Redbox 2011 Annual Report Download - page 32

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements
and related notes thereto included elsewhere in this Annual Report. Except for the consolidated historical
information, the following discussion contains forward-looking statements. Actual results could differ from those
projected in the forward-looking statements. Please refer to “Special Note Regarding Forward-Looking
Statements” and “Risk Factors” elsewhere in this Annual Report.
Changes in Our Organizational Structure
During the first quarter of 2011, in addition to our existing Redbox and Coin segments, we added a third
reportable segment, New Ventures, to reflect changes in how our chief executive officer (“CEO”) manages our
businesses and allocates resources for the future growth of the company. Our New Ventures segment consists
primarily of our Coffee self-service concept and includes certain other self-service concepts such as refurbished
electronics and photo services.
As part of our new reporting structure, during the second quarter of 2011, we completed our evaluation of the
reassignment of goodwill to our New Ventures segment by using a relative fair value approach that is similar to
the approach used when a portion of a segment is to be disposed. We used both the income and cost methods to
estimate the fair value of our New Ventures segment and both the income and market methods to estimate the
fair values of our Redbox and Coin segments. As a result of our evaluation, we did not assign any goodwill to our
New Ventures segment because the amount was immaterial.
During the second quarter of 2011, we exited one of the self-service concepts we were testing, which was
included in our New Ventures segment. Based on our materiality assessment, we consider the results of that self-
service concept to be immaterial and therefore have elected not to present it as a discontinued operation in our
Consolidated Statements of Net Income.
Comparability of Segment Results
We have recast prior period results for the following:
• The addition of our New Ventures segment, which includes our self-service concepts, which were part
of our Coin and Redbox segments prior to the first quarter of 2011; and
• The allocation of share-based payments made to certain movie studios as part of content agreements
from corporate unallocated expenses to direct operating expenses in our Redbox segment beginning in
the first quarter of 2011.
Overview
We are a leading provider of automated retail solutions offering convenient products and services that benefit
consumers and drive incremental retail traffic and revenue for retailers. Our core offerings in automated retail
include our Redbox segment, where consumers can rent or purchase movies and video games from self-service
kiosks, and our Coin segment, where consumers can convert their coin to cash or stored value products at self-
service coin-counting kiosks. Our New Ventures segment is focused on identifying, evaluating, building, and
developing innovative self-service concepts in the marketplace.
Our strategy is based upon leveraging our core competencies in the automated retail space to provide the
consumer with convenience and value and to help retailers drive incremental traffic and revenue. Our
competencies include success in building strong consumer and retailer relationships, and in deploying, scaling
and managing kiosk businesses. We build strong consumer relationships by providing valuable self-service
products and services in convenient locations. We build strong retailer relationships by providing retailers with
turnkey solutions that complement their businesses without significant outlays of time and financial resources.
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