NetFlix 2014 Annual Report Download - page 62

Table of Contents
In the third quarter of 2013, the Company entered into facilities lease agreements to expand its Los Gatos headquarters. At the time the
Company entered into these lease agreements, the prior agreement signed in the fourth quarter of 2012 was simultaneously terminated. The
124
month lease term for each of the new leases will commence after the construction of the buildings is complete. Future minimum lease payments
associated with these leases are $122.2 million as of December 31, 2014 and are included below.
Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2014 are as
follows:
Rent expense associated with the operating leases was $26.6 million , $27.9 million and $29.7 million for the years ended December 31,
2014 , 2013 and 2012 , respectively.
Legal Proceedings
From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims, including claims
relating to employee relations, business practices and patent infringement. Litigation can be expensive and disruptive to normal business
operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company's view of these matters may change in
the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision
for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An
unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company's operations or its financial position,
liquidity or results of operations.
On January 13, 2012, the first of three purported shareholder class action lawsuits was filed in the United States District Court for the
Northern District of California against the Company and certain of its officers and directors. Two additional purported shareholder class action
lawsuits were filed in the same court on January 27, 2012 and February 29, 2012 alleging substantially similar claims. These lawsuits were
consolidated into In re Netflix, Inc., Securities Litigation , Case No. 3:12-cv-00225-SC, and the Court selected lead plaintiffs. On June 26,
2012, lead plaintiffs filed a consolidated complaint which alleged violations of the federal securities laws. The Court dismissed the
consolidated complaint with leave to amend on February 13, 2013. Lead plaintiffs filed a first amended consolidated complaint on March 22,
2013. The Court dismissed the first amended consolidated complaint with prejudice on August 20, 2013, and judgment was entered on
September 27, 2013. Lead plaintiffs filed a motion to alter or amend the judgment and requested leave to file a second amended complaint on
October 25, 2013. On January 17, 2014, the Court denied that motion. On February 18, 2014, lead plaintiffs appealed that decision to the
United States Court of Appeals for the Ninth Circuit. Management has determined a potential loss is reasonably possible however, based on its
current knowledge, management does not believe that the amount of such possible loss or a range of potential loss is reasonably estimable
On November 23, 2011, the first of six purported shareholder derivative suits was filed in the Superior Court of California, Santa Clara
County, against the Company and certain of its officers and directors. Five additional purported shareholder derivative suits were subsequently
filed: two in the Superior Court of California, Santa Clara County on February 9, 2012 and May 2, 2012; and three in the United States District
Court for the Northern District of California on February 13, 2012, February 24, 2012 and April 2, 2012. The purported shareholder derivative
suits filed in the Northern District of California have been voluntarily dismissed. On July 5, 2012, the purported shareholder derivative suits
filed in Santa Clara County were consolidated into In re Netflix, Inc. Shareholder Derivative Litigation , Case No. 1-12-cv-218399, and lead
counsel was appointed. A consolidated complaint was filed on December 4, 2012, with plaintiffs seeking compensatory damages and other
relief. The consolidated complaint alleges, among other things, that certain of the Company's current and former officers and directors breached
their fiduciary duties, issued false and misleading statements primarily regarding the Company's streaming business, violated accounting rules
concerning segment reporting, violated provisions of the California Corporations
55
Year Ending December 31,
Future
Minimum
Payments
(in thousands)
2015
$
35,501
2016
37,078
2017
27,697
2018
19,804
2019
14,923
Thereafter
76,130
Total minimum payments
$
211,133