Netflix (NFLX)

Operating Activities

Our operating activities consisted of net income of $22.4 million, increased by non-cash adjustments of $55.0 million offset by a decrease in net changes in operating assets and liabilities of $11.8 million. The majority of the non-cash adjustments resulted from amortization of the content library of $49.3 million as we continue to purchase additional titles in order to support our larger subscriber base. The net changes in operating assets and liabilities were mainly driven by acquisitions of streaming content, as we continued to increase our investments in streaming content in 2009. Cash provided by operating activities increased $1.6 million for the three months ended March 31, 2009 as compared to the same prior-year period. This was primarily due to an increase in net income of $9.1 million, offset by a decrease in non-cash adjustments of $3.8 million and a decrease in net changes in operating assets and liabilities of $3.7 million.

Operating Activities

During 2008, our operating activities consisted primarily of net income of $83.0 million, increased by non-cash adjustments of $225.1 million offset by a decrease in net changes in operating assets and liabilities of $24.1 million. The majority of the non-cash adjustments came from the amortization of the content library of $209.8 million which increased by $6.3 million over the prior period as we continue to purchase additional titles in order to support our larger subscriber base. The decrease in net changes in operating assets and liabilities was mainly driven by acquisitions of content library related to our streaming content, as we continued to increase our investments in streaming content in 2008. Cash provided by operating activities increased $6.6 million in 2008 as compared to 2007. This was primarily due to an increase in net income of $16.4 million, increased non-cash adjustments of $29.8 million and a decrease in net changes in operating assets and liabilities of $39.6 million.

During 2007, our operating activities consisted primarily of net income of $66.6 million, increased by non-cash adjustments of $195.3 million and net changes in operating assets and liabilities of $15.5 million. 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 continued to purchase additional titles, including streaming content in 2007, in order to support our larger subscriber base. Cash provided by operating activities increased $29.2 million in 2007 as compared to 2006. This was primarily due to an increase in net income of $17.8 million, increased non-cash adjustments of $31.1 million and a decrease in net changes in operating assets and liabilities of $19.7 million. See Note 1 of our Notes to Consolidated Financial Statements for information related to reclassifications in cash flows in 2007.

Operating Activities

During 2008, our operating activities consisted primarily of net income of $83.0 million, increased by non-cash adjustments of $225.1 million offset by a decrease in net changes in operating assets and liabilities of $24.1 million. The majority of the non-cash adjustments came from the amortization of the content library of $209.8 million which increased by $6.3 million over the prior period as we continue to purchase additional titles in order to support our larger subscriber base. The decrease in net changes in operating assets and liabilities was mainly driven by acquisitions of content library related to our streaming content, as we continued to increase our investments in streaming content in 2008. Cash provided by operating activities increased $6.6 million in 2008 as compared to 2007. This was primarily due to an increase in net income of $16.4 million, increased non-cash adjustments of $29.8 million and a decrease in net changes in operating assets and liabilities of $39.6 million.

During 2007, our operating activities consisted primarily of net income of $66.6 million, increased by non-cash adjustments of $195.3 million and net changes in operating assets and liabilities of $15.5 million. 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 continued to purchase additional titles, including streaming content in 2007, in order to support our larger subscriber base. Cash provided by operating activities increased $29.2 million in 2007 as compared to 2006. This was primarily due to an increase in net income of $17.8 million, increased non-cash adjustments of $31.1 million and a decrease in net changes in operating assets and liabilities of $19.7 million. See Note 1 of our Notes to Consolidated Financial Statements for information related to reclassifications in cash flows in 2007.

Operating Activities

Operating Activities

Operating Activities

Operating Activities

During the three months ended September 30, 2008, our operating activities consisted of net income of $20.4 million, increased by non-cash adjustments of $51.7 million, and an increase in net operating assets and liabilities of $1.1 million. The majority of the non-cash adjustments resulted from $47.6 million of amortization of the content library. Cash provided by operating activities decreased $4.4 million for the three months ended September 30, 2008 as compared to the same prior-year period. This was primarily due to a decrease in net operating assets and liabilities, offset by an increase in net income and non-cash adjustments.

During the nine months ended September 30, 2008, our operating activities consisted of net income of $60.3 million, increased by non-cash adjustments of $169.8 million, and a decrease in net operating assets and liabilities of $0.9 million. The majority of the non-cash adjustments resulted from $162.2 million of amortization of the content library. Our content library increased as we continued to both purchase and license additional content in order to support our larger subscriber base. Cash provided by operating activities increased $23.2 million for the nine months ended September 30, 2008 as compared to the same prior-year period. This was primarily due to a decrease in net operating assets and liabilities, offset by an increase in net income and non-cash adjustments.

Operating Activities

During the three months ended June 30, 2008, our operating activities consisted of net income of $26.6 million, increased by non-cash adjustments of $59.2 million, and a decrease in net operating assets and liabilities of $7.7 million. The majority of the non-cash adjustments resulted from $57.0 million of amortization of the content library. Cash provided by operating activities increased $12.9 million for the three months ended June 30, 2008 as compared to the same prior-year period. This was primarily due to an increase in non-cash adjustments of $17.9 million.

During the six months ended June 30, 2008, our operating activities consisted of net income of $39.9 million, increased by non-cash adjustments of $118.1 million, and a decrease in net operating assets and liabilities of $2.0 million. The majority of the non-cash adjustments resulted from $114.6 million of amortization of the content library. Our content library increased as we continued to both purchase and license additional content in order to support our larger subscriber base. Cash provided by operating activities increased $27.7 million for the six months ended June 30, 2008 as compared to the same prior-year period. This was primarily due to an increase in net income of $4.7 and an increase in non-cash adjustments of $27.0 million.

Operating Activities

Our operating activities consisted of net income of $13.4 million, increased by non-cash adjustments of $58.6 million, and an increase in net operating assets and liabilities of $5.7 million. The majority of the non-cash adjustments resulted from $57.6 million amortization of the content library. Our content library increased as we continued to both purchase and license additional content in order to support our larger subscriber base. Cash provided by operating activities increased $14.7 million for the three months ended March 31, 2008 as compared to the same prior-year period. This was primarily due to an increase in net income of $3.5 million and an increase in non-cash adjustments of $8.9 million.

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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.

Operating Activities

FACE="Times New Roman" SIZE="2">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.

SIZE="2">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.

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Cash used in investing activities increased $52.6 million in 2006 as compared to 2005. Investing
activities primarily consisted of additional titles being purchased for our content library in order to support our larger subscriber base and purchases of property and equipment in order to support our growing operations. Content acquisitions were
$58.1 million higher in 2006 as compared to 2005 while purchases of property and equipment were flat.

Operating activities

Cash provided by operating activities during the three months ended September 30, 2007 consisted primarily of net income of $15.7 million increased by non-cash amortization of content library of $48.2 million, depreciation of property and equipment of $5.8 million and an increase in accounts payable and accrued expenses of $6.0 million and $11.4 million, respectively. These increases were partially offset by the excess tax benefits from stock-based compensation of $5.2 million and a decrease in deferred revenue of $4.2 million.

Cash provided by operating activities during the nine months ended September 30, 2007 consisted primarily of net income of $51.2 million increased by non-cash amortization of content library of $148.7 million, depreciation of property and equipment of $15.5 million and an increase in accrued expenses of $33.4 million, as a result of our growing operations. These increases were partially offset by the excess tax benefits from stock-based compensation of $21.3 million, a decrease in deferred revenue of $13.4 million, and the gain on disposal of DVDs of $11.7 million.

Operating activities

Net cash provided by operating activities for the three months ended June 30, 2007 was $72.1 million as compared to $53.3 million for the same prior-year period. Cash provided by operating activities during the three months ended June 30, 2007 consisted primarily of net income of $25.6 million increased by non-cash amortization of content library of $51.0 million and an increase in accrued expenses of $14.2 million. These increases were partially offset by the excess tax benefits from stock-based compensation of $12.0 million and a decrease in accounts payable of $10.9 million.

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Net cash provided by operating activities for the six months ended June 30, 2007 was $135.2 million as compared to $99.3 million for the same prior-year period. Cash provided by operating activities during the six months ended June 30, 2007 consisted primarily of net income of $35.4 million increased by non-cash amortization of content library of $100.4 million, and an increase in accrued expenses of $21.9 million, as a result of our growing operations. These increases were partially offset by the excess tax benefits from stock-based compensation of $16.1 million, a decrease in deferred revenue of $9.2 million, and the gain on disposal of DVDs of $7.8 million.

Operating activities

Net cash provided by operating activities for the three months ended March 31, 2007 increased by $17.0 million as compared to the same prior-year period. The increase in operating cash was primarily attributable to an increase in net income of $5.5 million and an increase in amortization of content library of $22.2 million as a result of increased content purchases to support the growth of our subscriber base. In addition, accounts payable increased $8.5 million as a result of our growing operations. These increases were partially offset by decreases in prepaid expenses and other current assets of $12.6 million, deferred revenue of $4.8 million and deferred taxes of $2.3 million.