NetFlix 2012 Annual Report Download - page 40

For those agreements with variable terms, we do not estimate what the total obligation may be beyond any
minimum quantities and/or pricing as of the reporting date. For those agreements that include renewal
provisions that are solely at the option of the content provider, we include the commitments associated with
the renewal period to the extent such commitments are fixed or a minimum amount is specified. For these
reasons, the amounts presented in the table may not provide a reliable indicator of our expected future cash
outflows.
We have entered into certain streaming content license agreements that include an unspecified or a
maximum number of titles that we may or may not receive in the future and/or that include pricing
contingent upon certain variables, such as theatrical exhibition receipts for the title. As of the reporting date,
it is unknown whether we will receive access to these titles or what the ultimate price per title will be.
Accordingly such amounts are not reflected in the above contractual obligations table. However, such
amounts are expected to be significant and the expected timing of payments for these commitments could
range from less than one year to more than five years.
(2) Long-term debt obligations as of December 31, 2012 include our 8.50% Notes consisting of principal and
interest payments and the Convertible Notes consisting solely of the principal amount. See Note 4 of Item 8,
Financial Statements and Supplementary Data for further details. On January 29, 2013, we announced the
pricing of an offering of $500 million aggregate principal amount of 5.375% Notes due 2021 and plan to use
the proceeds in part to fully redeem our 8.50% Notes.
(3) The lease financing obligations of $15.1 million relate to our current Los Gatos, California headquarters for
which we are the deemed owner for accounting purposes.
Operating lease obligations include other facilities under non-cancelable operating leases with various
expiration dates through 2018. In the fourth quarter of 2012, the Company entered into a facilities lease
agreement to expand its Los Gatos headquarters to a nearby site. The ten year lease term will commence
after the construction of the buildings is complete. Future minimum lease payments associated with this
lease are $63.4 million as of December 31, 2012 and are included in the operating lease obligations line in
the above table.
(4) Other purchase obligations include all other non-cancelable contractual obligations. These contracts are
primarily related to streaming content delivery, DVD content acquisition, and miscellaneous open purchase
orders for which we have not received the related services or goods.
As of December 31, 2012, the Company had gross unrecognized tax benefits of $43.3 million and an
additional $3.1 million for gross interest and penalties. At this time, the Company is unable to make a reasonably
reliable estimate of the timing of payments in individual years due to uncertainties in the timing of tax audit
outcomes; therefore, such amounts are not included in the above contractual obligation table.
Off-Balance Sheet Arrangements
As part of our ongoing business, the Company does not engage into any transactions with unconsolidated
entities, such as entities often referred to as structured finance or special purpose entities, whereby the Company
has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements
that expose the Company to material continuing risks, contingent liabilities, or any other obligation under a
variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support
to the Company.
Indemnifications
The information set forth under Note 6 of Item 8, Financial Statements and Supplementary Data under the
caption “Guarantees—Indemnification Obligations” is incorporated herein by reference.
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