stock Additional Treasury stock
-------------------- --------------- paid-in Retained ----------------------
Shares Amount Shares Amount capital earnings Shares Amount
----------- ------ ------ ------ -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at May 1, 1992 108,972,699 $1,089 - $ - $120,749 $574,377 (2,375,002) $ (82,502)
Net earnings for the year - - - - - 180,705 - -
Stock options exercised - - - - (19,711) - 2,387,407 81,869
Unrealized loss on translation - - - - - (7,863) - -
Acquisition of treasury shares - - - - - - (2,629,868) (94,763)
Cash dividends paid - $.97 per share - - - - - (103,462) - -
----------- ------ ------- ------ ------- -------- ---------- --------
Balances at April 30, 1993 108,972,699 1,089 - - 101,038 643,757 (2,617,463) (95,396)
Net earnings for the year - - - - - 200,528 - -
Stock options exercised - - - - (10,486) - 1,677,674 60,805
Unrealized loss on translation - - - - - (9,110) - -
Acquisition of treasury shares - - - - - - (1,883,816) (68,899)
Cash dividends paid - $1.09 per share - - - - - (115,451) - -
----------- ------ ------- ------ -------- -------- ---------- --------
Balances at April 30, 1994 108,972,699 1,089 - - 90,552 719,724 (2,823,605) (103,490)
Net earnings for the year - - - - - 107,259 - -
Stock options exercised - - - - (4,164) - 1,624,843 62,161
Unrealized gain on translation - - - - - 2,043 - -
Acquisition of treasury shares - - - - - - (2,910,900) (114,900)
Stock issued for acquisition - - 401,768 4 54,190 - - -
Cumulative effect of change in accounting
for marketable securities, net of taxes - - - - - 5,526 - -
Change in net unrealized gain on
marketable securities - - - - - (5,291) - -
Cash dividends paid - $1.21 3/4 per share - - - - - (128,838) - -
----------- ------ ------- ------ -------- -------- ---------- ---------
Balances at April 30, 1995 108,972,699 $1,089 401,768 $ 4 $140,578 $700,423 (4,109,662) $(156,229)
=========== ====== ======= ====== ======== ======== ========== =========
</TABLE>
The Company is authorized to issue 6,000,000 shares of Preferred Stock,
without par value. At April 30, 1995, the Company had 5,598,232 shares of
authorized but unissued Preferred Stock. Of the unissued shares, 600,000
shares have been designated as Participating Preferred Stock in connection
with the Company's shareholder rights plan.
On March 8, 1995, the Board of Directors authorized the issuance of a series
of 500,000 shares of nonvoting Preferred Stock designated as Delayed
Convertible Preferred Stock, without par value. On April 4, 1995, 401,768
shares of Delayed Convertible Preferred Stock were issued to certain share-
holders of SPRY, Inc. in connection with the Company's acquisition of such
corporation. Each share of Delayed Convertible Preferred Stock is
convertible on or after April 5, 1998 into four shares of Common Stock of the
Company, subject to adjustment upon certain events. The holders of the
Delayed Convertible Preferred Stock are not entitled to receive dividends paid
in cash, property or securities and, in the event of any dissolution, liquida-
tion or winding-up of the Company, will share ratably with the holders of
<PAGE>
Common Stock then outstanding in the assets of the Company after any distri-
bution or payments are made to the holders of Participating Preferred Stock or
the holders of any other class or series of stock of the Company with
preference over the Common Stock.
STOCK OPTION PLANS
The Company has three stock option plans: the 1993 Long-Term Executive
Compensation Plan, the 1989 Stock Option Plan for Outside Directors and a
plan for eligible seasonal employees. The 1993 plan was approved by the
shareholders in September 1993 to replace the 1984 Long-Term Executive
Compensation Plan, which terminated at that time except with respect to
outstanding awards thereunder. Under the 1993 and 1989 plans, options may
be granted to selected employees and outside directors to purchase the
Company's Common Stock for periods not exceeding ten years at a price that
is not less than 100 percent of fair market value on the date of grant. A
majority of the options are exercisable each year starting one year after
the date of grant, or on a cumulative basis at the annual rate of 33 1/3
percent of the total number of option shares. Other options are
exercisable commencing three years after the date of grant on a cumulative
basis in annual increments of 60%, 20% and 20% of the total number of
option shares.
The plan for eligible seasonal employees, as amended, provided for the
grant of options on June 30, 1995, 1994 and 1993 at the market price on
the date of the grant. The options are exercisable during September in
each of the two years following the calendar year of grant.
Changes during the years ended April 30, 1995, 1994 and 1993 under these plans
were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ -------------
<S> <C> <C> <C>
Options outstanding, beginning of year 3,538,341 3,901,373 4,835,777
Options granted 3,912,763 2,410,317 2,327,340
Options exercised (1,624,203) (1,677,674) (2,387,407)
Options which expired (961,087) (1,095,675) (874,337)
Options outstanding, end of year 4,865,814 3,538,341 3,901,373
Shares exercisable, end of year 2,727,540 2,807,255 2,958,418
Shares reserved for future grants, end of year 15,465,557 18,417,233 12,736,987
Options prices per share:
Exercised during the year $5.515-39.25 $5.515-35.75 $5.515-28.75
Outstanding, end of year $6.9525-44.00 $5.515-44.00 $5.515-35.375
</TABLE>
In connection with the acquisition of SPRY, Inc., outstanding options to
purchase SPRY, Inc. common stock under an employee stock option plan were
converted on April 4, 1995 into options to purchase 51,828 shares of the
Company's Convertible Preferred Stock. All options to purchase Convertible
Preferred Stock, with exercise prices ranging from $9.54 to $19.08, were
outstanding at April 30, 1995.
<PAGE>
SHAREHOLDER RIGHTS PLAN
On July 14, 1988, the Company's Board of Directors adopted a shareholder
rights plan to deter coercive or unfair takeover tactics and to prevent a
potential acquiror from gaining control of the Company without offering a
fair price to all of the Company's stockholders. The plan was amended by
the Board of Directors on May 9, 1990, September 11, 1991, and May 10,
1995. Under the plan, a dividend of one right (a "Right") per share was
declared and paid on each share of the Company's Common Stock outstanding
on July 25, 1988. As to shares issued after such date, rights will
automatically attach to them after their issuance.
Under the plan, as amended, registered holders of each Right may purchase
from the Company one two-hundredths of a share of a new class of the
Company's Participating Preferred Stock, without par value, at a price of
$60.00, subject to adjustment, when the Rights become exercisable. They
become exercisable when a person or group of persons acquires beneficial
ownership of 10% or more of the outstanding shares of the Company's Common
Stock without the prior written approval of the Company's Board of
Directors (an "Unapproved Stock Acquisition"), and after ten business days
following the commencement of a tender offer that would result in an
Unapproved Stock Acquisition. If a person or group of persons makes an
Unapproved Stock Acquisition, the registered holder of each Right then
also has the right to purchase for the exercise price of the Right a
number of shares of the Company's Common Stock having a market value equal
to twice the exercise price of the Right. Following an Unapproved Stock
Acquisition, if the Company is involved in a merger, or 50% or more of the
Company's assets or earning power are sold, the registered holder of each
Right has the right to purchase for the exercise price of the Right a
number of shares of the common stock of the surviving or purchasing
company having a market value equal to twice the exercise price of the
Right.
After an Unapproved Stock Acquisition, but before any person or group of
persons acquires 50% or more of the outstanding shares of the Company's
Common Stock, the Board of Directors may exchange all or part of the then
outstanding and exercisable Rights for Common Stock at an exchange ratio
of one share of Common Stock per Right. Upon any such exchange, the right
of any holder to exercise a Right terminates.
The Company may redeem the Rights at a price of $.005 per Right at any
time prior to an Unapproved Stock Acquisition (and after such time in
certain circumstances). The Rights expire on July 25, 1998, unless
extended by the Board of Directors. Until a Right is exercised, the holder
thereof, as such, has no rights as a stockholder of the Company, including
the right to vote or to receive dividends. The issuance of the Rights
alone has no dilutive effect and does not affect reported earnings per
share.
<PAGE>
OTHER EXPENSES
Included in other expenses are the following:
<TABLE>
<CAPTION>
Year Ended April 30
---------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Royalties $59,027 $39,827 $25,326
Bad debts 13,619 24,977 16,312
Travel and entertainment 19,470 15,039 10,420
Taxes and licenses 8,915 13,285 11,033
Amortization of goodwill 4,875 5,026 3,115
Interest 4,060 3,798 6,580
Legal and professional 15,271 14,445 9,486
</TABLE>
TAXES ON EARNINGS
The components of earnings from continuing operations before taxes
on earnings upon which federal and foreign income taxes have been
provided are as follows:
Year Ended April 30
------------------------------
1995 1994 1993
-------- -------- --------
United States $213,122 $276,329 $261,981
Foreign 6,874 6,855 13,913
-------- -------- --------
$219,996 $283,184 $275,894
======== ======== ========
Deferred income tax provisions (benefits) reflect the impact of
temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by
tax laws. The current and deferred components of the provision
for income taxes from continuing operations is comprised of the
following:
<PAGE>
<TABLE>
<CAPTION>
Year Ended April 30
-----------------------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Currently payable:
Federal $ 92,620 $ 96,807 $ 80,915
State 13,424 22,091 20,736
Foreign 3,253 3,026 6,141
-------- -------- --------
109,297 121,924 107,792
-------- -------- --------
Deferred:
Capitalized research and development (27) 172 991
Deferred compensation (469) (2,319) (1,892)
Depreciation 3,828 (335) (1,565)
Intercompany profit upon sale of fixed assets 756 (257) (539)
Other (648) 4 90
-------- -------- --------
3,440 (2,735) (2,915)
-------- -------- --------
$112,737 $119,189 $104,877
======== ======== ========
</TABLE>
Provision is not made for possible income taxes payable upon
distribution of unremitted earnings of foreign subsidiaries.
Such unremitted earnings aggregated $59,279 at December 31, 1994.
Management believes that the cost to repatriate these earnings
would not be material.
The following table reconciles the U.S. federal income tax rate
to the Company's effective tax rate:
<TABLE>
<CAPTION>
Year Ended April 30
-------------------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 34.0%
Increases (reductions) in income taxes resulting from:
State income taxes, net of federal income tax benefit 4.0% 5.1% 5.0%
Foreign taxes, net of federal income tax benefit .3% .2% .5%
Purchased research and development 13.3% 3.1% -
Nontaxable federal income (1.8%) (.9%) (1.1%)
Other .4% (.4%) (.4%)
---- ---- ----
Effective rate 51.2% 42.1% 38.0%
==== ==== ====
</TABLE>
<PAGE>
ACQUISITIONS
On April 4, 1995, the Company acquired SPRY, Inc. for $41,785 in cash and
issued Convertible Preferred Stock valued at $54,194. In addition,
outstanding options for SPRY, Inc. common stock were converted into
options for Convertible Preferred Stock valued at $5,641. The transaction
was accounted for as a purchase and, accordingly, the consolidated
statements of earnings includes SPRY's operations from the date of
acquisition. In connection with the purchase, the Company acquired certain
intangible assets, including software technology, tradenames and an
assembled workforce totalling $11,656. These intangibles will be amortized
on a straight-line basis over five years. The Company also acquired
research and development projects related to SPRY's next product
generation. These projects represent SPRY's research and development
efforts prior to the merger, which had not yet reached the stage of
technological feasibility and had no alternative future use; thus, the
ultimate revenue generating capability of these projects was uncertain.
The purchased research and development was valued at $83,508 using a
discounted, risk-adjusted future income approach. The consolidated
statements of earnings includes a charge for the purchased research and
development which is not deductible for income tax purposes. The fair
value of assets acquired, including intangibles, was $106,371; liabilities
assumed were $4,751. Liabilities assumed and the Convertible Preferred
Stock and stock options issued were non-cash items excluded from the
consolidated statements of cash flows.
On November 24, 1993, the Company acquired MECA Software, Inc. for $45,384
in cash. The transaction was accounted for as a purchase and, accordingly,
the consolidated statements of earnings includes MECA's results since the
date of acquisition. The purchase price has been allocated to assets
acquired and liabilities assumed based on their fair value at the date of
acquisition. The excess of the purchase price over the fair value of the
net tangible assets acquired was $55,978, of which $25,072 was allocated
to purchased research and development, $4,900 was allocated to various
other intangibles including technology, software and trademarks, and the
remainder was allocated to goodwill. Goodwill and other intangibles will
be amortized on a straight-line basis over their estimated useful lives of
3 to 15 years. The consolidated statements of earnings includes a charge
for the purchased research and development which is not deductible for
income tax purposes. The fair value of assets acquired, including
intangibles, was $62,004; liabilities assumed were $16,620. Liabilities
assumed in connection with the acquisition were non-cash items excluded
from the consolidated statements of cash flows.
During fiscal 1995, 1994 and 1993, the Company made other acquisitions
which were accounted for as purchases. Their operations, which are not
material, are included in the consolidated statements of earnings. Pro
forma results assuming MECA and SPRY had been acquired as of the beginning
of the periods presented would not be materially different from reported
results.
SALE OF SUBSIDIARIES
On June 30, 1994, the Company sold the stock of its wholly-owned
subsidiary, Collier-Jackson, Inc., for $5,195 in cash. The operating
results of Collier-Jackson, which were included in the computer services
segment, are reflected in the consolidated statements of earnings through
the date of disposition, and the gain on the sale of $2,680 is included in
other income.
<PAGE>
On January 27, 1994, the Company completed the sale of its interest in its
wholly-owned subsidiary, Interim Services Inc., through an initial public
offering of 10,000,000 shares at $20 per share. The net proceeds from the
sale and the receipt from the retirement of a term loan to Interim
amounted to $218,500. The Company recorded a net gain on the sale of the
stock of $27,265. Interim's results are reflected as discontinued
operations, and all amounts for prior periods have been similarly
reported. The net sales of Interim for fiscal years 1994 and 1993 were
$399,573 and $451,067, respectively.
Subsequent to April 30, 1995, the Company sold its wholly-owned
subsidiary, MECA Software, Inc., for approximately $35,000. The proceeds
from the sale and the related gain are not material to the Company's
consolidated financial position or results from operations. The operations
of MECA Software, Inc. are included in the financial services segment.
COMMITMENTS
Substantially all of the Company's operations are conducted in leased
premises. Most of the operating leases are for a one-year period with
renewal options of one to three years and provide for fixed monthly
rentals. Lease commitments at April 30, 1995 for fiscal 1996, 1997, 1998,
1999 and 2000 aggregated $61,540, $45,866, $30,058, $15,532 and $8,238,
respectively, with no significant commitments extending beyond that period
of time. The Company's rent expense for the years 1995, 1994 and 1993
aggregated $70,377, $63,655 and $59,016, respectively.
The Company maintains a year-round $100,000 line of credit to support
various financial activities conducted by Block Financial Corporation.
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Fiscal 1995 Quarter Ended Fiscal 1994 Quarter Ended
----------------------------------------- -----------------------------------------
April 30, Jan. 31, Oct. 31, July 31, April 30, Jan. 31, Oct. 31, July 31,
1995 1995 1994 1994 1994 1994 1993 1993
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $774,047 $268,014 $172,857 $145,400 $774,716 $229,441 $131,206 $103,314
Continuing operations:
Earnings (loss) before provision
for income taxes (benefits) 213,720 13,102 (2,029) (4,797) 316,881 (11,455) (7,867) (14,375)
Provision for income taxes
(benefits) 110,333 5,018 (777) (1,837) 122,536 6,479 (3,694) (6,132)
Net earnings (loss) 103,387 8,084 (1,252) (2,960) 194,345 (17,934) (4,173) (8,243)
Discontinued operations:
Net earnings - - - - - 3,225 3,241 2,802
Net gain on sale - - - - - 27,265 - -
Net earnings (loss) 103,387 8,084 (1,252) (2,960) 194,345 12,556 (932) (5,441)
Earnings (loss) per share from
continuing operations .97 .08 (.01) (.03) 1.82 (.17) (.04) (.08)
Earnings (loss) per share .97 .08 (.01) (.03) 1.82 .12 (.01) (.05)
</TABLE>
The Company recorded a charge to earnings of $83,508 ($.79 per share) for
purchased research and development in the fourth quarter in 1995.
<PAGE>
SEGMENT INFORMATION
The principal business activity of the Company is providing services to
the general public and business community. It operates in the following
industry segments:
COMPUTER SERVICES: This segment is engaged in providing computer
information and networking services to corporations and individual
computer owners via a proprietary data network and host servers located in
Columbus and Dublin, Ohio. It is the world's largest provider of on-line
services and operates the only major on-line service with worldwide
membership and network reach.
TAX SERVICES: This segment is engaged in providing tax return preparation,
filing and related services to the general public on a fee basis. Revenues
are seasonal in nature and represent fees of company-owned offices and
royalties from franchised offices.
FINANCIAL SERVICES: This segment provides and invests primarily in
financial services delivery technology and financial services delivered by
that technology. It sponsors credit cards under two co-branding agreements
to existing Tax Services and CompuServe customers. This segment also
includes the operations of MECA Software, Inc. and Legal Knowledge
Systems, Inc. which provide personal finance and personal tax software to
the general public.
IDENTIFIABLE ASSETS: Identifiable assets are those assets, including the
excess of cost over fair value of net tangible assets acquired, associated
with each segment of the Company's operations. The remaining assets are
classified as corporate assets and consist primarily of cash, marketable
securities and corporate equipment.
Identifiable assets at April 30, 1993 do not include the assets of
discontinued operations of $188,008 which are included in the consolidated
balance sheet for the corresponding year.
Information concerning the Company's operations by industry segment for the
years ended April 30, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Computer services $ 582,793 $ 429,885 $ 315,399
Tax services 729,718 755,526 733,449
Financial services 39,246 51,009 25,422
Intersegment sales (15,194) (13,185) (15,804)
---------- ---------- ----------
Total operating revenues 1,336,563 1,223,235 1,058,466
Investment income 23,703 15,256 15,038
Corporate 52 186 759
---------- ---------- ----------
TOTAL REVENUES $1,360,318 $1,238,677 $1,074,263
========== ========== ==========
<PAGE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING PROFIT:
Computer services $ 150,109 $ 102,317 $ 74,039
Tax services 147,740 198,719 191,288
Financial services (5,826) 8,712 10,122
---------- ---------- ----------
Total operating profit 292,023 309,748 275,449
Investment income 23,703 15,256 15,038
Purchased research and development (83,508) (25,072) -
Unallocated corporate and administrative expenses (12,222) (16,748) (14,593)
---------- ---------- ----------
EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES $ 219,996 $ 283,184 $ 275,894
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Computer services $ 42,639 $ 29,876 $ 21,437
Tax services 21,991 24,899 24,858
Financial services 2,992 2,277 -
Corporate 62 65 342
---------- ---------- ----------
TOTAL DEPRECIATION AND AMORTIZATION $ 67,684 $ 57,117 $ 46,637
========== ========== ==========
IDENTIFIABLE ASSETS:
Computer services $ 310,039 $ 208,469 $ 148,814
Tax services 103,099 104,585 176,727
Financial services 208,391 134,671 19,682
Corporate 456,509 626,979 472,603
---------- ---------- ----------
TOTAL ASSETS $1,078,038 $1,074,704 $ 817,826
========== ========== ==========
CAPITAL EXPENDITURES:
Computer services $ 99,690 $ 73,359 $ 40,903
Tax services 26,033 11,411 25,994
Financial services 2,135 615 19
Corporate 45 126 289
---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $ 127,903 $ 85,511 $ 67,205
========== ========== ==========
</TABLE>
<PAGE>
MANAGEMENT'S REPORT
The financial information in this Annual Report, including the
consolidated financial statements, has been prepared by the management of
H&R Block, Inc. Management believes that the information presented in the
Annual Report is consistent with the financial statements, that the
financial statements are prepared in accordance with generally accepted
accounting principles, and that the financial statements do not contain
material misstatements due to fraud or error. Where appropriate, the
financial statements reflect management's best estimates and judgments.
Management also is responsible for maintaining a system of internal
accounting controls with the objectives of providing reasonable assurance
that the Company's assets are safeguarded against material loss from
unauthorized use or disposition, and that authorized transactions are
properly recorded to permit the preparation of accurate financial data.
However, limitations exist in any system of internal controls based on a
recognition that the cost of the system should not exceed its benefits.
The Company believes its system of accounting controls, of which its
internal auditing function is an integral part, accomplishes the stated
objectives.
Deloitte & Touche LLP, independent accountants, audit H&R Block's
consolidated financial statements and issue an opinion thereon. Their
audits are made in accordance with generally accepted auditing standards,
and include an objective, independent review of the system of internal
controls to the extent necessary to express an opinion on the financial
statements.
The Audit Committee of the Board of Directors, composed of outside
directors, meets periodically with management, the independent accountants
and the internal auditor to review matters relating to the Company's annual
financial statements, internal audit activities, internal accounting
controls and non-audit services provided by the independent accountants.
The independent accountants and the internal auditor have full access to
the Audit Committee and meet with it, both with and without management
present, to discuss the scope and results of their audits including
internal controls, audit and financial matters.
/s/ Thomas M. Bloch
Thomas M. Bloch
President and Chief Executive Officer
/s/ William P. Anderson
William P. Anderson
Senior Vice President
and Chief Financial Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
H&R Block, Inc.
Kansas City, Missouri
We have audited the accompanying consolidated balance sheets of H&R
Block, Inc. and subsidiaries as of April 30, 1995 and 1994, and the
related consolidated statements of earnings and cash flows for each
of the three years in the period ended April 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of H&R Block, Inc. and
subsidiaries as of April 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended April 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial statements, the
Company changed its method of accounting for its marketable securities
during the year ended April 30, 1995.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Kansas City, Missouri
June 20, 1995
<PAGE>
Exhibit 21
SUBSIDIARIES OF H&R BLOCK, INC.
The following is a list of the direct and indirect
subsidiaries of H&R Block, Inc., a Missouri corporation. All
active subsidiaries do business under their corporate names
listed below or close derivatives thereof:
Jurisdiction in
Name which organized
- ---------------------------------------- ---------------
H&R Block Group, Inc.................... Delaware (1)
Block Investment Corporation............ Delaware (1)
HRB Management, Inc..................... Missouri (2)
H&R Block Tax Services, Inc............. Missouri (2)
H&R Block Eastern Tax Services, Inc..... Missouri (3)
H&R Block of Dallas, Inc................ Texas (3)
HRB Partners, Inc....................... Delaware (4)
H&R Block and Associates, L.P........... Delaware (5)
HRB Royalty, Inc........................ Delaware (3)
BWA Advertising, Inc.................... Missouri (3)
H&R Block Canada, Inc................... Canada (3)
H&R Block (Nova Scotia), Incorporated... Nova Scotia (6)
H&R Block (Guam), Inc................... Guam (3)
H&R Block Limited....................... New South Wales (7)
H&R Block The Income Tax People Limited. New Zealand (3)
Companion Insurance, Ltd................ Bermuda (3)
Block Financial Corporation............. Delaware (2)
Franchise Partner, Inc.................. Nevada (8)
Block Financial Services Company........ Utah (8)
Chach Key Corporation................... Utah (8)
Legal Knowledge Systems, Inc............ Pennsylvania (8)
Block Financial Executive Services
Corporation........................... Colorado (8)
MECA Sub - LFOD, Ltd.................... New Hampshire (8)
BFC Investment, Inc..................... Delaware (2)
CompuServe Incorporated................. Ohio (2)
CompuPlex Incorporated.................. Ohio (9)
CompuServe Systems Integration
Group Southwest, Inc.................. Texas (9)
CompuServe Canada Limited............... Canada (9)
CompuServe Consulting Services
(UK) Limited.......................... United Kingdom (9)
CompuServe Information Services
(UK) Limited.......................... United Kingdom (9)
CompuServe Information Services GMBH.... Germany (9)
CompuServe Information Services AG...... Switzerland (9)
CompuServe Information Systems SARL..... France (9)
CompuServe AB........................... Sweden (9)
CompuServe Information Services, B.V.... The Netherlands (9)
CompuServe International Pty, Ltd....... Australia (9)
Spry, Inc............................... Washington (2)
Spry Soft, Inc.......................... Washington (10)
Free Range Media, Inc................... Washington (11)
Access Technology, Inc.................. Massachusetts (12)
PM Industries, Inc...................... Kansas (12)
<PAGE>
- ------------------------------
Notes to Subsidiaries of H&R Block, Inc.:
(1) Wholly-owned subsidiary of H&R Block, Inc.
(2) Wholly-owned subsidiary of H&R Block Group, Inc.
(3) Wholly-owned subsidiary of H&R Block Tax Services, Inc.
(4) Wholly-owned subsidiary of H&R Block of Dallas, Inc.
(5) Limited partnership in which H&R Block Tax Services, Inc. is
a 1% general partner and HRB Partners, Inc. is a 99% limited
partner.
(6) Wholly-owned subsidiary of H&R Block Canada, Inc.
(7) Wholly-owned subsidiary of HRB Royalty, Inc.
(8) Wholly-owned subsidiary of Block Financial Corporation.
(9) Wholly-owned subsidiary of CompuServe Incorporated.
(10) Wholly-owned subsidiary of Spry, Inc.
(11) 50%-owned subsidiary of Spry, Inc.
(12) Wholly-owned subsidiary of HRB Management, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> APR-30-1995
<CASH> 90248
<SECURITIES> 263239
<RECEIVABLES> 267472
<ALLOWANCES> 7274
<INVENTORY> 0
<CURRENT-ASSETS> 635508
<PP&E> 454504
<DEPRECIATION> 227056
<TOTAL-ASSETS> 1078038
<CURRENT-LIABILITIES> 358711
<BONDS> 0
<COMMON> 1089
0
4
<OTHER-SE> 684772
<TOTAL-LIABILITY-AND-EQUITY> 1078038
<SALES> 0
<TOTAL-REVENUES> 1360318
<CGS> 0
<TOTAL-COSTS> 1140322<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 219996<F1>
<INCOME-TAX> 112737
<INCOME-CONTINUING> 107259<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107259<F1>
<EPS-PRIMARY> 1.01<F1>
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES A CHARGE TO EARNINGS OF $83,508 ($.79 PER SHARE) FOR PURCHASED
RESEARCH AND DEVELOPMENT IN CONNECTION WITH THE ACQUISITION OF SPRY, INC.
SUCH AMOUNT IS NOT DEDUCTIBLE FOR INCOME TAX PURPOSES.
</FN>
</TABLE>
