NetFlix 2009 Annual Report Download - page 64

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NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock Repurchases
To facilitate a stock repurchase program, shares are repurchased by the Company in the open market and are
accounted for when the transaction is settled. Shares held for future issuance are classified as treasury
stock. Shares formally or constructively retired are deducted from common stock for par value and from
additional paid in capital for the excess over par value. If additional paid in capital has been exhausted, the
excess over par value is deducted from retained earnings. Direct costs incurred to acquire the shares are included
in the total cost of the shares.
Comprehensive Income
Other comprehensive income consists of unrealized gains and losses on available-for-sale securities, net of
tax. Total comprehensive income and the components of accumulated other comprehensive income are presented
in the accompanying consolidated statements of stockholders’ equity.
Net Income Per Share
Basic net income per share is computed using the weighted-average number of outstanding shares of
common stock during the period. Diluted net income per share is computed using the weighted-average number
of outstanding shares of common stock and, when dilutive, potential common shares outstanding during the
period. Potential common shares consist primarily of incremental shares issuable upon the assumed exercise of
stock options, warrants to purchase common stock and shares currently purchasable pursuant to the Company’s
employee stock purchase plan using the treasury stock method. The computation of net income per share is as
follows:
Year ended December 31,
2009 2008 2007
(in thousands, except per share data)
Basic earnings per share:
Net income ........................................ $115,860 $83,026 $66,608
Shares used in computation:
Weighted-average common shares outstanding ........ 56,560 60,961 67,076
Basic earnings per share .............................. $ 2.05 $ 1.36 $ 0.99
Diluted earnings per share:
Net income ........................................ $115,860 $83,026 $66,608
Shares used in computation:
Weighted-average common shares outstanding ........ 56,560 60,961 67,076
Employee stock options and employee stock purchase
plan shares .................................. 1,856 1,875 1,826
Weighted-average number of shares ................ 58,416 62,836 68,902
Diluted earnings per share ................................ $ 1.98 $ 1.32 $ 0.97
F-11