Redbox 2012 Annual Report Download - page 23

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Seasonal affects, however, may be minimized by the actual release slate and the relative attractiveness of movie
titles in a particular quarter or year. Our Coin segment generally experiences its highest revenue in the second
half of the year due to increased retailer foot traffic and holiday shopping in the fourth quarter and an increase in
consumers’ desire for disposable income in the summer months.
We depend upon third-party manufacturers, suppliers and service providers for key components and
substantial support for our kiosks.
We conduct limited manufacturing operations and depend on outside parties to manufacture key components of
our kiosks. We intend to continue to expand our installed base of kiosks. Such expansion may be limited by the
manufacturing capacity of our third-party manufacturers and suppliers. Third-party manufacturers may not be
able to meet our manufacturing needs in a satisfactory and timely manner. If there is an unanticipated increase in
demand for our kiosks or our manufacturing needs are not met in a timely and satisfactory manner, we may be
unable to meet demand due to manufacturing limitations.
Some key hardware components used in our kiosks are obtained from a limited number of suppliers. We may be
unable to continue to obtain an adequate supply of these components from our suppliers in a timely manner or, if
necessary, from alternative sources. If we are unable to obtain sufficient quantities of components from our
current suppliers or locate alternative sources of supply on a timely basis, we may experience delays in installing
or maintaining our kiosks, either of which could seriously harm our business, financial condition and results of
operations.
In addition, we rely on third-party service providers for substantial support and service efforts that we currently
do not provide directly. In particular, we contract with third-party providers to arrange for pick-up, processing
and depositing of coins, as well as to provide limited servicing of our kiosks. We generally contract with a single
transportation provider and coin processor to service a particular region. We do not currently have, nor do we
expect to have in the foreseeable future, the internal capability to provide back-up coin processing service in the
event of a sudden disruption in service from a commercial coin processor. Any failure by us to maintain our
existing coin processing relationships or to establish new relationships on a timely basis or on acceptable terms
could harm our business, financial condition and results of operations.
There are risks associated with conducting our business and sourcing goods internationally.
We currently have Redbox operations in Canada and Coin operations in Canada, the United Kingdom and
Ireland. We expect to continue our deployment of kiosks internationally. Accordingly, political uncertainties,
economic changes, exchange rate fluctuations, restrictions on the repatriation of funds, adverse changes in legal
requirements, including tax, tariff and trade regulations, difficulties with foreign distributors and other
difficulties in managing an organization outside the United States, could seriously harm the development of our
business and ability to operate profitably. Further, as we do more business in an increasing number of countries,
our business becomes more exposed to the impact of the political and economic uncertainties, including
government oversight, of foreign jurisdictions.
We purchase products from vendors that obtain a significant percentage of such products from foreign
manufacturers. As a result, we are subject to changes in governmental policies, exchange rate fluctuations,
various product quality standards, the imposition of tariffs, import and export controls, transportation delays and
interruptions and political and economic disruptions which could disrupt the supply and timely delivery of
products manufactured abroad. In addition, we could be affected by labor strikes in the sea shipping, trucking and
railroad industries. A reduction or interruption in supplies, or a significant increase in the price of one or more
supplies could have a material adverse effect on our business.
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