Dissident shareholders won three board seats at
H&R Block said Richard Breeden and his colleagues Robert Gerard and L. Edward Shaw were elected to the company's board, according to preliminary results from its annual shareholder meeting on Thursday.
Breeden Partners wants the company to consider several strategic options including "stopping the bleeding" at H&R Block's subprime mortgage business, Option One. The shareholder also wants H&R Block to consider selling its securities brokerage business and banking arm, among other things.
Breeden, a former
Securities and Exchange Commission
chief, owns approximately 1.8% shares of H&R Block.
H&R Block agreed to sell Option One back in April to
private-equity outfit Cerberus Capital Management. But as market conditions significantly worsened this summer as housing prices fell and the secondary market for mortgage securities collapsed, investors feared the worst for the deal.
Indeed, during a conference call last week to discuss its fiscal first quarter results, the Kansas City, Mo.-based tax services provider said it expects to shut down the mortgage origination operations at its Option One unit after Cerberus indicated it's interested only in the mortgage-servicing unit.
H&R Block said it will be "responsible for divesting or winding down Option One's remaining origination business, which would be pursued immediately."
Block is also trying to get Cerberus to agree to waive conditions that set minimum loan fundings and warehouse credit lines at closing.
The decision could lead to a further reduction in the price Cerberus will pay for Option One, as well as further layoffs. The company said that it has already cut 615 originations jobs at Option One and that about 400 remain.
The news came as H&R Block reported a steep loss for the quarter. Its net loss from continuing operations was $109.8 million, or 34 cents a share, compared with a loss of $117.8 million, or 36 cents a share, in the year-earlier period.
H&R Block's discontinued operations includes Option One, its retail lending franchise H&R Block Mortgage -- shuttered this spring -- and two other small non-mortgage related businesses.
The company also narrowed its fiscal 2008 earnings guidance for its continuing operations to a range of $1.30 to $1.45 a share, from the previous $1.25-$1.45.
As of last week, at least five proxy firms had endorsed Breeden's nominations and call for change.
"We look forward to the commitment and experience of our new directors to help achieve our common goal of enhancing value for all H&R Block shareholders," said Mark Ernst, chairman and CEO of H&R Block.
Shares of the company fell 5 cents to $19.99 on Thursday.