Redbox 2007 Annual Report Download - page 14

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• 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, e-payment and DVD products and
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,
• activities of and acquisitions or announcements by competitors,
• the impact from any impairment of inventory, goodwill, fixed assets or intangibles related to our
acquisitions,
• fluctuations in consumer spending patterns, and
• relationships with manufacturers and suppliers.
In addition, we have historically experienced seasonality in our revenues, with higher revenues in the second
half of the year than in the first half of the year. Our coin services generally experiences its highest revenues in the
third calendar quarter, followed by the fourth quarter, and relatively lower revenues in the first half of the year. Our
e-payment services (including money transfer) generally provides its highest revenue in the fourth calendar quarter.
We have not experienced significant seasonality in our entertainment services. 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, e-payment and DVD services machines and
equipment.
We conduct limited manufacturing operations and depend on outside parties to manufacture key components
of our coin-counting, entertainment, e-payment and DVD services machines and equipment. We intend to continue
to expand our installed base for coin-counting and e-payment machines in North America, Ireland and in the United
Kingdom. 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 an unanticipated increase in demand for coin-counting or e-payment machine or entertainment
services equipment installations, we may be unable to meet such demand due to manufacturing constraints.
Some key hardware components used in the coin-counting and e-payment machines and entertainment
services equipment are obtained from a limited number of suppliers. We may be unable to continue to obtain an
adequate supply of these components in a timely manner or, if necessary, from alternative sources. If we are unable
to obtain sufficient quantities of components or to locate alternative sources of supply on a timely basis, we may
experience delays in installing or maintaining coin-counting and e-payment machines or entertainment services
equipment, any of which could seriously harm our business, financial condition and results of operations.
In addition, we rely on third-party service providers for substantial support and service efforts that we currently
do not provide directly. In particular, we contract with third-party providers to arrange for pick-up, processing and
deposit of coins as well as limited servicing of our machines. We generally contract with a single transportation
provider and coin processor to service a particular region and either party generally can terminate the contracts with
advance notice ranging from 30 to 90 days. We do not currently have, nor do we expect to have in the foreseeable
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