Redbox 2005 Annual Report Download - page 21

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the Financial Statements and
related Notes thereto included elsewhere in this Annual Report on Form 10-K. Except for the consolidated
historical information, the following discussion contains forward-looking statements. Actual results could differ
from those projected in the forward-looking statements. Please refer to “Special Note Regarding Forward-
Looking Statements” at the beginning of this annual report.
Overview
We are a multi-national company offering a range of 4th Wall solutions for retailers’ storefront consisting of
self-service coin counting; e-payment services such as stored value cards, payroll cards, prepaid MasterCard®
cards and prepaid wireless products; and entertainment services such as skill-crane machines, bulk vending
machines and kiddie rides. These products and services are convenient, reliable, safe and fun. Providing a
combination of 4th Wall products and services greatly expands our opportunity to cross-sell these products and
services. We also offer a range of point-of-sale terminals, stand-alone e-payment kiosks and e-payment enabled
coin-counting machines in drugstores, universities, shopping malls, supermarkets and convenience stores in the
United States and the United Kingdom. Due to our recent strategic investments in DVDXpress and Redbox, we
are now able to offer self-service DVD kiosks where consumers can rent or purchase movies.
We launched our business in North America with the installation of the first Coinstar®coin-counting
machine in the early 1990s, and in 2001 we began offering our coin services in the United Kingdom. Since
inception, our coin-counting machines have counted and processed more than 260 billion coins worth more than
$13.0 billion in more than 370 million self-service coin-counting transactions. We now own and operate more
than 12,800 coin-counting machines in the United States, Canada and the United Kingdom and more than
320,000 entertainment services machines in the United States and Mexico. We also utilize more than 19,300
point-of-sale terminals and own and operate approximately 360 stand-alone e-payment kiosks for e-payment
services in the United States and the United Kingdom. In addition, approximately 5,800 of our 12,800 coin-
counting machines are e-payment enabled.
Our strategy, embodied in our 4th Wall concept, is based on cross-selling our full range of products and
services to retailers in each of our historically separate products and services. In addition, we believe that we will
increase operating efficiencies by combining and concentrating our products and services in our retail partners’
storefront. While the entertainment services market is relatively mature and has experienced slow growth, we
believe that we have significant opportunities in combining it with self-service coin counting and e-payment
services.
We expect to continue devoting significant resources to building our sales organization in connection with
our 4th Wall cross-selling strategy, adding administrative personnel to support our growing organization and
developing the information technology systems and technology infrastructure necessary to support our products
and services. We expect to continue evaluating new marketing and promotional programs to increase consumer
utilization of our services as well as further expand our product research and development efforts.
Coin services
We are the leader in the self-service coin-counting services market. We own and operate the only multi-
national fully automated network of self-service coin-counting machines across the United States, in Canada,
Puerto Rico and in the United Kingdom. We estimate that at any one time, there is approximately $10.5 billion
worth of coin sitting idle in households in the United States. In 2005, consumers processed more than $2.3 billion
worth of coin through our coin-counting machines.
We own and service all of our coin-counting machines. Consumers feed loose change into the machines,
which count the change and then dispense vouchers or, in some cases, issue e-payment products, at the
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