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H&R Block Inc., the nation’s largest tax preparer, said Monday it swung to a fourth-quarter profit, helped by a record-setting tax season and the sale of its troubled mortgage arm.

The Kansas City-based company earned $543.6 million, or $1.66 per share, in the three months ended April 30 compared with a loss of $85.6 million, or 26 cents per share, during the same period a year ago.

Excluding discontinued operations, including its Option One Mortgage Corp. subsidiary, the company said it earned $691.1 million, or $2.11 per share, compared with $591.2 million, or $1.81 per share, from continuing operations a year ago.

Discontinued operations contributed a loss of $147.6 million, or 45 cents per share, compared to a loss of $676.8 million, or $2.07 per share, during the fourth quarter of 2007.

The losses included the company adding about $203 million to its reserves for repurchasing defaulted mortgage loans, writing down the value of residual interests and the costs incurred from the April 30 sale of Option One to an affiliate of billionaire investor Wilbur Ross.

H&R Block (HRB) said revenue during the quarter rose 11% to $2.6 billion from $2.3 billion a year ago. It had a 1.9% increase in core customers using the company’s offices to file their income tax returns in the latest quarter.

Analysts surveyed by Thomson Financial expected adjusted earnings of $2.03 per share on $2.5 billion in revenue.

The company said it expects to earn between $1.60 and $1.70 per share for continuing operations in fiscal year 2009, which is above analysts’ predictions of $1.58 per share.

"While we are not providing earnings guidance beyond fiscal 2009, we are confident that for the three-year horizon through fiscal 2011, we can realize significant gains in earnings per share through unit growth, greater efficiency in our tax and other operations, and capital deployment, rather than relying solely on annual price increases for growth," Interim Chief Executive Officer Alan Bennett said in a release.

Bennett was named CEO last fall after former Chairman and Chief Executive Mark Ernst stepped down, ousted by the election of dissident shareholder Richard Breeden and two others to the board.

For the full year, the company said it lost $308.6 million, or 94 cents per share, compared with a loss of $433.7 million, or $1.33 per share, in 2007.

Annual revenues rose 10% to $4.4 billion from $4.0 billion a year earlier.

Analysts were expecting annual earnings of $1.35 per share on $4.3 billion in revenue. 

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