Redbox 2004 Annual Report Download - page 14

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authorities. Concerns about product safety may lead us to voluntarily recall or discontinue offering selected products and may
generally reduce consumers’ willingness to purchase the products distributed through our entertainment services business.
For example, a 2004 recall of certain toy jewelry resulted in consumer avoidance of bulk vending generally. We believe that
this development has adversely affected the bulk vending portion of our entertainment services business since the third
quarter of 2004. We cannot assure you that our toy or other entertainment services products may not experience defects or
errors after their production and sale to consumers. Such defects or errors could result in the rejection of our entertainment
services products by consumers, damage to our reputation, lost sales, potential inventory valuation write-downs, excess
inventory, diverted development resources and increased customer service and support costs, any of which could harm our
business. Any such errors, defects or recalls may not be covered by insurance or cause our insurance costs to increase in
future periods.
We may be subject to product liability claims if people or property are harmed by our products and services.
Some of the products we sell, especially through our entertainment services machines, may expose us to product
liability claims arising from personal injury, death or property damage. Any such product liability claim may result in adverse
publicity regarding us, our entertainment service machines and the products we sell. Even if we successfully defend ourselves
against this type of claim, we could be forced to spend a substantial amount of money in litigation expenses and our
management could be required to spend valuable time in defending against these claims. Our vendors may not indemnify us
against product liability. There is a risk that such claims or liabilities may exceed, or fall outside the scope of, our insurance
coverage and we cannot be certain that insurance will continue to be available to us on economically reasonable terms, or at
all. Any imposition of product liability could harm our business, financial condition and operating results.
Our stock price has been and may continue to be volatile.
Our stock price has fluctuated substantially since our initial public offering in July 1997. For example, during the last
twelve months, the sale price of our common stock has ranged from $14.87 to $27.85 per share. The market price of our
stock could decline from current levels or continue to fluctuate. The market price of our stock may be significantly affected
by the following factors:
• the termination, modification or non-renewal of one or more retail partner relationships,
• operating results below market expectations and changes in, or our failure to meet, financial estimates of securities
analysts or our own guidance,
• trends and fluctuations in the use of our coin-counting and entertainment services machines,
• period-to-period fluctuations in our financial results,
• release of analyst reports,
• announcements regarding the establishment, modification or termination of relationships regarding the development
of new products and services,
• announcements of technological innovations or new products or services by us or our competitors,
• industry developments, and
• economic or other external factors.
In addition, the securities markets have experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market fluctuations may also seriously harm the market price of our
common stock.
Acquisitions involve risks that could harm business and impair our ability to realize potential benefits from such
acquisitions.
As part of our business strategy, we have in the past sought and may in the future seek to acquire or invest in
businesses, products or technologies that we feel could complement or expand our business. We may be unable to adequately
address the financial, legal and operational risks raised by acquisitions, which could harm our business and prevent us from
realizing the projected benefits of the acquisitions. Further, the evaluation and negotiation of potential acquisitions, as well as
the integration of an acquired business, will divert management time and other resources. In addition, we cannot assure you