H&R Block: Losses Soar on Option One Debacle
H&R Block, Inc., the nation's largest tax preparer, said this morning in a filing with the Securities and Exchange Commission that it will report surprisingly large losses for the quarter ended October 31, 2007 due to problems at its Option One Mortgage Company franchise -- once one of the largest subprime lenders in the United States. The company said it expects to report a net loss for the second quarter of fiscal year 2008 of $502.3 million, compared with a loss of $156.5 million in the year-ago period. H&R Block said it was filing its earnings report late, pointing to its decision to change accounting firms. Of the total loss, H&R Block said that $366.2 million, or $1.13 per share, resulted from discontinued operations compared to a loss of $35.5 million one year ago. The company has reported Option One as a discontinued operation for most of the duration of 2007. That loss includes a $252 million net loss on sale of $3.0 billion in whole mortgage loans by the company or related mortgage trusts, H&R Block said. Earlier this month, the tax preparer said that a deal to sell its Option One mortgage franchise to Cerberus Capital Management, L.P. fell apart, and that it would shutter the lender's origination platform while looking for a buyer for the company's mortgage servicing operations.