H&R Block reported results for its fiscal fourth quarter today (that would be the first quarter of 2007 for the rest of us) — and said it lost $86 million because of woes at its Option One Mortgage lending unit. Per Bloomberg:

Net loss for the quarter ended April 30 was $85.6 million, or 26 cents a share, compared with a profit of $588 million, or $1.77, a year earlier, Kansas City, Missouri-based H&R Block said today in a statement. Profit excluding the mortgage unit was $591 million, or $1.81 a share, missing the $1.88 average estimate of seven analysts compiled by Bloomberg. Chief Executive Officer Mark Ernst … agreed in April to sell Option One Mortgage Corp. to hedge-fund manager Cerberus Capital Management LP. While Cerberus may pay as much as $800 million, the final price is tied to Option One’s performance until the sale is completed, which may take until October, and the writedown forced Ernst to put off a planned stock buyback.

The company also provided guidance for its fiscal 2008, and said that it expects the Option One business to continue to exert “modest” negative pressure on earnings for the next two quarters. For now, it appears that simply being forced to keep Option One on the books is doing enough damage to the balance sheet at H&R Block:

H&R Block won’t be able to buy back any shares until the fiscal fourth quarter of 2008 because charges tied to Option One depleted its capital, Chief Financial Officer Bill Trubeck said. The company had promised to use about $700 million from the sale to buy back shares. The charges mean H&R Block’s capital has fallen below regulatory requirements, Trubeck said. The firm is negotiating with the Treasury’s Office of Thrift Supervision on capital requirements and expects the regulator will allow share repurchases in the fourth quarter, he said.