NetFlix 2007 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2007 NetFlix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 83

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83

our common stock through the end of 2008. We completed this stock repurchase program in February 2008. The
following table highlights selected measures of our liquidity and capital resources as of December 31, 2007, 2006
and 2005:
Year Ended December 31,
2007 2006 2005
(in thousands)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 177,439 $ 400,430 $ 212,256
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,703 — —
$ 385,142 $ 400,430 $ 212,256
Net cash provided by operating activities . . . . . . . . . . . . . . . . $ 291,823 $ 247,862 $ 157,507
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . $(450,813) $(185,869) $(133,248)
Net cash (used in) provided by financing activities . . . . . . . . . $ (64,001) $ 126,181 $ 13,314
Operating Activities
Our operating activities consisted primarily of net income of $67.0 million, increased by non-cash
adjustments of $194.8 million and net changes in operating assets and liabilities of $30.0 million during 2007.
The majority of the non-cash adjustments came from the amortization of the content library of $203.4 million
which increased by $62.3 million over the prior period as we continue to purchase additional titles, including
Internet-delivered content in 2007, in order to support our larger subscriber base. Cash provided by operating
activities increased $44.0 million in 2007 as compared to 2006. This was primarily due to an increase in net
income of $17.9 million, increased non-cash adjustments of $31.2 million and a decrease in net changes in
operating assets and liabilities of $5.1 million.
Our operating activities consisted primarily of net income of $49.1 million, increased by non-cash
adjustments of $163.7 million and net changes in operating assets and liabilities of $35.1 million during 2006.
The majority of the non-cash adjustments came from the amortization of the content library of $141.2 million,
which increased $44.3 million over the prior period as we continue to purchase additional titles in order to
support our larger subscriber base. Cash provided by operating activities increased $90.4 million in 2006 as
compared to 2005 due to higher net income of $7.1 million, non-cash adjustments of $80.8 million and net
changes in assets and liabilities of $2.5 million.
Investing Activities
Our investing activities consisted primarily of purchases and sales of available-for-sale securities,
acquisitions of content library, including Internet-delivered content in 2007, and purchases of property and
equipment. Cash used in investing activities increased $264.9 million in 2007 as compared to 2006. During the
first quarter of 2007, we started an investment portfolio which is comprised of short-term investments consisting
of corporate debt securities, government and agency securities and asset and mortgage-backed securities. The
majority of the portfolio is invested in “AAA” rated residential and commercial mortgage-backed securities. The
mortgage bonds owned represent the senior tranches of the capital structure and provide credit enhancement
through over-collateralization and their subordinated characteristics.
We continue to purchase additional titles, including Internet-delivered content in 2007, for our content
library in order to support our larger subscriber base. Content acquisitions were $53.9 million higher in 2007 as
compared to 2006. Purchases of property and equipment consisted of expenditures related to Company
expansion, primarily to our headquarters in Los Gatos, California. In March 2006, we exercised our option to
lease a building adjacent to our headquarters in Los Gatos, California. The building will comprise approximately
80,000 square feet of office space and have an initial term of 5 years. The building is expected to be completed in
the first quarter of 2008. Additionally, purchases of property and equipment consisted of automation equipment
for our various shipping centers in order to achieve increased operational efficiencies.
39