NetFlix 2011 Annual Report Download - page 42

and short-term investments in a variety of securities. These securities are classified as available-for-sale and are
recorded at fair value with unrealized gains and losses, net of tax, included in “Accumulated other
comprehensive income” within stockholders equity in the Consolidated Balance Sheets.
For the year ended December 31, 2011, we had no material impairment charges associated with our short-
term investment portfolio. Although we believe our current investment portfolio has very little risk of material
impairment, we cannot predict future market conditions or market liquidity and can provide no assurance that our
investment portfolio will remain materially unimpaired. Some of the securities we invest in may be subject to
market risk due to changes in prevailing interest rates which may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate
and the prevailing interest rate later rises, the value of our investment will decline. At December 31, 2011, our
cash equivalents were generally invested in money market funds, which are not subject to market risk because
the interest paid on such funds fluctuates with the prevailing interest rate. Our short-term investments were
comprised of corporate debt securities, government and agency securities and asset and mortgage-backed
securities.
As of December 31, 2011, we had securities classified as short-term investments of $289.8 million. Changes
in interest rates could adversely affect the market value of these investments. The table below separates these
investments, based on stated maturities, to show the approximate exposure to interest rates.
(in thousands)
Due within one year .............................................. $108,382
Due within five years ............................................. 180,373
Due within ten years ............................................. —
Due after ten years ............................................... 1,003
Total .......................................................... $289,758
A sensitivity analysis was performed on our investment portfolio as of December 31, 2011. The analysis is
based on an estimate of the hypothetical changes in market value of the portfolio that would result from an
immediate parallel shift in the yield curve of various magnitudes. This methodology assumes a more immediate
change in interest rates to reflect the current economic environment.
The following table presents the hypothetical fair values (in $ thousands) of our debt securities classified as
short-term investments assuming immediate parallel shifts in the yield curve of 50 basis points (“BPS”), 100 BPS
and 150 BPS. The analysis is shown as of December 31, 2011:
Fair Value December 31, 2011
(in thousands)
-150 BPS -100 BPS -50 BPS +50 BPS +100 BPS +150 BPS
$295,788 $293,778 $291,768 $287,747 $285,737 $283,727
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and accompanying notes listed in Part IV, Item 15(a)(1) of this
Annual Report on Form 10-K are included elsewhere in this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
40