Redbox 2006 Annual Report Download - page 9

Grow through acquisitions. While we do not intend to actively pursue material acquisitions in the near
term, we continue to explore opportunities to acquire companies and assets in order to add complementary
products and services to our existing product lines.
Financial Information About Segments, Geographic Areas and Seasonality
The segment and geographic information required herein is contained in Note 14 to our Consolidated
Financial Statements. A discussion of seasonality is included in Item 8, along with other quarterly financial
information.
Where You Can Get Information We File with the SEC
We file with, and furnish to, the Securities and Exchange Commission (“SEC”), reports including annual
reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, as well as amendments
thereto. We maintain a website, www.coinstar.com, where we make these reports and related materials available
free of charge as soon as reasonably practicable after we electronically deliver such material to the SEC. These
materials can be found on our website under: About Us—Investor Relations—SEC Filings.
Item 1A. Risk Factors
You should carefully consider the following risk factors that may affect our business, financial condition
and results of operations. The risks and uncertainties described below are not the only risks we face. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our
business. If any of the following risks actually occur, our business could be harmed, the trading price of our
common stock could decline and you could lose all or part of your investment.
The termination, non-renewal or renegotiation on materially adverse terms of our contracts with one or more
of our significant retailers could seriously harm our business, financial condition and results of operations.
We derive substantially all of our revenue from two sources: coin-counting machines installed in high-
traffic supermarkets and entertainment services machines installed in supermarkets, mass merchandisers,
restaurants, bowling centers, truck stops, warehouse clubs and similar locations. The success of our business
depends in large part on our ability to maintain contractual relationships with our retailers in profitable locations.
Our typical contract term ranges from one to three years and automatically renews until we or the retailer gives
notice of termination. Certain contract provisions with our retailers vary, including product and service offerings,
the service fees we are committed to pay each retailer, frequency of service, and the ability to cancel the contract
upon notice after a certain period of time. We strive to provide direct and indirect benefits to our retailers that are
superior to or competitive with other providers or systems (including coin-counting systems which retailers could
operate themselves or through a third party) or alternative uses of the floor space that our machines occupy. If we
are unable to provide our retailers with adequate benefits, we may be unable to maintain or renew our contractual
relationships on acceptable terms causing our business, financial condition and results of operations to suffer.
We do a substantial amount of our business with certain retailers. For example, we have significant
relationships with Wal-Mart Stores, Inc. and the Kroger Company, which account for approximately 27% and
11% of our consolidated revenue, respectively. Our entertainment services relationship with Wal-Mart is
governed by a contract that Wal-Mart may terminate at any time. Cancellation or adverse renegotiation of these
relationships could seriously harm our business and reputation.
Payment of increased service fees to retailers could negatively affect our business results.
We face ongoing pricing pressure from our retailers to increase the service fees we pay to them on coin and
entertainment products and services or to make other financial concessions to win or retain business. If we are
unable to respond effectively to ongoing pricing pressures, we may fail to win or retain certain accounts. Our fee
arrangements are based on our evaluation of unique factors with each retailer, such as total revenue, e-payment
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