Redbox 2007 Annual Report Download - page 7

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ownership interest under the equity method in our Consolidated Financial Statements. Effective with the close of
this transaction, January 18, 2008, we will consolidate Redbox’s financial results into our Consolidated Financial
Statements. Along with our acquisition of Video Vending New York, Inc. (d.b.a. “DVDXpress”) in October 2007
and the majority ownership in Redbox, we offer self-service DVD kiosks where consumers can rent or purchase
movies. Our DVD kiosks supply all the functionality of a traditional video rental store, yet occupy an area of less
than ten square feet. Consumers use a touch screen to select their DVD, swipe a valid credit or debit card, and go.
The process is designed to be fast, efficient and fully automated with no upfront or membership fees. Typically, the
DVD rental price is a flat fee plus tax for one night and if the consumer chooses to keep the DVD for additional
nights, they are automatically charged the same flat fee price. Our DVD kiosks are available in all states in the
continental United States and Puerto Rico and offer our consumers with a more convenient home entertainment
solution. In addition, our DVD kiosks provide an additional revenue stream to our retail partners, who receive a
percentage of our fee.
Effective January 1, 2008, we completed the acquisition of GroupEx Financial Corporation, JRJ Express Inc.
and Kimeco, LLC (collectively, “GroupEx”), for an aggregate purchase price of up to $70.0 million. The purchase
price included a $60.0 million cash payment (subject to a customary working capital adjustment) at closing. Of the
$60.0 million paid at closing, $6.0 million is being held in escrow as partial security for the indemnification
obligations of the sellers under the agreement until the earlier of (1) the date eighteen months following the closing
and (2) the date thirty days after completion in calendar year 2009 of the 2008 calendar year audit. An additional
$34.0 million of the $60.0 million paid at closing is being held in escrow as partial security for the indemnification
obligations of the sellers under the agreement with respect to a lawsuit against GroupEx and one of the sellers,
which will be held until a final court order or written settlement agreement resolving such lawsuit has been
obtained. In addition, there is a contingent payment of up to $10.0 million should certain performance conditions be
met in the fifteen months following the closing.
Financial Information About Segments, Geographic Areas and Seasonality
The segment and geographic information required herein is contained in Note 15 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, including our 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 in us.
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.
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
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