NetFlix 2010 Annual Report Download - page 64

Shares repurchased by the Company are accounted for when the transaction is settled. There were no
unsettled share repurchases at December 31, 2010. Shares repurchased and 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. During the year ended December 31, 2010, $121.9 million
was deducted from retained earnings related to share repurchases.
In the fourth quarter of 2009, the Company determined that all shares held in treasury stock would be
retired. Accordingly, these constructively retired shares were deducted from common stock for par value and
from additional paid in capital for the excess over par value, until additional paid in capital was exhausted and
then from retained earnings.
Preferred Stock
The Company has authorized 10,000,000 shares of undesignated preferred stock with par value of $0.001
per share. None of the preferred shares were issued and outstanding at December 31, 2010 and 2009.
Voting Rights
The holders of each share of common stock shall be entitled to one vote per share on all matters to be voted
upon by the Company’s stockholders.
Employee Stock Purchase Plan
In February 2002, the Company adopted the 2002 Employee Stock Purchase Plan (“ESPP”), which reserved
a total of 1,166,666 shares of common stock for issuance. The 2002 Employee Stock Purchase Plan also provided
for annual increases in the number of shares available for issuance on the first day of each year, beginning with
2003, equal to the lesser of:
• 2% of the outstanding shares of the common stock on the first day of the applicable year;
• 666,666 shares; and
• such other amount as the Company’s Board of Directors may determine.
Under the Company’s ESPP, employees can purchase common stock of the Company through accumulated
payroll deductions. The purchase price of the common stock acquired by the employees participating in the ESPP
is 85% of the closing price on either the first day of the offering period or the last day of the purchase period,
whichever is lower. Through May 1, 2006, offering periods were twenty-four months, and the purchase periods
were six months. Therefore, each offering period included four six-month purchase periods, and the purchase
price for each six-month period was determined by comparing the closing prices on the first day of the offering
period and the last day of the applicable purchase period. In this manner, the look-back for determining the
purchase price was up to twenty-four months. However, effective May 1, 2006, the ESPP was amended so that
offering and purchase periods take place concurrently in consecutive six month increments. Under the amended
ESPP, therefore, the look-back for determining the purchase price is six months. Employees can invest up to 15%
of their gross compensation through payroll deductions. In no event would an employee be permitted to purchase
more than 8,334 shares of common stock during any six-month purchase period.
In March 2010, the ESPP was amended to terminate the annual increase to the share reserve and to limit the
maximum number of shares available under the ESPP to 2,800,000 shares. As of December 31, 2010, there were
2,785,721 shares available for future issuance under the 2002 Employee Stock Purchase Plan. There was only
one ESPP offering in 2010, and the Company does not expect any future ESPP offerings.
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