ServiceMagic 2012 Annual Report Download - page 84

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8—LONG-TERM INVESTMENTS
The balance of long-term investments is comprised of:
Cost method investments
In the third quarter of 2011, the Company acquired a 20% interest in Zhenai Inc. ("Zhenai"), a leading provider of online matchmaking
services in China. Our voting power is limited by a shareholders agreement. In light of this limitation and the significance of our interest relative
to other shareholders, we do not have the ability to exercise significant influence over the operating and financial matters of Zhenai and this
investment is accounted for as a cost method investment.
In the fourth quarter of 2010, the Company recorded a $7.8 million impairment charge related to the write-down of a cost method
investment to fair value. The impairment charge was determined to be other-than-temporary due to the investee's inability to achieve its 2010
cash flow forecast during its seasonally strongest fourth quarter and the Company's assessment that the investee would be unable to continue to
operate without new outside financing. The impairment charge is included in "Other (expense) income, net" in the accompanying consolidated
statement of operations.
Long-term marketable equity securities
The cost basis of the Company's long-term marketable equity securities at December 31, 2012 is $ 42.1 million , with a gross unrealized
loss of $ 10.8 million included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. The cost basis of
the Company's long-term marketable equity securities at December 31, 2011 is $53.1 million , with gross unrealized gains of $29.8 million
and a
gross unrealized loss of $8.2 million included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. At
December 31, 2012, the Company's long-term marketable equity securities are both in an unrealized loss position. The Company evaluated the
near-term prospects of the issuers in relation to the severity and duration of the unrealized losses. The Company recorded an $8.7 million other-
than-temporary impairment charge related to the security that was in a continuous unrealized loss position for more than one year, based on the
Company's evaluation of the near-term prospects of the issuer in relation to the severity (fair value was 50 percent less than cost) and duration of
the unrealized loss. The impairment charge is included in “Other (expense) income, net” in the accompanying consolidated statement of
operations. The Company does not consider the second security to be other-than-temporarily impaired at December 31, 2012 based on the
Company's evaluation of the near term prospects of the issuer in relation to the severity and duration, less than two months, of the unrealized loss
and the Company's ability and intent to hold this security for a reasonable period of time sufficient for an expected recovery of fair value.
Equity method investments
In 2012, the Company recorded a pre-tax non-cash charge of $ 18.6 million related to the re-measurement of the carrying value of our
equity method investment in News_Beast to fair value in connection with our acquisition of a controlling interest in June 2012. The re-
measurement charge is included in "Equity in losses of unconsolidated affiliates" in the accompanying consolidated statement of operations.
In 2011, the Company recorded a pre-tax non-cash charge of $11.7 million related to the re-measurement of the carrying value of our
equity method investment in Meetic to fair value in connection with our acquisition of a controlling interest in August 2011. The re-
measurement charge is included in "Equity in losses of unconsolidated affiliates" in the accompanying consolidated statement of operations.
In the first quarter of 2010, the Company recorded an $18.3 million impairment charge to write-down an equity method investment to fair
value. The decline in value was determined to be other-than-temporary due to the investee's continued losses and negative operating cash flows.
The Company estimated the fair value of its investment using a multiple of revenue
December 31,
2012
2011
(In thousands)
Cost method investments
$
113,830
$
82,318
Long-term marketable equity securities
31,244
74,691
Equity method investments
8,104
10,873
Auction rate security
8,100
5,870
Total long-term investments
$
161,278
$
173,752