Kansas City, Mo. ? H&R Block Inc. reported a 14 percent drop in third quarter earnings Thursday, but beat expectations as an increase in early tax clients provided the company with record revenues.

For the quarter ending Jan. 31, the Kansas City, Mo.-based tax preparer reported earnings of $91.7 million, or 55 cents per share, compared to income of $106.7 million, or 59 cents per share, during the same period a year ago.

The company said it had $1.03 billion in revenue during the quarter, compared to revenue of $977 million in 2004. Analysts surveyed by Thomson First Call had expected profits of 48 cents per share on revenues of $997.2 million.

The third-quarter results included a charge of $12.5 million, or 5 cents per share, to account for stock-based compensation, up from $6.8 million during the year-ago period. The results also include $16.7 million the company received in a litigation payment.

The company’s tax business saw a 3.7 percent increase in tax clients during the quarter, a 4 percent increase over the previous year.