NetFlix 2014 Annual Report Download - page 29

Table of Contents
Interest expense for the year ended December 31, 2013 consists primarily of $26.1 million of interest on our 5.375% Notes. The increase
in interest expense for the year ended December 31, 2013 as compared to the year ended December 31, 2012 is due to the higher aggregate
principal of interest bearing notes outstanding, partially offset by their lower interest rate.
Interest and Other Income (Expense)
Interest and other income (expense) consists primarily of interest earned on cash, cash equivalents and short-
term investments and foreign
exchange gains and losses on foreign currency denominated balances.
Interest and other income (expense) was relatively flat as compared to the prior year. Losses on foreign currency denominated balances
were $8.2 million and $8.4 million for the years ended December 31, 2014 and 2013, respectively.
Interest and other income (expense) decreased due to increased foreign exchange losses on foreign currency denominated balances. The
foreign exchange losses were $8.4 million and $4.0 million for the years ended December 31, 2013 and 2012, respectively.
Extinguishment of Debt
In connection with the redemption of the outstanding $200.0 million aggregate principal amount of the 8.50% Notes, we recognized a loss
on extinguishment of debt of $25.1 million in the year ended December 31, 2013, which consisted of expenses associated with the redemption,
including a $19.4 million premium payment pursuant to the make-whole provision in the indenture governing the 8.50% Notes. For further
detail see Note 5 of Item 8, Financial Statements and Supplementary Data.
Provision for Income Taxes
In 2014, the difference between our 24% effective tax rate and the federal statutory rate of 35% was $39.7 million primarily due to the
release of tax reserves on previously unrecognized tax benefits of $38.6 million as a result of an IRS Appeals settlement for the tax years 2008-
2009 leading to the reassessment of our reserves for all open years, coupled with the retroactive reinstatement of the 2014 Federal research and
development ("R&D") credits partially offset by state income taxes, foreign taxes and nondeductible expenses. The decrease in our effective
tax rate for the year ended December 31, 2014 as compared to the year ended December 31, 2013 was primarily attributable to the $38.6
million release of tax reserves on previously unrecognized tax benefits.
On December 19, 2014, the Tax Increase Prevention Act of 2014 (H.R. 5771) was signed into law which retroactively extended the
Federal R&D credit from January 1, 2014 through December 31, 2014. As a result, we recognized the retroactive benefit of the 2014 Federal
R&D credit of approximately $10.7 million as a discrete item in the fourth quarter of 2014, the period in which the legislation was enacted.
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Year Ended December 31, Change
2014 2013 2014 vs. 2013
(in thousands, except percentages)
Interest and other income (expense)
$
(3,060
)
$
(3,002
)
$
(58
)
(2
)%
Year Ended December 31, Change
2013 2012 2013 vs. 2012
(in thousands, except percentages)
Interest and other income (expense)
$
(3,002
)
$
474
$
(3,476
)
(733
)%
Year Ended December 31, Change
2014 2013 2014 vs. 2013
(in thousands, except percentages)
Provision for income taxes
$
82,570
$
58,671
$
23,899
41
%
Effective tax rate
24
%
34
%