H&R Block delayed its Form 10-Q filing for its fiscal 2008 second quarter after hiring a new auditor, but reported a wider loss as the tax prep giant continues to experience fallout from its mortgage business.

The company reported a net loss of $502.3 million, or $1.55 per share, for the quarter, compared with a loss of $156.5 million, or $0.49 per share, in the year-ago period. Nearly all of the wider loss was due to Block's discontinued subprime mortgage business.

Last week, Block announced that a deal it struck in April with Cerberus Capital Management to buy its troubled Option One Mortgage subsidiary had been called off. Block said it would close all of Option One's loan origination activities and pursue the sale of its loan-servicing business. The net loss from discontinued operations was $366.2 million, or $1.13 per share, for the quarter, compared to a loss of $35.5 million, or $0.11 per share, in the year-ago quarter.

Block filed a report with the Securities and Exchange Commission explaining its inability to file a Form 10-Q for the quarter within the initial 40-day required period. Block engaged Deloitte & Touche as its independent auditor on Oct. 15. Because it hired Deloitte at such a late stage in the quarter, which ended Oct. 31, 2007, Block and Deloitte were not able to complete the transition work in time for the initial filing deadline.

Tax services took a hit last quarter at Block due to an incremental $12 million write-off of refund anticipation loan receivables and the related collection expenses. Block blamed the write-off on increased withholding of refunds by the Internal Revenue Service after the recent introduction of its enhanced individual taxpayer fraud detection system.

Block did see growth in business services from its RSM McGladrey business, however, with revenues rising 5 percent.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access