Redbox 2005 Annual Report Download - page 17

machines. For example, in Washington state, skill-crane machines are subject to the licensing requirements of the
Washington State Gambling Commission. There can be no assurance that we will be granted all necessary
permits or approvals in the future or that current permits and approvals will be renewed. Given the unique nature
of our business and new products and services we may develop in the future, the application of various laws and
regulations to our business is or in the future may be uncertain.
Recall of any of the products dispensed by our entertainment services machines or by the entertainment
services industry generally could adversely affect our entertainment services business.
Our entertainment services machines, and the entertainment services industry generally, are subject to
regulation by the Consumer Product Safety Commission and similar state and international regulatory authorities.
The toys and other products dispensed from our entertainment services machines could be subject to involuntary
recalls and other actions by such authorities. Concerns about product safety may lead us to voluntarily recall or
discontinue offering selected products. Defects in any of our products distributed through our entertainment services
machines 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 $16.95 to $27.10 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,
• ineffective internal controls,
• industry developments, and
• economic or other external factors.
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