Lease financing obligations excluding current portion Note payable Subordinated

Lease financing obligations excluding current portion

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Lease financing obligations, excluding current portion---Note payable---Subordinated notes payable---Other non-current liabilities---Total liabilities95,510 138,429 194,568 Redeemable convertible preferred stock---Convertible preferred stock---Common stock53 55 69 Additional paid-in capital292,843 317,194 454,731 Treasury stock at cost---Foreign currency---Change in unrealized gains on available for sale securities---Accumulated other comprehensive income (loss)(222)--Retained earnings (accumulated deficit)(131,698)(89,671)(40,589)Deferred stock-based compensation4,693 1,326 -Total stockholders' equity (deficiency)156,283 226,252 414,211 Exhibit 3 Netflix Financial Statements w/ Delta 2007-2009Netflix Financial Statements*(Dollars in Thousands)2007(withoutchange)Delta(changefrom2006)2007(withchange)Analysis47
BUSI 690-D06: Group Case Study 1: NetflixIncome StatementIn the first year of the new business strategy, Netflix will continue to offer DVD rentals, while beginning to offer online streaming. Current subscriber trends will continue, which sees an increase of approximately 20% year over year.Sales Subscription1,205,3401,446,408Cost of RevenuesSubscription664,407797,288Fulfillment121,761146,113Total786,168943,401Gross Profit419,1720.13503,007Operating ExpensesTech and Development71,395128,126Increased funds should not be allocated to tech & development, as well as marketing to launch the new VOD business. Funds will also needto be applied allocated to begin restructuring of the organization. Marketing218,280268,280G&A52,53255,000Restructuring0 50,000 Stock-based Comp0Gain on Disposal of DVD’s7,1967,196Total Operating Expenses328,0110.07494,210Operating Income91,161120,500Cash flows for operations including acquisition of DVD's and property purchases can be cut in half and reallocated to development and marketing of VOD, as this expenditures will no longer be necessary.Interest and other Income20,34015,500Interest ExpensePre-tax Income111,501136,000Taxes44,54954,332 Net Income66,9520.3681,668Cash Flow SummaryTo begin reducing the number of DVD's in the library, Netflix will cutthe acquisition budget in half, and increase sales of used DVD's. They will also stop the purchase of new property unless necessary to continue operations.Cash flows for operations291,823156,731Acquisition Costs of DVD Library223,436111,718Purchase of property, plant and equipment44,25610,000Proceeds from sales of DVDs21,64040,000Free Cash Flow45,771-0.2875,01348
BUSI 690-D06: Group Case Study 1: NetflixNetflix Financial Statements*(Dollars in Thousands)2008(withoutchange)2008(withchange)Deltachangefrom2007AnalysisIncome StatementIn year 2, Netflix will begin to phase out mail-order DVD's in favor of VOD. This may lead to an initial loss of subscribers as they struggle to understand the new VOD platform and purchase the necessary technology to take advantage of VOD.Sales Subscription1,364,6611,157,126-0.20Cost of RevenuesSubscription761,133637,830Fulfillment149,101116,890Total910,234754,720Gross Profit454,427402,406-0.20Operating ExpensesTech and Development89,87396,094-0.25The VOD platform has been developed and functioning for a year, therefore tech & development funds can be cut slightly from 2007. A good marketing budget will still be needed to recoup subscribers. As unneeded distribution centers begin closing, G&A costs will decrease.

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