NetFlix 2014 Annual Report Download - page 59

Table of Contents
Property and Equipment, Net
Property and equipment and accumulated depreciation consisted of the following:
As of December 31, 2014 and 2013, the Company had unpaid property and equipment included in accounts payable of $11.8 million and
$6.8 million , respectively on the Consolidated Balance Sheets, and consequently such amounts are excluded from purchases of property and
equipment on the Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013.
Senior Convertible Notes
In November 2011, the Company issued $200.0 million aggregate principal amount of zero coupon senior convertible notes due on
December 1, 2018 (the “Convertible Notes”)
in a private placement offering to TCV VII, L.P., TCV VII(A), L.P., and TCV Member Fund, L.P.
A general partner of these funds also serves on the Company’s Board of Directors, and as such, the issuance of the notes is considered a related
party transaction. The net proceeds to the Company were approximately $197.8 million . Debt issuance costs of $2.2 million (of which $0.3
million was paid in the year ended December 31, 2012) were recorded in “Other non-current assets” on the Consolidated Balance Sheets and
were amortized over the term of the notes as interest expense. At any time following May 28, 2012, the Company could have elected to cause
the conversion of the Convertible Notes into shares of the Company’s common stock when specified conditions were satisfied, including that
the daily volume weighted average price of the Company’s common stock was equal to or greater than $111.54 for at least 50 trading days
during a 65 trading day period prior to the conversion date.
The Company determined that the embedded conversion option in the Convertible Notes did not require separate accounting treatment as
a derivative instrument because it was both indexed to the Company's own stock and would be classified in stockholders' equity if freestanding.
Additionally, the Convertible Notes did not require or permit any portion of the obligation to be settled in cash and accordingly the liability and
equity (conversion option) components were not required to be accounted for separately.
In April 2013, after all specified conditions were satisfied, the Company elected to cause the conversion of all outstanding Convertible
Notes with an aggregate principal amount of
$200.0 million in accordance with the terms of the Indenture governing such notes. Pursuant to
this conversion, the Company issued 2.3 million shares of common stock to the holders of the Convertible Notes at a conversion ratio of
11.6553 . The fair market value of one share of common stock on the date of conversion was $216.99 per share.
8.50% Senior Notes
In November 2009, the Company issued $200.0 million aggregate principal amount of 8.50%
senior notes due November 15, 2017 (the
“ 8.50% Notes”). The net proceeds to the Company were approximately $193.9 million . Debt issuance costs of $6.1 million were recorded
in “Other non-current assets” on the Consolidated Balance Sheets and were amortized over the term of the notes as interest expense. The notes
were issued at par and were senior unsecured obligations of the Company. Interest was payable semi-annually at a rate of 8.50% per annum
on May 15 and November 15 of each year, commencing on May 15, 2010. The 8.50% Notes were repayable in whole or in part upon the
occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to 101% of the principal plus accrued interest.
The
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As of December 31,
Estimated Useful Lives
(in Years)
2014 2013
(in thousands)
Information technology assets
$
189,274
$
139,306
3 years
Furniture and fixtures
25,758
21,011
3 years
Building
40,681
40,681
30 years
Leasehold improvements
57,339
51,194
Over life of lease
DVD operations equipment
89,144
96,361
5 years
Capital work-in-progress
12,495
8,643
Property and equipment, gross
414,691
357,196
Less: Accumulated depreciation
(264,816
)
(223,591
)
Property and equipment, net
$
149,875
$
133,605
5. Long-
term Debt