Redbox 2006 Annual Report Download - page 11

• We assumed unanticipated liabilities, such as certain employee-related costs, and may have assumed
other unanticipated liabilities, when we acquired various entities and assets that now comprise our
entertainment services business.
• We may incur adverse accounting charges. For example, in connection with our acquisition of ACMI,
we recorded approximately $136.1 million of goodwill in connection with the acquisition that will not
be amortized, but instead must be tested periodically for impairment. Any impairment of this goodwill
in the future could result in substantial charges to our operating results.
For these and other reasons, we may be unable to achieve the strategic and financial objectives for our entry
into and the expansion of our entertainment services business. Our failure to do so could materially and adversely
affect our business, operating results and financial condition.
Competitive pressures could seriously harm our business, financial condition and results of operations.
Our coin-counting services faces competition from supermarkets, banks and other companies that purchase
and operate coin-counting equipment from companies such as ScanCoin AB, Cummins-Allison Corporation and
others. Our retailers may choose to replace our coin-counting machines with competitor machines and operate
such machines themselves or through a third party. In addition, retailers, some of which have significantly more
resources than us, may decide to enter the coin-counting market. Some banks and other competitors already
provide coin-counting free of charge or for an amount that yields very low margins or that may not generate a
profit at all. An expansion of the coin-counting services provided by any of these competitors could materially
and adversely affect our business and results of operations.
Our entertainment services faces competition from a number of regional and local operators of
entertainment services equipment. Many of these competitors are engaged in expansion programs, and we
experience intense competition for locations. Our entertainment services equipment also competes with other
vending machines, coin-operated entertainment devices, and seasonal and bulk merchandise for sites within retail
locations. We may be unable to maintain current sites in retail locations or to obtain new sites in the future on
attractive terms or at all. It is possible that a well-financed vending machine manufacturer or other vending
machine operator with existing relationships with our retailers could compete with us in certain markets or
capture additional market share at our expense.
Our e-payment services, including our prepaid wireless and long distance accounts, stored value cards, debit
cards, payroll services and money transfer services, faces competition from a variety of types of providers,
including, among others, national distributors of similar cards, other retailers who provide these services
themselves, as well as money transfer companies. Many of these providers are more established in selling their
e-payment services than we are and many invest more resources in providing such services to customers. In
addition, in order for us to provide many of our e-payment services, we depend on relationships with third
parties, such as national wireless carriers, national supermarket chains and other retailers and financial
institutions. Accordingly, if we are unable to effectively market our e-payment services or maintain and establish
successful relationships with appropriate third parties, our e-payment services will not be competitive.
In addition, the nature and extent of consolidation in markets where we install our machines and equipment,
particularly the supermarket and other retailing industries, could adversely affect our operations, including our
competitive position, as the number of our machine and equipment installations could be significantly reduced.
We may be unable to adequately protect or enforce our patents and other proprietary rights.
Our success depends, in part, on our ability to protect our intellectual property and maintain the proprietary
nature of our technology through a combination of patents, licenses and other intellectual property arrangements,
without infringing the proprietary rights of third parties. We have over 70 United States and international patents
related to aspects of self-service coin-counting, including patents regarding machine networking, fraud avoidance
and voucher authentication. We also have additional patent applications pending in the United States and several
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