ServiceMagic 2009 Annual Report Download

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IAC/INTERACTIVECORP
FORM 10-K
(Annual Report)
Filed 02/26/10 for the Period Ending 12/31/09
Address 152 WEST 57TH ST
42ND FLOOR
NEW YORK, NY 10019
Telephone 2123147300
CIK 0000891103
Symbol IACI
SIC Code 5990 - Retail Stores, Not Elsewhere Classified
Industry Retail (Catalog & Mail Order)
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2010, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    IAC/INTERACTIVECORP FORM 10-K (Annual Report) Filed 02/26/10 for the Period Ending 12/31/09 Address 152 WEST 57TH ST 42ND FLOOR NEW YORK, NY 10019 2123147300 0000891103 IACI 5990 - Retail Stores, Not Elsewhere Classified Retail (Catalog & Mail Order) Services 12/31 Telephone CIK Symbol SIC Code ...

  • Page 2
    ... 26, 2010 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2009 Commission File No. 0-20570 IAC/INTERACTIVECORP (Exact name of registrant...

  • Page 3
    ...of February 5, 2010, the following shares of the Registrant's Common Stock were outstanding: Common Stock Class B Common Stock Total 103,757,687 12,799,999 116,557,686 No 1 The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2009 was $1,551...

  • Page 4
    ... Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services PART IV Item 15. Exhibits and Financial Statement Schedules i 113 112 113 113 113...

  • Page 5
    ...venture then controlled by Vivendi, the Company changed its name to USA Interactive. In September 2002, the Company acquired Interval International. In 2003, the Company acquired the minority interests in its former public subsidiaries, Expedia.com, Hotels.com and Ticketmaster, and acquired a number...

  • Page 6
    ...-two reverse stock split. In January 2009, we sold ReserveAmerica and acquired MarketHardware, Inc., an online provider of marketing solutions for home services businesses. In June 2009, we sold the European operations of Match.com to Meetic, a leading European online dating company based in France...

  • Page 7
    ...search websites through which we provide search and related advertising services, as well as toolbars and applications through which we promote and distribute these services, and Citysearch, a leading online local city guide. Search Business Overview. Search services generally involve the generation...

  • Page 8
    ... listing, also takes certain actions on the advertiser's website. To a lesser extent, we also generate revenues from the direct sale of paid listings directly to advertisers on a cost-per-click basis, as well as from the sale of display advertising on a fixed fee per impression basis. Competition...

  • Page 9
    ...is a leading online local guide that provides consumer users with information regarding businesses and events in cities and neighborhoods across the U.S. Citysearch also operates CityGrid, a local content and advertising network. Through Citysearch.com , we provide consumer users with free access to...

  • Page 10
    ... listing on Citysearch.com or a CityGrid third party publisher website or mobile application or a user calls a metered number to reach a business. Marketing. We market our services to users primarily through search engines. We market our products and services to local merchants and other advertisers...

  • Page 11
    ... as use any related searching and matching tools free of charge. Subscribers (those who establish a username and password and pay a subscription fee) may, in addition to these services, initiate, review or respond to e-mails from other subscribers. Our subscription programs start with a single-month...

  • Page 12
    ... connects consumers, by way of patented proprietary technologies, with home and other local service professionals, all of which are pre-screened and the majority of which are customer-rated. When consumers submit a service request through the ServiceMagic marketplace, ServiceMagic generally matches...

  • Page 13
    ...-time fees charged upon enrollment and activation of new service professionals in our network. Lead fees vary based upon the service requested, with fees for leads generated through our Exact Match service being greater than those for leads generated through our Market Match service. Competition We...

  • Page 14
    ... or other similar organizations. Additional Information Company Website and Public Filings. The Company maintains a website at www.iac.com . Neither the information on the Company's website, nor the information on the website of any IAC business, is incorporated by reference in this report, or in...

  • Page 15
    ... our success. If Mr. Diller no longer serves in, or serves in some lesser capacity than, his current role, our business, financial condition and results of operations, as well as the market price of IAC securities, could be adversely affected. Competition for well-qualified employees across IAC and...

  • Page 16
    ... our traffic fails to generate revenue for Google's advertisers, revenues we receive from Google pursuant to the paid listing supply agreement would decrease, which would have an adverse effect on our business, financial condition and results of operations. Our paid listing supply agreement requires...

  • Page 17
    ... ServiceMagic business, our ability to drive traffic depends, in part, on the nature and number of the third party service professionals who are members of our service provider network. While these professionals are required to agree that they will operate in accordance with our terms and conditions...

  • Page 18
    ...nature, sales and marketing costs as a percentage of revenue would increase over the long-term. Any such failure to attract and acquire new, and retain existing, traffic, users and customers in a cost-effective manner could adversely affect our business, financial condition and results of operations...

  • Page 19
    ... key personnel at acquired businesses; and successfully manage acquisition-related strain on the management, operations and financial resources of IAC and/or acquired businesses. We may not be successful in addressing these challenges or any other problems encountered in connection with historical...

  • Page 20
    ... risks and costs as our products and services are offered in international markets and may be subject to additional regulations. Any failure on our part to comply with applicable laws may subject us to additional liabilities, which could adversely affect our business, financial condition and results...

  • Page 21
    ... Ask.com , FunWebProducts , Match.com and ServiceMagic.com and related domain names and logos), through which they market their services and seek to build and maintain brand loyalty and recognition. So long as these businesses continue to use these trademarks to identify their products and services...

  • Page 22
    ... unavailable or prevent us from providing services, which could adversely affect our business. Moreover, as traffic to our various websites and the related number of users and customers increase and the number of new (and presumably more complex) products and services that we introduce continues to...

  • Page 23
    ... users and customers, which could have an adverse effect on our business, financial condition and results of operations and otherwise be costly to remedy. Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties IAC believes that the facilities for its management and operations...

  • Page 24
    ...Securities Class Action Litigation against IAC As previously disclosed in a number of the Company's filings on SEC Forms 10-K and 10-Q, beginning on September 20, 2004, twelve purported shareholder class actions were commenced in the United States District Court for the Southern District of New York...

  • Page 25
    ...). On May 15, 2007, the plaintiffs in the securities class action filed a second amended complaint. The new pleading continues to allege that the defendants failed to disclose material information concerning problems at the Company's then-travel businesses and to assert the same legal claims as its...

  • Page 26
    ... There is no established public trading market for IAC Class B common stock. The table below sets forth, for the calendar periods indicated, the high and low sales prices per share for IAC common stock as reported on NASDAQ. High and low sales prices per share of IAC common stock have been adjusted...

  • Page 27
    ... stock during the quarter ended December 31, 2009: (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) (d) Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (a) Total Number of Shares Period Purchased (b) Average Price...

  • Page 28
    ...) (6.98) 0.95 Basic (loss) earnings per common share attributable to IAC shareholders (10) (7.06) (1.12) Diluted (loss) earnings per common share attributable to IAC shareholders (10) (7.06) (1.08) Balance Sheet Data (end of period): Working capital Total assets Long-term obligations, net of current...

  • Page 29
    24

  • Page 30
    ...") into separate independent publicly traded companies. The results of HSNi, ILG, Ticketmaster and Tree.com have been presented as discontinued operations for 2008 and all prior periods. (Loss) earnings from discontinued operations, net of tax, includes after-tax impairment charges of $262.1 million...

  • Page 31
    ... and more productive for people all over the world. IAC includes the businesses comprising its Search segment; its Match and ServiceMagic segments; the businesses comprising its Media & Other segment; and certain investments in unconsolidated affiliates. All references to "IAC," the "Company," "we...

  • Page 32
    ...businesses manage affiliate programs, pursuant to which we pay commissions and fees to third parties based on revenue earned. These distribution channels might also offer their own products and services, as well as those of other third parties, that compete with those we offer. The cost of acquiring...

  • Page 33
    ... for the services and goods that our brands and businesses offer. We believe foreign markets generally exhibit similar characteristics of the U.S. in regards to customer acceptance of an online marketplace. As a percentage of total IAC revenue (which excludes revenue related to discontinued...

  • Page 34
    ... with network revenue generated from integrated paid listings are lower than traffic acquisition costs associated with distribution revenue generated from partners who redirect traffic to the Ask.com landing page. The decrease in traffic acquisition costs from Match was due primarily to improved...

  • Page 35
    ...compensation and other employee-related costs (including stock-based compensation) for personnel engaged in executive management functions, finance, legal, tax and human resources, facilities costs and fees for professional services. General and administrative expense in 2009 decreased $63.1 million...

  • Page 36
    ... with Connected Ventures, InstantAction.com, RushmoreDrive.com and various early stage businesses not in the year ago period. Product development expense Years Ended December 31, % Change 2008 % Change (Dollars in thousands) 2009 2007 Product development expense As a percentage of total revenue...

  • Page 37
    ...Off related professional fees, a reduction in insurance reserves due to favorable loss experience and a decrease in rent expense from corporate. Operating loss Years Ended December 31, % Change 2008 % Change (Dollars in thousands) 2009 2007 Operating loss As a percentage of total revenue $(1,058...

  • Page 38
    ... of non-cash marketing referred to in this report consists of non-cash advertising credits secured from Universal Television as part of the transaction pursuant to which Vivendi Universal Entertainment, LLLP ("VUE") was created, and the subsequent transaction by which IAC sold its partnership...

  • Page 39
    Table of Contents revenue and the amortization of intangibles, required by purchase accounting rules. Equity in (losses) income of unconsolidated affiliates was further impacted by a $5.5 million impairment charge in 2008 described below. Gain on sale of long-term investments in 2009 of $28.8 ...

  • Page 40
    ..., respectively, for penalties. The Internal Revenue Service is currently examining the Company's tax returns for the years ended December 31, 2001 through 2006. The statute of limitations for these years has been extended to December 31, 2010. Various state, local and foreign jurisdictions are...

  • Page 41
    ... An estimate of other changes in unrecognized tax benefits, while potentially significant, cannot be made. On February 1, 2010, President ...such modifications would require Congressional approval; however, changes to these rules could impact the Company's effective tax rate. The Company will continue ...

  • Page 42
    ... an ad campaign to rebrand the Ask.co.UK website. Overall traffic acquisition costs during the period decreased as a direct result of a sharp decline in network revenue at IAC Search & Media; however, traffic acquisition costs as a percentage of revenue increased. The decrease in product development...

  • Page 43
    ... acquisition costs associated with network revenue generated from integrated paid listings are lower than traffic acquisition costs associated with distribution revenue generated from partners who redirect traffic to the Ask.com landing page. Contributing to the decrease in selling and marketing...

  • Page 44
    ...and increased compensation and other employee-related costs related to product development. In 2008, Match experienced increases in advertising expenses associated with television advertising and online marketing related to Chemistry.com and various international marketing campaigns. The increase in...

  • Page 45
    ...Revenue grew 33% to $123.9 million, benefiting from a more active service provider network and a 27% increase in service requests driven by increased marketing efforts. During 2008, ServiceMagic experienced a 29% increase in the number of times service requests are accepted by a service professional...

  • Page 46
    ... in amortization of non-cash marketing related to Shoebuy and a decrease of non-cash compensation expense. The impairment at Connected Ventures resulted from the Company's assessment of its future profitability. Corporate For the year ended December 31, 2009 compared to the year ended December...

  • Page 47
    ... proceeds of $150.9 million from the exercise of warrants to acquire 11.5 million shares of IAC common stock that were due to expire on February 4, 2009. The strike price of the warrants was $13.09 per share. Net cash used in financing activities attributable to continuing operations in 2008 of $674...

  • Page 48
    ... in connection with the development and expansion of its overall operations. The Company may make a number of acquisitions which could result in the reduction of its cash balance or the incurrence of debt. IAC expects that 2010 capital expenditures will be slightly lower than 2009. IAC believes...

  • Page 49
    ... Long-term ...funding commitments that could potentially require registrant performance in the event of demands by third parties or contingent events, such as under lines of credit extended or under a guarantee of debt. Off-Balance Sheet Arrangements Other than the items described above, the Company...

  • Page 50
    ... Company remitting the required tax withholding amount from its current funds. Amortization of non-cash marketing consists of non-cash advertising credits secured from Universal Television as part of the transaction pursuant to which VUE was created, and the subsequent transaction by which IAC sold...

  • Page 51
    ... its ordinary cost/benefit marketing planning process. Accordingly, the Company's aggregate level of advertising, and the increased concentration of that advertising on NBC Universal network and cable channels, does not reflect what our advertising effort would otherwise be without these credits. As...

  • Page 52
    ... asset below its carrying value. The annual assessments identified impairment charges in 2009 related to the IAC Search & Media reporting unit and in 2008 related to the Connected Ventures and IAC Search & Media reporting units. These impairment charges are more fully described above in "Results...

  • Page 53
    ... DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. The discount rates used in the Company's annual impairment assessments were the same in 2009 and 2008. The royalty rates were unchanged from 2008 to...

  • Page 54
    ... The Company writes off accounts receivable when they become uncollectible. The Company also maintains allowances to reserve for potential credits issued to customers or other revenue adjustments. The amount of these reserves are based, in part, on historical experience. As of December 31, 2009, the...

  • Page 55
    ... notes to the consolidated financial statements, the Company estimated the fair value of stock options issued in 2009 and 2008 using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 2.1% and 2.6%, respectively, a dividend yield of zero...

  • Page 56
    ... changes for the remainder of the period. Equity Price Risk At December 31, 2009, the Company had investments in equity securities of publicly traded companies that are considered available-forsale marketable equity securities and are included in either "Marketable securities" or "Long-term...

  • Page 57
    ...'s stock price. As a result of this transaction, IAC no longer accounts for its investment using the cost method of accounting but rather accounts for such investment as an available-for-sale marketable equity security. During the third and fourth quarters of 2009, the Company sold 1.8 million...

  • Page 58
    ... to adjust its financing and operating strategies. Foreign exchange gains and losses were not material to the Company's earnings in 2009, 2008 and 2007. As currency exchange rates change, translation of the income statements of the Company's international businesses into U.S. dollars affects year...

  • Page 59
    ... in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), IAC/InterActiveCorp's internal control over financial reporting as of December 31, 2009, based on criteria established...

  • Page 60
    ... LIABILITIES: Accounts payable, trade Deferred revenue Accrued expenses and other current liabilities Total current liabilities Long-term debt Income taxes payable Other long-term liabilities Redeemable noncontrolling interests Commitments and contingencies SHAREHOLDERS' EQUITY: Common stock $.001...

  • Page 61
    ...Per share information attributable to IAC shareholders: Basic (loss) earnings per share from continuing operations Diluted (loss) earnings per share from continuing operations Basic loss per share Diluted loss per share Non-cash compensation expense by function: Cost of revenue Selling and marketing...

  • Page 62
    ... of certain warrants Purchase of treasury stock Cumulative effect of a change in $ Shares Class B Convertible Common Common Accum. Stock $.001 Stock $.001 Other Par Value Additional Par Value Paid-in Retained Comp. $ Shares $ Shares Capital Earnings Income (In thousands) 8,739,474 $ - 1 $205...

  • Page 63
    ... related to the exercise of stock options, vesting of restricted stock units and other Redemption of preferred shares Issuance of common stock upon conversion of convertible notes Purchase of treasury stock Spin-Off of HSNi, ILG, Ticketmaster and Tree.com to 420,697 - - - - - - - 420,697...

  • Page 64
    ... December 31, 2008 $ 4,427,536 $ - Comprehensive loss: Net loss attributable to IAC shareholders for the year ended December 31, 2009 (978,822) - Foreign currency translation, net of tax provision of $2,186 14,918 - Change in net unrealized gains on available-forsale securities, net of tax provision...

  • Page 65
    December 31, 2009 $ 3,127,826 $ - - $223 222,658 $ 16 16,157 $11,322,993 $(751,377) $ 24,503 $(7,468,532) $ - The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 57

  • Page 66
    ... acquired Capital expenditures Proceeds from sales and maturities of marketable securities Purchases of marketable securities Proceeds from sales of long-term investments Purchases of long-term investments Proceeds from sale of discontinued operations Net cash distribution from spun-off businesses...

  • Page 67
    ...in exchange for Match Europe. ServiceMagic ServiceMagic is a leading online marketplace that connects consumers, by way of patented proprietary technologies, with home and other local service professionals, all of which are pre-screened and the majority of which are customer-rated. Media & Other Our...

  • Page 68
    ... the fair value of such cost method investment is not estimated, as it is impracticable to do so. Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists, services are rendered or merchandise is delivered to customers, the fee or price charged is fixed or...

  • Page 69
    ...revenue is generated from customers who subscribe to online personals services on Match.com, Chemistry.com and Match's other personals websites. Subscription fee revenue is recognized over the terms of the applicable subscriptions, which range from one to six months. ServiceMagic ServiceMagic's lead...

  • Page 70
    ... pay its obligation to the Company and the condition of the general economy and the customer's industry. The Company writes off accounts receivable when they become uncollectible. The Company also maintains allowances to reserve for potential credits issued to customers or other revenue adjustments...

  • Page 71
    ... value of capitalized internal use software amounted to $45.9 million and $46.4 million as of December 31, 2009 and 2008, respectively. Software Development Costs to Be Marketed to Others The Company capitalizes certain software development costs, including costs to develop software products or the...

  • Page 72
    ... of potential impairment charges relative to future changes in estimated fair values, had the estimated fair values of each of these reporting units been hypothetically lower by 10% as of October 1, 2009, the carrying values of IAC Search & Media, InstantAction.com and Connected Ventures would have...

  • Page 73
    ...) NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Traffic Acquisition Costs Traffic acquisition costs consist of revenue share payments to partners that have distributed toolbars and/or integrated paid listings into their websites and similar arrangements with third parties who...

  • Page 74
    ... the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. Earnings Per Share Basic earnings per share ("Basic EPS") is computed by dividing net earnings attributable to IAC shareholders by the weighted average number of common shares outstanding...

  • Page 75
    ... allowances; and the determination of stock-based compensation. Certain Risks and Concentrations A significant portion of our revenue is derived from online advertising, the market for which is highly competitive and rapidly changing. Significant changes in this industry or changes in customer 67

  • Page 76
    ... ACCOUNTING POLICIES (Continued) buying behavior or advertiser spending behavior, including those changes that may result from the current economic environment, could adversely affect our operating results. A significant component of the Company's revenue is attributable to a paid listing...

  • Page 77
    ..., 2009 2008 Buildings and leasehold improvements Computer equipment and capitalized software Furniture and other equipment Projects in...(in thousands): December 31, 2009 2008 Accrued employee compensation and benefits Accrued revenue share Accrued advertising expense Other Accrued expenses and other...

  • Page 78
    ..., net of tax Accumulated other comprehensive income, net of tax Revenue Revenue is comprised of (in thousands): $ 20,264 $ 4,239 $ 24,503 $ 5,346 (3,166) 2,180 2009 Years Ended December 31, 2008 2007 Service revenue Product revenue Revenue $ 1,266,503 $ 1,339,732 $ 1,243,007 109,285 105,363...

  • Page 79
    ...2007 2009 Cost of service revenue Cost of product revenue Cost of revenue Other income (expense) $ 370,395 $ 398,206 $ 456,837 79,395 79,184 64,907 $ 449,790 $ 477,390 $ 521,744 Other income (expense) is comprised of (in thousands): Years Ended December 31, 2008 2007 2009 Gain on sale of Match...

  • Page 80
    ... related to New York State tax credits under the Brownfield Cleanup Program Act. The related income tax benefit of this credit was recorded as a reduction in the carrying value of the related building and improvements. This credit principally relates to qualifying costs incurred in connection with...

  • Page 81
    ...benefit will not be realized. December 31, 2009 2008 Deferred tax assets: Accrued expenses Net operating loss carryforwards Tax credit carryforwards Stock... to limitations under state laws similar to Section 382 of the Internal Revenue Code of 1986. At December 31, 2009, the Company had foreign...

  • Page 82
    ... $283.8 million. If not utilized, the state capital losses will expire between 2013 and 2014. Utilization of capital losses will be limited to the Company's ability to generate future capital gains. At December 31, 2009, the Company had tax credit carryforwards of $17.4 million. Of this amount, $11...

  • Page 83
    ... of change in estimated state tax rate Change in tax reserves, net of effect of federal, state and foreign tax benefits Federal tax credits for research activities Non-taxable gains on derivatives Non-deductible expenses related to the Spin-Off Non-deductible expenses Change in federal valuation...

  • Page 84
    ... million would be required upon the subsequent recognition of unrecognized tax benefits for an increase in the Company's valuation allowance against certain deferred tax assets. The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense...

  • Page 85
    ...growth rates, competitive dynamics and IAC Search & Media's current operating strategies and the impact of these factors on the fair value of IAC Search & Media and its goodwill and indefinite-lived intangible assets. The indefinite-lived intangible asset impairment charge relates to trade names and...

  • Page 86
    ... DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. The discount rates used in the Company's annual impairment assessments were the same in 2009 and 2008. The royalty rates were unchanged from 2008 to...

  • Page 87
    ...349,084 $ 103,033 $ Citysearch 12,830 9 Search 1,361,914 103,042 Match 233,397 - ServiceMagic 99,641 7,728 Shoebuy 49,744 - InstantAction.com 27,159 4,875 ReserveAmerica 30,900 - Connected Ventures 19,968 68 Gifts.com 1,056 - Media & Other 128,827 4,943 Total $ 1,823,779 $ 115,713 $ (335) $ (3,509...

  • Page 88
    ... 31, 2010 2011 2012 2013 2014 $ 6,329 4,224 2,981 1,832 69 $ 15,435 NOTE 6-MARKETABLE SECURITIES At December 31, 2009, available-for-sale marketable securities were as follows (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Corporate debt...

  • Page 89
    ... primarily to changes in credit quality of the security or interest rates. Because the Company does not intend to sell any marketable securities and it is not more likely than not that the Company will be required to sell any marketable securities before recovery of their amortized cost bases, which...

  • Page 90
    ... million shares of ARO stock plus additional consideration in the form of a contingent value right ("CVR") (See Note 8 for additional information on the CVR). ARO shares are listed on the German stock exchange (XETRA: ARO). During 2009, the Company sold its 5.5 million shares of ARO stock, resulting...

  • Page 91
    ..., the Company recorded a $6.2 million impairment charge related to the write-down of certain long-term marketable securities. These losses were determined to be other-than-temporary due to the significant decline in and the duration of the decline in their stock prices. These impairment charges are...

  • Page 92
    ... this transaction, IAC accounted for its remaining investment in Points as a marketable equity security. During the fourth quarter of 2009, IAC sold its remaining investment in Points resulting in a nominal gain. The Company's equity in (losses) income of its unconsolidated affiliates for each of...

  • Page 93
    ... may have different market prices from multiple market data sources, in which case a weighted average market price is used. Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the...

  • Page 94
    ... and government agency money market funds Marketable securities: Corporate debt securities States of the U.S. and state political subdivisions U.S. treasuries and government agency bonds Other fixed term obligations Long-term investments: Marketable equity security Auction rate securities Other non...

  • Page 95
    ...The following table presents the gains and losses included in earnings for the years ended December 31, 2009 and 2008 relating to the Company's assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3): For the Year Ended December 31...

  • Page 96
    ... charges in 2009 and 2008. NOTE 9-FINANCIAL INSTRUMENTS The fair value of financial instruments listed below has been determined by the Company using available market information and appropriate valuation methodologies. The Company's financial instruments include a guarantee and letters of credit...

  • Page 97
    ... the financing of the construction of IAC's corporate headquarters, on August 31, 2005, the New York City Industrial Development Agency (the "Agency") issued $80 million in aggregate principal amount of New York City Industrial Development Agency Liberty Bonds (IAC/InterActiveCorp Project), Series...

  • Page 98
    ...the powers, preferences, rights and qualifications, limitations and restrictions of preferred stock issued by IAC without any further vote or action by the shareholders. Any shares of preferred stock so issued would have priority over shares of IAC common stock and shares of IAC Class B common stock...

  • Page 99
    ...compensation plans, warrants, and other matters, 55.6 million shares of IAC common stock were reserved as of December 31, 2009. Warrants A summary of changes in outstanding warrants is as follows: December 31, 2009 Number of IAC Weighted Common Shares Average Underlying Warrants Strike Price (Shares...

  • Page 100
    ...EQUITY (Continued) At December 31, 2009, warrants to acquire shares of IAC common stock were outstanding as follows: Expiration Date Number of IAC Common Shares Underlying Warrants Outstanding At December 31, 2009 (In thousands) Average Strike per IAC Share Issued in Vivendi deal: Tranche 1 Tranche...

  • Page 101

  • Page 102
    ... cover stock options to acquire shares of IAC common stock, RSUs, PSUs and restricted stock, as well as provide for the future grant of these and other equity awards. These plans are: the IAC 2008 Stock and Annual Incentive Plan (the "2008 Plan"), the IAC 2005 Stock and Annual Incentive Plan (the...

  • Page 103
    ... equity based awards for up to 20.0 million shares of IAC common stock, adjusted to reflect IAC's one-for-two reverse stock split in August 2008. Under the 2000 Plan, the Company is authorized to grant stock options, RSUs, PSUs, restricted stock, and other equity based awards and the number of 93

  • Page 104
    ... granted will not be less than the market price of the Company's common stock on the grant date. The plans do not specify grant dates or vesting schedules as those determinations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee"). Each...

  • Page 105
    ... giving consideration to expectations of future employee behavior. The following are the weighted average assumptions used in the Black-Scholes option pricing model: Years Ended December 31, 2009 2008 Expected volatility Risk-free interest rate Expected term Dividend yield 59% 2.1% 4.9 years 0 47...

  • Page 106
    ... IAC's closing stock price on the last trading day of 2009 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2009. This amount changes based on the fair market...

  • Page 107
    ...management. These equity awards vest over a period of years or upon the occurrence of certain prescribed events. In some cases, IAC has taken a preferred interest in the subsidiary with a face value equal to the subsidiary's acquisition price or, when funding a start-up business, its investment cost...

  • Page 108
    ... information in a manner consistent with how the chief operating decision maker and executive management view the businesses, how the businesses are organized as to segment management, and the focus of the businesses with regards to the types of products or services offered or the target market...

  • Page 109
    Table of Contents IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14-SEGMENT INFORMATION (Continued) December 31, 2009 2008 (In thousands) Segment Assets(b): Search Match ServiceMagic Media & Other Corporate Total $ 251,586 $ 257,398 233,919 65,...

  • Page 110
    ... Compensation Expense Amortization of Non-Cash Marketing Amortization of Intangibles Goodwill Impairment Operating (Loss) Income Search $ 81,727 $ (588) $ (6,494) $ Match 94,124 (154) (4,375) ServiceMagic 21,286 (150) (4,999) Media & Other (28,659) (726) - Corporate (65,635) (68,268) - Total $ 102...

  • Page 111

  • Page 112
    ... Net loss attributable to IAC shareholders $ Year Ended December 31, 2007 Operating Income Before Amortization Non-Cash Compensation Expense Amortization of Non-Cash Marketing Amortization of Intangibles Operating Income (Loss) Search Match ServiceMagic Media & Other Corporate Total $ $ 85,388...

  • Page 113
    ... is accounted for as an equity method investment. Corporate assets consist primarily of cash and cash equivalents, marketable securities and IAC's headquarters building. NOTE 15-DISCONTINUED OPERATIONS On August 20, 2008, IAC completed the Spin-Off. In addition, on May 30, 2008, IAC sold EPI for...

  • Page 114
    ... of HSNi, ILG, Ticketmaster and Tree.com as of August 20, 2008 were as follows (in thousands): August 20, 2008 Current assets Goodwill Intangible assets, net Other non-current assets Non-current assets Current liabilities Deferred income taxes Other long-term liabilities Non-current liabilities Net...

  • Page 115
    ... consist of a $15.0 million guarantee and a $6.9 million letter of credit. The guarantee supports a former subsidiary's operation of a camping reservation system and the letter of credit supports the Company's casualty insurance program. The guarantee is set to expire July 2010 and is for the remote...

  • Page 116
    ... equity as an increase to additional paid-in-capital. On June 5, 2009, IAC completed the sale of Match Europe to Meetic. In exchange for Match Europe, IAC received a 27% stake in Meetic (approximately 6.1 million shares of Meetic common stock), valued at $154.8 million, plus a promissory note valued...

  • Page 117
    ... that may be used by both companies. Members of this aircraft's flight crew are employed by an entity in which each of the Company and Expedia has a 50% ownership interest. The Company and Expedia have agreed to share costs relating to flight crew compensation and benefits pro-rata according to...

  • Page 118
    ... nor matching contributions are required to be invested in IAC common stock. IAC also has or participates in various benefit plans, principally defined contribution plans, for its international employees. IAC's contributions for these plans were $0.5 million, $0.7 million and $0.6 million in 2009...

  • Page 119
    ...) Basic earnings (loss) per share(i) $ 0.38 $ (3.02) Diluted earnings (loss) per share(i) $ 0.38 $ (3.02) $ $ $ $ (0.01) $ (0.01) $ (0.11) $ (0.11) $ 1.60 1.56 1.62 1.57 (a) In the second quarter of 2009, certain expenses were reclassified from cost of revenue to selling and marketing expense.

  • Page 120
    Accordingly, the March 31 quarterly cost of revenue amounts presented above differ from the amounts reflected in the Company's quarterly report on Form 10-Q for the first quarter of 2009 due to this reclassification. (b) The second quarter of 2009 includes an after-tax gain of $64.3 million related ...

  • Page 121
    ... limitation, market conditions, share price and future outlook. In accordance with ASC Topic 855, "Subsequent Events," the Company has evaluated, for potential recognition and/or disclosure, events that have occurred after December 31, 2009 and prior to the filing of this Annual Report on Form...

  • Page 122
    ... as conditions warrant. As required by Rule 13a-15(d), IAC management, including the Chief Executive Officer and the Chief Financial Officer, also conducted an evaluation of the Company's internal control over financial reporting to determine whether any changes occurred during the quarter ended...

  • Page 123
    ...detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation...

  • Page 124
    ...not to solicit IAC's employees or business partners during the term of his employment and for eighteen (18) months after a Qualfying Termination. In addition, Mr. Winiarski agreed not to use or disclose any confidential information of IAC or its affiliates. PART III The information required by Part...

  • Page 125
    ... Related Person Transactions" and "Corporate Governance," respectively, in the 2010 Proxy Statement and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services Information regarding the fees and services of IAC's independent registered public accounting firm and the pre...

  • Page 126
    ... Statement Schedule of IAC Schedule Number II Valuation and Qualifying Accounts. All other financial statements and schedules not listed have been omitted since the required information is included in the Consolidated Financial Statements or the notes thereto, or is not applicable or required...

  • Page 127
    ... Transition Services Agreement, dated as of August 20, 2008, by and among IAC/InterActiveCorp, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. 10.8 IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1) Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed...

  • Page 128
    ... to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009. 10.19 Amended and Restated 2000 Exhibit 10.17 to the Registrant's Annual IAC/InterActiveCorp Deferred Compensation Report on Form 10-K for the fiscal year Plan For Non-Employee Directors. ended December...

  • Page 129
    ....2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(3) (1) (2) (3) Reflects management contracts and management and director compensatory plans. Filed herewith. Furnished herewith. 117

  • Page 130
    ... undersigned, thereunto duly authorized. February 26, 2010 IAC/INTERACTIVECORP By: /s/ BARRY DILLER Barry Diller Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 131
    Table of Contents Signature Title /s/ JOHN C. MALONE Director John C. Malone /s/ ARTHUR C. MARTINEZ Director Arthur C. Martinez /s/ DAVID S. ROSENBLATT Director David S. Rosenblatt /s/ ALAN G. SPOON Director Alan G. Spoon /s/ ALEXANDER VON FURSTENBERG Director Alexander von Furstenberg /s/ RICHARD ...

  • Page 132
    ... of Contents Schedule II IAC/INTERACTIVECORP AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS Balance at Beginning of Period Charges to Earnings Charges to Other Accounts (In Thousands) Balance at End of Period Description Deductions 2009 Allowance for doubtful accounts and revenue reserves...

  • Page 133

  • Page 134
    ....com, LLC GDC Media, Inc. GiftCo, Inc. HSE Media LLC HSN Capital LLC HSN Home Shopping Network GmbH HSN UK Holdings Ltd. HSN, LLC HTRF Holdings, Inc. HTRF Ventures, LLC IAC 19 th St. Holdings, LLC IAC Falcon Holdings, LLC IAC Search & Media (Canada) Inc. IAC Search & Media (Hangzhou) Limited IAC...

  • Page 135
    ....com LatAm Ltd. Match.com Offshore Holdings, Ltd Match.com Pegasus Limited Match.com SN, LLC Match.com, Inc. Match.com, L.L.C. Mindspark Interactive Network, Inc. Mojo Acquisition Corp. NLG Merger Corp. Notional, LLC People Media, Inc. People Media, LLC Points Investments, Inc. Power Ten Ventures...

  • Page 136
    ... Group Ltd. TV Travel Shop Broadcasting Ltd. TV Travel Shop Holidays Ltd. TV Travel Shop Ltd. uDate.com Ltd. uDate.com, Inc. Unicorn Acquisition Corp. USA Electronic Commerce Solutions LLC USA Video Distribution LLC USANi Capital Corp. USANi LLC USANi SpinCo., Inc. USANi Sub LLC USA-Vue Funding...

  • Page 137
    ... February 26, 2010, with respect to the consolidated financial statements and schedule of IAC/InterActiveCorp, and the effectiveness of internal control over financial reporting of IAC/InterActiveCorp, included in this Annual Report (Form 10-K) for the year ended December 31, 2009. COMMISSION FILE...

  • Page 138
    QuickLinks Exhibit 23.1 Consent of Independent Registered Public Accounting Firm

  • Page 139
    ... in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who...

  • Page 140
    QuickLinks Exhibit 31.1 Certification

  • Page 141
    ... Thomas J. McInerney, certify that: 1. 2. I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2009 of IAC; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements...

  • Page 142
    QuickLinks Exhibit 31.2 Certification

  • Page 143
    ...: (1) the Annual Report on Form 10-K for the fiscal year ended December 31, 2009 of IAC/InterActiveCorp (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and the information...

  • Page 144
    QuickLinks Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002

  • Page 145
    ...: (1) the Annual Report on Form 10-K for the fiscal year ended December 31, 2009 of IAC/InterActiveCorp (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and the information...

  • Page 146
    QuickLinks Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANESOXLEY ACT OF 2002