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H&R Block Sees Wider Third-Quarter Loss On Loan Charges

CNBC.com
Wednesday, 14 Mar 2007 | 10:43 AM ET

H&R Block said its fiscal third-quarter loss was larger than first reported because of a decision to write down the value of its Option One Mortgage business, which is up for sale.

Subprime Lender
An interview with Mark Ernst, H&R Block CEO

Still, Chairman and Chief Executive Mark Ernst told CNBC that he remains optimistic that the unit remains attractive to buyers.

In a Form 10-Q filed with the Securities and Exchange Commission Wednesday, the nation's largest tax preparer said a $29.2 million reduction in carrying value for the mortgage business pushed its quarterly loss up by $15.5 million, to $60.3 million or 18 cents a share.

H&R Block initially reported a loss of $44.7 million, or 14 cents a share, in February.

"In light of the extreme volatility in the mortgage market, we conducted a rigorous review of the carrying value of all the assets of our Option One Mortgage Corporation subsidiary," Ernst said, in a written statement. "We continue to believe that the net asset value in this business is appropriate and prudent."

During his CNBC interview, Ernst said the write-down was not significant relative to the unit's $1.3 billion total value. He also said that the unit's business is strong due to steps taken a year ago.

"We believe high quality lenders like Option One are going to fare very well in this environment and come out the other end as a stronger business," Ernst said. "Throughout this process, we have found there are very sophisticated investors who recognize that as a reality and are very interested in the business."

Ernst said he plans to update the market on its progress in selling the unit later this month.

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