ServiceMagic 2009 Annual Report Download - page 38

Table of Contents
resulted from the Company's assessment of its future profitability. The impairment at the Search segment primarily resulted from the decline in
revenue and profitability at IAC Search & Media's Excite, iWon and MyWay portals businesses. The intangible asset impairment charges are
included in amortization of intangibles in the accompanying consolidated statement of operations. The intangible asset impairment charges were
determined by comparing the fair values of the respective reporting unit's intangible assets with the carrying values. The goodwill impairment
charges were determined by comparing the implied fair value of the respective reporting unit's goodwill with the carrying value. Fair values were
determined using discounted cash flow analyses.
Operating loss in 2009 increased $996.5 million from 2008 primarily due to the impairment charges described above. Partially offsetting
this increase in operating loss is an increase of $2.7 million in Operating Income Before Amortization described above and the decreases of
$16.7 million in non-cash compensation expense, $4.1 million in amortization of non-cash marketing and $1.9 million in amortization of
intangibles, exclusive of the impairment charges noted above. The decrease in non-cash compensation expense is primarily due to the
acceleration and modification of certain equity awards associated with the Spin-Off in the prior year period. The amortization 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
interests in VUE.
Operating loss in 2008 decreased $16.5 million from 2007 primarily due to the increase of $19.6 million in Operating Income Before
Amortization described above and a decrease of $29.7 million in amortization of non-cash marketing, partially offset by the impairment charges
noted above and an increase of $13.0 million in non-cash compensation expense. The decrease in amortization of non-cash marketing is
attributable to IAC Search & Media and Shoebuy. The increase in non-cash compensation expense is primarily due to the acceleration and
modification of certain equity awards associated with the Spin-Off.
Other income (expense)
Interest income in 2009 decreased $14.5 million from 2008 primarily due to the impact of lower average interest rates resulting, in part,
from a reallocation of investments during the second half of 2008 into lower risk and yielding treasury and government agency funds, partially
offset by higher average investment balances throughout the year. Interest expense in 2009 decreased $26.5 million from 2008 as the average
amount of debt outstanding during the year decreased due to the extinguishment of $734.2 million of the Company's 7% Senior Notes due 2013
(the "Senior Notes") as described below. The remaining outstanding principal of the Senior Notes at December 31, 2009 is $15.8 million.
Equity in (losses) income of unconsolidated affiliates in 2009 decreased $30.7 million from 2008 primarily due to the inclusion in the prior
year period of $29.8 million related to the equity in earnings of our former investment in Jupiter Shop Channel Co., Ltd. ("Jupiter Shop"), a
Japanese TV shopping company, and a loss of $5.5 million from the Company's investment in Meetic, which is not in the year ago period. The
loss from the investment in Meetic is primarily due to the write-off of Meetic's deferred
33
Years Ended December 31,
2009 % Change 2008 % Change 2007
(Dollars in thousands)
Other income (expense):
Interest income
$
10,218
(59
)%
$
24,759
(58
)%
$
58,931
Interest expense
(5,823
)
(82
)%
(32,364
)
(45
)%
(59,054
)
Equity in (losses) income of
unconsolidated affiliates
(14,014
)
NM
16,640
(26
)%
22,352
Gain on sale of long-term
investments
28,835
(92
)%
381,099
2,186
%
16,669
Other income (expense)
71,759
NM
(234,690
)
NM
35,516