NetFlix 2012 Annual Report Download - page 35

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General and Administrative
General and administrative expenses consist of payroll and related expenses for executive and
administrative personnel, as well as professional fees and other general corporate expenses. General and
administrative expenses also include the gain on disposal of DVDs.
Year Ended December 31, Change
2012 2011 2012 vs. 2011
(in thousands, except percentages)
General and administrative ........................ $119,687 $126,937 (6)%
As a percentage of revenues ....................... 3% 4%
The $7.3 million decrease in general and administrative expenses was primarily attributable to a $9.0
million expense in 2011 related to the settlement of a legal claim related to our compliance with the Video
Privacy Protection Act, a $5.8 million increase in the gain on sale of previously viewed DVDs, and a $8.6 million
decrease in miscellaneous expenses related to the use of outside and professional services, taxes, insurance costs
and to costs associated with various legal claims against us. These decreases were partially offset by an increase
in personnel-related costs of $16.1 million attributed to an 11% increase in average headcount and a $3.5 million
increase in stock-based compensation. We expect legal costs to continue at a high level for the foreseeable future
as we defend claims against us.
Year Ended December 31, Change
2011 2010 2011 vs. 2010
(in thousands, except percentages)
General and administrative ........................ $126,937 $64,461 97%
As a percentage of revenues ....................... 4% 3%
The $62.5 million increase in general and administrative expenses was primarily attributable to an increase
in personnel-related costs of $33.6 million attributed to an $11.5 million increase in stock-based compensation
and a 32% increase in average headcount. Legal costs increased $15.6 million primarily due to the $9.0 million
settlement of a legal claim related to our compliance with the Video Privacy Protection Act and due to legal fees
associated with various other claims against us. Other miscellaneous expenses primarily related to the use of
outside and professional services, taxes, and insurance increased by $13.3 million.
Interest Expense
Interest expense consists of the interest on our lease financing obligations and the interest on our 8.50%
Notes including the amortization of debt issuance costs. Starting in the fourth quarter of 2011, interest expense
also includes the amortization of debt issuance costs on our Convertible Notes issued in November 2011.
Year Ended December 31, Change
2012 2011 2012 vs. 2011
(in thousands, except percentages)
Interest expense ..................................... $19,986 $20,025 —%
As a percentage of revenues ........................... 1% 1%
Interest expense was relatively flat as compared to the prior year. Interest expense in 2012 consists primarily
of $17.0 million of interest due on our 8.50% Notes.
Year Ended December 31, Change
2011 2010 2011 vs. 2010
(in thousands, except percentages)
Interest expense ..................................... $20,025 $19,629 2%
As a percentage of revenues ........................... 1% 1%
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