NetFlix 2010 Annual Report Download - page 35

activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. The
following table reconciles net cash provided by operating activities, a GAAP financial measure, to free cash flow,
a non-GAAP financial measure:
Year Ended December 31,
2010 2009 2008
(in thousands)
Non-GAAP free cash flow reconciliation:
Net cash provided by operating activities ............ $276,401 $ 325,063 $ 284,037
Acquisition of DVD content library ................. (123,901) (193,044) (162,849)
Purchases of property and equipment ............... (33,837) (45,932) (43,790)
Acquisition of intangible assets .................... (505) (200) (1,062)
Proceeds from sale of DVDs ...................... 12,919 11,164 18,368
Other assets ................................... (70) 71 (1)
Non-GAAP free cash flow ................... $131,007 $ 97,122 $ 94,703
Free cash flow for the year ended December 31, 2010 increased $33.9 million as compared to the year
ended December 31, 2009 primarily due to lower DVD content library and property and equipment expenditures.
These reduced spending levels more than offset the decrease in net cash provided by operating activities
described above.
Free cash flow for the year ended December 31, 2009 increased $2.4 million as compared to the year ended
December 31, 2008 primarily due to an increase in cash flow from operations, offset by higher DVD content
library expenditures and a decrease in the proceeds from sale of previously viewed DVDs.
Contractual Obligations
For the purposes of this table, contractual obligations for purchases of goods or services are defined as
agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of
the transaction. The expected timing of payment of the obligations discussed above is estimated based on
information available to us as of December 31, 2010. Timing of payments and actual amounts paid may be
different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some
obligations. The following table summarizes our contractual obligations at December 31, 2010:
Payments due by Period
Contractual obligations (in thousands): Total
Less than
1 year 1-3 years 3-5 years
More than
5 years
8.50% senior notes ............. $ 319,000 $ 17,000 $ 34,000 $ 34,000 $234,000
Operating lease obligations ....... 53,038 13,693 21,995 12,304 5,046
Lease financing obligations (1) .... 23,573 4,184 7,372 5,886 6,131
Content obligations (2) .......... 1,299,176 530,878 531,698 236,600 —
Other purchase obligations ....... 157,957 85,546 68,036 4,375 —
Total .................... $1,852,744 $651,301 $663,101 $293,165 $245,177
(1) In the first quarter of 2010, we extended the facilities leases for the Los Gatos buildings. See note 5 to the
consolidated financial statements for further discussion of our lease financing obligations.
(2) Content obligations include agreements to acquire and license content that represent long-term liabilities or
that are not reflected on the consolidated balance sheets. For those agreements with variable terms, we do
not estimate what the total obligation may be beyond any minimum quantities and/ or pricing as of the
reporting date. For those agreements that include renewal provisions that are solely at the option of the
content provider, we include the commitments associated with the renewal period to the extent such
commitments are fixed or a minimum amount is specified. For these reasons, the amounts presented in the
table may not provide a reliable indicator of our expected future cash outflows.
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