Tuesday, November 23, 2004

H&R Block Posts Fiscal 2Q Loss Amid Lower Mortgage Income

Smart Money

KANSAS CITY, Mo. -- H&R Block Inc. (HRB) swung to a net loss in its fiscal second quarter amid lower income from its mortgage business. The company also cut its full-year earnings forecast, sending its shares downward in after-hours trading.

For the quarter ended Oct. 31, the tax preparer and mortgage company late Tuesday reported a net loss of $52.2 million, or 32 cents a share, compared with net income of $10.4 million, or six cents a share, a year earlier.

The mean estimate of analysts surveyed by Thomson First Call was for a loss of 16 cents a share.

Revenue slipped 5.2% to $539.3 million from $568.9 million.

Tax services revenue increased 12% to $74.1 million. Revenue from H&R Block's mortgage-services segment fell 17% to $281.6 million. Revenue from the company's business-services segment rose 18% to $129 million, while revenue from investment services edged up 2% to $53.8 million.

Income from mortgage services plunged 42% to $106.2 million.

H&R Block said an asset write-down in investment services and corporate-development spending associated with new business initiatives also hurt its earnings.

The company said that historically it has reported second-quarter losses because of the seasonal nature of its tax and accounting businesses.

"The competitive environment in the mortgage industry limited our pricing flexibility in the face of rising interest rates in the secondary market," Mark A. Ernst, H&R Block's chairman and chief executive, said in a prepared statement.

Citing the "current mortgage pricing environment" as well as technology-related investments, H&R Block said it now expects fiscal full-year earnings of $3.50 to $4 a share. The company in June had projected earnings of $4 to $4.25 a share.

H&R Block reported net income of $697.9 million, or $3.86 a share, a year earlier.

The company reported its results after the market close. As of 4 p.m. EST in New York Stock Exchange composite trading, shares of H&R Block were down 15 cents at $48.45.

In after-hours trading, H&R Block's shares fell to $46.55 shortly after 4:40 p.m. EST, according to INET.

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