NetFlix 2010 Annual Report Download - page 31

The $19.2 million increase in general and administrative expenses was primarily attributable to an increase
in personnel-related costs of $11.7 million attributed to a $7.6 million increase in stock-based compensation and
a 23.1% increase in headcount. Legal costs increased $8.9 million primarily resulting from ongoing litigation of
claims against the Company as well as a $2.1 million release of accruals in 2009 that was associated with a
former class action suit that settled in 2008. The terms of the class action settlement provided certain former and
current subscribers with an optional free month subscription or free one-month upgrade to be utilized prior to the
third quarter of 2009. The accrual related to those subscribers who did not utilize the free month prior to
expiration was released in 2009. We expect legal costs to continue at a high level for the foreseeable future as we
defend these claims.
Year ended December 31, Change
2009 2008 2009 vs. 2008
(in thousands, except percentages)
General and administrative ........................ $51,333 $49,662 3.4%
As a percentage of revenues ........................ 3.1% 3.6%
The $1.7 million increase in general and administrative expenses was primarily attributable to a $7.4 million
increase in legal costs resulting from ongoing litigation of claims against the Company. This increase is offset
partially by a $2.7 million decrease in costs related to a significant reduction in the level of operations of our
subsidiary, Red Envelope Entertainment, and a $2.1 million release of accruals in 2009 associated with a former
class action suit that was settled in 2008. The terms of the class action settlement provided certain former and
current subscribers with an optional free month subscription or free one-month upgrade to be utilized prior to the
third quarter of 2009. The accrual related to those subscribers who did not utilize the free month prior to
expiration was released. We also had decreases in personnel-related costs due to lower headcount as we
streamline our administrative functions.
Interest Expense
Interest expense consists of the interest on our lease financing obligations and the interest on our 8.50%
senior notes including the amortization of debt issuance costs. Also, in the fourth quarter of 2009, we expensed
the debt issuance costs related to our line of credit.
Year ended December 31, Change
2010 2009 2010 vs. 2009
(in thousands, except percentages)
Interest Expense ..................................... $19,629 $6,475 203.2%
As a percentage of revenues ............................ 0.9% 0.4%
The $13.2 million increase in interest expense is primarily attributable to the interest expense associated
with our 8.50% senior notes. Interest expense in 2010 includes $2.3 million for our lease financing obligations,
$17.0 million of interest payments due on our notes and $0.5 million of amortization of debt issuance costs.
Year ended December 31, Change
2009 2008 2009 vs. 2008
(in thousands, except percentages)
Interest Expense .................................. $6,475 $2,458 163.4%
As a percentage of revenues ......................... 0.4% 0.2%
The $4.0 million increase in interest expense is entirely attributable to the interest expense associated with
our 8.50% senior notes and line of credit. Interest expense in 2009 includes $2.8 million for our lease financing
obligations, $2.6 million of interest payments due on our notes and $1.1 million of amortization of debt issuance
costs.
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