ServiceMagic 2011 Annual Report Download - page 38

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Other income, net in 2011 is primarily due to $4.6 million in gains associated with certain non-income tax refunds related to Match Europe,
which was sold in 2009, and the foreign currency exchange gain of $3.3 million related to the funds that were held in escrow for the Meetic
tender offer.
Other expense, net in 2010 is primarily due to a $7.8 million impairment charge related to one of the Company's cost method investments.
The impairment charge was determined to be other-than-
temporary due to the investee's inability to achieve its 2010 cash flow forecast during its
seasonally strongest fourth quarter and the Company's assessment that the investee would be unable to continue to operate without new outside
funding. Partially offsetting the impairment charge is a gain of $4.0 million related to the sale of certain securities.
Other income, net in 2009 is primarily due to a $132.2 million gain related to the June 5, 2009 sale of Match Europe to Meetic and a gain on
sale of long-term investments of $28.8 million. Partially offsetting the increase in 2009 are charges of $58.1 million and $4.6 million related to
the write-down of a contingent value right ("CVR") and the impairment of the Company's shares of Arcandor AG ("ARO") stock, respectively,
which the Company received as part of the consideration for the sale of HSE in June 2007. ARO filed for insolvency on June 9, 2009. The write-
down related to the CVR was based upon the Company's assessment of the value that it expects to 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.
Income tax provision
In 2011, the Company recorded an income tax benefit for continuing operations despite pre-tax income. The income tax benefit is due
principally to the release of previously established deferred tax liabilities described in the next sentence, the effective settlement of audits and
expirations of statutes of limitations and foreign income taxed at lower rates. In connection with the acquisition of Meetic, the Company
concluded that it intends to permanently reinvest outside of the United States the earnings of Match's international operations related to Meetic,
including the 2009 gain on sale of Match Europe, which resulted in a deferred tax liability release of $43.7 million. In 2010, the Company
recorded an income tax provision for continuing operations, which represents an effective tax rate of 141%. The 2010 tax rate is higher than the
federal statutory rate of 35% due principally to non-deductible impairment charges related to goodwill and intangible assets, interest on tax
contingencies, a valuation allowance on the deferred tax asset created by the impairment charge for an investment accounted for using the equity
method and state taxes, partially offset by foreign tax credits and foreign income taxed at lower rates. In 2009, the Company recorded an income
tax provision for continuing operations despite losses from continuing operations. The tax provision is primarily due to non-deductible
impairment charges related to IAC Search & Media.
At December 31, 2011 and 2010, the Company has unrecognized tax benefits of $351.6 million and $389.9 million, respectively.
Unrecognized tax benefits at December 31, 2011 decreased by $38.3 million from December 31, 2010 due principally to the expiration of
statutes of limitations, the effective settlement of audits and a net decrease in deductible temporary differences. The Company recognizes interest
and, if applicable, penalties related to unrecognized tax benefits in income tax provision. Included in income tax provision for continuing
operations and discontinued operations for the year ended December 31, 2011 is a $1.4 million expense and a $6.7 million expense, respectively,
net of related deferred taxes of $0.9 million and $4.2 million, respectively, for interest on unrecognized tax
35
Years Ended December 31,
2011 $ Change
% Change
2010 $ Change % Change 2009
(Dollars in thousands)
Income tax
benefit
(provision)
$
4,047
NM
NM
$
(32,079
)
$
(22,605
)
239
%
$
(9,474
)