Redbox 2004 Annual Report Download - page 58

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COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
54
NOTE 17: CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Current Vulnerability Due to Supplier Concentrations:
Substantially all of the plush toys and other products dispensed from the entertainment services machines are produced
by foreign manufacturers. A majority of these purchases are made directly from manufacturers in China. We purchase our
other products indirectly from vendors who obtain a significant percentage of such products from foreign manufacturers. As a
result, we are subject to changes in governmental policies, the imposition of tariffs, import and export controls, transportation
delays and interruptions, political and economic disruptions and labor strikes, which could disrupt the supply of products
from such manufacturers and could result in substantially increased costs for certain products purchased by us which could
have a material adverse effect on our financial performance.
We currently conduct limited manufacturing operations and obtain key hardware components used in our coin-counting
and entertainment services machines from a limited number of suppliers. Although we use a limited number of suppliers, we
believe that other suppliers could provide similar equipment, which may require certain modifications or may have a longer
lead time from order date. Accordingly, a change in suppliers could cause a delay in manufacturing and a possible slow-down
of growth, which could have a materially adverse affect on future operating results.
NOTE 18: RELATED PARTY TRANSACTIONS
Randall J. Fagundo, President of our entertainment services subsidiary, is a member of a limited liability company
which has agreed to lease to Coinstar a 31,000 square foot building located in Louisville, Colorado. The terms of the
agreement provide for a ten year lease term, commencing March 1, 2003, at monthly rental payments ranging from $25,353
for the first year to $33,076 for the tenth year, together with additional payments in respect of the tenant’s proportionate share
of the maintenance and insurance costs and property tax assessments for the leased premises. We believe that the terms of
this lease are comparable to those that would be entered into between unrelated parties on an arms’ length basis.
Approximately $1.2 million of our accounts receivable balance is due from a related party of our e-payment subsidiary.
This receivable arose in the ordinary course of business and relates to the purchase of prepaid air time.