Redbox 2011 Annual Report Download - page 33

We are focusing on growing our core businesses and developing innovative new concepts in the automated retail
space through organic growth and external investment. We will also continue to expand our use of social media
to drive awareness of our offerings and continue to leverage new and innovative ideas to drive demand. In order
to support growth, we also expect to continue devoting significant resources for the ongoing development of our
infrastructure, including information technology systems and technology infrastructure necessary to support our
products and services.
Subsequent Events
• On February 3, 2012, we announced an agreement between Redbox and Verizon Ventures IV LLC
(“Verizon”), a wholly owned subsidiary of Verizon Communications Inc., to form a joint venture (the
“Joint Venture”) to develop, launch, market and operate a nationwide “over-the-top” video distribution
service which will provide consumers with access to video programming content delivered via
broadband networks to video enabled viewing devices and offering rental of physical DVDs and
Blu-ray Discs®from Redbox kiosks. Redbox is initially acquiring a 35.0% ownership interest in the
Joint Venture and will make an initial capital contribution of $14.0 million in cash. So long as Redbox
contributes its pro rata share of the first $450.0 million of capital contributions to the Joint Venture,
Redbox’s interest cannot be diluted below 10.0%. In addition, Redbox has certain rights to cause
Verizon to acquire Redbox’s interest in the Joint Venture (generally following the fifth anniversary of
the Limited Liability Company Agreement (the “LLC Agreement”) or in limited circumstances, at an
earlier period of time) and Verizon has certain rights to acquire Redbox’s interest in the Joint Venture
(generally following the seventh anniversary of the LLC Agreement, or, in limited circumstances, the
fifth anniversary of the LLC Agreement). Redbox’s ownership interest in the Joint Venture will be
accounted for using the equity method of accounting.
• On February 3, 2012, we announced an agreement between Redbox and NCR Corporation (“NCR”)
(the “NCR Agreement”), to acquire certain assets of NCR’s self-service entertainment DVD kiosk
business. The purchase price includes a $100.0 million cash payment, which may be adjusted if certain
contracts aren’t transferred at closing, and the assumption of certain liabilities of NCR that are related
to the assets acquired. The closing of the transaction is subject to the Hart Scott Rodino Antitrust
Improvements Act, as amended (“HSR”). If antitrust approval is not obtained, then Rebox is required
to pay NCR a $10.0 million break fee within five days of the termination. We expect the transaction
will be recorded as a business combination. Additionally, in connection with the NCR Agreement, we
intend to enter into a strategic arrangement with NCR for manufacturing and services during the five-
year period post-closing. At the end of the five-year period, if the aggregate amount paid in margin to
NCR for manufacturing and services delivered equaled less than $25.0 million, we would pay NCR the
difference between such aggregate amount and $25.0 million. Assuming HSR approval, we expect the
transaction to close no later than the third quarter of 2012.
Results of Operations
Consolidated Results
The discussion and analysis that follows covers our results from continuing operations.
Dollars in thousands, except
per share amounts
Year Ended December 31, 2011 vs. 2010 2010 vs. 2009
2011 2010 2009 $ % $ %
Revenue ................. $1,845,372 $1,436,421 $1,032,623 $408,951 28.5% $403,798 39.1%
Operating income ......... $ 209,885 $ 143,207 $ 104,712 $ 66,678 46.6% $ 38,495 36.8%
Income from continuing
operations ............. $ 114,951 $ 65,894 $ 43,693 $ 49,057 74.4% $ 22,201 50.8%
Diluted earnings per share
from continuing
operations ............. $ 3.61 $ 2.03 $ 1.31 $ 1.58 77.8% $ 0.72 55.0%
25