NEW YORK – H&R Block Inc. (HRB), the world's largest tax services company, on Tuesday posted a quarterly loss because of decreased income in its mortgage business and cut its outlook for the year.
The company reported a net loss of $52.2 million, or 32 cents a share, for the fiscal second quarter ended Oct. 31, compared with a profit of $10.4 million, or 6 cents a share, a year earlier.
An asset write-down in investment services and corporate development spending associated with new business initiatives also contributed to the loss, the company said in a statement.
Besides preparing taxes and providing financial advice, H&R Block, based in Kansas City (search), Missouri, offers investment and mortgage products and services.
"The competitive environment in the mortgage industry limited our pricing flexibility in the face of rising interest rates in the secondary market," Chairman and Chief Executive Mark Ernst (search) said in a statement.
Historically, H&R Block (search) has reported second-quarter losses because of the seasonal nature of its tax and accounting businesses, although the company reported its first-ever second-quarter profit a year ago, helped by a strong performance in its mortgage operations.
The company said it would begin deploying service enhancements to its mortgage broker clients during the fourth quarter, which it believes will position the business for a higher rate environment.
But because of the current environment and investments in new technology, the company cut its fiscal-year earnings forecast to a range of $3.50 to $4.00 per share.
The company had been expected to earn $3.99 a share in fiscal year 2005, according to Reuters Estimates.
Mortgages Drag
Mortgage services, which include Option One Mortgage Corp. and H&R Block Mortgage Corp., reported pretax income of $106.2 million, down 42.3 percent from a year ago.
Investment services reported a pretax loss of $24.6 million, wider by $9.2 million compared with last year's $15.3 million loss. The loss included a $6 million write-down of a branch office facility.
The company's stock changed hands at $46.90 in after-hours trading on the Inet electronic brokerage, down 3.1 percent from the New York Stock Exchange close of $48.45.
The share price drop came even as H&R Block's board of directors declared the company's 169th consecutive quarterly dividend.
A quarterly cash dividend of 22 cents per share will be payable Jan. 3 to shareholders of record Dec. 13.
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