$15.9 million and $5.8 million in 2007, 2006 and 2005, respectively.

The increase in interest and other income in 2006 as compared to 2005 was primarily due to higher interest income earned on our cash and cash equivalents due to increased interest rates as well as higher average cash balances resulting from a net increase in cash flows and net proceeds of $101.1 million from the secondary public offering of our common stock in May 2006.

Provision for (Benefit from) Income Taxes

In 2007 and 2006, our effective tax rate differed from the federal statutory rate of 35% principally due to state income taxes. In 2005, we recorded an income tax benefit of $33.7 million on pretax income of $8.3 million. Our 2005 income tax benefit includes a tax benefit for the reduction in the valuation allowance of $34.9 million. In 2005 we reduced the valuation allowance after determining that substantially all deferred tax assets are more likely than not to be realizable due to expected future income.

Liquidity and Capital Resources

We have generated net cash from operations during each quarter since the second quarter of 2001. Many factors will impact our ability to continue to generate and grow cash from our operations including, but not limited to, the number of subscribers who sign up for our service, the growth or reduction in our subscriber base and our ability to develop new revenue sources. In addition, we may have to or otherwise choose to lower our prices and increase our marketing expenses in order to grow faster or respond to competition. Although we currently anticipate that cash flows from operations, together with our available funds, will be sufficient to meet our cash needs for the foreseeable future, we may require or choose to obtain additional financing. Our ability to obtain financing will depend on, among other things, our development efforts, business plans, operating performance and the condition of the capital markets at the time we seek financing.

Our primary source of liquidity has been cash from operations, which consists primarily of net income adjusted for non-cash items such as amortization of our content library and the depreciation of property and equipment. Our primary uses of cash include the acquisition of content, marketing and fulfillment expenses.

In 2008, operating cash flows will be a significant source of liquidity, while the acquisition of content, marketing and fulfillment expenses will continue to be significant uses of cash. In addition, on January 31, 2008, our Board of Directors authorized a stock repurchase program allowing us to repurchase up to $100.0 million of our common stock through the end of 2008. We completed this stock repurchase program in February 2008. The following table highlights selected measures of our liquidity and capital resources as of December 31, 2007, 2006 and 2005:

Operating Activities

Our operating activities consisted primarily of net income of $67.0 million, increased by non-cash adjustments of $194.8 million and net changes in operating assets and liabilities of $30.0 million during 2007. The majority of the non-cash adjustments came from the amortization of the content