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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 25, 1997
H&R BLOCK, INC.
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(Exact name of registrant as specified in its charter)
Missouri
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(State or other jurisdiction of incorporation or organization)
1-6089 44-0607856
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(Commission File Number) (I.R.S. Employer Identification No.)
4400 Main Street, Kansas City, Missouri 64111
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(Address of principal executive office, including zip code)
(816) 753-6900
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(Registrant's telephone number, including area code)
Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
The Registrant is filing as part of this Report pro forma financial
information reflecting the exchange of the outstanding shares of common stock
of CompuServe Corporation beneficially owned by the Registrant for shares of
WorldCom, Inc. stock pursuant to the transaction reported in the Registrant's
Current Report on Form 8-K dated September 7, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma condensed consolidated balance sheet of
H&R Block, Inc. as of July 31, 1997 is filed as part of this
Current Report on Form 8-K.
(c) EXHIBITS.
Not Applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
H&R BLOCK, INC.
By:/s/ Frank L. Salizzoni
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Frank L. Salizzoni
President and Chief Executive Officer
Date: September 25, 1997
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H&R BLOCK, INC.
INDEX TO PRO FORMA FINANCIAL STATEMENT
<TABLE>
<CAPTION>
Page
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<S> <C>
Description of Transaction............................................. F-2
Pro Forma Financial Statement Assumptions.............................. F-3
Pro Forma Condensed Consolidated Balance Sheet as of July 31, 1997..... F-4
Notes to Pro Forma Consolidated Balance Sheet.......................... F-5
</TABLE>
F-1
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H&R BLOCK, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DESCRIPTION OF TRANSACTION
On September 7, 1997, the Registrant entered into an Agreement and Plan of
Merger (the "Merger Agreement") with H&R Block Group, Inc., a Delaware
corporation and a wholly owned subsidiary of the Registrant ("Group"),
Compuserve Corporation, a Delaware corporation and a majority-owned subsidiary
of Group ("CompuServe"), WorldCom, Inc., a Georgia corporation ("WorldCom"),
and Walnut Acquisition Company, L.L.C., a Delaware limited liability company
which is wholly owned by WorldCom ("WAC"). Pursuant to the Merger Agreement,
WorldCom would acquire CompuServe through a merger of WAC with and into
CompuServe (the "Merger") in accordance with the laws of the state of Delaware
and the provisions of the Merger Agreement. Pursuant to the Merger Agreement,
at the Effective Time (as defined in the Merger Agreement), each of the
CompuServe Common Shares (as defined in the Merger Agreement) outstanding as of
the Effective Time shall be converted into the right to receive, and there
shall be paid and issued as provided in the Merger Agreement in exchange for
each of the CompuServe Common Shares, 0.40625 of a share of WorldCom Common
Stock (as defined in the Merger Agreement), subject to adjustment as provided
in the Merger Agreement. Consummation of the Merger is subject to the
satisfaction of certain conditions, including, among others, the expiration or
termination of any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, any foreign competition law or
similar law, the receipt of other required regulatory approvals, and the
absence of certain material adverse changes. Consummation of the Merger is
also subject to the approval and adoption of the Merger Agreement by the
requisite number of CompuServe Common Shares. The Registrant has agreed to
vote all of the shares directly or indirectly owned by it, which number of
shares is sufficient to approve the Merger Agreement and the Merger. The
closing of the Merger is expected to occur as soon as practicable after the
satisfaction of all the conditions set forth in the Merger Agreement. The
description of the Merger Agreement contained herein is qualified in its
entirety by reference to the Merger Agreement, a copy of which was included as
Exhibit 2.1 to the Current Report on Form 8-K dated September 7, 1997, and is
incorporated herein by reference.
F-2
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H&R BLOCK, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
PRO FORMA FINANCIAL STATEMENT ASSUMPTIONS
The following pro forma condensed consolidated balance sheet of the Registrant
is as of July 31, 1997 and assumes that a subsidiary of WorldCom acquired
CompuServe on such date. Since this pro forma financial statement is as of
July 31 and is based on preliminary information related to the Merger, the
actual adjustments will differ from those presented herein.
The pro forma condensed consolidated balance sheet assumes that: (i)
the market price per share of WorldCom stock on the consummation date is
$31.50 per share, which is the closing price of such stock on the last business
day prior to the public announcement of the Merger Agreement, (ii) selling
expenses incurred by the Registrant amount to $10 million, and (iii) the
effective tax rate with respect to this transaction is 58%, which represents
the Registrant's liability for Federal, state and local income taxes (including
the liability for Federal, state and local income taxes on behalf of the
minority interest ownership) and certain adjustments made to the tax bases of
CompuServe's assets and liabilities.
F-3
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H&R BLOCK, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JULY 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Consolidated Adjustments Pro Forma
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<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 303,920 $ (70,600)(1) $ 208,681
(7,500)(2)
(10,000)(4)
(7,139)(5)
Marketable securities 20,269 - 20,269
Credit card loans, net 239,913 - 239,913
Mortgage loans held for sale, net 221,911 - 221,911
Other receivables, net 56,915 - 56,915
Prepaid expenses and other
current assets 84,299 - 84,299
Net assets of discontinued operations 517,928 7,500 (2) -
29,444 (3)
(554,872)(4)
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Total current assets 1,445,155 (613,167) 831,988
INVESTMENTS AND OTHER ASSETS:
Investments in marketable securities 35,582 949,528 (4) 985,110
Excess of cost over fair value
of net tangible assets acquired, net 260,991 - 260,991
Other 68,552 - 68,552
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365,125 949,528 1,314,653
PROPERTY AND EQUIPMENT, net 66,082 - 66,082
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$1,876,362 $ 336,361 $2,212,723
========== ========= ==========
CURRENT LIABILITIES:
Notes payable $ 657,209 - $ 657,209
Accounts payable, accrued expenses
and deposits 152,103 (70,600)(1) 81,503
Accrued salaries, wages and
payroll taxes 10,662 - 10,662
Accrued taxes on earnings 74,640 29,444 (3) 327,184
223,100 (4)
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Total current liabilities 894,614 181,944 1,076,558
OTHER NONCURRENT LIABILITIES 40,098 (7,139)(5) 32,959
STOCKHOLDERS' EQUITY:
Common stock 1,089 - 1,089
Convertible preferred stock 4 - 4
Additional paid-in capital 501,528 501,528
Retained earnings 625,479 161,556 (4) 787,035
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1,128,100 165,640 1,289,656
Less cost of common stock in treasury 186,450 - 186,450
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941,650 165,640 1,103,206
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$1,876,362 $ 336,361 $2,212,723
========== ========= ==========
</TABLE>
The accompanying notes are an intergral part of this pro forma financial
statement.
F-4
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H&R BLOCK, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JULY 31, 1997
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA AND THE EXCHANGE RATIO)
(1) Adjustment is made to reflect the payment of the intercompany balance owed
to CompuServe.
(2) The Merger Agreement provides that CompuServe may grant bonuses in an
aggregate amount not in excess of $15,000 to its key employees in order
to encourage such employees to continue their employment from the date of
the Merger Agreement until the closing date of the transaction. One-half
of the total bonus will be paid by the Registrant by means of a capital
contribution of $7,500 from the Registrant to CompuServe. Adjustment is
made to reflect this capital contribution.
(3) Adjustment is made to reflect a capital contribution by the Registrant to
CompuServe for the payment to be made by the Registrant on behalf of
CompuServe for CompuServe's net deferred tax liability at July 31, 1997.
(4) Adjustment is made to reflect the proceeds from the sale of 74,200 shares
of CompuServe common stock to a subsidiary of WorldCom on July 31,
1997, and record the related gain, as calculated below:
<TABLE>
<S> <C>
Number of shares of CompuServe common stock
owned by the Registrant 74,200
Exchange ratio 0.40625
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Number of shares of WorldCom stock
to be received 30,143.75
Assumed market market price per share of
WorldCom common stock $ 31.50
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Proceeds from the sale $ 949,528
Net assets of discontinued operations $ 554,872
Estimated transaction expenses $ 10,000
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Estimated pretax gain on sale $ 384,656
Estimated provision for income taxes (at 58%) $ 223,100
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Estimated net gain on sale $ 161,556
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</TABLE>
(5) Certain CompuServe employees participate in the Registrant's deferred
compensation plans for executives under which eligible participants
defer portions of their compensation, receive matching of deferred
salaries and accrue earnings on the deferred amounts. According to the
provisions of the plans, in the event of a change in control of a
subsidiary of the Registrant, participants then currently employed by such
subsidiary are immediately 100% vested in their account balances, and the
account balances are distributed via lump-sum payments to those
participants within 90 days after the change in control. Adjustment is
made to reflect the payout of the Registrant's obligation, which was fully
accrued at July 31, 1997, to participating CompuServe employees as a
result of the transaction with WorldCom.
F-5
