Archive for Wednesday, August 25, 2004

H&R Block blames lending for losses

K.C. tax preparer reports $44.1M drop in profits

August 25, 2004


— H&R; Block Inc. reported big losses for its first quarter, saying its mortgage business was hurt by interest rate gains.

But the company said it was standing by its earlier expectations of earning between $4 and $4.25 per share for the year.

For the quarter ending July 31, the world's largest tax preparer said it lost $44.1 million, or 26 cents per share, compared to earnings of $5.2 million, or 3 cents per share, during the same period last year.

Analysts polled by Thomson First Call had expected a loss of 5 cents per share on revenue of $525 million.

H&R; Block reported revenue of $482.7 million, a 2.5 percent decrease from $495.3 million in the year-ago period.

The company put the most focus for its woes on its mortgage lending subsidiaries, Option One Mortgage Corp. and H&R; Block Mortgage Corp.

The two companies reported combined earnings of $93.5 million, a 42.9 percent drop from a year ago when the division reported earnings of $163.8 million. Revenues for the quarter declined from $292.6 million to $268.1 million.

H&R; Block said that while it produced a record $6.8 billion in loans for the quarter, loan originations were down 7.8 percent as customers shied away in the face of rising interest rates.

Chairman and CEO Mark Ernst said he wasn't too worried by the numbers and expected the company to hit its target earnings figures for the year.

In tax services, the company reported a pretax loss of $113 million, compared to the $99.6 million loss from a year ago.

Officials said that while the company saw tax services revenue increase from $46 million to $50.4 million during the quarter, it had to pay $9 million to acquire former major franchise territories during the company's second quarter of last year. It also is ramping up to open more than 500 tax offices and add 400 tax kiosks to the 500 kiosks it already has in Wal-Mart locations.

In late trading on the New York Stock Exchange, H&R; Block shares were up $1.43 per share to $51.40.

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