Redbox 2006 Annual Report Download - page 16

e-payment machines and entertainment services equipment internationally. In addition, our money transfer
services are offered in over 142 countries, and we expect to continue expanding that area of our business over
time. Accordingly, political uncertainties, civil unrest, exchange rate fluctuations, restrictions on the repatriation
of funds, adverse changes in tax, tariff and trade regulations, difficulties with foreign distributors and other
difficulties in managing an organization outside the United States could seriously harm the development of our
business and ability to operate profitably. Further, as we do business with an increasing number of countries, our
business becomes more exposed to the impact of the political and economic uncertainties, including government
oversight, of foreign jurisdictions.
For example, substantially all of the plush toys and other products dispensed from our entertainment
services machines are produced by foreign manufacturers, including a majority purchased directly from
manufacturers in China. Further, we purchase other vending products from vendors that obtain a significant
percentage of such products from foreign manufacturers. As a result, we are subject to changes in governmental
policies, exchange rate fluctuations, the imposition of tariffs, import and export controls, transportation delays
and interruptions and political and economic disruptions which could disrupt the supply and timely delivery of
products manufactured abroad. In addition, we could be affected by labor strikes in the sea shipping, trucking and
railroad industries. A reduction or interruption in supplies or a significant increase in the price of one or more
supplies could have a material adverse effect on our business.
We may be unable to successfully integrate our acquisition of CMT into our operations, which, among other
things, requires us to meet additional federal, state, local and foreign laws and government regulations.
On May 31, 2006, we acquired CMT, a company that is in the business of offering money transfer services.
In connection with the acquisition of CMT, we entered into a Transitional Services Agreement (“TSA”) with
Travelex Limited (“Travelex”), the seller of CMT.
Under the TSA, affiliates of Travelex will continue to operate the money transfer services business in
certain jurisdictions, including the United States, until May 31, 2007 or until we obtain any required licenses or
approvals in those jurisdictions and the business is transferred to us. Although we are in the process of applying
for these licenses, there is no assurance that we will receive all of the required licenses or approvals before
May 31, 2007 or thereafter, or that the money transfer services business can be transferred to us in certain
jurisdictions, including in the United States.
The money transfer industry is heavily regulated, both in the United States and internationally. Travelex and
its affiliates are responsible for legal compliance and related risks with respect to the money transfer services
business in the United States and certain other jurisdictions under the TSA until the business in those
jurisdictions is transferred. If Travelex or its affiliates or its or their employees violate a legal requirement in any
of these jurisdictions where they are responsible for legal compliance, including a United States state or federal
law or regulation applicable to the money transfer services business, such a violation may delay or preclude the
transfer of the business in that jurisdiction to us, or the violation may increase our costs of transferring the
business or operating the business after the transfer.
As the money transfer services business in the United States is transferred to us, we are becoming
increasingly responsible for compliance with a variety of state laws and regulations, including licensing
requirements, applicable to the business. In addition, we are becoming increasingly subject to United States
federal anti-money laundering laws, including United States Department of the Treasury registration
requirements, and the requirements of the Office of Foreign Assets Control, which prohibit transmitting money
to specified countries or to or on behalf of prohibited individuals or entities. If we were to transmit money to or
on behalf of, or otherwise conduct business with, a prohibited individual or entity, we could be required to pay
significant damages, including fines and penalties. The USA PATRIOT Act mandates several anti-money
laundering requirements. Any violation of anti-money laundering laws could lead to significant penalties, and
could limit our ability to conduct business in the United States and other jurisdictions.
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