NetFlix 2003 Annual Report Download - page 32

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If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the
respective valuation allowance would be reversed, resulting in a positive adjustment to earnings in the period
such determination is made. In addition, the calculation of tax liabilities involves significant judgment in
estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in
a manner inconsistent with management’s expectations could have a material impact on our results of operations
and financial position.
Results of Operations
The following table sets forth, for the periods presented, the line items in our Statements of Operations as a
percentage of total revenues. The information contained in the table below should be read in conjunction with the
financial statements and notes thereto included in “Item 8. Financial Statements and Supplementary Data” of this
annual report on Form 10-K.
Year Ended December 31,
2001 2002 2003
Revenues:
Subscription ..................................................... 97.8% 98.7% 99.3%
Sales ........................................................... 2.2 1.3 0.7
Totalrevenues ............................................... 100.0 100.0 100.0
Cost of revenues:
Subscription ..................................................... 64.7 50.4 54.3
Sales ........................................................... 1.0 0.7 0.2
Totalcostofrevenues ......................................... 65.7 51.1 54.5
Grossprofit.......................................................... 34.3 48.9 45.5
Operating expenses:
Fulfillment ...................................................... 17.7 12.7 11.5
Technology and development ....................................... 23.4 9.6 6.6
Marketing ....................................................... 27.7 23.4 18.3
General and administrative ......................................... 6.1 4.4 3.5
Restructuring charges .............................................. 0.9 — —
Stock-based compensation .......................................... 8.2 5.8 4.0
Total operating expenses ....................................... 84.0 55.9 43.9
Operating income (loss) ................................................ (49.7) (7.0) 1.6
Other income (expense):
Interest and other income ........................................... 0.5 1.1 1.0
Interest and other expense .......................................... (2.4) (7.8) (0.2)
Netincome(loss) ..................................................... (51.6)% (13.7)% 2.4%
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