NetFlix 2007 Annual Report Download - page 73

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NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The
Company does not use a post-vesting termination rate as options are fully vested upon grant date.
The weighted-average fair value of employee stock options granted during 2007, 2006 and 2005 was $9.68,
$10.76 and $6.16 per share, respectively. The weighted-average fair value of shares granted under the employee
stock purchase plan during 2007, 2006 and 2005 was $6.70, $7.49 and $6.68 per share, respectively.
The following table summarizes stock-based compensation expense, net of tax, related to stock option plans
and employee stock purchases under SFAS No. 123(R) which was allocated as follows:
Year Ended December 31,
2007 2006 2005
(in thousands)
Fulfillment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 427 $ 925 $ 1,225
Technology and development . . . . . . . . . . . . . . . . . . . . . . . . . . 3,695 3,608 4,446
Marketing ......................................... 2,160 2,138 2,565
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,694 6,025 6,091
Stock-based compensation expense before income taxes . . . . . 11,976 12,696 14,327
Incometaxbenefit................................... (4,757) (4,937) —
Total stock-based compensation after income taxes . . . . . . . . . $ 7,219 $ 7,759 $14,327
8. Income Taxes
The components of provision for (benefit from) income taxes for all periods presented were as follows:
Year Ended December 31,
2007 2006 2005
(in thousands)
Current tax provision:
Federal ....................................... $38,002 $10,282 $ 633
State ......................................... 7,208 4,804 580
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,210 15,086 1,213
Deferred tax provision:
Federal ....................................... (413) 15,005 (31,453)
State ......................................... (248) 1,145 (3,452)
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (661) 16,150 (34,905)
Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . $44,549 $31,236 $(33,692)
Provision for (benefit from) income taxes differed from the amounts computed by applying the U.S. federal
income tax rate of 35 percent to pretax income as a result of the following:
Year Ended December 31,
2007 2006 2005
(in thousands)
Expected tax expense at U.S. federal statutory rate of 35% . . . . . . . . . . . $39,025 $28,111 $ 2,917
State income taxes, net of Federal income tax effect . . . . . . . . . . . . . . . . 5,818 3,866 377
Valuationallowance ......................................... (80) (16) (35,596)
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (248) (878) (1,433)
Other ..................................................... 34 153 43
Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . . . . . . . 44,549 $31,236 $(33,692)
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