Redbox 2006 Annual Report Download - page 14

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develop and commercialize new products and services and the costs incurred to do so, and our ability to
successfully integrate new lines of business into our operations, including, for example, money transfer services.
Our operating results have a history of fluctuating and may continue to fluctuate based upon many factors,
including:
• the transaction fee we charge consumers to use our services, including our customers’ response to
increased transaction fees for use of certain of our entertainment services equipment,
• the amount of service fees that we pay to our retailers,
• our ability to establish or maintain relationships with significant retailers on acceptable terms,
• the commercial success of our retailers, which could be affected by such factors as severe weather,
strikes or general economic conditions,
• fluctuations in revenue generated by our coin-counting, entertainment and e-payment services,
• fluctuations in operating expenses caused by various factors, including petroleum costs, labor costs and
transportation costs,
• our ability to effectively manage the product mix of our entertainment services equipment to maximize
consumer preferences,
• fluctuations in interest rates, which affects our debt service obligations,
• the timing of, and our ability to develop and successfully commercialize, new or enhanced products and
services,
• the level of product and price competition,
• our success in maintaining and expanding our network and managing our growth,
• the successful operation of our coin-counting and e-payment network,
• activities of and acquisitions or announcements by competitors,
• the impact from any impairment of goodwill related to our acquisitions,
• fluctuations in consumer spending patterns, and
• relationships with manufacturers and suppliers.
In addition, we have historically experienced seasonality in our coin services revenue, with highest revenues
experienced in the third calendar quarter, followed by the fourth calendar quarter, and relatively lower revenues
in the first half of the year. Our entertainment services revenue has also experienced seasonality, with peak
revenues in the fourth quarter and periods surrounding the Easter holiday season. Although our entertainment
services revenue may offset the historical seasonality of the coin services revenue to some degree, we expect our
results of operations will continue to fluctuate both as a result of seasonal fluctuations and our revenue mix
between relatively higher margin coin and e-payment services and relatively lower margin entertainment
services.
We depend upon third-party manufacturers, suppliers and service providers for key components and
substantial support for our coin-counting, entertainment and e-payment services machines and equipment.
We conduct limited manufacturing operations and depend on outside parties to manufacture key
components of our coin-counting, entertainment and e-payment services machines and equipment. We intend to
continue to expand our installed base for coin-counting and e-payment machines in North America and in the
United Kingdom and for entertainment services equipment in the United States and Mexico. Such expansion may
be limited by the manufacturing capacity of our third-party manufacturers and suppliers. Third-party
manufacturers may not be able to meet our manufacturing needs in a satisfactory and timely manner. If there is
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