HR Block 2014 Annual Report Download - page 24

16 2014 Form 10-K | H&R Block, Inc.
changes to tax laws and tax forms can result in condensed development cycles for our tax service and product offerings
because our clients expect high levels of accuracy and a timely launch of such offerings to prepare and file their taxes
by the tax filing deadline and, in turn, receive any tax refund amounts on a timely basis. In addition, governmental
authorities continually change their processes for accepting tax filings and related tax forms. Any changes in
governmental regulations and processes that affect how we provide services and products to our clients may require
us to make corresponding changes to our client service systems and procedures. Furthermore, any unanticipated
changes in governmental processes for accepting tax filings and related forms, or the ability of taxing authorities to
accept electronic tax return filings, may result in delays in processing our clients' tax filings, or delays in tax authorities
accepting electronic tax return filings, and, in turn, delay any tax refund amounts to which such clients may be entitled.
From time to time, we review and enhance our quality controls for assuring accurate tax returns that we prepare, but
there can be no assurance that we will be able to prevent all inaccuracies. Any significant delays in launching our tax
service and product offerings, changes in government regulations or processes that affect how we provide such
offerings to our clients, significant problems with such offerings or the manner in which we provide them to our clients
may harm our revenue, results of operations and reputation.
If we encounter development challenges or discover errors in our systems, services or products it may cause us to
delay or suspend our offerings. Any major defects or launch delays, or failure to anticipate changes in governmental
processes accepting tax filings and related forms, may lead to loss of clients and revenue, negative publicity, client
and employee dissatisfaction, a deterioration in our business relationships with our franchisees, reduced retailer shelf
space and promotions, exposure to litigation and increased operating expenses. Any of the risks described above
could have a material adverse effect on our business and our consolidated financial position, results of operations
and cash flows.
We rely on a single vendor or a limited number of vendors to provide certain key services or products, and the
inability of these key vendors to meet our needs could have a material adverse effect on our business and our
consolidated financial position, results of operations and cash flows.
Historically we have contracted, and in the future will likely continue to contract, with a single vendor or a limited
number of vendors to provide certain key services or products for our tax, financial and other services and products.
In certain instances, we are vulnerable to vendor error, service inefficiencies, service interruptions or service delays;
however, our sensitivity to any of these issues may be heightened (1) due to the seasonality of our business, (2) with
respect to any vendor that we utilize for the provision of any such product or service that has specialized expertise,
(3) with respect to any vendor which is a sole provider, or (4) with respect to any vendor whose indemnification
obligations are limited or who does not have the financial capacity to satisfy its indemnification obligations. Some of
our vendors are subject to the oversight of regulatory bodies and, as a result, our product offerings may be affected
by the actions or decisions of such regulatory bodies. In the event of vendor error, or if a particular vendor is unable
to meet our needs in a timely manner or if the services or products provided by such a vendor are terminated or
otherwise delayed because the vendor fails to perform adequately, is no longer in business, experiences shortages,
or discontinues a certain product or service that we utilize, or if we are not able to develop alternative sources for
these services and products quickly and cost-effectively, it could result in a material and adverse impact on our business
and our consolidated financial position, results of operations and cash flows.
The highly seasonal nature of our business presents financial risks and operational challenges, which, if we become
unable to satisfactorily address, could materially affect our business and our consolidated financial position, results
of operations and cash flows.
Our business is highly seasonal, with the substantial portion of our revenue earned in the last quarter of our fiscal
year. The concentration of our revenue-generating activity during this relatively short period presents a number of
challenges for us, including but not limited to: (1) cash and resource management during the first nine months of our
fiscal year, when we generally operate at a loss and incur fixed costs and costs of preparing for the upcoming tax
season; (2) ensuring compliance with financial covenants under our debt agreements, particularly if the timing of our
revenue generation deviates from this seasonal period; (3) the availability of a seasonal workforce, including tax
professionals, and our ability to hire, train, and supervise these employees; (4) responding to changes in competitive
conditions, including marketing, pricing, and new product offerings, which could affect our position during the tax
season; (5) disruptions in a tax season, including any customer dissatisfaction issues, which may not be timely
discovered; and (6) ensuring optimal uninterrupted operations and service delivery during peak season. If we