include the gain on disposal of DVDs.

The $7.3 million decrease in general and administrative expenses was primarily attributable to a $9.0 million expense in 2011 related to the settlement of a legal claim related to our compliance with the Video Privacy Protection Act, a $5.8 million increase in the gain on sale of previously viewed DVDs, and a $8.6 million decrease in miscellaneous expenses related to the use of outside and professional services, taxes, insurance costs and to costs associated with various legal claims against us. These decreases were partially offset by an increase in personnel-related costs of $16.1 million attributed to an 11% increase in average headcount and a $3.5 million increase in stock-based compensation. We expect legal costs to continue at a high level for the foreseeable future as we defend claims against us.

The $62.5 million increase in general and administrative expenses was primarily attributable to an increase in personnel-related costs of $33.6 million attributed to an $11.5 million increase in stock-based compensation and a 32% increase in average headcount. Legal costs increased $15.6 million primarily due to the $9.0 million settlement of a legal claim related to our compliance with the Video Privacy Protection Act and due to legal fees associated with various other claims against us. Other miscellaneous expenses primarily related to the use of outside and professional services, taxes, and insurance increased by $13.3 million.

Interest Expense

Interest expense consists of the interest on our lease financing obligations and the interest on our 8.50% Notes including the amortization of debt issuance costs. Starting in the fourth quarter of 2011, interest expense also includes the amortization of debt issuance costs on our Convertible Notes issued in November 2011.

Interest expense was relatively flat as compared to the prior year. Interest expense in 2012 consists primarily of $17.0 million of interest due on our 8.50% Notes.

Interest expense was relatively flat as compared to the prior year. Interest expense in 2011 consists primarily of $17.0 million of interest due on our 8.50% Notes.

Provision for Income Taxes

In 2012, our effective tax rate differed from the federal statutory rate of 35% by $2.7 million primarily due to state income taxes and nondeductible expenses partially offset by the California research and development ("R&D") credit. The increase in our effective tax rate for the year ended December 31, 2012 as compared to the year ended December 31, 2011 was primarily attributable to the expiration of the Federal R&D credit on December 31, 2011.

On January 2, 2013, the American Taxpayer Relief Act of 2012 (H.R. 8) was signed into law which retroactively extends the Federal R&D credit from January 1, 2012 through December 31, 2013. As a result, we will recognize the retroactive benefit of the 2012 Federal R&D credit of approximately $3.1 million as a discrete item in the first quarter of 2013, the period in which the legislation, including the reinstatement, was enacted.

In 2011, our effective tax rate differed from the federal statutory rate of 35% primarily due to state income