SEC Info - Netflix Inc - ‘10-K’ for 12/31/09

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Netflix Inc – ‘10-K’ for 12/31/09 – ‘XML.R11’

On: Monday, 2/22/10, at 2:09pm ET · For: 12/31/09 · Accession #: 1193125-10-36181 · File #: 0-49802

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/22/10  Netflix Inc                       10-K       12/31/09   33:3.1M                                   Donnelley … Solutions/FA

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report for the Fiscal Year Ended December    HTML    893K 
                31, 2009                                                         
 2: EX-23.1     Consent of Independent Registered Public            HTML     13K 
                Accounting Firm                                                  
 3: EX-31.1     Certification of Chief Executive Officer Pursuant   HTML     18K 
                to Section 302                                                   
 4: EX-31.2     Certification of Chief Financial Officer Pursuant   HTML     18K 
                to Section 302                                                   
 5: EX-32.1     Certifications of CEO and CFO Pursuant to Section   HTML     16K 
                906                                                              
26: XML         IDEA XML File -- Definitions and References          XML     89K 
30: XML         IDEA XML File -- Filing Summary                      XML     53K 
28: XML.R1      Statement Of Financial Position Classified           XML    229K 
29: XML.R2      Statement Of Financial Position Classified           XML     75K 
                (Parenthetical)                                                  
18: XML.R3      Statement Of Income                                  XML    233K 
21: XML.R4      Statement Of Income (Parenthetical)                  XML     62K 
25: XML.R5      Statement Of Shareholders Equity And Other           XML    524K 
                Comprehensive Income                                             
24: XML.R6      Statement Of Cash Flows Indirect                     XML    413K 
32: XML.R7      Organization and Summary of Significant Accounting   XML     69K 
                Policies                                                         
15: XML.R8      Short-term Investments                               XML    125K 
23: XML.R9      Balance Sheet Components                             XML     66K 
14: XML.R10     Long-term Debt                                       XML     28K 
13: XML.R11     Commitments and Contingencies                        XML     43K 
17: XML.R12     Guarantees-Intellectual Property Indemnification     XML     26K 
                Obligations                                                      
27: XML.R13     Stockholders' Equity                                 XML    107K 
19: XML.R14     Income Taxes                                         XML     70K 
20: XML.R15     Employee Benefit Plan                                XML     24K 
22: XML.R16     Related Party Transaction                            XML     25K 
33: XML.R17     Selected Quarterly Financial Data (Unaudited)        XML     42K 
16: XML.R18     Document Information                                 XML     34K 
12: XML.R19     Entity Information                                   XML    102K 
31: EXCEL       IDEA Workbook of Financial Reports (.xls)            XLS     89K 
 6: EX-101.INS  XBRL Instance -- nflx-20091231                       XML    616K 
 8: EX-101.CAL  XBRL Calculations -- nflx-20091231_cal               XML    127K 
 9: EX-101.DEF  XBRL Definitions -- nflx-20091231_def                XML    277K 
10: EX-101.LAB  XBRL Labels -- nflx-20091231_lab                     XML    318K 
11: EX-101.PRE  XBRL Presentations -- nflx-20091231_pre              XML    332K 
 7: EX-101.SCH  XBRL Schema -- nflx-20091231                         XSD     51K

‘XML.R11’ — Commitments and Contingencies

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<div> 5. Commitments and Contingencies The Company leases facilities under non-cancelable operating leases with various expiration dates through 2016. The facilities generally require the Company to pay property taxes, insurance and maintenance costs. Further, several lease agreements contain rent escalation clauses or rent holidays. For purposes of recognizing minimum rental expenses on a straight-line basis over the terms of the leases, the Company uses the date of initial possession to begin amortization, which is generally when the Company enters the space and begins to make improvements in preparation of intended use. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expenses on a straight-line basis over the terms of the leases in the consolidated statements of operations. The Company has the option to extend or renew most of its leases which may increase the future minimum lease commitments. Because the terms of the Company’s original facilities lease agreements required the Company’s involvement in the construction funding of the buildings at its Los Gatos, California headquarters site, the Company is the “deemed owner” (for accounting purposes only) of these buildings. Accordingly, the Company recorded an asset of $40.7 million, representing the total costs of the buildings and improvements, including the costs paid by the lessor (the legal owner of the buildings), with corresponding liabilities. Upon completion of construction of each building, the Company did not meet the sale-leaseback criteria for de-recognition of the building assets and liabilities. Therefore the leases are accounted for as financing obligations. Future minimum payments under lease financing obligations and non-cancelable operating leases as of December 31, 2009 are as follows: <table border="0" cellspacing="0" cellpadding="0" width="80%" align="center"> <tr> <td width="84%"></td> <td valign="bottom" width="10%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom" nowrap="nowrap"> Year Ending December 31, </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Future Minimum Payments</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center">(in thousands)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> 2010 </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">17,214</td> </tr> <tr> <td valign="top"> 2011 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">13,950</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> 2012 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11,506</td> </tr> <tr> <td valign="top"> 2013 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5,064</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> 2014 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,144</td> </tr> <tr> <td valign="top"> Thereafter </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,868</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Total minimum payments </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">52,746</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom"> </td> </tr> </table> Future minimum payments under lease financing obligations as of December 31, 2009 total $12.4 million. The lease financing obligation balance at the end of the lease term will be approximately $32.6 million which reflects the net book value of the buildings to be relinquished to the lessor. Rent expense associated with the operating leases was $14.5 million, $13.7 million and $10.6 million for the years ended December 31, 2009, 2008 and 2007, respectively. The Company also has $114.8 million of commitments at December 31, 2009 related to streaming content license agreements that have been executed but for which the streaming content does not meet asset recognition criteria. Litigation From time to time, in the normal course of its operations, the Company is a party to litigation matters and claims, including claims relating to employee relations and business practices. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company cannot reasonably estimate the likelihood or potential dollar amount of any adverse results. The Company expenses legal fees as incurred. Listed below are material legal proceedings to which the Company is a party. An unfavorable outcome of any of these matters could have a material adverse effect on the Company’s financial position, liquidity or results of operations. On December 17, 2009, plaintiffs Jane Doe, Nelly Valdez-Marquez, Anthony Sinopoli, and Paul Navarro filed a purported class action lawsuit against the Company in the United District Court, District of Northern California, Case No. C09-05903 on behalf of (1) a nationwide class consisting of “all Netflix subscribers that rented a Netflix movie and also rated a movie on the Netflix website during the period of October 1998 through December 2005, residing in the United States,” (2) a subclass of California residents and (3) an injunctive class consisting of “all Netflix subscribers since 2006, residing in the United States.” Plaintiffs allege that Netflix breached the privacy rights of its subscribers by, among other things, releasing certain data in connection with the “Netflix Prize” contest. Plaintiffs have brought this action pursuant to the Video Privacy Protection Act, 18 U.S.C. § 2710; California Consumers Legal Remedies Act, Civil Code § 1750 (“CLRA”); California Customer Records Act, Civil Code § 1798.80; California’s Unfair Competition Law, Bus. & Prof’l Code §§ 17200, 17500 (“UCL”); and common law actions for Unjust Enrichment and Public Disclosure of Private Facts. Plaintiffs are seeking declaratory relief; statutory, actual and punitive damages; disgorgement of profits; and injunctive relief. On September 25, 2009, Alcatel-Lucent USA Inc. filed a complaint for patent infringement against the Company in the United States District Court for the Eastern District of Texas, captioned Alcatel-Lucent USA Inc. v. Amazon.com Inc., et. al, Civil Action No. 6:09-cv-422. The complaint alleges that the Company infringed U.S. Patents Nos. 5,649,131 entitled “Communications Protocol” issued on July 15, 1997, 5,623,656 entitled “Script Based Data Communication System and Method Utilizing State Memory” issued on April 22, 1997 and 5,404,507 entitled “Apparatus and Method for Finding Records in a Database by Formulating a Query Using Equivalent Terms Which Correspond to Terms in the Input Query” issued April 4, 1995. The complaint seeks unspecified compensatory and enhanced damages, interest, costs and fees, and seeks to permanently enjoin the Company from infringing the patents in the future. On April 1, 2009, Jay Nunez, individually and on behalf of others similarly situated in California, filed a purported class action lawsuit against the Company in California Superior Court, County of Orange. The complaint asserts claims of unlawful, unfair and deceptive business practices and violation of the California Consumer Legal Remedies Act relating to certain of the Company’s marketing statements. The complaint seeks restitution, injunction and other relief. On July 14, 2009, the Company filed a demurrer to the first amended complaint. On August 21, 2009, the Court granted the Company’s demurrer and granted leave to amend. Plaintiff filed a second amended complaint on September 11, 2009. On November 30, 2009, plaintiff filed a voluntary request for dismissal. As set forth in the declaration of plaintiff’s counsel in support of dismissal, neither plaintiff nor his counsel has received or will receive any compensation or other consideration from Netflix or any other entity as a result of the voluntary dismissal of this action. On December 18, 2009, the Court dismissed the action. In January through April of 2009, a number of purported anti-trust class action suits were filed against the Company. Wal-Mart Stores, Inc. and Walmart.com USA LLC (collectively, Wal-Mart) were also named as defendants in these suits. Most of the suits were filed in the United States District Court for the Northern District of California and other federal district courts around the country. A number of suits were filed in the Superior Court of the State of California, Santa Clara County. The plaintiffs, who are current or former Netflix customers, generally allege that Netflix and Wal-Mart entered into an agreement to divide the markets for sales and online rentals of DVDs in the United States, which resulted in higher Netflix subscription prices. The complaints, which assert violation of federal and/or state antitrust laws, seek injunctive relief, costs (including attorneys’ fees) and damages in an unspecified amount. On April 10, 2009, the Judicial Panel on Multidistrict Litigation ordered all cases pending in federal court transferred to the Northern District of California to be consolidated or coordinated for pre-trial purposes. These cases have been assigned the multidistrict litigation number MDL-2029. The cases pending in the Superior Court of the State of California, Santa Clara County have been consolidated. In addition, in May of 2009, three additional lawsuits were filed—two in the Northern District of California and one in the Superior Court of the State of California, San Mateo County—alleging identical conduct and seeking identical relief. In these three cases, the plaintiffs are current or former subscribers to the online DVD rental service offered by Blockbuster Inc. The two cases filed in federal court on behalf of Blockbuster subscribers have been related to MDL-2029. On December 1, 2009, the federal Court entered an order granting defendants’ motion to dismiss the two federal cases filed on behalf of Blockbuster subscribers. Plaintiffs have until March 1, 2010 to file an amended complaint. The lawsuit filed in Superior Court of the State of California, San Mateo County has been coordinated with the cases pending in Santa Clara County. On December 26, 2008, Quito Enterprises, LLC filed a complaint for patent infringement against the Company in the United States District Court for the Southern District of Florida, captioned Quito Enterprises, LLC v. Netflix, Inc., et. al, Civil Action No. 1:08-cv-23543-AJ. The complaint alleges that the Company infringed U.S. Patent No. 5,890,152 entitled “Personal Feedback Browser for Obtaining Media Files” issued on March 30, 1999. The complaint seeks unspecified damages, interest, and seeks to permanently enjoin the Company from infringing the patent in the future. On September 30, 2009, the Company filed a motion for summary judgment of invalidity. The Court has not set a hearing date for the motion. On October 24, 2008, Media Queue, LLC filed a complaint for patent infringement against the Company in the United States District Court for the Eastern District of Oklahoma, captioned Media Queue, LLC v. Netflix, Inc., et. al , Civil Action No. CIV 08-402-KEW. The complaint alleges that the Company infringed U.S. Patent No. 7,389,243 entitled “Notification System and Method for Media Queue” issued on June 17, 2008. The complaint seeks unspecified compensatory and enhanced damages, interest and fees, and seeks to permanently enjoin the Company from infringing the patent in the future. On February 24, 2009, the case was transferred to the Northern District of California. On August 14, 2009, the Company filed a motion for summary judgment of non-infringement. A hearing on the motion was held on November 17, 2009. On December 1, 2009, the Court granted the Company’s motion for summary judgment of non-infringement. On February 10, 2009, plaintiff appealed the summary judgement ruling. On December 28, 2007, Parallel Networks, LLC filed a complaint for patent infringement against the Company in the United States District Court for the Eastern District of Texas, captioned Parallel Networks, LLC v. Netflix, Inc., et. al , Civil Action No 2:07-cv-562-LED. The complaint alleges that the Company infringed U.S. Patent Nos. 5,894,554 and 6,415,335 B1 entitled “System For Managing Dynamic Web Page Generation Requests by Intercepting Request at Web Server and Routing to Page Server Thereby Releasing Web Server to Process Other Requests” and “System and Method for Managing Dynamic Web Page Generation Requests”, issued on April 13, 1999 and July 2, 2002, respectively. The complaint seeks unspecified compensatory and enhanced damages, interest and fees, and seeks to permanently enjoin the Company from infringing the patent in the future. </div>

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3 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 6/25/10  SEC                               UPLOAD¶    10/13/17    1:49K  Netflix Inc.
 5/28/10  SEC                               UPLOAD¶    10/13/17    1:109K Netflix Inc.
 4/30/10  SEC                               UPLOAD¶    10/13/17    1:141K Netflix Inc.

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Filing Submission 0001193125-10-036181 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Netflix Inc – ‘10-K’ for 12/31/09 – ‘XML.R11’

On: Monday, 2/22/10, at 2:09pm ET · For: 12/31/09 · Accession #: 1193125-10-36181 · File #: 0-49802

Previous ‘10-K’: ‘10-K’ on 2/25/09 for 12/31/08 · Next: ‘10-K’ on 2/18/11 for 12/31/10 · Latest: ‘10-K’ on 1/26/24 for 12/31/23 · 3 References: By: SEC – ‘UPLOAD’ on 6/25/10 By: SEC – ‘UPLOAD’ on 5/28/10 By: SEC – ‘UPLOAD’ on 4/30/10

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34Filing Table of Contents

‘XML.R11’ — Commitments and Contingencies

This Financial Report is an XBRL XML File.

3 Subsequent Filings that Reference this Filing

Previous ‘10-K’: ‘10-K’ on 2/25/09 for 12/31/08 · Next: ‘10-K’ on 2/18/11 for 12/31/10 · Latest: ‘10-K’ on 1/26/24 for 12/31/23 · 3 References:

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents