Redbox 2008 Annual Report Download - page 20

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actions taken by our agents, employees, or third party vendors, we could suffer financial loss, loss of customers,
regulatory sanctions and damage to our reputation.
Volatile petroleum prices may adversely affect our operating results and reduce our profitability.
We purchase a substantial amount of goods overseas, particularly plush toys and other products dispensed from
our entertainment services machines, resulting in significant transportation-related costs. Petroleum-based resins
are used in the manufacture of these products. In addition, we operate a large number of vehicles used by our field
service personnel for the purpose of servicing and maintaining our coin-counting, DVD, entertainment and
E-payment services machines and equipment. Furthermore, customer use of our products and services is affected by
petroleum costs as customers may need to pay higher transportation costs, including for travel to locations that carry
our machines and equipment. The volatility in petroleum prices during recent years, including significantly higher
prices during various periods, have negatively impacted our results of operations. The cost of petroleum is generally
influenced by factors beyond our control, including natural disasters, political and geopolitical issues. Continued
volatility in petroleum prices may continue to have an adverse affect on our operating results.
Our customers’ ability to access our products and services can be adversely affected by severe weather, nat-
ural disasters and other events beyond our control, such as fires, power failures, telecommunication loss
and terrorist attacks.
Our operational and financial performance is a direct reflection of customer use of and the ability to operate
and service the coin-counting, DVD, entertainment, money transfer and E-payment services machines and
equipment used in our business. Severe weather, natural disasters and other events beyond our control can, for
extended periods of time, significantly reduce customer use of our products and services as well as interrupt the
ability of our employees and third-party providers to operate and service our equipment and machines. In some
cases, severe weather, natural disasters and other events beyond our control may result in extensive damage to or
destruction of our infrastructure and equipment, including loss of machines used to provide our products and
services, which losses may not be fully covered by insurance. For example, hurricanes in the gulf coast region of the
United States in 2005 caused damage and operational interruptions to some of the retail and other locations where
our machines are installed.
Acquisitions and investments involve risks that could harm our business and impair our ability to realize
potential benefits from such acquisitions and investments.
As part of our business strategy, we have in the past sought and may in the future seek to acquire or invest in
businesses, products or technologies that we feel could complement or expand our business. For example, in
October 2007, we purchased substantially all of the assets of DVDXpress and in January 2008 we completed the
acquisition of a majority interest in Redbox, both providers of self-service DVD kiosks, and in January 2008 and
May 2006, we purchased the money transfer services business GroupEx and CMT, respectively. However, we may
be unable to adequately address the financial, legal and operational risks raised by these acquisitions or investments,
which could harm our business and prevent us from realizing the projected benefits of the acquisitions and
investments. Further, the evaluation and negotiation of potential acquisitions and investments, as well as the
integration of acquired businesses, divert management time and other resources. In addition, we cannot assure you
that any particular transaction, even if successfully completed, will ultimately benefit our business. Certain
financial and operational risks related to acquisitions and investments that may have a material impact on our
business are:
• the assumption of known and unknown liabilities of an acquired company, including employee and
intellectual property claims and other violations of applicable law,
• managing relationships with other investors and the companies in which we have made investments,
• use of cash resources and incurrence of debt and contingent liabilities in funding acquisitions and
investments,
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