H&R Block Reports $85.5 Million 4Q Loss

Thursday, June 21st 2007, 7:16 am

By: News On 6

KANSAS CITY, Mo. (AP) _ H&R Block Inc. swung to a fourth-quarter loss Thursday as the continuing struggles of its mortgage lending arm offset higher revenue in its tax and financial services divisions.

The company reported losing $85.5 million, or 26 cents per share, during the February-April period, which is when the nation's largest tax preparer sees the majority of its revenue. By comparison, the company earned $587.5 million, or $1.79, during the same period a year ago.

Revenues during the quarter grew 7.9 percent from about $2.18 billion to about $2.35 billion.

H&R Block announced in April that it will sell its Option One Mortgage Corp. to a subsidiary of private equity firm Cerberus Capital Management LP by October 31. The price won't be final until the sale closes but it's expected the company will sell Option One at a discount.

Option One, which lends money to people with poor credit, has suffered as the so-called subprime market has been rocked as rising interest rates and declining home prices has forced more borrowers to default on their loans.

The company said it recorded a quarterly loss of $676.8 million, or $2.07 per share, on discontinued operations, which includes Option One as well as several smaller non-mortgage businesses.

Not including those operations, the company said it earned $591.2 million, or $1.81 per share. By comparison, earnings from continuing operations during the same period a year ago totaled $541.7 million, or $1.63 per share.

Analysts surveyed by Thomson Financial expected earnings of $1.88 on $2.44 billion in revenue.

The company's tax division reported $1.91 billion in revenue, up 8.2 percent from $1.76 billion during the same period last year.

H&R Block's consumer financial services, which includes its year-old bank, saw fourth-quarter revenues jump almost 57 percent from $76.8 million to $120.2 million.

For the year, the company said it lost $433.6 million, or $1.34 per share, compared with earnings of $490.4 million, or $1.49 per share, during the previous year.

H&R Block reported an $808 million, or $2.48 per share, loss on discontinued operations. Not including those operations, the company said it earned $374.3 million, or $1.15 per share, for the year, up 26 percent from $297.5 million, or 89 cents per share, the year before.

The 2006 earnings included a $42.5 million after-tax charge for settling various lawsuits and other legal expenses.

Revenue for the year increased 12 percent from $3.57 billion to $4.02 billion.

Analysts were expecting annual earnings of $1.17 per share on $4.5 billion in revenue.

Looking ahead to the current fiscal year, the company said it expected earnings of between $1.25 and $1.45 per share, below analysts' expectation of $1.47 per share. H&R Block said it expected Option One and other discontinued operations to continue posting modest losses during the first two quarters.