ServiceMagic 2009 Annual Report Download - page 57

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Table of Contents
As part of the consideration for the sale of HSE to ARO on June 19, 2007, IAC received approximately 5.5 million shares of ARO stock
plus additional consideration in the form of a CVR. ARO shares are listed on the German stock exchange (XETRA: ARO) and as a result, IAC is
exposed to changes in ARO's stock price. ARO filed for insolvency on June 9, 2009 which accelerated the maturity date of the CVR. The ARO
stock is an available-for-sale marketable equity security. The CVR is accounted for as a derivative asset and maintained at fair value each
reporting period with any changes in fair value recognized in current earnings as a component of other income (expense) in the consolidated
statement of operations each period. During 2009, the Company sold its 5.5 million shares of ARO stock, resulting in aggregate losses of
$12.3 million. Prior to the sale of its last 1.1 million shares of ARO stock, the Company concluded that the decline in the stock price of these
remaining shares was other-than-temporary, due in part, to ARO's insolvency filing, and recorded impairment charges totaling $4.6 million. In
addition, during 2009, the Company recorded a write-down totaling $58.1 million related to the CVR based upon the Company's assessment of
the value that it expects to recover from the insolvency proceedings. The impairment charges related to the shares of ARO stock and the loss
related to the write-down of the CVR are included in "Other income (expense)" in the accompanying consolidated statement of operations.
On October 25, 2004, IAC made an investment in OpenTable, a provider of online restaurant reservations. The purchase price of the
investment was $15.1 million in cash and was accounted for under the cost method. On May 21, 2009, OpenTable became a public company
trading on the Nasdaq stock exchange (Nasdaq: OPEN) and as a result, IAC is exposed to changes in OpenTable'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 and 0.2 million shares
of OpenTable stock, respectively, resulting in gains of $36.2 million and $3.4 million, respectively. The carrying value of the OpenTable
investment is $4.9 million at December 31, 2009. The related unrealized gain of $2.1 million, net of deferred taxes, is included in other
comprehensive income in the accompanying consolidated financial statements.
On June 5, 2009, in exchange for Match Europe, IAC received approximately 6.1 million shares of common stock (a 27% stake) in Meetic,
an online dating company based in France, plus a promissory note valued at $6.2 million. The promissory note was subsequently paid in the
fourth quarter of 2009. Meetic shares are listed on the Euronext stock exchange (EPA: MEET) and as a result, IAC is exposed to changes in
Meetic's stock price. The investment in Meetic is accounted for under the equity method on a one-quarter lag. The carrying value of the Meetic
investment is $156.5 million (€106.3 million) at December 31, 2009. The fair value of the Meetic investment, based on its quoted market price,
is $166.7 million (€115.8 million) at December 31, 2009.
Foreign Currency Exchange Risk
The Company conducts business in certain foreign markets, primarily in the European Union. The Company's primary exposure to foreign
currency risk relates to investments in foreign subsidiaries that transact business in a functional currency other than the U.S. Dollar, primarily the
Euro and British Pound Sterling. However, the exposure is mitigated since the Company has generally reinvested profits from international
operations in order to grow the businesses. As a percentage of total IAC revenue (which excludes revenue related to discontinued operations),
international operations represented approximately 15%, 19% and 15% in 2009, 2008 and 2007, respectively. The statements of operations of the
Company's international operations are translated into United States dollars at the average exchange rates in each applicable period. To the extent
the United States dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions results in
reduced revenues and operating income. Similarly, the Company's revenue and operating income will increase for our international operations if
the United States dollar weakens against foreign currencies. The
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