NetFlix 2009 Annual Report Download - page 65

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NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Employee stock options with exercise prices greater than the average market price of the common stock
were excluded from the diluted calculation as their inclusion would have been anti-dilutive. The following table
summarizes the potential common shares excluded from the diluted calculation:
Year ended December 31
2009 2008 2007
(in thousands)
Employee stock options .................................... 64 726 1,973
The weighted average exercise price of excluded outstanding stock options was $45.78, $32.42 and $27.83
for the years ended December 31, 2009, 2008 and 2007, respectively.
Stock-Based Compensation
The Company grants stock options to its employees on a monthly basis. The Company has elected to grant
all options as fully vested non-qualified stock options. As a result of immediate vesting, stock-based
compensation expense is fully recognized on the grant date, and no estimate is required for post-vesting option
forfeitures.
2. Short-term Investments
The Company’s investment policy is consistent with the definition of available-for-sale securities. The
Company does not buy and hold securities principally for the purpose of selling them in the near future. The
Company’s policy is focused on the preservation of capital, liquidity and return. From time to time, the Company
may sell certain securities but the objectives are generally not to generate profits on short-term differences in
price. Short-term investments are therefore classified as available-for-sale securities and are reported at fair value
as follows:
December 31, 2009
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Corporate debt securities ..................... $ 82,362 $ 915 $ (106) $ 83,171
Government and agency securities ............. 96,998 72 (416) 96,654
Asset and mortgage backed securities ........... 6,262 143 (212) 6,193
$185,622 $1,130 $ (734) $186,018
December 31, 2008
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Corporate debt securities ..................... $ 45,482 $ 440 $ (727) $ 45,195
Government and agency securities ............. 92,378 1,812 (244) 93,946
Asset and mortgage backed securities ........... 19,446 15 (1,212) 18,249
$157,306 $2,267 $(2,183) $157,390
F-12