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September 5, 2009

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Tax agent faces leaner returns in first quarter

TAX agent H&R Block Inc said yesterday that it lost a larger-than-expected US$133.6 million in the first quarter, about the same as a year ago, as acquisition expenses and other costs offset slightly higher revenues.

America's largest tax preparer typically records losses in its first two fiscal quarters outside the normal tax season.

The Kansas City-based company said its loss amounted to 40 cents per share. It lost US$132.7 million, or 41 cents per share, in the same quarter a year ago.

Not including discontinuing operations, the company said it would have lost 39 cents per share, slightly above the loss of 37 cents per share expected by analysts.

Revenue edged up 1.3 percent to US$275.5 million from US$271.9 million but fell short of analysts' expectations of US$280 million.

But its network of around 13,000 retail offices prepared 5.8 percent fewer returns this tax season.

The company said revenues in its tax division rose almost 8 percent, thanks to tax return business in Australia. But expenses rose as well, including US$7.4 million from last year's acquisition of franchisee offices in Texas, Oklahoma and Arkansas, US$3.5 million in severance expenses and US$2.9 million in technology upgrades in preparation for next year's tax season.

Revenues for the company's business services division increased 1.7 percent and recorded a US$1.3 million profit versus a US$295,000 loss a year ago. H&R Block's corporate division, which includes the H&R Block Bank, said its losses improved because of better performance of its mortgage loan securitization portfolio. The company still set aside an extra US$7.6 million to cover potential losses.

The company said it still expects annual earnings of between US$1.60 and US$1.80 per share. Analysts are expecting US$1.65 per share on US$4.17 billion in revenue.


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