Redbox 2007 Annual Report Download - page 66

e-payment service revenue separate from revenue generated from our entertainment services business. Revenue for
these two product lines is as follows:
2007 2006 2005
Year Ended December 31,
(In thousands)
Revenue:
Coin-counting and e-payment services.................. $307,385 $260,952 $220,675
Entertainment services ............................. 238,912 273,490 239,064
Total revenue .................................. $546,297 $534,442 $459,739
We have coin-counting, entertainment and e-payment machines that are placed with retailers that accounted
for the following percentages of our consolidated revenue:
2007 2006 2005
Year Ended December 31,
Wal-Mart Stores Inc .......................................... 24.9% 27.0% 25.3%
The Kroger Company ......................................... 11.6% 11.4% 10.5%
NOTE 16: CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Current Vulnerability Due to Supplier Concentrations:
Substantially all of the plush toys and other products dispensed from the entertainment services machines are
produced by foreign manufacturers. A majority of these purchases are made directly from manufacturers in China.
We purchase our other products indirectly from vendors who 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, political and economic
disruptions and labor strikes, which could disrupt the supply of products from such manufacturers and could result
in substantially increased costs for certain products purchased by us which could have a material adverse effect on
our financial performance.
We currently conduct limited manufacturing operations and obtain key hardware components used in our coin-
counting and entertainment services machines from a limited number of suppliers. Although we use a limited
number of suppliers, we believe that other suppliers could provide similar equipment, which may require certain
modifications or may have a longer lead time from order date. Accordingly, a change in suppliers could cause a
delay in manufacturing and a possible slow-down of growth, which could have a materially adverse affect on future
operating results.
NOTE 17: RELATED PARTY TRANSACTIONS
Randall J. Fagundo, former executive of our entertainment services subsidiary, is a member of a limited
liability company which has agreed to lease to Coinstar a 31,000 square foot building located in Louisville,
Colorado. The terms of the agreement provide for a ten year lease term, commencing March 1, 2003, at monthly
rental payments ranging from $25,353 for the first year to $33,076 for the tenth year, together with additional
payments in respect of the tenant’s proportionate share of the maintenance and insurance costs and property tax
assessments for the leased premises. We believe that the terms of this lease are comparable to those that would be
entered into between unrelated parties on an arms’ length basis.
As of December 31, 2007 and 2006, approximately $219,000 and $448,000, respectively, of our accounts
receivable balance is due from a related party of our e-payment subsidiary. This receivable arose in the ordinary
course of business and relates to the purchase of prepaid air time. In addition, approximately $5.5 million of our
other accrued liabilities balance is our best estimate of the amount due to a related party of our e-payment subsidiary
relating to the amount that was refunded to us on their behalf relating to a telecommunication fee refund as a result
of an Internal Revenue Service ruling that telecommunication fees paid during the period of March 1, 2003 through
July 31, 2006 were improperly collected by the United States government. In the third quarter of 2007, we have
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