H&R BlockInc. on Thursday warned that its committed lines of credit may not be sufficient to meet its financing needs, and said it may have to issue additional equity and debt securities as a result.
The Kansas City, Mo.-based tax-preparation giant said in its second-quarter report with the Securities and Exchange Commission that it doesn't expect it will be in compliance with an Office of Thrift Supervision order.
H&R Block is required to meet a 3% minimum ration of adjusted tangible capital to adjusted total assets, as defined by the OTS, an office of the Department of the Treasury that regulates savings and loans institutions. The company fell below that level at April 30 and told the OTS in a revised capital plan that it expected to meet the ratio by April 2008.
In the risk factor section of its quarterly report, H&R Block disclosed that it doesn't expect to meet the minimum ratio by April, and said the OTS could require the company to pay civil monetary penalties and sell assets.
If H&R Block doesn't cure the deficiencies and if its operating results continue to below its revised capital plan, "a resulting failure could impair our ability to repurchase shares of our common stock, acquire businesses or pay dividends," the company said.
H&R Block reported that its second-quarter net loss widened to $502.3 million, or $1.55 a share, from a loss of $156.5 million, or 49 cents a share, in the second quarter of 2006, amid charges related to the dismantling of its Option One Mortgage Unit.