NetFlix 2015 Annual Report Download - page 40

The following table presents the hypothetical fair values 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, 2015 :
Fair Value as of December 31, 2015
(in thousands)
-150 BPS -100 BPS -50 BPS +50 BPS +100 BPS +150 BPS
$509,125 $507,746 $504,661 $498,103 $494,824 $491,545
Based on investment positions as of December 31, 2015, a hypothetical 100 basis point increase in interest
rates across all maturities would result in a $6.6 million incremental decline in the fair market value of the
portfolio. As of December 31, 2014, a similar 100 basis point increase in the yield curve would have resulted in a
$5.9 million incremental decline in the fair market value of the portfolio. Such losses would only be realized if
the Company sold the investments prior to maturity.
As of December 31, 2015, we had $2.4 billion of debt, consisting of fixed rate unsecured debt in four
tranches: $500.0 million of 5.375% notes due in 2021; $400.0 million of 5.750% notes due in 2024; $700.0
million of 5.50% notes due in 2022; and $800.0 million of 5.875% notes due in 2025. The fair value of our debt
will fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining
in periods of increasing rates of interest.
Foreign Currency Risk
International revenues and cost of revenues account for 29% and 39%, respectively of consolidated amounts
for the year ended December 31, 2015. The majority of international revenues and a smaller portion of expenses
are denominated in currencies other than the U.S. dollar and we therefore have foreign currency risk related to
these currencies, which are primarily the euro, the British pound, the Canadian dollar, the Australian dollar, the
Japanese Yen and the Brazilian real.
Accordingly, changes in exchange rates, and in particular a weakening of foreign currencies relative to the
U.S. dollar may negatively affect our revenue and contribution profit (loss) of our International streaming
segment as expressed in U.S. dollars. For the year ended December 31, 2015, we believe our international
revenues would have been approximately $331 million higher had foreign currency exchange rates remained
consistent with those for the year ended December 31, 2014.
We have also experienced and will continue to experience fluctuations in our net income as a result of gains
(losses) on the settlement and the remeasurement of monetary assets and liabilities denominated in currencies
that are not the functional currency. In the year ended December 31, 2015, we recognized a $37.3 million foreign
exchange loss which resulted primarily from the remeasurement of significant content liabilities denominated in
currencies other than functional currencies in our European entities coupled with the strengthening of the U.S.
dollar.
We do not use foreign exchange contracts or derivatives to hedge any foreign currency exposures. The
volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our
continued international expansion increases our exposure to exchange rate fluctuations and as a result such
fluctuations could have a significant impact on our future results of operations.
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 immediately following Part IV hereof and incorporated by reference
herein.
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