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IAC/INTERACTIVECORP
FORM 10-K
(Annual Report)
Filed 03/01/11 for the Period Ending 12/31/10
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 Computer Services
Sector Technology
Fiscal Year 12/01
http://www.edgar-online.com
© Copyright 2011, 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
    ... WEST 57TH ST 42ND FLOOR NEW YORK, NY 10019 2123147300 0000891103 IACI 5990 - Retail Stores, Not Elsewhere Classified Computer Services Technology 12/01 Telephone CIK Symbol SIC Code Industry Sector Fiscal Year http://www.edgar-online.com © Copyright 2011, EDGAR Online, Inc. All Rights Reserved...

  • Page 2
    ... December 31, 2010 Commission File No. 0-20570 IAC/INTERACTIVECORP (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 555 West 18th Street, New York, New York (Address of Registrant's principal executive offices) (212) 314...

  • Page 3
    ...June 30, 2010 was $1,932,385,781. For the purpose of the foregoing calculation only, all directors and executive officers of the Registrant are assumed to be affiliates of the Registrant. Documents Incorporated By Reference: Portions of the Registrant's proxy statement for its 2011 Annual Meeting of...

  • Page 4
    ... About Market Risk Consolidated Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate...

  • Page 5
    ..., 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 of other companies, including...

  • 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
    ... that we develop, market and distribute and destination search and other websites, including Ask.com and Dictionary.com , through which we primarily provide search, reference and content services, as well as CityGrid Media, an online media company that aggregates and integrates local advertising and...

  • Page 8
    ... to consumers free of charge. We also market and distribute Ask.com branded and custom toolbars to third parties through the Ask Partner Network, a leading provider of custom applications and search solutions to software and media companies with web browser add-ons. Ask Partner Network works closely...

  • Page 9
    ...and fitness information and activities. Revenues Substantially all of the revenues from our toolbars, destination search and other websites and related services are derived from advertising, with the substantial majority of these revenues attributable to our paid listing supply agreement with Google...

  • Page 10
    ... information from such listing) is viewed on a CityGrid Property or a user calls a metered number to reach a business. In the case of resellers, advertisers pay resellers for CityGrid Advertising, which resellers in turn share the revenues received with CityGrid Media pursuant to a variety of models...

  • Page 11
    ... password and pay a subscription fee). Within our portfolio of websites, we have both subscription-based and advertising-supported offerings. Our subscription-based websites offer registered members the ability to post a profile and use any related searching and matching tools free of charge, while...

  • Page 12
    ... 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 them with up to four members from its network of service professionals, which as of December 31, 2010, consisted of more...

  • Page 13
    ... home improvement; 123Devis.com , a French lead generation business with one of the largest networks of tradespeople in France; and 123GetAQuote.co.uk , a leading lead generation platform for home service and trade professionals in the United Kingdom. Services Through our Market Match service...

  • Page 14
    ... 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. Our revenues are also generated, to a lesser extent, from fees paid by service professionals for website development and hosting...

  • Page 15
    ... executive officers and senior financial officers (including IAC's CFO and Controller)) and directors and is posted on the Company's website at www.iac.com/newiaccodeofethics.pdf . The code of ethics complies with Item 406 of SEC Regulation S-K and the rules of The Nasdaq Stock Market. Any changes...

  • Page 16
    ... 2011, up to 1.5 million shares of IAC common stock he acquires in the open market or otherwise for shares of IAC Class B common stock currently held in treasury by IAC. In addition, under an amended and restated governance agreement among IAC and Mr. Diller, for so long as Mr. Diller serves as IAC...

  • Page 17
    ...the relative attractiveness of clicks on paid listings from our search services could have an adverse effect on our business, financial condition and results of operations. Such changes could come about for a number of reasons, including general market conditions, competition or policy and operating...

  • Page 18
    ... of the businesses within our Match segment, we have entered into a number of arrangements with third parties to drive traffic to our online personals websites. Pursuant to these arrangements, third parties generally promote our services on their websites and we either pay a fixed fee when visitors...

  • Page 19
    ... adversely affect our business, financial condition and results of operations. One of the most cost-effective efforts we employ to attract and acquire new, and retain existing, users and customers is commonly referred to as search engine optimization, or SEO. SEO involves developing websites to rank...

  • Page 20
    ...could make the use of our various services through these devices difficult. While we have developed mobile versions of certain of our services, we have limited experience with these applications and they may not be compelling to users. Furthermore, existing agreements across our business may need to...

  • Page 21
    ..., which could result in significant impairment charges. The occurrence of any these events could have an adverse effect on our business, financial condition and results of operations. We operate in certain international markets in which we have limited experience, and as a result, face additional...

  • Page 22
    ...risks and costs as our products, services and content 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...

  • Page 23
    ... (primarily Ask.com , our various toolbar brands, Match.com and ServiceMagic.com and related domain names and logos), through which they market their products and services and seek to build and maintain brand loyalty and recognition. So long as these businesses continue to use these trademarks to...

  • Page 24
    ... brand names and limitations on our ability to control marketing on or through the internet using our various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any of which could adversely affect our business, financial conditions and...

  • Page 25
    ... 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 26
    ... of New York against IAC and certain of its officers and directors, alleging violations of the federal securities laws. These cases arose out of the Company's August 4, 2004 announcement of its earnings for the second quarter of 2004 and generally alleged that the value of the Company's stock was...

  • Page 27
    ...information concerning problems at the Company's then-travel businesses and to assert the same legal claims as its predecessor. On August 15, 2007, the defendants filed a motion to dismiss the second amended complaint, which motion the plaintiffs opposed. On March 19, 2010, the district court issued...

  • Page 28
    ... Company management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook. As discussed in "Item 1-Business-Equity Ownership and Vote" and "Item 8-Consolidated Financial Statements and Supplementary Data-Note 11,"on December 1, 2010...

  • Page 29
    ... December 31, 2009 2008 2007 (Dollars in thousands, except per share data) 2010 2006 Statement of Operations Data (1) : Revenue $ 1,636,815 $ 1,346,695 $ 1,410,078 $ Operating income (loss) 49,795 (1,037,987) (44,254) (Loss) earnings from continuing operations, net of tax (9,393) (956,473) 141...

  • Page 30
    ... Income Before Amortization (as defined in IAC's Principles of Financial Reporting) for the years ended December 31, 2010, 2009 and 2008 (dollars in thousands). Years Ended December 31, 2009 Growth 2010 Growth 2008 Revenue: Search Match ServiceMagic Media & Other Inter-segment elimination Total...

  • Page 31
    ... to our paid listing supply agreement with Google Inc. ("Google"). The revenue earned from our Match segment is derived from subscription fees for its subscription-based online personals services and online advertising. ServiceMagic's revenue is derived from fees paid by members of its network...

  • Page 32
    ... from the acquisition of People Media and solid growth in the U.S. business. The increase in revenue from ServiceMagic was primarily due to a more active service provider network resulting in a 25% increase in the number of times service requests were accepted by a service professional and a shift...

  • Page 33
    ... primarily due to a decrease of $20.0 million in traffic acquisition costs resulting primarily from the sale of Match Europe and the impact of more favorable economic terms under agreements with certain distribution partners. Cost of revenue from Media & Other decreased primarily due to the sale of...

  • Page 34
    ... Media Corporation's ("Liberty") equity stake in IAC, partially offset by lower salary expense. On December 1, 2010, the Company entered into a stock exchange agreement with Liberty. Under the agreement, Liberty agreed to exchange with IAC 4.3 million shares of common stock and 8.5 million shares...

  • Page 35
    ... at IAC Search & Media and an increase in costs being capitalized in 2009 related to IAC Search & Media's product offerings and related technology. Depreciation Years Ended December 31, % Change 2009 % Change (Dollars in thousands) 2010 2008 Depreciation As a percentage of total revenue $63...

  • Page 36
    ... of $7.7 million at Media & Other. The increase in Operating Income Before Amortization reflects higher revenue across these segments, as well as lower marketing costs from Search, a reduction in acquisition related expenses from Match and cost savings related to certain businesses that have been...

  • Page 37
    ...-lived intangible asset impairment charge at IAC Search & Media is primarily due to lower future revenue projections associated with a trade name and trademark based largely upon the impact of 2010's full year results. In the fourth quarter of 2009, the Company identified and recorded impairment...

  • Page 38
    ...of lower average investment balances and lower average interest rates. Equity in losses of unconsolidated affiliates in 2010 increased $11.7 million from 2009 primarily due to an $18.3 million impairment charge to write-down the Company's investment in The HealthCentral Network, Inc. ("HealthCentral...

  • Page 39
    ... recover from the insolvency proceedings. The impairment charge related to the ARO stock was based on the Company's conclusion that the decline in ARO's stock price was other-than-temporary due, in part, to ARO's insolvency filing. Gain on sales of long-term investments in 2008 represents a gain of...

  • Page 40
    ... fourth quarter of 2010, Evite, Gifts.com and IAC Advertising Solutions through December 1, 2010, HSNi, ILG, Ticketmaster and Tree.com through August 20, 2008, and EPI through May 30, 2008. The Company recognized after-tax gains of $140.8 million on the tax-free exchange of Evite, Gifts.com and IAC...

  • Page 41
    ... we develop, market and distribute and destination search and other websites, including Ask.com and Dictionary.com, through which we primarily provide search, reference and content services, as well as CityGrid Media, a media company that operates CityGrid, a leading local content and advertising...

  • Page 42
    ... in advertising and promotional expenditures, including those associated with the NASCAR partnership and an ad campaign to rebrand the Ask Jeeves 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...

  • Page 43
    ...Media. ServiceMagic For the year ended December 31, 2010 compared to the year ended December 31, 2009 Revenue increased 16% to $181.4 million, benefiting from a 14% increase in service requests and a 19% increase in accepted service requests domestically and from growth at ServiceMagic International...

  • Page 44
    ...25% increase in domestic accepted service requests. Revenue also benefited from the combined contribution from ServiceMagic International, acquired October 29, 2008, and Market Hardware, acquired January 23, 2009. Excluding the results of these acquisitions, revenue grew 19%. Operating Income Before...

  • Page 45
    ... to Connected Ventures. Also contributing to the decrease in operating loss are decreases in amortization of intangibles, exclusive of the impairment charge noted above, and non-cash compensation expense of $2.0 million and $0.6 million, respectively. Corporate For the year ended December 31, 2010...

  • Page 46
    ... million of marketable securities and $95.8 million in long-term debt. Long-term debt consists of $80.0 million in Liberty Bonds due September 1, 2035 and $15.8 million in Senior Notes. During 2010 and 2009, the Company purchased 23.1 million and 32.1 million shares of IAC common stock for aggregate...

  • Page 47
    ... of $97.7 million. This amount includes $310.0 million for unrecognized tax benefits and related interest that could result in future net cash payments to taxing authorities. The Company cannot make a reasonably reliable estimate of the expected period of cash settlement of these items. Represents...

  • Page 48
    ... cost of doing business, but excluding the effects of any other non-cash expenses. Operating Income Before Amortization has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses, including non-cash compensation, non-cash marketing...

  • Page 49
    ... acquisition, the identifiable definite-lived intangible assets of the acquired company, such as customer lists, technology and supplier agreements, are valued and amortized over their estimated lives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names...

  • Page 50
    ... and industry specific factors. The discount rates used in the Company's annual goodwill impairment assessment ranged from 13% to 20% in both 2010 and 2009. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired and the second...

  • Page 51
    ... based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows...

  • Page 52
    ... 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, 2010, the Company's allowance for doubtful accounts is $8.8 million. Income Taxes Estimates of deferred income taxes and...

  • Page 53
    ... notes to the consolidated financial statements, the Company estimated the fair value of stock options issued in 2010, 2009 and 2008 using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 2.4%, 2.1% and 2.6%, respectively, a dividend...

  • Page 54
    ... rates. Long-term Debt At December 31, 2010, the Company's outstanding debt approximated $95.8 million, all of which pays interest at fixed rates. If market rates decline, the Company runs the risk that the related required payments on the fixed rate debt will exceed those based on market rates...

  • Page 55
    ... adjust its financing and operating strategies. Foreign exchange gains and losses were not material to the Company's earnings in 2010, 2009 and 2008. As currency exchange rates change, translation of the income statements of the Company's international businesses into U.S. dollars affects year-over...

  • Page 56
    ... with the standards of the Public Company Accounting Oversight Board (United States), IAC/InterActiveCorp's internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations...

  • Page 57
    ... 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 par value; authorized 1,600,000,000 shares; issued 225,873,751 and 222,657...

  • Page 58
    ... CONSOLIDATED STATEMENT OF OPERATIONS Years Ended December 31, 2010 2009 2008 (In thousands, except per share data) Revenue Costs and expenses: Cost of revenue (exclusive of depreciation shown separately below) Selling and marketing expense General and administrative expense Product development...

  • Page 59
    ... Contents IAC/INTERACTIVECORP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Class B Convertible Common Accum. Stock $.001 Additional Other Par Value Paid-in Retained Comp. $ Shares Capital Earnings Income (In thousands) Total Preferred Stock $.01 Par Value $ Shares Common Stock...

  • Page 60
    ...Spin-Off of HSNi, ILG, Ticketmaster and Tree.com to shareholders 4,052 Balance as of December 31, 2009 $ 3,127,826 $ Comprehensive income: Net earnings attributable to IAC shareholders for the year ended December 31, 2010 99,359 Change in foreign currency translation adjustment, net of tax provision...

  • Page 61
    ... Amortization of intangibles Amortization of non-cash marketing Goodwill impairment Impairment of long-term investments Non-cash compensation expense Deferred income taxes Equity in losses (income) of unconsolidated affiliates Gain on sale of Match Europe Loss on extinguishment of Senior Notes...

  • Page 62
    ..., with home and other local service professionals, all of which are pre-screened and the majority of which are customer-rated. In addition, through ServiceMagic International we operate businesses in the local lead generation space in France and the United Kingdom. Media & Other Our Media & Other...

  • Page 63
    ... such as financial condition and the rate at which the investee company utilizes cash and the investee company's ability to obtain additional financing to achieve its business plan; the need for changes to the investee company's existing business model due to changing business environments and...

  • Page 64
    ... months. Deferred revenue at Match totaled $57.4 million and $45.2 million at December 31, 2010 and 2009, respectively. ServiceMagic ServiceMagic's lead acceptance revenue is generated and recognized when an in-network home service professional is delivered a customer lead. ServiceMagic's activation...

  • Page 65
    ...on historical experience. Shipping and handling fees billed to customers are recorded as revenue. The costs associated with shipping goods to customers are recorded as cost of revenue. Revenue of media businesses included in this segment is derived primarily from online advertising, media production...

  • Page 66
    ... 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. Property and Equipment Property and equipment, including significant improvements, are recorded at cost...

  • Page 67
    ... Reportable Segment IAC Search & Media CityGrid Media Match ServiceMagic Shoebuy Connected Ventures Search Search Match ServiceMagic Media & Other Media & Other Media & Other includes other operating segments that do not have goodwill. See Note 14 for additional information regarding the Company...

  • Page 68
    ... websites. These payments include amounts based on revenue share and other arrangements. The Company expenses these payments as a component of cost of revenue in the accompanying consolidated statement of operations. Advertising Costs (excluding Amortization of Non-Cash Marketing) Advertising costs...

  • Page 69
    ... could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. Foreign Currency Translation and Transaction Gains and Losses The financial position and operating...

  • Page 70
    ... Company's stock-based compensation plans. Redeemable Noncontrolling Interests Redeemable noncontrolling interests as of December 31, 2010 primarily relate to the international operations of Match, certain operations included in the Media & Other segment, the international operations of ServiceMagic...

  • Page 71
    ... could be material, on our business, financial condition and results of operations. If any of these events were to occur, we may not be able to find another suitable alternate paid listings provider (or if an alternate were found, the economic and other terms of the agreement and the quality of paid...

  • Page 72
    Table of Contents IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3-CONSOLIDATED FINANCIAL STATEMENT DETAILS (Continued) Property and equipment, net December 31, 2010 2009 (In thousands) Buildings and leasehold improvements Computer equipment and ...

  • Page 73
    Table of Contents IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3-CONSOLIDATED FINANCIAL STATEMENT DETAILS (Continued) Redeemable noncontrolling interests For the Year Ended December 31, 2010 2009 2008 (In thousands) Balance at January 1 ...

  • Page 74
    ... Contents IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3-CONSOLIDATED FINANCIAL STATEMENT DETAILS (Continued) Cost of revenue Years Ended December 31, 2009 2008 (In thousands) 2010 Cost of service revenue Cost of product revenue Cost of revenue...

  • Page 75
    ... IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 4-INCOME TAXES (Continued) The components of the provision (benefit) for income taxes attributable to continuing operations are as follows (in thousands): Years Ended December 31, 2009 2008 2010...

  • Page 76
    ...of 1986, as amended. In addition, utilization of certain state NOLs may be subject to limitations under state laws similar to Section 382 of the Internal Revenue Code of 1986. At December 31, 2010, the Company had foreign NOLs of $44.4 million available to offset future income. Of these foreign NOLs...

  • Page 77
    ... FINANCIAL STATEMENTS (Continued) NOTE 4-INCOME TAXES (Continued) federal capital losses will expire in 2015, and the state capital losses will expire between 2013 and 2015. Utilization of capital losses will be limited to the Company's ability to generate future capital gains. At December 31, 2010...

  • Page 78
    ...Contents IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 4-INCOME TAXES (Continued) No federal and state income taxes have been provided on permanently reinvested earnings of certain foreign subsidiaries aggregating $75.8 million at December 31, 2010...

  • Page 79
    ... intangible assets as of October 1 in connection with the preparation of its annual financial statements. In connection with its annual assessment in 2010, the Company identified and recorded impairment charges at the Media & Other segment related to the write-down of the goodwill and indefinite...

  • Page 80
    ... based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows...

  • Page 81
    ... (Deductions) Impairment Foreign Exchange Translation Balance as of December 31, 2010 IAC Search & Media CityGrid Media Search Match ServiceMagic Shoebuy Connected Ventures Media & Other Total $ 527,604 $ 7,323 $ 17,450 - 545,054 7,323 253,812 37,375 110,689 - 49,744 - 8,436 - 58,180 - $ 967...

  • Page 82
    ... relate to trade names and trademarks acquired in various acquisitions. At December 31, 2010, intangible assets with definite lives relate to the following (in thousands): WeightedAverage Amortization Life (Years) Cost Accumulated Amortization Net Supplier agreements Customer lists Technology...

  • Page 83
    ... FINANCIAL STATEMENTS (Continued) NOTE 5-GOODWILL AND INTANGIBLE ASSETS (Continued) At December 31, 2009, intangible assets with definite-lives relate to the following (in thousands): WeightedAverage Amortization Life (Years) Cost Accumulated Amortization Net Supplier agreements Customer lists...

  • Page 84
    ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6-MARKETABLE SECURITIES (Continued) 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 securities...

  • Page 85
    ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6-MARKETABLE SECURITIES (Continued) Less than 12 months Gross Fair Unrealized Value Losses December 31, 2009 12 months or longer Gross Fair Unrealized Value Losses Total Fair Value Gross Unrealized Losses Corporate debt securities State...

  • Page 86
    ... ARO stock price, and recorded impairment charges totaling $166.7 million. NOTE 7-LONG-TERM INVESTMENTS The balance of long-term investments is comprised of (in thousands): December 31, 2010 2009 Equity method investments Cost method investments Auction rate securities Long-term marketable equity...

  • Page 87
    ... business model. The resulting valuation of the investee also reflected the assessment of market conditions and the investee's ability to successfully restructure. The impairment charge is included in "Equity in (losses) income of unconsolidated affiliates" in the accompanying consolidated statement...

  • Page 88
    ... FINANCIAL STATEMENTS (Continued) NOTE 7-LONG-TERM INVESTMENTS (Continued) 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...

  • Page 89
    Table of Contents IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 7-LONG-TERM INVESTMENTS (Continued) Twelve Months Ended September 30, 2010 2009 2008 Operating data: Net sales Gross profit Net income (loss) Cost method investments $ 275,584 $ 114...

  • Page 90
    ... Time deposits Corporate debt securities Marketable securities: Corporate debt securities States of the U.S. and state political subdivisions U.S. Treasury securities Other fixed term obligations Equity security Long-term investments: Marketable equity security Auction rate securities Total...

  • Page 91
    ... FINANCIAL STATEMENTS (Continued) NOTE 8-FAIR VALUE MEASUREMENTS (Continued) The following table presents the changes in 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, 2010...

  • Page 92
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 9-FINANCIAL INSTRUMENTS The fair values of the financial instruments listed below have been determined by the Company using available market information and appropriate valuation methodologies. December 31, 2010 Carrying Fair Value...

  • Page 93
    ... FINANCIAL STATEMENTS (Continued) NOTE 10-LONG-TERM DEBT (Continued) in aggregate principal amount of New York City Industrial Development Agency Liberty Bonds (IAC/InterActiveCorp Project), Series 2005 (the "Liberty Bonds"). IAC is obligated to make all principal, interest and other payments...

  • Page 94
    ... voting power of the Company. Prior to December 1, 2010, in the event that IAC issued or proposed to issue any shares of IAC common stock or Class B common stock (with certain limited exceptions), including shares issued upon vesting of restricted stock units ("RSUs") and performance stock units...

  • Page 95
    ... FINANCIAL STATEMENTS (Continued) NOTE 11-SHAREHOLDERS' EQUITY (Continued) Warrants A summary of changes in outstanding warrants is as follows: December 31, 2010 Number of IAC Weighted Common Shares Average Underlying Warrants Strike Price (Shares in thousands) Outstanding at January 1, 2010 Issued...

  • Page 96
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 12-EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per share attributable to IAC shareholders. Years Ended December 31, 2009 Basic Diluted (In thousands, except per share data) 2010 Basic...

  • Page 97
    91

  • Page 98
    ... to its employees, officers, directors and consultants. At December 31, 2010, there were 12.7 million shares available for grant under the Company's stock-based compensation plans. The plans described above have a stated term of ten years and provide that the exercise price of stock options granted...

  • Page 99
    ...awards held by IAC employees were converted into either awards denominated solely in IAC common shares or a combination of IAC common shares and the common shares of the spun-off businesses, in all cases with appropriate adjustments to the number of shares of common stock, and exercise prices in the...

  • Page 100
    ... FINANCIAL STATEMENTS (Continued) NOTE 13-STOCK-BASED COMPENSATION (Continued) to 2010, due to the lack of sufficient historical IAC stock price volatilities subsequent to the Spin-Off, expected stock price volatilities were estimated based on historical stock price volatilities of peer companies...

  • Page 101
    ... over the vesting term, subject to mark-to-market adjustments for changes in the price of IAC common stock, as compensation expense within general and administrative expense. At December 31, 2010, 2009 and 2008, 0.1 million, less than 0.1 million and 0.1 million international awards were outstanding...

  • Page 102
    ...number of shares vesting can range from 0% to 250% of the initial "target" award. The PSU table above includes these awards at their maximum. The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2010, 2009 and 2008 based on market prices of IAC's common stock...

  • Page 103
    ... 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 services or products offered or the target market...

  • Page 104
    Table of Contents IAC/INTERACTIVECORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14-SEGMENT INFORMATION (Continued) December 31, 2010 2009 (In thousands) Segment Assets(b): Search Match ServiceMagic Media & Other Corporate Total $ 280,773 $ 250,475 196,177 233,...

  • Page 105
    ...), the Company excludes, if applicable, goodwill, intangible assets and unamortized non-cash marketing from the measure of segment assets presented above. Revenue by geography is based on where the customer is located. Geographic information about the United States and international territories is...

  • Page 106
    ... earnings (loss) attributable to IAC shareholders in total (in thousands): Year Ended December 31, 2010 Operating Income Before Amortization Non-Cash Compensation Expense Amortization of Intangibles Goodwill Impairment Operating Income (Loss) Search Match ServiceMagic Media & Other Corporate Total...

  • Page 107
    ... 14-SEGMENT INFORMATION (Continued) Year Ended December 31, 2009 Operating Income Before Amortization Non-Cash Compensation Expense Amortization of Intangibles Amortization of Non-Cash Marketing Goodwill Impairment Operating (Loss) Income Search $ Match ServiceMagic Media & Other Corporate Total...

  • Page 108
    ...) NOTE 14-SEGMENT INFORMATION (Continued) The following tables reconcile segment assets to total assets (in thousands): December 31, 2010 Indefinite-lived Intangibles Segment Assets Goodwill Definite-lived Intangibles Total Assets Search Match(c) ServiceMagic Media & Other Corporate(d) Total...

  • Page 109
    ... years ended December 31, 2010, 2009 and 2008, respectively. The Company's most significant operating lease is a 77 year ground lease for IAC's headquarters building in New York City and approximates 60% of the future minimum payments due under all operating lease agreements in the table above. 103

  • Page 110
    ... the accompanying consolidated statement of cash flows. Supplemental Disclosure of Non-Cash Transactions for 2010 On December 1, 2010, in accordance with the Company's stock exchange agreement with Liberty, IAC exchanged $217.9 million in cash and all the outstanding shares of Celebrate Interactive...

  • Page 111
    ... elections made by the Company pursuant to the tax sharing agreement executed in connection with the Spin-Off. The amount is included in the consolidated statement of shareholders' equity as an increase to additional paid-in-capital. On June 5, 2009, IAC completed the sale of Match Europe to Meetic...

  • Page 112
    ... through 2010, total payments made to this entity by the Company were immaterial. NOTE 20-BENEFIT PLANS IAC has a retirement savings plan in the United States that qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute up to 50% of their pre-tax earnings...

  • Page 113
    ... 31, 2010 Revenue Cost of revenue Operating income (loss) (Loss) earnings from continuing operations, net of tax (Loss) earnings from discontinued operations, net of tax Net (loss) earnings Net (loss) earnings attributable to IAC shareholders Per share information attributable to IAC shareholders...

  • Page 114
    ....com, IAC Advertising Solutions and InstantAction as discontinued operations with effect from January 1, 2009. Accordingly, quarterly financial data presented above differs from the amounts reflected in the Company's quarterly reports on Form 10-Q for the first, second and third quarters of 2010...

  • Page 115
    ... Gifts.com and IAC Advertising Solutions to Liberty, and an after-tax impairment charge of $31.6 million related to the write-down of the goodwill of InstantAction. NOTE 22-SUBSEQUENT EVENTS (UNAUDITED) On February 1, 2011, IAC contributed The Daily Beast, previously reported in IAC's Media & Other...

  • Page 116
    ...(d), IAC management, including the Chairman and Senior Executive, 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 December 31, 2010...

  • Page 117
    ...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 118
    ...reference to IAC's definitive Proxy Statement to be used in connection with its 2011 Annual Meeting of Stockholders, or the 2011 Proxy Statement, as set forth below, in accordance with General Instruction G(3) of Form 10-K. Item 10. Directors, Executive Officers and Corporate Governance Information...

  • Page 119
    ..., in the 2011 Proxy Statement and is incorporated herein by reference. PART IV Item 15. (a) (1) Exhibits and Financial Statement Schedules List of documents filed as part of this Report: Consolidated Financial Statements of IAC Report of Independent Registered Public Accounting Firm: Ernst...

  • Page 120
    ...1, 2010, by and between the Registrant and Barry Diller. 10.4 Tax Sharing Agreement, dated as of August 20, 2008, by and among the Registrant, Ticketmaster, Interval Leisure Group, Inc., HSN, Inc. and Tree.com, Inc. 10.5 IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1) 10.6 Form of Terms...

  • Page 121
    ... and Restated 2007 IAC/InterActiveCorp Deferred Compensation Plan For Non-Employee Directors.(1) 10.14 IAC/InterActiveCorp Executive Deferred Compensation Plan.(1) 10.15 Stock Option Agreement between the Registrant and Barry Diller, dated as of June 7, 2005.(1) 10.16 Match.com, Inc. Equity Program...

  • Page 122
    ... of the Sarbanes-Oxley Act of 2002.(3) 32.2 Certification of the Chairman and Senior Executive pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(3) 32.3 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted...

  • Page 123
    ...report to be signed on its behalf by the undersigned, thereunto duly authorized. March 1, 2011 IAC/INTERACTIVECORP By: /s/ GREGORY R. BLATT Gregory R. Blatt Chief Executive Officer...Director Donald R. Keough 117 Executive Vice President and Chief Financial Officer Senior Vice President and Controller...

  • Page 124
    Table of Contents Signature Title /s/ BRYAN LOURD Director Bryan Lourd /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 F. ...

  • Page 125
    ...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 2010 Allowance for doubtful accounts and revenue...allowance on net benefited losses for ...

  • Page 126

  • Page 127
    ... (" Executive ") and IAC/InterActiveCorp, a Delaware corporation (the " Company "), and is effective as of December 1, 2010 (the " Effective Date "). WHEREAS, the Company now desires to establish its right to the services of Executive, in the capacity described below, on the terms and conditions...

  • Page 128
    .... (b) EQUITY AWARDS . In connection with the execution of this Agreement, the Company has granted to Executive (i) a stock option to purchase 750,000 shares of common stock of the Company, subject to the terms of the Stock Option Agreement attached hereto as Exhibit A-1 (the " 2010 Option ") and (ii...

  • Page 129
    ... States. It is expected that Executive shall spend his professional time both at the New York headquarters and at the various businesses, and unless agreed upon otherwise, shall have an office at the Company's headquarters in New York, at the office of Match.com, Inc. (" MatchCo ") in Dallas, TX...

  • Page 130
    ... of this Agreement. References to "this Agreement" or the use of the term "hereof" shall refer to this Agreement and the Standard Terms and Conditions attached hereto, taken as a whole. 9A. SECTION 409A OF THE INTERNAL REVENUE CODE . (a) The date of Executive's "separation from service", as defined...

  • Page 131
    ... any payments or benefits paid or provided to Executive under this Agreement or any Plan , provided that the steps so requested do not cause the Company to incur any additional costs (other than incidental costs) associated with taking such steps. Any modification to the terms of this Agreement or...

  • Page 132
    ... is or was an officer, director or employee of Company or any of its affiliates or is or was serving as an officer, director, member, employee, trustee or agent of any other entity at the request of the Company. This Section 10A shall not limit Executive's rights to indemnification under the...

  • Page 133
    ...to be paid or provided to Executive or for his benefit in connection with a 280G Change in Control (whether under this Agreement or otherwise, including by the entity, or by any affiliate of the entity, whose acquisition of the stock of the Company or its assets constitutes the Change in Control) if...

  • Page 134
    (iii) "Excise Tax Threshold Amount" shall mean an amount equal to (x) three times Executive's "base amount" within the meaning of section 280G(b)(3) of the Code and the regulations issued thereunder, less (y) $1,000. [The Signature Page Follows] 8

  • Page 135
    ...GREGORY R. BLATT Gregory R. Blatt STANDARD TERMS AND CONDITIONS 1. TERMINATION OF EXECUTIVE'S EMPLOYMENT. (a) DEATH . In the event Executive's employment hereunder is terminated by reason of Executive's death, the Company shall pay Executive's designated beneficiary or beneficiaries, within thirty...

  • Page 136
    ... hereunder prior to the expiration of the Term for Good Reason, then: (i) the Company shall pay to Executive an amount equal to the Base Salary Executive would have been paid for the balance of the applicable Term but in any event for no less than a twelve (12) month period, in the time and manner...

  • Page 137
    ... the first business day of the second month following the month in which Executive's Separation from Service (as such term is defined below) took place (plus interest on the amount delayed from the date of termination to the date payment begins at the then applicable borrowing rate of the Company as...

  • Page 138
    ... Good Reason, (D) any material reduction in Executive's Base Salary, (E) requiring Executive's principal place of business to be in a location other than Dallas, TX or New York, NY, (F) the failure of the Company (or, if the Company ceases to be the ultimate parent entity of its affiliated group...

  • Page 139
    ...businesses, employees, consultants, contractors, clients and customers that is not disclosed by the Company or any of its subsidiaries or affiliates for financial reporting purposes or otherwise generally made available to the public (other than by Executive's breach of the terms hereof or the terms...

  • Page 140
    ... during the Term, the relevant Company Products or Services, and (ii) Executive shall be considered to have become "associated with a Competitive Activity" if Executive becomes directly or indirectly involved as an owner, principal, employee, officer, director, independent contractor, representative...

  • Page 141
    ...hire by Executive for the Company or any of its subsidiaries or affiliates. " Employee Developments " means any discovery, invention, design, method, technique, improvement, enhancement, development, computer program, machine, algorithm or other work or authorship that (i) relates to the business or...

  • Page 142
    ... event of any such assignment or transaction, all references herein to the " Company " shall refer to the Company's assignee or successor hereunder. 5. WITHHOLDING . The Company shall make such deductions and withhold such amounts from each payment and benefit made or provided to Executive hereunder...

  • Page 143
    ... to "this Agreement" or the use of the term "hereof" shall refer to these Standard Terms and Conditions and the Employment Agreement attached hereto, taken as a whole. 7. REMEDIES FOR BREACH . Executive expressly agrees and understands that Executive will notify the Company in writing of any alleged...

  • Page 144
    ACKNOWLEDGED AND AGREED: Date: December 22, 2010 IAC/InterActiveCorp /S/ GREGG WINIARSKI By: Gregg Winiarski Title: Senior Vice President, General Counsel and Secretary /s/ GREGORY R. BLATT Gregory R. Blatt

  • Page 145
    ... services on the terms set forth herein. During Executive's employment with the Company, Executive shall report directly to the Chief Executive Officer of the Company, or such person as may from time to time be designated by the Company (hereinafter referred to as the "Reporting Officer"). Executive...

  • Page 146
    ... time by the Company on the same basis as that provided to similarly situated employees of the Company. Without limiting the generality of the foregoing, Executive shall be entitled to the following benefits: (i) Reimbursement for Business Expenses . During the period that Executive is employed with...

  • Page 147
    ... to "this Agreement" or the use of the term "hereof" shall refer to this Agreement and the Standard Terms and Conditions attached hereto, taken as a whole. 8A. SECTION 409A OF THE INTERNAL REVENUE CODE . This Agreement is not intended to constitute a "nonqualified deferred compensation plan" within...

  • Page 148
    ... provided that Executive shall, if requested, reimburse the Company for any incremental costs (other than incidental costs) associated with taking such steps. All payments to be made upon a termination of employment under this Agreement may only be made upon a "separation from service" under Section...

  • Page 149
    IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and delivered by its duly authorized officer and Executive has executed and delivered this Agreement as of December 1, 2010. IAC/InterActiveCorp /S/ GREGG WINIARSKI By: Gregg Winiarski Title: Senior Vice President, General ...

  • Page 150
    STANDARD TERMS AND CONDITIONS 2. TERMINATION OF EXECUTIVE'S EMPLOYMENT . DEATH . In the event Executive's employment hereunder is terminated by reason of Executive's death, the Company shall (a) pay Executive's designated beneficiary or beneficiaries, within thirty (30) days of Executive's death in...

  • Page 151
    ... terminates his employment hereunder prior to the expiration of the Term for Good Reason, then: (i) the Company shall continue to pay to Executive the Base Salary for twelve (12) months from the date of such termination (the "Severance Period"), payable in equal biweekly installments based on...

  • Page 152
    ...and its affiliates, in a form substantially similar to that used for similarly situated executives of the Company and its affiliates (the "Release"), and Executive's compliance with the restrictive covenants set forth in Section 2 hereof. Executive acknowledges and agrees that the severance benefits...

  • Page 153
    ...businesses, employees, consultants, contractors, clients and customers that is not disclosed by the Company or any of its subsidiaries or affiliates for financial reporting purposes or otherwise generally made available to the public (other than by Executive's breach of the terms hereof or the terms...

  • Page 154
    has provided during the Term, the relevant Company Products or Services, and (ii) Executive shall be considered to have become "associated with a Competitive Activity" if Executive becomes directly or indirectly involved as an owner, 5

  • Page 155
    ... employees, consultants and contractors is not generally known, is of substantial value to the Company and its subsidiaries or affiliates in developing their respective businesses and in securing and retaining customers, and has been and will be acquired by Executive because of Executive's business...

  • Page 156
    ... hire by Executive for the Company or any of its subsidiaries or affiliates. "Employee Developments" means any discovery, invention, design, method, technique, improvement, enhancement, development, computer program, machine, algorithm or other work or authorship that (i) relates to the business or...

  • Page 157
    ... to "this Agreement" or the use of the term "hereof" shall refer to these Standard Terms and Conditions and the Employment Agreement attached hereto, taken as a whole. 8. REMEDIES FOR BREACH . Executive expressly agrees and understands that Executive will notify the Company in writing of any alleged...

  • Page 158
    ...or power at any other time or times. This Agreement shall not be modified in any respect except by a writing executed by each party hereto. 10. SEVERABILITY . In the event that a court of competent jurisdiction determines that any portion of this Agreement is in violation of any law or public policy...

  • Page 159
    ACKNOWLEDGED AND AGREED: Dated as of: December 1, 2010 IAC/InterActiveCorp /S/ GREGG WINIARSKI By: Gregg Winiarski Title: Senior Vice President, General Counsel and Secretary /s/ THOMAS J. MCINERNEY Thomas J. McInerney

  • Page 160
    ... LLC Electus, LLC Elicia Acquisition Corp. Five Star Matchmaking Information Technology (Beijing) Co., Ltd. Floraflora.com, LLC GDC Media, Inc. High Line Venture Partners GP, LLC High Line Venture Partners, L.P. HSE Media LLC HSN Capital LLC HSN Home Shopping Network GmbH HSN UK Holdings Ltd. HSN...

  • Page 161
    ...Market Hardware, Inc. Match ProfilePro LLC Match.com Canada Ltd. Match.com Global Services Limited Match.com International Holdings, Inc. Match.com International Ltd. Match.com Investments, Inc. Match.com Japan KK Match.com Japan Networks GK Match.com Offshore Holdings, Ltd Match.com Pegasus Limited...

  • Page 162
    ... TMNV HoldCo, Inc. Trustic, Inc. TV Travel Europe Ltd. TV Travel 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...

  • Page 163
    ... dated March 1, 2011, 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, 2010. COMMISSION FILE...

  • Page 164
    Exhibit 31.1 Certification I, Gregory R. Blatt, certify that: 1. 2. I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2010 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 ...

  • Page 165
    Exhibit 31.2 Certification I, Barry Diller, certify that: 1. 2. I have reviewed this report on Form 10-K for the fiscal year ended December 31, 2010 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 ...

  • Page 166
    Exhibit 31.3 Certification I, Thomas J. McInerney, certify that: 1. 2. I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2010 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 ...

  • Page 167
    ... Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of IAC/InterActiveCorp. /S/ GREGORY R. BLATT Gregory R. Blatt Chief Executive Officer (2) Dated: March 1, 2011

  • Page 168
    ...of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of IAC/InterActiveCorp. /S/ BARRY DILLER Chairman and Senior Executive (2) Dated: March 1, 2011

  • Page 169
    ...78m or 78o(d)); and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of IAC/InterActiveCorp. /s/ THOMAS J. MCINERNEY Thomas J. McInerney Executive Vice President and Chief Financial Officer (2) Dated: March 1, 2011