NetFlix 2009 Annual Report Download - page 69

NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Restricted cash of $2.8 million and $1.9 million, as of December 31, 2009 and 2008, respectively, related to
workers’ compensation insurance deposits.
Accrued Expenses
Accrued expenses consisted of the following:
As of December 31,
2009 2008
(in thousands)
Accrued state sales and use tax ............................... $11,625 $ 9,127
Accrued payroll and employee benefits ........................ 6,427 5,956
Accrued settlement costs .................................... — 2,409
Accrued interest on debt .................................... 2,597 —
Accrued content acquisition costs ............................. 5,810 6,237
Other ................................................... 6,928 7,665
Total accrued expenses ..................................... $33,387 $31,394
4. Long-term Debt
Senior Notes
In November 2009, the Company issued $200.0 million aggregate principal amount of 8.50% senior notes
due November 15, 2017 (the “8.50% Notes”). The net proceeds to the Company from the 8.50% Notes were
approximately $193.9 million. Debt issuance costs of $6.1 million are recorded in other assets on the
consolidated balance sheet and are amortized over the term of the notes as interest expense. The notes were
issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at a rate of
8.50% per annum on May 15 and November 15 of each year, commencing on May 15, 2010. The 8.50% Notes
are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a
purchase price in cash equal to 101% of the principal plus accrued interest. Prior to November 15, 2012, in the
event of a qualified equity offering, the Company may redeem up to 35% of the 8.50% Notes at a redemption
price of 108.50% of the principal plus accrued interest. Additionally, the Company may redeem the 8.50% Notes
prior to November 15, 2013 in whole or in part at a redemption price of 100% of the principal plus accrued
interest, plus a “make-whole” premium. On or after November 15, 2013, the Company may redeem the
8.50% Notes in whole or in part at specified prices ranging from 104.25% to 100% of the principal plus accrued
interest.
The 8.50% Notes include, among other terms and conditions, limitations on the Company’s ability to create,
incur, assume or be liable for indebtedness (other than specified types of permitted indebtedness); dispose of
assets outside the ordinary course (subject to specified exceptions); acquire, merge or consolidate with or into
another person or entity (other than specified types of permitted acquisitions); create, incur or allow any lien on
any of its property or assign any right to receive income (except for specified permitted liens); make investments
(other than specified types of investments); or pay dividends or make distributions (each subject to specified
exceptions). At December 31, 2009, the Company was in compliance with these covenants.
Based on quoted market prices, the fair value of the 8.50% Notes was approximately $207.5 million as of
December 31, 2009.
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