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March 1, 2013February 29, 2012
UNITED STATES 2012 Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Common Stock Class B Common Stock Lexico Publishing Group, owner of various reference websites, Data.” In September 2012, we acquired The About Group. In December 2012, we acquired Tutor, an online tutoring service. & Applications ability to access search services, as well as engage in a number of other activities online, such as play games, send e-cards, decorate e-mails and web pages and explore select vertical categories. The majority of our B2C applications are toolbars, which consist of a browser search box and related technology (which together enable users to run search queries and otherwise access search services directly from their web browsers). Many of our toolbars are coupled with other applications that we have developed that enable users to personalize their online activities and otherwise make them more expressive and fun. These applications include: MyFunCards, through which users can send online greeting cards; Popular Screensavers, through which users can personalize their desktops with photos, images and animations; and Retrogamer and Gaming Wonderland, through which users can access classic arcade, sports and action and other casual games directly from their web browsers. Other B2C applications target users with a special or passionate interest in select vertical categories (such as television programming, sports, shopping and gossip, among others) or that provide users with particular reference information (such as maps or weather forecasts). These applications include: Television Fanatic, through which users can browse and search for scheduling information, episode synopses and actor profiles for television shows, as well as directly access online episodes via media players and links to related third party services; TotalRecipeSearch, through which users can access thousands of recipes and cooking tips; and Coupon Alert, through which users can access coupons and online promotions. We distribute B2C applications directly to consumers free of charge. When we market our search and content services, our competitors include destination websites that primarily acquire traffic through paid and algorithmic search results. In We refer to Match.com in the United States, Chemistry and PeopleMedia (through which we operate demographically targeted dating websites) as Match's "Core" operations, operations and to our European operations as "Meetic." We are also the exclusive provider of subscription‑based personals services on Yahoo.com. As a complement to our online personals services, in June 2012, we introduced live, local events for our Match.com members. We believe that our ability to compete successfully will depend primarily upon the following factors: In all cases, if a match is made, HomeAdvisor. We market our services to consumers primarily through search engine marketing, as well as through affiliate agreements with third parties. Pursuant to these agreements, third parties agree to advertise and promote our services and We currently compete an online entertainment company targeting males ages eighteen to forty-nine through CollegeHumor.com and other websites, as well as Notional, a content production studio which creates long-form content for distribution through traditional media channels. especially critical to our success. Competition for well-qualified employees across IAC and its various businesses is intense and our continued ability to compete effectively depends, in part, upon our ability to attract new employees. While we have established programs to attract new employees and provide incentives to retain existing employees, particularly our senior management, we cannot assure you that we will be able to attract new employees or retain the services of our senior management or any other key employees in the future. the quality of paid listings may be inferior relative to our arrangements with, and the paid listings supplied by, Google) or otherwise replace the lost revenues. services. collectively represent a significant percentage of which could affect our ability to compete effectively and, in turn, adversely affect our business, financial condition and results of operations. our businesses. New laws and regulations (or new interpretations of existing laws) in this area may make it more costly to operate our businesses and/or limit our ability to engage in certain types of activities, such as targeted advertising, which could adversely affect our business, financial condition and results of operations. value of goodwill and other intangible assets acquired could be impacted by one or more continuing unfavorable events and/or trends, 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. 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 of operations. In addition, if the laws to which we are currently subject are amended or interpreted adversely to our interests, or if new adverse laws are adopted, our products and services might need to be modified to comply with such laws, which would increase our costs and could result in decreased demand for our products and services to the extent that we pass on such costs to We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties. compete against competitors with similar technologies, any of which could adversely affect our business, financial conditions and results of operations. business. In addition, downloadable For a discussion regarding the financing of (and related mortgage interest in) IAC's corporate headquarters, see “Item 8-Consolidated Financial Statements and Supplementary Data-Note 11." Year Ended December 31, 2011 Fourth Quarter Third Quarter Second Quarter First Quarter Year Ended December 31, 2010 Fourth Quarter Third Quarter Second Quarter First Quarter October 2011 November 2011 December 2011 Total Statement of Operations Data:(1) Revenue Earnings (loss) from continuing operations Earnings (loss) per common share from continuing operations attributable to IAC shareholders: Basic Diluted Cash dividends declared per share Balance Sheet Data at December 31: Total assets Long-term obligations, net of current maturities than Revenue: Search Match ServiceMagic Media & Other Inter-segment elimination Total Operating Income (Loss): Search Match ServiceMagic Media & Other Corporate Total Operating Income Before Amortization: Search Match ServiceMagic Media & Other Corporate Total Sources of Revenue sales. Results of Operations for the Years Ended December 31, 2012, 2011 Revenue Cost of revenue As a percentage of revenue stock-based compensation) for personnel engaged in data center functions, rent, energy and bandwidth costs. Cost of revenue Selling and marketing expense As a percentage of revenue marketing expense in 2012 increased from 2011 primarily due to increases of $187.2 million from Search & Applications and $88.2 million from Match. The increase from Search & Applications is primarily due to an increase of $180.6 million in online marketing related to Ask.com and existing B2C downloadable applications. Selling and marketing General and administrative expense General and administrative expense As a percentage of revenue Product development expense As a percentage of revenue Product development expense consists primarily of compensation and other employee-related costs (including stock-based compensation) that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and related technology. Depreciation As a percentage of revenue Operating Income Before Amortization As a percentage of revenue Match Operating Income Before Amortization Operating income (loss) As a percentage of revenue Equity in losses of unconsolidated affiliates Other income (expense), net Income tax benefit (provision) Gain on Liberty Exchange Loss from discontinued operations, net of tax For the year ended December 31, 2011 compared to the year ended December 31, 2010 new B2C downloadable applications. Operating Income Before Amortization increased 28% to $156.3 million, primarily due to the higher Core and Developing revenue noted above, partially offset by losses at Meetic resulting from the write-off of $32.6 million of deferred revenue in connection with its acquisition. Operating Income Before Amortization was further impacted by increases in selling and marketing expense, general and administrative expense and product development expense. The increase in selling and marketing expense is due to an increase of $22.7 million in advertising and promotional expenditures primarily related to offline and online marketing spend associated with the OurTime.com website and an advertising agreement entered into during the second quarter of 2010 with Yahoo. General and administrative expense increased from 2010, primarily due to estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.4 years. Excluding the intangible asset impairment charge in 2010, amortization of intangibles increased $10.1 million primarily due to the acquisition of Meetic. Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities of net capital losses generated from the sale of ARO stock in 2009 and the receipt of refundable New York State tax credits under the Brownfield Cleanup Program Act, which were recorded as an income tax receivable in 2007 and principally related to the construction of the Company's headquarters building in New York City. The increase in accounts payable and other current liabilities is primarily due to an increase in accrued revenue share expense and an increase in accrued advertising expense. The increase in accrued revenue share expense is primarily due to an increase in the proportion of revenue from our B2B customized browser-based applications and other arrangements with third parties who direct traffic to our websites as well as a shift in partner mix to partners carrying higher traffic acquisition costs. The increase in accrued advertising expense is primarily due to an increase in advertising and promotional expenditures in the fourth quarter of 2010 relative to the fourth quarter of 2009 at Search & Applications and Match. The increase in deferred revenue is primarily due to the growth in subscription revenue at Match. The increase in accounts receivable is primarily due to the growth in revenue earned from our The Company's principal sources of liquidity are its cash and cash equivalents and marketable securities as well as its cash flows generated from operations. The Company revolving credit facility. Long-term debt(b) Purchase obligations(c) Operating leases Total contractual cash obligations Guarantee and letters of credit Off-Balance Sheet Arrangements Amortization of intangibles (including impairment of intangibles, if applicable) and goodwill impairment (if applicable) are non-cash expenses relating primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as 2012. The fair value of each of the Company's 2012. step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. At December 31, debt, including the current portion thereof. The other-than-temporary impairment charge is included in "Other (expense) income, net" in the accompanying consolidated statement of operations. reinvested cash flows from international operations in order to grow the businesses. The statements of operations of the Company's international businesses are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions results in reduced revenue and operating results. Similarly, the Company's revenue and operating results will increase for our international operations if the U.S. dollar weakens against foreign currencies. The Company is also exposed to foreign currency exchange risk related to its assets and liabilities denominated in a currency other than the functional currency. ASSETS Cash and cash equivalents Marketable securities Accounts receivable, net of allowance of $7,309 and $8,848, respectively Other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Long-term investments Other non-current assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Accounts payable, trade Deferred revenue Accrued expenses and other current liabilities Total current liabilities Long-term debt Income taxes payable Deferred income taxes Other long-term liabilities Redeemable noncontrolling interests Commitments and contingencies SHAREHOLDERS' EQUITY: Common stock $.001 par value; authorized 1,600,000,000 shares; issued 234,100,950 and 225,873,751 shares, respectively, and outstanding 77,126,881 and 84,078,621 shares, respectively Class B convertible common stock $.001 par value; authorized 400,000,000 shares; issued 16,157,499 shares and outstanding 5,789,499 and 4,289,499 shares, respectively Additional paid-in capital Accumulated deficit Accumulated other comprehensive (loss) income Treasury stock 167,342,069 and 153,663,130 shares, respectively Total IAC shareholders' equity Noncontrolling interests Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Revenue Costs and expenses: Cost of revenue (exclusive of depreciation shown separately below) Selling and marketing expense General and administrative expense Product development expense Depreciation Amortization of intangibles Amortization of non-cash marketing Goodwill impairment Total costs and expenses Operating income (loss) Equity in losses of unconsolidated affiliates Other income (expense), net Earnings (loss) from continuing operations before income taxes Income tax benefit (provision) Earnings (loss) from continuing operations Gain on Liberty Exchange Loss from discontinued operations, net of tax Net earnings (loss) Net loss attributable to noncontrolling interests Net earnings (loss) attributable to IAC shareholders Per share information attributable to IAC shareholders: Basic earnings (loss) per share from continuing operations Diluted earnings (loss) per share from continuing operations Basic earnings (loss) per share Diluted earnings (loss) per share Non-cash compensation expense by function: Cost of revenue Selling and marketing expense General and administrative expense Product development expense Total non-cash compensation expense Balance as of December 31, 2008 Comprehensive loss: Net loss attributable to IAC shareholders for the year ended December 31, 2009 Change in foreign currency translation adjustment, net of tax provision of $2,186 Change in net unrealized gains on available-for-sale securities, net of tax provision of $1,440 Comprehensive loss Non-cash compensation expense Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes Income tax provision related to the exercise of stock options, vesting of restricted stock units and other Issuance of common stock upon the exercise of warrants Purchase of treasury stock Fair value of redeemable noncontrolling interests adjustment Settlement of vested stock-based awards denominated in subsidiaries' equity, net of tax Spin-off of HSNi, ILG, Ticketmaster and Tree.com to shareholders Balance as of December 31, 2009 Comprehensive income: Net earnings attributable to IAC shareholders for the year ended December 31, 2010 Change in foreign currency translation adjustment, net of tax benefit of $4,711 Change in net unrealized losses on available-for-sale securities, net of tax benefit of $1,555 Comprehensive income Non-cash compensation expense Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes Income tax provision related to the exercise of stock options, vesting of restricted stock units and other Purchase of treasury stock Receipt of stock from Liberty Media Corporation Fair value of redeemable noncontrolling interests adjustment Settlement of vested stock-based awards denominated in a subsidiary's equity, net of tax Balance as of December 31, 2010 Comprehensive income: Net earnings for the year ended December 31, 2011 Change in foreign currency translation adjustment Change in net unrealized gains on available-for-sale securities, net of tax provision of $5,460 Comprehensive income Noncontrolling interests related to acquisition of Meetic S.A. Non-cash compensation expense Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes Income tax benefit related to the exercise of stock options, vesting of restricted stock units and other Issuance of common stock upon the exercise of warrants Cash dividend declared on common stock Purchase of treasury stock Receipt of stock from Liberty Media Corporation Fair value of redeemable noncontrolling interests adjustment Balance as of December 31, 2011 Cash flows from operating activities attributable to continuing operations: Net earnings (loss) Less: loss (earnings) from discontinued operations, net of tax Earnings (loss) from continuing operations Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by operating activities attributable to continuing operations: Non-cash compensation expense Depreciation Amortization of intangibles Amortization of non-cash marketing Goodwill impairment Impairment of long-term investments Deferred income taxes Equity in losses of unconsolidated affiliates Gain on sale of Match Europe Gain on sales of investments Decrease in the fair value of the derivative asset related to Arcandor AG stock Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable Other current assets Accounts payable and other current liabilities Income taxes payable Deferred revenue Other, net Net cash provided by operating activities attributable to continuing operations Cash flows from investing activities attributable to continuing operations: Acquisitions, net of cash acquired Capital expenditures Proceeds from maturities and sales of marketable debt securities Purchases of marketable debt securities Proceeds from sales of investments Purchases of long-term investments Dividend received from Meetic Other, net Net cash used in investing activities attributable to continuing operations Cash flows from financing activities attributable to continuing operations: Purchase of treasury stock Issuance of common stock, net of withholding taxes Payment of dividends to IAC shareholders Excess tax benefits from stock-based awards Settlement of vested stock-based awards denominated in subsidiaries' equity Liberty Exchange Other, net Net cash used in financing activities attributable to continuing operations Total cash used in continuing operations Total cash used in discontinued operations Effect of exchange rate changes on cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period & Applications Dictionary.com downloadable applications. Through the brands and businesses within our Match segment, we are a leading provider of subscription-based and Kingdom under various brands. CityGrid Media is an online media company that owns and operates CityGrid, an advertising network that integrates local content and advertising for distribution to both affiliated and third party publishers across web and mobile platforms, as well as proprietary websites, such as Citysearch.com and Urbanspoon.com, through which consumers can access local merchant information and reviews online. related apparel and accessories, and Tutor, an online tutoring solution which was acquired in December 2012. Revenue Recognition & Applications Accounts Receivable Buildings and leasehold improvements Computer equipment and capitalized software Furniture and other equipment The Company's reporting units are consistent with its determination of its operating segments. Goodwill is tested for impairment at the reporting unit level. The Company's operating segments, reporting units and reportable segments are as follows: circumstances, about the assumptions market participants would use in pricing the those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax expense. arrangements are exercisable by the counter-party outside the control of the Company. Accordingly, to the extent that the fair value of these interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital. During the years ended sheet. segments. Deferred income taxes Prepaid expenses Capitalized downloadable search toolbar costs, net Income taxes receivable Other Other current assets Buildings and leasehold improvements Computer equipment and capitalized software Furniture and other equipment Projects in progress Land Less: accumulated depreciation and amortization Property and equipment, net Income taxes receivable Other Other non-current assets Accrued employee compensation and benefits Accrued revenue share expense Accrued advertising expense Other Accrued expenses and other current liabilities Balance at January 1 Noncontrolling interests related to acquisition of Meetic Noncontrolling interests related to the acquisition of a business contributed to a consolidated Latin American venture Noncontrolling interests created by a decrease in the ownership of a subsidiary contributed to a consolidated Latin American venture Noncontrolling interests related to other acquisitions Decrease in redeemable noncontrolling interests in a consolidated Latin American venture resulting from the acquisition of Meetic Purchase of noncontrolling interests Distribution to owners of noncontrolling interests Contribution from owners of noncontrolling interests Net loss attributable to noncontrolling interests Change in fair value of redeemable noncontrolling interests Change in foreign currency translation adjustment Other Balance at December 31 Foreign currency translation adjustment, net of tax Unrealized gains on available-for-sale securities, net of tax Accumulated other comprehensive (loss) income Service revenue Product revenue Revenue Cost of service revenue Cost of product revenue Cost of revenue Interest income Interest expense Non-income tax refunds related to Match Europe Foreign currency exchange gains, net Gain on sales of investments Impairment of long-term investments Gain on sale of Match Europe Impairment of shares of Arcandor AG ("ARO") stock Net decrease in the fair value of the derivative asset related to ARO stock Other Other income (expense), net NOTE 4—INCOME TAXES U.S. Foreign Total Current income tax provision (benefit): Federal State Foreign Current income tax provision (benefit) Deferred income tax (benefit) provision: Federal State Foreign Deferred income tax (benefit) provision Income tax (benefit) provision The tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below. The valuation allowance is related to items for which it is more likely than not that the tax benefit will not be realized. Deferred tax assets: Accrued expenses Net operating loss carryforwards Tax credit carryforwards Stock-based compensation Income tax reserves, including related interest Intangible and other assets Equity method investments Other Total deferred tax assets Less valuation allowance Net deferred tax assets Deferred tax liabilities: Property and equipment Investment in subsidiaries Intangible and other assets Equity method investments Other Total deferred tax liabilities Net deferred tax liability between Income tax provision (benefit) at the federal statutory rate of 35% Release of deferred tax liability associated with investment in Meetic Change in tax reserves, net Foreign income taxed at a different statutory tax rate Net adjustment related to the reconciliation of income tax provision (benefit) accruals to tax returns Federal valuation allowance on equity method investments State income taxes, net of effect of federal tax benefit Foreign tax credits Non-deductible impairments of goodwill and intangible assets Non-deductible goodwill associated with the sale of Match Europe Other, net Income tax (benefit) provision No $93.3 million. Balance at January 1 Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions for tax positions of prior years Settlements Expiration of applicable statute of limitations Balance at December 31 December 31, 90,000 topics. The purchase price was $300 million in cash, plus an amount equal to the net working capital of $17.1 million at closing. Shares acquired pursuant to tender offer Equity method investment in Meetic Noncontrolling interests, including the fair value of unvested stock awards attributable to pre-acquisition services Total Cash and cash equivalents Other current assets Property and equipment Goodwill Intangible assets Other assets Total assets Current liabilities Current deferred tax liability Other liabilities Non-current deferred tax liabilities Net assets Indefinite-lived trade names Customer lists Technology Total The unaudited pro forma financial information in the table below summarizes the combined results of IAC, Meetic and Revenue Net earnings attributable to IAC shareholders Basic earnings per share attributable to IAC shareholders Diluted earnings per share attributable to IAC shareholders 2011. indefinite-lived intangible assets of Shoebuy of Goodwill Intangible assets with indefinite lives Intangible assets with definite lives, net Total goodwill and intangible assets, net The following table presents the balance of goodwill by reporting unit, including the changes in the carrying value of goodwill, for the year ended December 31, IAC Search & Media CityGrid Media Search Match ServiceMagic Shoebuy Connected Ventures Media & Other Total The About Group. IAC Search & Media CityGrid Media Search Match ServiceMagic Shoebuy Connected Ventures Media & Other Total balances include accumulated impairment losses of Customer lists Technology Supplier agreements Other Total Supplier agreements Customer lists Technology Other Total 2012 2013 2014 2015 2016 Corporate debt securities States of the U.S. and state political subdivisions U.S. Treasury securities Total debt securities Equity security Total marketable securities The net unrealized gains in the tables above are included in "Accumulated other comprehensive Due in one year or less Due after one year through five years Total Corporate debt securities States of the U.S. and state political subdivisions Total position. At 2011 Proceeds from maturities and sales of available-for-sale marketable securities Gross realized gains Gross realized losses Equity method investments Cost method investments Auction rate securities Long-term marketable equity securities Total long-term investments Meetic (Europe) Other Total equity method investments included in long-term investments The Newsweek/Daily Beast Company (United States) included in accrued expenses and other current liabilities Total equity method investments Balance sheet data(a): Current assets Non-current assets Current liabilities Non-current liabilities Operating data(a): Net sales Gross profit Net (loss) income Cost method investments 42.1 million, with a gross unrealized loss of $10.8 million included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. The cost basis of the Company's long-term marketable equity securities at December 31, 2011 intent to hold this Assets: Cash equivalents: Treasury and government agency money market funds Commercial paper Time deposits Marketable securities: Corporate debt securities States of the U.S. and state political subdivisions Equity security Long-term investments: Auction rate security Marketable equity securities Total Liabilities: Contingent consideration arrangement Assets: Cash equivalents: Treasury and government agency money market funds Commercial paper Time deposits Marketable securities: Corporate debt securities States of the U.S. and state political subdivisions U.S. Treasury securities Equity security Long-term investments: Auction rate securities Total Balance at January 1 Total net (losses) gains (realized and unrealized): Included in other comprehensive income Fair value at date of acquisition Settlements Balance at December 31 Auction rate security and a potential additional payment of up to Assets: Cash and cash equivalents Marketable securities Auction rate securities Long-term marketable equity securities Notes receivable Liabilities: Contingent consideration arrangement Long-term debt Guarantee of an equity method investee's debt Letters of credit and surety bond is based on Level 3 inputs. 7.00% Senior Notes due January 15, 2013; interest payable each January 15 and July 15 which commenced July 15, 2003 5% New York City Industrial Development Agency Liberty Bonds due September 1, 2035; interest payable each March 1 and September 1 which commenced March 1, 2006 Long-term debt 2013 2035 held. Notwithstanding the foregoing, the holders of shares of IAC common stock, acting as a single class, are entitled to elect Following consummation of the above transactions, Mr. Diller 2012. Outstanding at January 1, 2011 Exercised Outstanding at December 31, 2011 Issued in Vivendi deal: Tranche 1 Tranche 2 Common Stock Repurchases Numerator: Earnings (loss) from continuing operations Net loss attributable to noncontrolling interests Earnings (loss) from continuing operations attributable to IAC shareholders (Loss) earnings from discontinued operations, net of tax attributable to IAC shareholders(a) Net earnings (loss) attributable to IAC shareholders Denominator: Weighted average basic shares outstanding Dilutive securities including stock options, warrants and RSUs(b)(c)(d) Denominator for earnings per share—weighted average shares(b)(c)(d) Earnings (loss) per share attributable to IAC shareholders: Earnings (loss) per share from continuing operations Discontinued operations, net of tax Earnings (loss) per share Stock Options Outstanding at January 1, 2011 Granted Exercised Forfeited Expired Outstanding at December 31, 2011 Options exercisable $0.01 to $10.00 $10.01 to $20.00 $20.01 to $30.00 $30.01 to $40.00 $40.01 to $50.00 The Black-Scholes option pricing model incorporates various assumptions, including expected volatility and expected term. Expected volatility Risk-free interest rate Expected term Dividend yield There are no stock options issued during the year ended December 31, 2011 with exercise prices greater than the market value of IAC's common stock on the date of grant. Nonvested RSUs and PSUs outstanding Nonvested at January 1, 2011 Granted Vested Forfeited Nonvested at December 31, 2011 The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2012, 2011 Revenue: Search Match ServiceMagic Media & Other Inter-segment elimination Total Operating Income (Loss): Search Match ServiceMagic Media & Other Corporate Total Operating Income Before Amortization(a): Search Match ServiceMagic Media & Other Corporate Total Segment Assets(b): Search Match ServiceMagic Media & Other Corporate Total Depreciation: Search Match ServiceMagic Media & Other Corporate Total Capital expenditures: Search Match ServiceMagic Media & Other Corporate Total Revenue United States All other countries Total Long-lived assets (excluding goodwill and intangible assets) United States All other countries Total Search Match ServiceMagic Media & Other Corporate Total Search Match ServiceMagic Media & Other Corporate Total Search Match ServiceMagic Media & Other Corporate Total The following tables reconcile segment assets to total assets: Search Match ServiceMagic Media & Other Corporate(c) Total Search Match(d) ServiceMagic Media & Other Corporate(c) Total NOTE 16—COMMITMENTS 2012 2013 2014 2015 2016 Thereafter Total The Company also has funding commitments that could potentially require its performance in the event of demands by third parties or contingent events Guarantee and letters of credit Purchase obligations Total commercial commitments Supplemental Disclosure of Non-Cash Transactions for 2010 Cash paid (received) during the period for: Interest Income tax payments Income tax refunds Year Ended December 31, 2011 Revenue Cost of revenue Operating income Earnings from continuing operations (Loss) earnings from discontinued operations, net of tax Net earnings Net earnings attributable to IAC shareholders Per share information attributable to IAC shareholders: Basic earnings per share from continuing operations(d) Diluted earnings per share from continuing operations(d) Basic earnings per share(d) Diluted earnings per share(d) Year Ended December 31, 2010 Revenue Cost of revenue Operating income (loss) (Loss) earnings from continuing operations (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: Basic (loss) earnings per share from continuing operations(d) Diluted (loss) earnings per share from continuing operations(d) Basic (loss) earnings per share(d) Diluted (loss) earnings per share(d) Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 2011. 2010. 2010. 2010. 2011 Allowance for doubtful accounts and revenue reserves Sales returns accrual Deferred tax valuation allowance Other reserves 2010 Allowance for doubtful accounts and revenue reserves Sales returns accrual Deferred tax valuation allowance Other reserves 2009 Allowance for doubtful accounts and revenue reserves Sales returns accrual Deferred tax valuation allowance Other reserves2011 (Address
(Zip Common Stock, par value $0.001 Noneýx No oýxýx No oýx No oýoýx (Do ýxJanuary 27, 2012,February 1, 2013, the following shares of the Registrant's Common Stock were outstanding: 78,471,784 75,481,373 5,789,499 Total 84,261,283 Total81,270,87220112012 was $3,079,546,221.$3,754,179,431. For the purpose of the foregoing calculation only, all directors and executive officers of the Registrant are assumed to be affiliates of the Registrant.20122013 Annual Meeting of Stockholders are incorporated by reference into Part III herein.operatesis a leading media and internet company comprised of more than 50 leading150 brands and diversified Internet businessesproducts, including Ask.com, About.com, Match.com, HomeAdvisor.com and Vimeo.com. Focused in the areas of search, applications, online dating, local and media, IAC's family of websites is one of largest in the world, with more than a billion monthly visits across more than 30 countries... our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world.countries. The results of operations of IAC's various businesses are reported within the following five segments: Search & Applications, Match, ServiceMagicLocal, Media and Media & Other."Item 7—Management's“Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations"Operations” beginning on page 2722 and "Item 8—Consolidated“Item 8-Consolidated Financial Statements and Supplementary Data"Data,” beginning on page 54. Unless otherwise indicated, all41. Since its inception, has transformed itself frominitially a hybrid media/electronic retailing company, into a leading internet company. IAC was incorporated in July 1986 in Delaware under the name Silver King Broadcasting Company, Inc. After several name changes (first to HSN, Inc., asthen to USA Networks, Inc., USA Interactive and InterActiveCorp, and finally to IAC/InterActiveCorp) and the completion of a subsidiarynumber of Home Shopping Network, Inc. In December 1992, Home Shopping Network distributedsignificant corporate transactions over the capital stock of Silver King to its stockholders. In December 1996,years, the Company completed mergers with Savoy Pictures Entertainment, Inc.transformed itself into the leading media and Home Shopping Network, with Savoy and Home Shopping Network becoming subsidiaries of Silver King. In connection with these mergers,internet company it is today. Company changed its name to HSN, Inc. The Company acquired a controlling interest in Ticketmaster Group Inc. in 1997 and(and the remaining interest in 1998. In 1998, upon the purchase of USA Networks1998) and Studios USA from Universal Studios, Inc., the Company was renamed USA Networks, Inc. From 1999 through 2001, the Company acquired Hotel Reservations Network (later renamed Hotels.com), as well as acquired Match.com and other smaller e-commerce companies. In 2001, the Company sold USA BroadcastingAs its transformation from a hybrid media/electronic retailing company continued to Univision Communications, Inc. In Februaryevolve, in May 2002, the Company acquired a controlling stakeinterest in Expedia.com. In May 2002, after contributingExpedia.com and contributed its entertainment assets to Vivendi Universal Entertainment LLLP, or VUE, a joint venture then controlled by Vivendi,Vivendi. The Company continued to grow its portfolio of e-commerce companies by acquiring all of 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,shares of Expedia.com, Hotels.com and Ticketmaster and acquiredthat it did not previously own, together with a number of other e-commerce companies including Entertainment Publications, Inc. ("EPI"),(including LendingTree and Hotwire. The Company changed its name to InterActiveCorpHotwire), in June 20032003.to IAC/InterActiveCorp in July 2004. Onon August 9, 2005, IAC completed the separation of its travel and travel-relatedtravel‑related businesses and investments into an independent public company.company called Expedia, Inc. That year, IAC also completed the following transactions in 2005: the acquisition of IAC Search & Media (formerly known as Ask Jeeves, Inc.), the results of operations of which are now reported within our Search segment (July 2005), a transaction with NBC Universal in which IAC sold its common and preferred interests in VUE (June 2005) and the acquisition of Cornerstone Brands, Inc. ("Cornerstone Brands") (April 2005). In November 2006, IAC sold PRC, LLC, its teleservices subsidiary. In June 2007, the Company sold its German TV and internet retailer, HSE Germany. to NBC Universal.Dictionary.com, Thesaurus.com and Reference.com, and in June 2008, the Company sold EPI.including Dictionary.com. On August 20, 2008, IAC separated into five publicly traded companies: IAC, HSN, Inc. ("HSNi"), Interval Leisure Group, Inc. ("ILG"), Ticketmaster and Tree.com, Inc. ("Tree.com"). In this report, we refer to this 2008 transaction as the "Spin-Off."“Spin-Off.” Immediately following the Spin-Off, IAC effected a one-for-two reverse stock split. In January 2009, we sold ReserveAmerica, a leading provider of campground reservation services and software to United States federal and state agencies. ("Meetic"), in exchange for a 27% interest in Meetic and a €5 million note. In July 2009, we acquired PeopleMedia, a leadingInc., operator of a number of demographically targeted dating websites. In May 2010, we acquired a majority stake in DailyBurn.com, a diet and fitness tracking website. In June 2010, Citysearch changed its name to CityGrid Media in connection with the launch of CityGrid®, its local advertising network, and its transformation from an owner and operator of local, consumer-oriented websites into one of the largest local advertising networks on the web.wholly-ownedwholly‑owned subsidiary that held our Evite, Gifts.com and IAC Advertising Solutions businesses and approximately $218 million in cash for substantially all of Liberty Media Corporation's equity stake in IAC. See "Item 7—Management's“Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations"Operations” and "Item 8—Consolidated“Item 8-Consolidated Financial Statements and Supplementary Data—Notes 1 and 12."advertiser-supportedad‑supported online personals service. During the third quarter of 2011, through Match, we increased our ownership stake in Meetic to 81%.January 27, 2012,February 1, 2013, Barry Diller, IAC's Chairman43.4%42.5% of the outstanding total voting power of IAC. (i) Mindspark Interactive Network ("Mindspark"), a digital consumer products business consisting of our B2C operations, through which we develop, market and distribute downloadable applications, and our B2B operations, through which we provide customized browser-based applications for software and media companies; (ii) destination websites,additional services;content; and (iii) CityGrid Media, an online media company that aggregatesintegrates local contentour partnership operations (“B2B”), as well as our Ask.com and advertising for distributionDictionary.com downloadable applications.publishers across web and mobile platforms. Searchour users. These search services generally involve the generation and display of a set of hyperlinks to websites, together with summary information regarding these websites deemed relevant to search queries entered by users. In addition to these algorithmic search results, paid listings are also generally displayed in response to search queries. Paid listings are advertisements displayed on search results pages in response to search queries that contain advertiser-selected keywords. A paid listing is generally a short textual advertising unit containingcontain a link to an advertiser's website. Paid listings are generally displayed based on keywords selected by the websiteadvertiser. The paid listings we display are furnished by Google Inc. ("Google") pursuant to a services agreement.an advertiserthe following destination websites: purchasedprovide direct answers to natural‑language questions;relevant keyword(s).segment's revenue consists principally of advertising revenue, which& Applications segment is derived from online advertising, primarily from the display of paid listings, as well as from the display of other advertising in connection with the provision of search, content and other services. The substantial majority of the paid listings we display are supplied to us by Google pursuant to a paid listing supplyservices agreement with Google that expires on March 31, 2016."sponsored"sponsored listings on search results pages. To a lesser extent, we also syndicate Google paid listings through third parties with whom we enter into syndication agreements. See "Item 1A—Risk Factors—We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition and results of operations." In addition, we sell display advertising on our destination search and other websites. In the case of CityGrid Media, revenue is derived primarily from the sale of local and national online advertising distributed through CityGrid, our leading local content and advertising network.Toolbars Through Mindspark, we develop, market and distribute a variety of downloadable toolbars through which users can access search services, as well as a variety of applications through which users can creatively and visually express themselves and interact online. The majority of these toolbars consist of a search box and related technology (which together enable users to run search queries and otherwise access search services directly from their web browsers), together with applications we have developed that enable users to personalize their online activities and otherwise make them more expressive and fun. These applications include: MyFunCards, through which users can send online greeting cards; Popular Screensavers, through which users can personalize their desktops with photos, images and animations; Webfetti and CursorMania, through which users can personalize pages on various social networking websites; Zwinky, through which users can create avatars to express their online persona and design and update profile pages to share with friends; IWON, through which users can access their favorite online games from IWON.com and elsewhere directly from their web browsers; Smiley Central, through which users can add emoticons to e-mails and instant messages; MyWebFace, through which users can create cartoon-like images of themselves for download or use in connection with their profilepages on social networks; Retrogamer, through which users can access their favorite classic arcade, sports and action games directly from their web browsers; and CouponAlert, through which users can access coupons and online promotions. We also develop, market and distribute toolbars that target users with a passionate interest in select vertical categories (such as movies, television, sports and gossip, among others). In addition to a search box and related technology, these toolbars provide users with the ability to access primarily third party online content and services relating to various vertical categories directly from their web browsers. We distribute these toolbars and applications directly to consumers free of charge and we refer to them as Mindspark's "B2C operations." 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, media and other companies. Ask Partner Network works closely with third parties to design and develop customized browser-based applications, which are highly-targeted, custom toolbars that, when bundled with third party applications and websites, extend services into web browsers and enhance end-user experiences online. We refer to toolbars and applications marketed and distributed through Ask Partner Network as Mindspark's "B2B operations."Destination Search and Other Websites We also operate a number of destination websites and portals through which we provide search and additional services, including: Ask.com, which provides general search services, as well as question and answer services that provide direct answers to natural-language questions; Dictionary.com, which provides online dictionary, reference, educational and learning services; IWON.com, which offers a variety of casual games and sweepstakes; Girlsense.com, which provides a virtual fashion community for girls and teens; MyWebSearch.com, which provides users with home page and search services; MyWay.com, which is free from banner, pop-up and rich-media ads and through which we provide general search and e-mail services; and Excite.com, a content-rich portal that aggregates news, sports, weather and entertainment content.Mobile Applications We market and distribute a number of mobile applications through which we provide search and additional services, including: the Ask.com iPhone, iPad and Android applications, which provide general search and natural-language question and answer services; the Dictionary.com iPhone, iPad and Android applications, which provide dictionary, reference, educational and learning services; and various DailyBurn iPhone, iPad and Android applications, which track nutritional and fitness information and activities.Revenue Substantially all of the revenue from our Search segment is derived from online advertising, with most of this revenue attributable to our paid listing supply agreement with Google. When a user submits a search query through our Search & Applications properties and services within our Search segment and clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of its related paid listing fee with us, which we in turn either retain in its entirety or share with third parties. In some cases, Google does not charge advertisers unless our user, after clicking on the paid listing, also takes certain actions on the advertiser's website. To a lesser extent, revenuewe also syndicate Google paid listings through third parties with whom we enter into syndication agreements. See “Item 1A-Risk Factors-We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition and results of operations.” including on a fixed fee per impression, cost-per-click and cost-per-action basis and the syndication of search results generated by Ask-branded destination search websites.
CompetitionCompetitionsearchSearch & Applications properties and search and other services generally; (ii) develop, market and distribute toolbarsour B2C and relatedB2B applications; (iii) attract third parties to distribute our toolbars, search boxesApplications and related technology; and (iv) attract advertisers. In the case of our search services generally, our competitors include Google, Yahoo!, Bing and other destination search websites and search-centricsearch‑centric portals (some of which provide a broad range of content and services and/or link to various desktop applications), third party toolbar, convenience search and applications providers, other search technology and convenience service providers (including internet access providers, social networks,media platforms, online advertising networks, traditional media companies and companies that provide online content).Mindspark business,Websites, we believe that our ability to compete successfully will depend primarily upon the relevance and authority of our search results, answers and other content, the functionality of our various Websites and the quality of related content and features and the attractiveness of the services provided by our Websites generally to consumers relative to those of our competitors. We believe that we differentiate Ask.com from its competitors through question and answer services that provide accurate, authoritative and direct answers to natural‑language questions (in the form of algorithmic search results and/or responses from other Ask.com users). Our ability to continue to differentiate Ask.com from its competitors in this manner depends primarily upon our ability to deliver authoritative and trustworthy content to users, as well as our ability to attract advertisers to this initiative.manner, as well as attract advertisers. In the case of our destination search websites, we believe that our ability to compete successfully will depend primarily upon the relevance and authority of our search results, answers and other content, the functionality of our various destination search websites and the quality of related content and features and the attractiveness of our services generally to consumers relative to those of our competitors. Our current goal is to differentiate Ask.com from its competitors through question and answer services that provide accurate, authoritative and direct answers to natural-language questions (in the form of algorithmic search results and/or responses from other Ask.com users). The success of this initiative depends primarily upon our ability to deliver authoritative and trustworthy content to users, as well as our ability to attract advertisers to this initiative.CityGrid Media Overview. CityGrid Media is an online media company that operates CityGrid, a leading local content and advertising network through which local business listings, advertising and content are distributed to publishers across web and mobile platforms, as well as consumer-oriented websites Citysearch.com, InsiderPages.com and Urbanspoon.com. CityGrid. Through CityGrid, we aggregate local business listings, advertising and content, including editorial and other user-generated content and related information ("CityGrid Advertising"), which we then distribute to websites and mobile applications affiliated with CityGrid. Websites and mobile applications affiliated with CityGrid include third party websites and mobile applications, as well as the websites and applications we own and operate described below (the "CityGrid Properties"). Owned and Operated Properties. CityGrid Media owns and operates Citysearch.com, InsiderPages.com and Urbanspoon.com, websites (and related mobile applications in the case of Citysearch.com and Urbanspoon.com) that connect consumers with local businesses by providing consumers with free access to local business profiles, customized messages from local businesses,
manner.reviews and user-generated content and related information. Citysearch.com is a comprehensive directory of local business listings and related information across most verticals of businesses in the United States. InsiderPages.com publishes content regarding professional service providers based in the United States. Urbanspoon.com publishes content focused exclusively on restaurants and dining in North America, the United Kingdom and Australia. Advertising Services. CityGrid Advertising is sold to businesses through direct sales and resellers. In the case of direct sales, we sell CityGrid Advertising directly to businesses through field sales teams in major metropolitan areas within the United States, as well as through in house sales teams catering to various types of advertisers (i.e., local businesses, businesses covering multiple regions or with multiple locations and advertising agencies) and an online self-enrollment model. CityGrid Advertising is also sold through resellers (third parties with their own independent advertising sales forces). CityGrid Advertising is then published on CityGrid Properties. Revenue. CityGrid Media revenue is derived primarily from the sale of CityGrid Advertising. In the case of direct sales, advertising is sold primarily pursuant to a pay-for-performance-based model. Under this model, local businesses pay CityGrid Media a fee each time their enhanced business listing (or select 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 revenue received with CityGrid Media pursuant to a variety of models, the specifics of which vary by reseller and the substantial majority of which have some performance-based element. When we publish CityGrid Advertising on our owned and operated CityGrid Properties, we retain all of the revenue paid to us by our direct sales customers and all of the amounts paid to us by our resellers. When CityGrid Advertising is published and viewed by an end user on a third party CityGrid Property, we share the related revenue we receive with the applicable third party CityGrid Property. Revenue is also derived from our sale of local merchant and national display advertising on owned and operated CityGrid Properties on a per impression and fixed fee basis. Competition. The markets for local business advertising and content are highly competitive and diverse. We primarily compete with online and offline local and national directories and online and mobile advertising services and networks. We also face competition from search engines and other site aggregation companies that aggregate our content for display on their websites, which interferes with search engine optimization and marketing efforts designed to drive traffic to CityGrid Properties.subscription-basedsubscription‑based and advertiser-supportedad‑supported online personals services in the United StatesNorth America, Europe, Latin America, Australia and various European and Latin American jurisdictions abroad.Asia. We provide theseoperate in twenty-five countries, in seven languages and on four continents, as well asoperate. Our European operations are conducted through our mobile applications. Through Match, we own an 81% stake in Meetic, a European online dating companyS.A. ("Meetic"), which is based in France through which we provide online personals services in certain European jurisdictions.France. As of December 31, 2011,2012, we collectively provided online personals services to approximately 2.72.8 million subscribers.February 2011,addition, we acquired OkCupid, an advertiser-supported online personals service in the United States. During the third quarter of 2011, we increased our ownership stake in Meetic to 81% and acquiredown a 20% interest in Zhenai, Inc., a leading provider of online dating and matchmaking services in China. We are also the exclusive provider of subscription-based personals services on Yahoo.com.and to OkCupid, Singlesnet, mobile-only productsDateHookup and non-MeeticMatch's international operations (excluding Meetic) as Match's "Developing" operations. primarily provide online personals services through branded websites that we own and operate, including Match.com, Chemistry.com, OurTime.com, BlackPeopleMeet.com and OkCupid.com, and through a variety of Meetic-brandedMeetic‑branded websites abroad.in Europe. These websites, all of which provide single adults with a private and convenient environment for meeting other single adults, primarily provide online personals services to registered members (those establishing usernames and passwords) and subscribers (those who establish a username and password and pay a subscription fee).subscription-basedsubscription‑based and advertising-supportedad-supported offerings. Our subscription-basedsubscription‑based websites offer registered members the ability to post a profile and use any related searching and matching tools free of charge, while subscribers have access to enhanced tools and a broader feature set, including the ability to initiate, review or respond to communications with or from other users. Our subscription programs consist of programs with a single-monthsingle‑month term, with discounts for programs with various longer terms. Our advertiser-supportedad‑supported websites generally provide online personals services with basic functionality without the commitment of a monthly subscription, in some cases making a variety of premium or add-on features available for a fee. We also offer access to our services via various mobile devices through ourmatchMobile service Match, OkCupid, DateHookup and other branded mobile applications.radio and outdoorradio advertising and related public relations efforts.efforts, as well as events. Our online marketing activities generally consist primarily of the purchase of banner and other display advertising, search engine marketing and targeted e-mail campaigns. In addition, we enter into a variety of alliances with third parties who advertise and promote our services. Some alliances are exclusive and some, but not all, contain renewal provisions. In connection with the exclusive provision of subscription-basedsubscription‑based personals services on Yahoo.com, we agreed to makemade certain advertising commitments. These commitments, which are reducible or terminable in certain circumstances.principallyprimarily from subscription fees for our subscription-basedsubscription‑based online personals and related services, as well asservices. Match also earns revenue from online advertising and other add-on features, primarily from our OkCupid service. in the United States and abroad and barriers to entry are minimal. We compete primarily with online and offline broad-basedbroad‑based personals, dating and matchmaking services (both paid and free), social networking websitesmedia platforms and applications, the personals sections of newspapers and magazines, other conventional media companies that provide personals services and traditional venues where singles meet (both online and offline). We also compete with numerous online and offline personals, dating and matchmaking services that cater to specific demographic groups.••••••••ServiceMagicHomeAdvisorOverviewOverview. ServiceMagic HomeAdvisor is a leading online marketplace for matching consumers with home services professionals in the United States thatStates. HomeAdvisor connects consumers, by way of patented proprietary technologies, with home and other local serviceservices 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 them with up to four members from its network of service professionals, which ascustomer‑rated. As of December 31, 2011,2012, HomeAdvisor's network of home services professionals consisted of more than 80,000 service professionals in the United States providing services in more than 700500 categories primarily home service-related, ranging from simple home repairs to home remodeling projects. ServiceMagic International, we search for local lead generation business opportunities around the world and hold a majority interest in ServiceMagic Europe, whichinvestment, HomeAdvisor also operates businesses in the local lead generationonline home services space in France and the United Kingdom including Travaux.com,under various brands.leading French website for consumer information regarding home improvement; 123Devis.com,submits a French lead generation business with one ofrequest through the largest networks of home service professionals in France; and 123GetAQuote.co.uk, a leading lead generation platform for home service professionals in the United Kingdom.Services Through ourMarket Match service,HomeAdvisor marketplace, we generally match consumersthat consumer with up to four servicehome services professionals from our network based upon service requests that specifyon the type of services desired and the consumer's zip code. Through our Exact Match service, consumerslocation. Consumers can then review servicehome services professional profiles and select the service professional that they believe best meets their specific needs. Consumers can also be matched to a service professional by way of 1800Contractor.com, an online directory of our network of service professionals that we own and operate. Consumers that visit this site are ultimately matched to a service professional by way of our Exact Match service or, if a match cannot be made through this service, by way of our Market Match service.through our services, consumers arethe consumer is under no obligation to work with home service professionals referred by ServiceMagic. In addition, if we are unable to match a consumer with service professionals from our network, we may provide the consumer with contact information concerning service professionals outside of our network.service-relatedservice‑related resources, which primarily includeincludes articles about home improvement, repair and maintenance, and related tools to assist consumers with the research, planning and management of their projects and general advice for working with servicehome services professionals.MarketingMarketing.the servicesthose of our member servicehome services professionals on their websites and we agree to pay them a fixed fee when visitors from their websites submit a valid service request through our website (on a cost-per-acquisition basis) or click through to our website (on a cost-per-click basis). We also market our services to consumers through the purchase of paid listings displayed in yellow page directories, portals and contextual home improvement related sites and, to a lesser extent, through traditional offline advertising. We market our services to servicehome services professionals through our sales force, which obtains information concerning servicehome services professionals through a variety of sources. We also promote online enrollment in our network through search engine marketing, relationships with trade associations and affiliate marketing relationships.RevenueRevenue.ServiceMagic'sHomeAdvisor's revenue is derived from fees paid by members of our network of servicehome services professionals for consumer leads,matches with consumers made by HomeAdvisor, regardless of whether the service professional that receives the lead ultimately provides the requested service, as well as from one-time fees charged upon the enrollment and activation of new servicehome services professionals in our network. Lead feesFees for matches vary based upon the service requested and where the service is provided, with fees for leads generated through ourprovided.Exact Match service being greater than those for leads generated through ourMarket Match service.Competition with other service-related lead generation services, primarily home service-related lead generation services, as well as with internet search engines and directories and with other forms of local advertising, including radio, direct marketing campaigns, yellow pages, newspapers and other offline directories.directories, as well as with home services-related lead generation services. We also compete with local and national retailers of home improvement products that•servicehome services professionals and the quality of the services provided by these professionals;•consumer leadsservice requests that convert into revenue for our network of servicehome services professionals in a cost-effective manner; and•servicehome services professionals, as well as our ability to introduce new products and services that resonate with consumers and home services professionals; andprofessionals.providers based in the United States. Urbanspoon.com publishes content focused exclusively on restaurants and dining in North America, the United Kingdom and Australia. CityGrid also offers related mobile applications in the case of Citysearch.com and Urbanspoon.com.
Revenue. CityGrid Media revenue is derived from the sale, both through a direct sales force and reseller relationships, of local and national online advertising distributed through the CityGrid advertising network. In the case of direct sales, the advertising is primarily pay-for-performance based, pursuant to which local businesses pay CityGrid each time an advertisement is viewed or each time a user calls a metered number. In the case of resellers, a variety of advertising models are utilized.& Other&segment also includes News_Beast and DailyBurn. News_Beast is an online media company that currently produces the digital version of Newsweek magazine and operates TheDailyBeast.com, a website dedicated to news, commentary, culture and entertainment that curates and publishes existing and original online content from its own roster of contributors. DailyBurn is a health and fitness property that provides streaming fitness and workout videos across a variety of platforms, including iPhone, iPad and Android.Electus, Connected Ventures, Vimeo, Pronto, Shoebuy and Hatch Labs. ElectusTutor. Shoebuy is a multimedia company that seeks to enable media content creators to engage with advertising and technology partners at the inception of the creative process and partner on the finished product across a global and multi-platform distribution model. Connected Ventures is a new media network and development company that operates: CollegeHumor Media, a leading online entertainment company targeting a core audience of young males ages eighteen to twenty-four through CollegeHumor.com and other websites; and Notional, a production company specializing in the creation of video content for all distribution platforms. Vimeo is a website on which users can upload, share and view video. Pronto owns and operates Pronto.com, a leading comparison search engine, through which consumers can search and compare prices for a wide range of merchandise offered by online retailers. Shoebuy, a leading internet retailer of footwear and related apparel and accessories,accessories. Shoebuy generally passes purchases made by customers through its various websites on to the relevant vendors for fulfillment and shipping. Hatch LabsTutor is a business focused on prototyping and launching mobile products and services. Through January 2011, we owned and operated The Daily Beast,an online tutoring solution which was merged with print magazine Newsweek to form a joint venture on January 31, 2011. The Daily Beast is a website dedicated to news and commentary, culture and entertainment that curates and provides existing online content and new works from its own roster of contributors to users free of charge. In the case of our Media &acquired in December 2012. Our Other segment revenue is derived primarily from merchandise sales online advertising, media production and subscriptions.2011,2012, IAC and its subsidiaries employed approximately 3,2004,200 full-time employees. IAC believes that it generally has good employee relationships, including relationships with employees represented by unions or other similar organizations.www.iac.com/Investors/amend-and-restated.http://ir.iac.com/corporate-governance-document.cfm?DocumentID=11372. This code of ethics complies with Item 406 of SEC Regulation S-K and the rules of The Nasdaq Stock Market. Any changes to the code of ethics that affect the provisions required by Item 406 of Regulation S-K, and any waivers of such provisions of the code of ethics for IAC's executive officers, senior financial officers or directors, will also be disclosed on IAC's website."forward-looking statements"“forward‑looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "anticipates," "estimates," "expects," "intends," "plans"“anticipates,” “estimates,” “expects,” “intends,” “plans” and "believes,"“believes,” among others, generally identify forward-lookingforward‑looking statements. These forward-lookingforward‑looking statements include, among others, statements relating to: IAC's future financial performance, IAC's business prospects and strategy, anticipated trends and prospects in the industries in which IAC's businesses operate and other similar matters. These forward-lookingforward‑looking statements are based on IAC management's current expectations and assumptions about future events as of the date of this annual report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.forward-lookingforward‑looking statements for a variety of reasons, including, among others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect IAC's business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-lookingforward‑looking statements discussed in this annual report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-lookingforward‑looking statements, which only reflect the views of IAC management as of the date of this annual report. IAC does not undertake to update these forward-lookingforward‑looking statements.January 27, 2012,February 1, 2013, Mr. Diller owned 5,789,499 shares of IAC Class B common stock representing 100% of IAC's outstanding Class B common stock and approximately 43.4%42.5% of the total outstanding voting power of IAC. As of this date, Mr. Diller also owned 705,734780,734 vested options to purchase IAC common stock and 300,000225,000 unvested options to purchase IAC common stock.twelve-monthtwelve‑month period. While Mr. Diller may not currently exercise this right, no assurances can be given that this right will not become exercisable in the future, and if so, that Mr. Diller will consent to any of the limited matters at such time, in which case IAC would not be able to engage in transactions or take actions covered by this consent right.paid listing supplyservices agreement with Google that expires on March 31, 2016. Pursuant to this agreement, we display and syndicate paid listings provided by Google in response to search queries generated by users of our search services that contain keywords selected and purchased by advertisers through Google.Search & Applications properties. In exchange for making our search traffic available to Google, we receive a share of the revenue generated by the paid listings supplied to us, as well as certain other search-relatedsearch‑related services.search servicesSearch & Applications properties and these judgments factor into the amount of revenue we receive. Changes to Google's paid listings network efficiency, its judgment about the relative attractiveness of clicks on paid listings from our search servicesSearch & Applications properties or the parameters applicable to the display of paid listings 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 decisions made by Google.paid listing supplyservices agreement with Google requires that we comply with certain guidelines promulgated by Google for the use of its brands and services, including the manner in which Google's paid listings are displayed withwithin search results, and that we establish guidelines to govern certain activities of third parties to whom we syndicate paid listings, including the manner in which these parties drive search traffic to their websites and display paid listings. Subject to certain limitations, Google may unilaterally update its policies and guidelines, which could in turn require modifications to, or prohibit and/or render obsolete certain of, our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results of operations. Noncompliance with Google's guidelines by us or the third parties to whom we syndicate paid listings or through which we secure distribution arrangements for our toolbars could, if not cured, result in Google's suspension of some or all of its services to our websites or the websites of our third party partners, the imposition of additional restrictions on our ability to syndicate paid listings or the termination of the paid listing supplyservices agreement by Google.paid listing supplyservices agreement by Google, the curtailment of IAC's rights under the agreement (whether pursuant to the terms thereof or otherwise) or the failure of Google to perform its obligations under the agreement would have an adverse effect on our business, financial condition and results of operations. In addition, our inability to obtain a renewal of our agreement with Google with substantially comparable economic and other terms upon the expiration of our current agreement could have an adverse effect 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 provider were found, the economic and other terms of the agreement andtargeting)targeting and/or utilize mobile devices), the continued growth in commercial use of the internet (particularly abroad), the extent to which web browsers, software programs and/or software programsother applications that limit or prevent advertising from being displayed become commonplace and the extent to which the industry is able to effectively manage click fraud. Any lack of growth in the marketconvert visitors into usersdistribute our products and customers.MindsparkSearch & Applications search boxes, toolbars and search boxesother applications to users through third parties. Most of these agreements are either non-exclusivenon‑exclusive and short-termshort‑term in nature or, in the case of long-termlong‑term or exclusive agreements, are terminable by either party in certain specified circumstances. In addition, a few of these agreementsMindspark's revenue.the revenue generated by our B2B applications. Our inability to enter into new (or renew existing) agreements to distribute Mindsparkour search boxes, toolbars and search boxesother applications through third parties for any reason would result in decreases in traffic, queries and advertising revenues,revenue, which could have an adverse effect on our business, financial condition and results of operations.onwith our online personals websites or pay a percentage of revenue we receive from such visitors who pay us subscription fees. These arrangements are generally not exclusive, are short-termshort‑term in nature and are generally terminable by either party given notice. If existing arrangements with third parties are terminated (or are not renewed upon their expiration) and we fail to replace this traffic and related revenues, or if we are unable to enter into new arrangements with existing and/or new third parties in response to industry trends, our business, financial condition and results of operations could be adversely affected.ServiceMagicHomeAdvisor business, our ability to drive traffic depends, in part, on the nature and number of servicehome services professionals who are members of our network. While these home services professionals are required to agree that they will operate in accordance with our terms and conditions, we do not enter into long-termlong‑term agreements with them. In addition, a significant number of our servicehome services professionals are sole proprietorships and small businesses, which are particularly sensitive to adverse economic conditions, such as constrained liquidity and decreases in consumer spending. As a result, our network of servicehome services professionals experiences turnover from time to time. This turnover, if significant or recurring over a prolonged period, could result in a decrease in traffic to ServiceMagic.comHomeAdvisor.com and increased costs, all of which could adversely affect our business, financial condition and results of operations.may notbelieve that our success depends, in part, upon our continuing ability to maintain and enhance these brands. Our brands could be ablenegatively impacted by a number of factors, including product and service quality concerns, consumer complaints, actions brought by consumers, governmental or regulatory authorities and related media coverage and data protection and security breaches. Moreover, the failure to market our products and services successfully (or in a cost-effective manner), the inability to develop and introduce products and services that resonate with consumers and/or the inability to adapt quickly enough (and/or in a cost effective manner) to changing industry standards. Theevolving changes in the internet and related technologies, applications and devices, are characterized by evolving industry standards, coupled with frequentcould adversely impact our various brands, and in turn, our business, financial condition and results of operations.new producttechnologies and service introductionsapplications continue to evolve and enhancements. we may not be able to adapt to these changes.productproducts and service introductions and enhancementsservices in response to the evolving industry standardstrends and technologies of the internet, as well as the identification of new business opportunities in this dynamic environment, requires significant time and resources and weresources. We may not be able to adapt quickly enough (and/or in a cost-effective manner) to these changes, or appropriately time the introduction of new products services and enhancementsservices to the market or identify new business opportunities in a timely manner. Also, these changes could require us to modify related infrastructures and our failure to do so could render our existing websites, applications, services and proprietary technologies obsolete. Our failure to respond to any of these changes appropriately (and/or in a cost effective manner) could adversely affect our business, financial condition and results of operations.search services,Applications, third parties have introduced (and continue to introduce) new or updated technologies, applications and policies that may interfere with the ability of users to access or utilize these servicesApplications generally or otherwise make users less likely to use these services (such as through the introduction of features and/or processes that makedisproportionately and adversely impact the ability of consumers to access and use of these services cumbersome relative to those of our competitors). For example, third parties continue to introduce technologies and applications (including new and enhanced web browsers)browsers and operating systems) that may limit or prevent userscertain types of applications from downloading toolbars generallybeing installed and/or have features and policies that significantly lessen the likelihood that users will downloadinstall our toolbars andapplications or that previously downloaded toolbarsinstalled applications will remain in active use. In addition, there are technologies and applications that interfere with the functionality of (or settings changes made by) our Applications. For example, there are technologies and applications that interfere with search boxes embedded within our toolbars and the maintenance of home page and otherweb browser search settings previously selected by users. Third parties have also introduced technologies and applications that are either not compatible with (or otherwise interfere with) the "search assistant" function embedded within our toolbars, pursuant to which our toolbars generate search results for users that receive "DNS," "404" and other errors in response to search queries entered into search boxes embeddedwithintoolbars or the address bar of their web browsers.users. These technologies, applications and applicationspolicies adversely impact our ability to generate search queries through our toolbars,Applications, which in turn adversely impacts our revenues. Technologies have also been introduced that can block the display of advertisements on web pages and that provide users with the ability to opt out of our advertising products. Our failure to successfully modify our toolbars and other search servicesApplications in a cost-effective manner in response to the introduction and adoption of these new technologies and applications could adversely affect our business, financial condition and results of operations. Furthermore, the continued widespread adoptionnew internetour products and telecommunications technologiesservices. While most of our users currently access our products and devices or other technological changes could require us to modify or adapt our services or infrastructures and our failure to do so could render our existing websites, services and proprietary technologies obsolete, which could adversely affect our business, financial condition and resultsthrough personal computers, users of operations. For example, user and(and usage volumes onon) mobile devices, including tablets, continue to increase relative to those of personal computers. While we have developed mobile versions of certain of our products and services and intend to continue to do so in the future, we have limited experience with thesemobile applications, both in terms of development and theymonetization. Moreover, mobile versions of our products and services that we develop may not be compelling to users. In addition,users and/advertisers. Even if we are able to develop mobile applications that resonate with users and advertisers, the success of these applications is dependent on their interoperability with various mobile operating systems, technologies, networks and standards that we do not control and any changes in any of these things that compromise the case of certain types of mobile devices, their lower resolution,quality or functionality display limitations and memory could make the use of our variousproducts and services through these devices difficult or impossible. Lastly, existing agreements acrosscould adversely impact usage of our business may need to be amended to address the provision of ourproducts and services on mobile devices and, in turn, our ability to attract advertisers. Lastly, as the adoption of mobile devices becomes more widespread, the usage of certain of our products and services may not translate to mobile devices, which shift could adversely affect our business, financial condition and results of operations if we are unable to replace the counterpartiesrelated revenues.unwillinginterpreted in a manner that would extend their reach to do.WeEven if we identify what we believe to be suitable acquisition candidates, we may experience operational and financial risks in connection with acquisitions. Toacquisitions, and to the extent that we continue to grow through acquisitions, we will need to:•••acquisition-relatedacquisition‑related strain on the management, operations and financial resources of IAC and its businesses and/or acquired businesses.U.S.United States. Moreover, we must continue to successfully tailor our products and services to the unique customs and cultures of theseforeign jurisdictions, which can be difficult and costly and the failure to do so could slow our international growth and adversely impact our business, financial condition and results of operations.value-addedvalue‑added and other tax laws and consumer protection laws, are applicable to businesses generally and others are unique to the typevarious types of businesses in which we are engaged. Many of these laws were adopted prior to the advent of the internet and related technologies and, as a result, do not contemplate or address the unique issues of the internetrelatingincluding the Communications Decency Act, or CDA, and the Digital Millennium Copyright Act, or DMCA, limit our liability for posting or linking to third party content. For example, the liabilityDMCA generally protects online service providers from claims of providerscopyright infringement based on use of online servicesthird party content, so long as certain statutory requirements are currently unsettled both withinsatisfied. However, the scope and applicability of the DMCA are subject to judicial interpretation and, as such, remain uncertain, and the U.S. and abroad. ClaimsCongress may enact legislation limiting the protections afforded by the DMCA to online service providers. Moreover, similar protections may not exist in other jurisdictions in which our various businesses operate. As a result, claims could be threatened and filed under both U.S. and foreign law forlaws based upon use of third party content asserting, among other things, defamation, libel, slander, invasion of privacy and other tort claims, unlawful activity,or right or publicity, copyright and trademark infringement or other theories based on the nature and content of the materials searched and related ads, or content generated by us and our users.trademark infringement. In addition, the Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, our liability for listing or linking to third party websites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. Those of our businesses that mention or otherwise incorporate copyrighted material into the content they produce also rely on fair use principles, which allow limited use of copyrighted materials without having to obtain the consent of the copyright holder, provided we satisfy certain legal criteria. Also, the Children's Online Privacy Protection Act restricts the distribution of materials considered harmful to children and imposes additional restrictions on the ability of online services to collect information from minors. In the area of data protection, many states have passed laws requiring notification to users when there is a security breach for personal data. We face similar risks and costs as our products, services and content are offered in international markets and may be subject to additional regulations.consumers.our customers. Specifically, in the case of tax laws, positions that we have taken or will take are subject to interpretation by the relevant taxing authorities and whileauthorities. While we believe that the positions we have taken to date comply with applicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position, and if so, that such positions will not adversely affect us. Any events of this nature could adversely affect our business, financial condition and results of operations.The processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights. We receive, transmit and store a large volume of personally identifiable information and other user data (including personal credit card data) in connection with the processing of search queries, the provision of online services, transactions with users and customers and advertising on our websites. The sharing, use, disclosure and protection of this information are governed by the respective privacy and data security policies maintained by our various businesses. Moreover, there are federal, state and international laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction. There are currently pending several bills in the U.S. Congress, which if passed could result in more onerous requirements regarding the manner in which certain personally identifiable information and other user data will need to be stored and managed. Additionally, the U.S. Federal Trade Commission released a staff report in December 2010 in which it proposed a new framework for addressing commercial use of consumer data. Similarly, privacy laws and directives abroad, particularly in Europe, are still developing and could likewise result in onerous requirements. We could be adversely affected if legislation or regulations are expanded to require changes in the practices and/or privacy policies of our various businesses, which could be costly to implement, or if governing jurisdictions interpret or implement their legislation or regulations in ways that otherwise negatively affect our business, financial condition and results of operations. As privacy and data protection have become more sensitive issues, we may also become exposed to potential liabilities as a result of differing views on the privacy of consumer and other user data collected by our businesses. Also, we cannot guarantee that our security measures will prevent security breaches. In the case of security breaches involving personal credit card data, credit card companiescould curtail our ability to transact payments. The failure of any of our businesses, or their various third party vendors and service providers, to comply with applicable privacy policies or federal, state or similar international laws and regulations or any compromise of security that results in the unauthorized release of personally identifiable information or other user data could adversely affect our business, financial condition and results of operations.our Search,(Search & Applications, Match and ServiceMagic reporting segments,Local) rely heavily upon their trademarks (primarily Ask.com and Dictionary.com, our various toolbar brands, Match.com, OkCupid.com, Meetic.com and ServiceMagic.comHomeAdvisor.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 identify their products and services and renew related trademarks upon their expiration,trademark registrations as required, they will continue to have relatedenjoy trademark protectionsprotection indefinitely under current trademark laws, rules and regulations.heavily upon trade secrets, primarilyincluding algorithms for the generation, organization and presentation of search algorithms through which organic search results are generated.results. To a lesser extent, these businesses also rely upon patented and patent-pendingpatent‑pending proprietary technologies and processes, primarily those relating to search-relatedsearch‑related products and services, with expiration dates for patented technologies ranging from 2017 to 2027, and copyrighted material, primarily emoticons, characters and other content that is incorporated into, and used in connection with the marketing of, toolbars generally.patent-pendingpatent‑pending proprietary technologies relating to matching process systems and related features, products and services. Our ServiceMagic segmentHomeAdvisor also relies heavily upon trade secrets, primarily the matching algorithm through which members of its network of local servicehome services professionals are matched with consumers, as well as related patented proprietary technologies that expire in 2020.precautions,measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise or third parties could copy or otherwise obtain and use our intellectual property without authorization. The occurrence of any of these events could result in the erosion of our brand namesbrands 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 effectivelyinfrastructureinfrastructures and those of third parties. System interruptioninterruptions and the lack of integration and redundancy in our and third party information systems may affect our businesses.infrastructureinfrastructures must perform well on a consistent basis. From time to time, we may experience occasional system interruptions that make some or all of our systems or data unavailable or that prevent us from providing products and services, which could adversely affect our business. Moreover, as traffic to our various websites, applications and online properties increases and the number of new (and presumably more complex) products and services that we introduce continues to grow, we will need to upgrade our systems, infrastructureinfrastructures and technologies generally to facilitate this growth. If we do not do so, users, customers and third parties with whom we do business may not be able to access our products and services on an intermittent or prolonged basis, andwhich could adversely affect the quality of their experiences could be adversely affected.experiences. In addition, we could experience inefficiencies and/or operational failures in connection with these efforts, which could have the same effect. Moreover, even if we do not encounter any inefficiencies and/or operational failures in connection with these efforts, third parties with whom we do business may not make the changes to their systems, infrastructureinfrastructures and technologytechnologies needed to access our products and services on a timely basis, if at all. The occurrence of any of these events could adversely affect our business, financial condition and results of operations.the actions oftaken by hackers or otherwise), fire, power loss, telecommunications failure, natural disasters, acts of war or terrorism, acts of God and other similar events or disruptions may damage or interrupt computer, data, broadband or other communications systems at any time. Any event of this nature could cause system interruption,interruptions, delays and loss of critical data, and could prevent us from providing services to users and customers. While we have backup systems for certain aspects of our operations, our systems are not fully redundant and disaster recovery planning is not sufficient for all eventualities. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.or(or consent fromfrom) users, resulting in a negative experience that users may associate with us. These disruptive programs and applications may be difficult or impossible to uninstall or disable, may reinstall themselves and may circumvent efforts to block or remove them.toolbarsapplications through which we provide search services are also subject to attack by viruses, worms and other malicious software programs, which could jeopardize the security of information stored in users' computercomputers or in our systems and networks. No assurances can be given that our efforts to combat these malicious applications will be successful and/or that our products and services will not have (or will not be perceived to have) vulnerabilities in this regard.incidentincidental to the registrant's business, and advise that proceedings ordinarily need not be described if they primarily involve claims for damages claims for amounts (exclusive of interest and costs) not exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of Company management, none of the pending litigation matters which the Company and its subsidiaries are defending including those described below, involves or is likely to involve amounts of that magnitude. The litigationmagnitude, nor do such matters described below involve issues or claims that may be of particular interest to the Company's shareholders, regardless of whether any of these matters may be material to the financial position or operations of the Company based upon the standard set forth in the SEC's rules.Litigation Arising Out of the Company's Sale of PRC In 2006, the Company sold its call-center business, PRC, after conducting an auction process managed by an investment bank. In August 2008, various affiliates of the private-equity firm that won the auction and bought PRC (collectively, "Diamond Castle") sued the Company for breach of contract in New York state court.See Diamond Castle Partners IV PRC, L.P. et al. v. IAC/InterActiveCorp, No. 602427/08 (Supreme Court, New York County). The complaint alleges that the Company breached certain representations, warranties, and covenants in the purchase agreement through materially false, misleading, and incomplete statements to Diamond Castle concerning a PRC services contract that
shareholders.allegedly became unprofitable and later caused PRC to declare bankruptcy. The complaint (as amended in June 2010) seeks damages of up to $138.5 million, Diamond Castle's total investment in PRC. Discovery commenced in 2010. In January 2011, the Company, alleging that during the auction process Diamond Castle had secretly obtained extensive confidential information from PRC's then-CEO, filed counterclaims and third-party claims against Diamond Castle and several of its principals for fraud, aiding and abetting breach of fiduciary duty, and breach of the non-disclosure agreement governing the auction. In January 2012, IAC amended its pleading to add claims for fraud and breach of fiduciary duty against PRC's former CEO. The Company believes that Diamond Castle's claims in this lawsuit are without merit and will continue to defend against them, and to prosecute its own claims, vigorously. High Low High Low Year Ended December 31, 2012 Fourth Quarter $ 55.00 $ 42.20 Third Quarter 54.01 45.45 Second Quarter 50.47 44.00 First Quarter 50.67 41.37 $ 43.89 $ 36.13 $ 43.89 $ 36.13 43.80 34.12 43.80 34.12 38.37 30.11 38.37 30.11 32.13 28.05 32.13 28.05 $ 30.96 $ 25.08 27.09 21.47 24.11 20.25 24.47 20.01 24, 2012,26, 2013, there were approximately 1,9001,800 holders of record of the Company's common stock and the closing price of IAC common stock on NASDAQ was $45.19.$40.93. Because the substantial majority of the outstanding shares of IAC common stock are held by brokers and other institutions on behalf of shareholders, IAC is not able to estimate the total number of beneficial shareholders represented by these record holders. As of February 24, 2012,26, 2013, there was one holder of record of the Company's Class B common stock.was paid on December 1, 2011 to stockholderswere $0.24 per share of record as of the close of business on November 15, 2011. common and Class B common stock outstanding.2012,2013, IAC's Board of Directors declared a quarterly cash dividend of $0.12$0.24 per share of common and Class B common stock outstanding, which is payable on March 1, 20122013 to stockholders of record as of the close of business on February 15, 2012.2013. While we currently expect that comparable cash dividends will continue to be paid in the near future, any future declarations of dividends are subject to the determination of IAC's Board of Directors.2011,2012, the Company did not issue or sell any shares of its common stock or other equity securities pursuant to unregistered transactions.2011:2012:Period October 2012 — — — 9,497,676 November 2012 350,000 $ 46.34 350,000 9,147,676 December 2012 6,060,070 $ 45.66 6,060,070 3,087,606 Total 6,410,070 $ 45.69 6,410,070 3,087,606 (a)
Total
Number of Shares
Purchased (b)
Average
Price Paid
Per Share(1) (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(3) — — — 11,440,576 923,796 $ 40.68 923,796 10,516,780 1,892,948 $ 41.95 1,892,948 8,623,832 2,816,744 $ 41.55 2,816,744 8,623,832 (1) Reflects repurchases made pursuant to a repurchase authorization previously announced in May 2012. (2) Represents the total number of shares of common stock that remained available for repurchase as of December 31, 2012 pursuant to the May 2012 repurchase authorization. IAC may purchase shares pursuant to this repurchase authorization over an indefinite period of time in the open market and/or privately negotiated transactions, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook. (1)Reflects the average price paid per share of IAC common stock.(2)Reflects repurchases made pursuant to a repurchase authorization previously announced in July 2011.(3)Represents the total number of shares of common stock that remained available for repurchase as of December 31, 2011 pursuant to the July 2011 repurchase authorization. IAC may purchase shares pursuant to this repurchase authorization over an indefinite period of time, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.20112012 should be read in conjunction with the consolidated financial statements and accompanying notes included herein. Year Ended December 31, 2012 2011 2010 2009 2008 (Dollars in thousands, except per share data) Revenue $ 2,800,933 $ 2,059,444 $ 1,636,815 $ 1,346,695 $ 1,410,078 Earnings (loss) from continuing operations 169,847 175,569 (9,393 ) (956,473 ) 141,935 Earnings (loss) per common share from continuing operations attributable to IAC shareholders: Basic $ 1.95 $ 2.05 $ (0.04 ) $ (6.89 ) $ 1.07 Diluted 1.81 1.89 (0.04 ) (6.89 ) 1.04 Cash dividends declared per share $ 0.72 $ 0.12 $ — $ — $ — Balance Sheet Data at December 31: Total assets $ 3,805,828 $ 3,409,865 $ 3,329,079 $ 3,913,597 $ 5,080,034 Long-term debt, including current maturities 595,844 95,844 95,844 95,844 95,844 (1) We recognized items that affected the comparability of results for the years 2012, 2011 and 2010, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations." Year Ended December 31, 2011 2010 2009 2008 2007 (Dollars in thousands, except per share data) $ 2,059,444 $ 1,636,815 $ 1,346,695 $ 1,410,078 $ 1,301,969 175,569 (9,393 ) (956,473 ) 141,935 1,051 2.05 (0.04 ) (6.89 ) 1.07 0.04 1.89 (0.04 ) (6.89 ) 1.04 0.04 0.12 — — — — 3,409,865 3,329,079 3,913,597 5,080,034 12,503,223 95,844 95,844 95,844 95,844 834,542 (1)We recognized items that affected the comparability of results for the years 2011, 2010 and 2009, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations."operatesis a leading media and internet company comprised of more than 50 leading150 brands and diversified Internet businessesproducts, including Ask.com, About.com, Match.com, HomeAdvisor.com and Vimeo.com. Focused in the areas of search, applications, online dating, local and media, IAC's family of websites is one of largest in the world, with more than a billion monthly visits across 30 countries... our mission is to harness the power of interactivity to make daily life easier 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; as well as investments in unconsolidated affiliates.Results30 Set forth below are the contributions made by our various segments and corporate operations to consolidated revenue, operating income (loss) and Operating Income Before Amortization (as defined in IAC's Principles of Financial Reporting) for the years ended December 31, 2011, 2010 and 2009. Years Ended December 31, 2011 Growth 2010 Growth 2009 (Dollars in thousands) $ 1,093,863 31 % $ 837,134 23 % $ 681,781 518,027 29 % 400,723 17 % 342,598 205,079 13 % 181,423 16 % 155,813 243,814 11 % 219,896 30 % 168,787 (1,339 ) 43 % (2,361 ) (3 )% (2,284 ) $ 2,059,444 26 % $ 1,636,815 22 % $ 1,346,695 Years Ended December 31, 2011 Growth 2010 Growth 2009 (Dollars in thousands) $ 201,695 79 % $ 112,867 NM $ (980,231 ) 137,555 19 % 115,367 36 % 84,655 21,380 30 % 16,448 23 % 13,383 (13,707 ) 71 % (47,539 ) (115 )% (22,061 ) (149,161 ) (1 )% (147,348 ) (10 )% (133,733 ) $ 197,762 297 % $ 49,795 NM $ (1,037,987 ) NM = not meaningful Years Ended December 31, 2011 Growth 2010 Growth 2009 (Dollars in thousands) $ 203,136 62 % $ 125,549 37 % $ 91,615 156,274 28 % 122,057 30 % 94,124 23,857 31 % 18,165 (15 )% 21,286 (12,073 ) (1 )% (12,009 ) 39 % (19,699 ) (62,787 ) 2 % (64,183 ) 2 % (65,465 ) $ 308,407 63 % $ 189,579 56 % $ 121,861 Refer to Note 15 to the consolidated financial statements for reconciliations by segment of Operating Income Before Amortization to operating income (loss).advertising, with most of thisadvertising. This revenue is primarily attributable to our paid listing supplyservices agreement with Google Inc. ("Google"). The revenue earned from our Match segment is derived primarily from subscription fees for its subscription-based online personals services andservices; Match also derives revenue from online advertising. ServiceMagic'sOur Local segment consists of HomeAdvisor (formerly ServiceMagic) and CityGrid Media. HomeAdvisor's revenue is derived from fees paid by members of its network of servicehome services professionals for consumer leads regardless of whether the service professional that receives the lead ultimately provides the requested service, as well as from one-time fees charged upon enrollment and activation of new servicehome services professionals in its network. CityGrid Media revenue is derived from online advertising. The revenue earned by theour Media &segment is derived from advertising, media production and subscription fees. The revenue earned by our Other segment is derived principally from merchandise sales, online advertising and content production. Our various businesses provide supplier partners with important customer acquisition channels and we believe that the ability of our supplier partners to reach a large qualified audience through our services is a significant benefit. While we aim to build and maintain strong relationships with our supplier partners, we may not succeed in these efforts and there is always the risk that certain supplier partners may not make their products and services available to us in the future.paid listing supplyservices agreement with Google, which expires on March 31, 2016. For the years ended December 31, 2012, 2011 2010 and 2009,2010, revenue earned from Google was $970.4$1.4 billion, $970.4 million $727.9 and $727.9 million and $561.9 million,, respectively. The majority of thisThis revenue was earned by the businesses comprising the Search & Applications segment.membership programs,subscriptions, allowing consumers to transact directly with us in a convenient manner. We have made, and expect to continue to make, substantial investments in online and offline advertising to build our brands and drive traffic to our websites and consumers and advertisers to our businesses.made to partners who distribute Mindspark'sour B2B customized browser-based applications, integrate our paid listings into their websites or direct traffic to our websites. We also pay to market and distribute our services on third party distribution channels, such as internet portals and search engines. In addition, some of our 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, which compete with those we offer.segmentsmarkets in which IAC's businesses operate increases.2010 and 20092010Consolidated ResultsRevenue Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $2,059,444 $422,629 26% $1,636,815 $290,120 22% $1,346,695 Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Search & Applications $ 1,465,795 $ 425,288 41 % $ 1,040,507 $ 235,223 29 % $ 805,284 Match 713,449 195,422 38 % 518,027 117,304 29 % 400,723 Local 322,627 19,209 6 % 303,418 39,669 15 % 263,749 Media 164,824 94,660 135 % 70,164 20,472 41 % 49,692 Other 134,555 6,490 5 % 128,065 9,316 8 % 118,749 Inter-segment elimination (317 ) 420 57 % (737 ) 645 47 % (1,382 ) Total $ 2,800,933 $ 741,489 36 % $ 2,059,444 $ 422,629 26 % $ 1,636,815 Revenue infrom 2010 as a result of increases of $256.7 million from Search, $117.3 million from Match, $23.9 million from Media & Other and $23.7 million from ServiceMagic. The increase from Search reflects41% to $1.5 billion, reflecting strong growth from Mindspark's B2Bboth Applications (which includes our direct to consumer downloadable applications business (B2C) and our partnership operations and destination websites(B2B), as well as ourMindspark's B2C operationsexisting and CityGrid Media.new partners and products. Websites revenue grew 42% to $710.4 million, reflecting 49% query growth driven primarily by increased marketing and site optimization. The increasegrowth in Websites revenue reflects the contribution from The About Group, acquired September 24, 2012, which had revenue of $30.1 million.reflectsrevenue increased 38% to $713.4 million benefiting from the full year contribution of Meetic, which was consolidated beginning September 1, 2011, and growth from itswithin our Core operations, (consistingpartially offset by a decrease in Developing revenue. Core revenue, which consists of Match.com in the U.S., Chemistry and People Media, increased 10% to $439.9 million driven by an increase in subscribers. Revenue at Meetic in 2012 and Chemistry)2011 of $206.7 million and $46.1 million, respectively, was negatively impacted by the write-off of $5.2 million and $32.6 million, respectively, of deferred revenue in connection with its acquisition. Developing revenue, which includes OkCupid, DateHookup and Match's international operations, excluding Meetic, decreased 9% to $66.9 million, despite strong growth from OkCupid, due to lower subscription revenue from our Latin America venture and Singlesnet. Excluding Meetic in both years, revenue grew 7% to $506.8 million.impactprior year, partially offset by lower subscription revenue from Singlesnet. Revenue at Meetic of $46.1 million was negatively impacted by the write-off of $32.6 million of deferred revenue in connection with its acquisition. Excluding Meetic, consolidated beginning September 1, 2011,revenue grew 18% to $471.9 million. Revenue in the prior year was negatively impacted by the write-off of $4.1 million in deferred revenue associated with the Singlesnet acquisition and OkCupid, acquired January 20, 2011. Thethe formation of our venture with Meetic in Latin America in early 2010.from Media & Otherin accepted service requests, which was driven, in part, by a 9% increase in service requests. HomeAdvisor domestic growth also reflects an increase in revenue from website design and hosting services. HomeAdvisor international revenue growth reflects a 43% increase in accepted service requests, which was driven, in part, by a 44% increase in service requests and a 15% increase in home services professionals. CityGrid Media revenue increased primarily due to growth from existing resellers and increased display advertising. Shoebuy, Electus, Notional and Vimeo, partially offset by a decrease in revenue from The Daily Beast, which following the formation of The Newsweek/Daily Beast Companythe joint venture with Harman Newsweek on January 31, 2011, has beenwas accounted for as an equity method investment a decline at Pronto and the inclusion in 2010beginning February 1, 2011. Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $761,244 $167,428 28% $593,816 $163,967 38% $429,849 37% 68 bp 36% 436 bp 32% bp = basis points Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Cost of revenue $992,470 $231,226 30% $761,244 $167,428 28% $593,816 As a percentage of revenue 35% 37% 36% Mindspark'sour B2B customized browser-based applications, integrate our paid listings into their websites or direct traffic to our websites. These payments include amounts based on revenue share and other arrangements. Cost of revenue also includes Shoebuy's cost of products sold and shipping and handling costs, production costs related to digital media produced by Electus and other businesses within our Media segment, content acquisition costs, expenses associated with the operation of the Company's data centers, including compensation and other employee-related costs (includingcontentincreased production costs at Electus related to the increase in its revenue. The increase from Match is due to Meetic, which was included for only part of the prior year, partially offset by a decrease in customer acquisition costs.$129.4$119.9 million from Search $23.3& Applications, $14.4 million from Media, & Other and$13.2 million from Local, $9.8 million from Match.Match and $9.5 million from Other. The increase from Search & Applications was primarily due to an increase of $115.3$111.2 million in traffic acquisition costs related to the increase in revenue. As a percentage of revenue, traffic acquisition costs at Search & Applications increased over the prior year period due to an increase in the proportion of revenue from our B2B customized browser-basedbrowser based applications and other arrangements with third parties who direct traffic to our websites. Cost of revenue from Media & Other increased primarily due to an increase of $7.7 million in production costs at Electus related to the cost of products sold at Shoebuy resulting from increased sales.increase in its revenue. Also contributing to the increase from Media & Other are increases from Electus, Vimeo and Notional, partially offset by a decrease from The Daily Beast, which has beenwas accounted for as an equity method investment since January 31,beginning February 1, 2011 as described above.above in the Revenue discussion. Cost of revenue from Local increased primarily due to an increase in traffic acquisition costs at CityGrid Media. The increase from Match is primarily due to the acquisition of Meetic.in 2010from Other increased from 2009 primarily due to increases of $121.6 million from Search, $27.7 million from Media & Other and $10.3 million from Match. The increase from Search was primarily due to an increase of $108.5 million in traffic acquisition costs related to an increase in revenue. As a percentage of revenue, traffic acquisition costs increased over the prior year due to an increase in the proportion of revenue from customized browser-based applications and other arrangements with third parties who direct traffic to our websites, as well as a shift in partner mix to partners carrying higher traffic acquisition costs. Cost of revenue from Media & Other increased due to Notional, which was not in the full prior year period, The Daily Beast and an increase of $6.0 million in the cost of products sold at Shoebuy due toresulting from increased sales. The increase from Match was primarily due to the acquisitions of People Media and Singlesnet and the formation of the Latin America venture, partially offset by the sale of Match Europe to Meetic. Years Ended December 31, Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) (Dollars in thousands) $614,174 $121,968 25% $492,206 $28,767 6% $463,439 $898,761 $284,587 46% $614,174 $121,968 25% $492,206 30% (25) bp 30% (434) bp 34% 32% 30% 30% Mindspark'sour B2C downloadable applications, and offline marketing, principallywhich is primarily television advertising.radio advertising.$63.7$66.8 million from Search & Applications and $49.6 million from Match and $10.3 million from ServiceMagic.Match. The increase from Search & Applications is due to an increase of $68.6$66.2 million in advertising and promotional expenditures due to increased online marketing related to its destination websitesAsk.com and new product launches at Mindspark since the year ago period, partially offset by a decrease in bad debt expense at CityGrid Media.B2C downloadable applications. Selling and marketing expense at Match increased primarily due to the acquisition of Meetic and increases in offline and online marketing spend associated with the OurTime.com website and an advertising agreement entered into during the second quarter of 2010 with Yahoo! Inc. ("Yahoo"). The increase from ServiceMagic is primarily due to an increase of $10.8 million in advertising and promotional expenditures associated with online marketing.Table of Contents Selling and marketing expense in 2010 increased from 2009 primarily due to increases of $21.0 million from ServiceMagic, $15.1 million from Match and $7.0 million from Media & Other, partially offset by a decrease of $13.4 million from Search. The increase from ServiceMagic is due to increases of $14.0 million and $7.0 million in marketing and compensation and other employee-related costs, respectively. The increase in compensation and other employee-related costs from ServiceMagic is primarily due to the expansion of its sales force. The increase from Match is primarily due to an increase of $13.3 million in advertising and promotional expenditures related primarily to an advertising agreement entered into during the second quarter of 2010 with Yahoo as well as the impact of the acquisitions of People Media and Singlesnet and the formation of the Latin America venture, partially offset by the sale of Match Europe to Meetic. Selling and marketing expense from Media & Other increased primarily due to higher online marketing costs at Pronto and advertising and promotional expenditures related to Vimeo's 2010 video festival. Partially offsetting these factors is a decrease from Search primarily due to lower advertising and promotional expenditures of $7.2 million, as 2009 included expenditures associated with the NASCAR partnership and an ad campaign to rebrand the Ask Jeeves UK website, as well as a decrease in compensation and other employee-related costs at CityGrid Media, due in part, to a decrease in average headcount. Years Ended December 31, Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) (Dollars in thousands) $328,728 $12,228 4% $316,500 $34,107 12% $282,393 $396,013 $67,285 20% $328,728 $12,228 4% $316,500 16% (337) bp 19% (163) bp 21% 14% 16% 19% $7.1$10.9 million from Search.Search & Applications. As a percentage of revenue, general and administrative expense in 2011 decreased from 2010 primarily due to operating expense leverage. The increase from Match resulted primarily from the acquisition of Meetic, as well as an increase in professional fees due, in part, to $4.0 million in transaction fees associated with the Meetic acquisition, and operating expenses from OkCupid, which was not in the prior year period.year. General and administrative expense from Search & Applications decreased primarily due to a decrease in compensation and other employee-related costs, lower professional fees, including a decrease in litigation related expenses, and the inclusion in 2010 of lease termination costs associated with the Ask.com restructuring, partially offset by an increase in compensation and other employee-related costs at Mindspark and CityGrid Media. As a percentage of revenue, general and administrative expense decreased from 2010 primarily due to operating expense leverage. General and administrative expense in 2010 increased from 2009 primarily due to increases of $12.4 million from corporate, $10.5 million from Media & Other, $5.6 million from ServiceMagic and $5.5 million from Search. General and administrative expense from corporate increased primarily due to an increase of $10.3 million in non-cash compensation expense and $5.3 million of transaction expenses in 2010 related to the exchange of substantially all of Liberty 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 of Class B common stock, which were valued at $364.2 million based on the closing price of IAC common stock on December 1, 2010, for Evite, Gifts.com and IAC Advertising Solutions and $217.9 million in cash (referred to herein as the "Liberty Exchange"). The increase in non-cash compensation expense is primarily related to an increase in expense attributable to awards granted subsequent to the second quarter of 2009, partially offset by awards having become fully vested. The increase from Media & Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Product development expense $101,869 $23,109 29% $78,760 $13,663 21% $65,097 As a percentage of revenue 4% 4% 4% Other is principally due to Electus and Notional, which were not in the full prior year period, as well as increased operating expenses associated with Vimeo, partially offset by the cost savings related to certain businesses that have been sold or shutdown. General and administrative expense at ServiceMagic increased primarily due to higher compensation and other employee-related costs. The increase from Search is primarily due to an increase in compensation and other employee-related costs at Mindspark and employee termination costs associated with the Ask.com restructuring that took place in the fourth quarter of 2010, partially offset by a decrease in litigation related expenses.Product development expense Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $78,760 $13,663 21% $65,097 $7,254 13% $57,843 4% (15) bp 4% (32) bp 4% 20112012 increased from 20102011 primarily due to increases of $7.7$12.6 million from Match, and $1.3$4.5 million from Search.Media and $4.2 million from Search & Applications. The increase from Match is primarily due to an increase in compensation and other employee-related costs due, in part, to recentan increase in headcount and Meetic, which was included for only part of the prior year. The increase from Media is primarily due to News_Beast, consolidated beginning June 1, 2012. The increase from Search & Applications is primarily due to the acquisition of The About Group on September 24, 2012. period, partially offset by lower compensation and other employee-related costs due, in part, to staff reductions that took place during the fourth quarter of 2010 associated with the Ask.com restructuring. Product development expense in 2010 increased from 2009 primarily due to increases of $3.3 million from Match and $2.3 million from Search. Contributing Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Depreciation $52,481 $(4,238) (7)% $56,719 $(7,178) (11)% $63,897 As a percentage of revenue 2% 3% 4% increase at Match is an increaseyear ended December 31, 2011compensation2012 decreased from 2011 resulting primarily from certain fixed assets becoming fully depreciated in 2011 and other employee-related costs driven by growththe write-off of $4.9 million in headcount related to recent acquisitions. The increase from Search is primarily due to the inclusion in 2010 of employee terminationcapitalized software costs associated with the Ask.com restructuring.Depreciation Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $56,719 $(7,178) (11)% $63,897 $2,506 4% $61,391 3% (115) bp 4% (65) bp 5% period, partially offset by the write-off of $4.9 million in capitalized software costs in the third quarter of 2011 associated with the exit from the Company's direct sponsored listings business. DepreciationYears Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Search & Applications $ 313,146 $ 108,166 53 % $ 204,980 $ 64,188 46 % $ 140,792 Match 225,765 69,491 44 % 156,274 34,217 28 % 122,057 Local 24,932 (3,352 ) (12 )% 28,284 17,613 165 % 10,671 Media (44,827 ) (28,982 ) (183 )% (15,845 ) 6,004 27 % (21,849 ) Other (6,095 ) (3,596 ) (144 )% (2,499 ) (4,590 ) NM 2,091 Corporate (67,957 ) (5,170 ) (8 )% (62,787 ) 1,396 2 % (64,183 ) Total $ 444,964 $ 136,557 44 % $ 308,407 $ 118,828 63 % $ 189,579 2010 increased from 2009 primarilydepreciation, partially offset by increases of $187.2 million in selling and marketing expense and $122.0 million in traffic acquisition costs. The decrease in depreciation is due to certain fixed assets becoming fully depreciated in 2011 and the write-off of certain$4.9 million in capitalized software costs associated with the exit of the Company's direct sponsored listings business in 2011. The increase in selling and marketing expense is driven primarily by increased online marketing expenditures related to Ask.com restructuring.and existing B2C downloadable applications. The increase in traffic acquisition costs is primarily due to increased revenue from our B2B operations.Operating Income Before Amortization Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $308,407 $118,828 63% $189,579 $67,718 56% $121,861 15% 339 bp 12% 253 bp 9% in 2011 increased from 201044% to $225.8 million, primarily due to the contribution from Meetic and higher Core revenue noted above. Operating Income Before Amortization, excluding Meetic, was impacted by increases of $77.6 million from Searchin selling and $34.2 million from Match. The increase from Search is primarily due to higher revenuemarketing expense and operatingproduct development expense, leverage. The increase from Match is primarily due to higher revenue, partially offset by increased advertising and promotional expendituresdecreases in cost of revenue and general and administrative expense. Operating Income Before Amortization in 2010 increased from 2009 primarily due to increases of $33.9 million and $27.9 million from Search and Match, respectively, and reduced losses of $7.7 million at Media & Other. The increase in Operating Income Before Amortization reflects higher revenue across these segments, as well as lowerselling and marketing costs from Search, a reduction in acquisition related expenses from Match and cost savings related to certain businesses that have been sold or shutdown and the profit participations related to our interests in Reveille from Media & Other.Operating income (loss) Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $197,762 $147,967 297% $49,795 $1,087,782 NM $(1,037,987) 10% 656 bp 3% NM (77)% Operating income in 2011 increased from 2010expense is primarily due to an increase of $118.8 million in Operating Income Before Amortization described above and decreases of $28.0 million in goodwill and $15.5 million in intangible asset impairment charges, described below, partially offset by an increase of $4.3 million in non-cash compensation expense. The increase in non-cash compensationoffline marketing spend. Product development expense is primarily related to equity grants issued subsequent to 2010 and the impact of the cancellation and acceleration of certain equity awards during the second and third quarters ofincreased from 2011 respectively, partially offset by awards becoming fully vested. Excluding the intangible asset impairment charge in 2010, amortization of intangibles increased $10.1 million primarily due to the acquisition of Meetic. At December 31, 2011, there was $107.8 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.1 years. Operating income in 2010 increased from 2009 primarily due to a decrease of $888.8 million in goodwill impairment charges described below and an increase of $67.7 million in Operating Income Before Amortization described above. Further contributing to the increase in operating income are decreases of $16.8 million in amortization of intangibles, exclusive of the impairment charges noted below, and $15.9 million in amortization of non-cash marketing, partially offset by an increase of $14.2 million in non-cash compensation expense. The decrease in amortization of intangibles is primarily due to a decrease at Search, partially offset by an increase at Match relating to the acquisition of Singlesnet and its venture formed with Meetic in Latin America. 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 interestsin VUE. The increase in non-cash compensation expense is primarily related to an increase in expense attributablecompensation and other employee-related costs due, in part, to awards granted subsequent to the second quarteran increase in headcount. The decrease in cost of 2009, partially offset by awards having become fully vested. In connection with the Company's annual impairment assessment in the fourth quarter of 2010, the Company identified and recorded impairment charges at the Media & Other segment related to the write-down of the goodwill and intangible assets of Shoebuy of $28.0 million and $4.5 million, respectively, and at the Search segment related to the write-down of an indefinite-lived intangible asset of IAC Search & Media of $11.0 million. The goodwill and indefinite-lived intangible asset impairment charges at Shoebuy reflected expectations of lower revenue and profit performance in future years due to Shoebuy's 2010 fourth quarter revenue and profit performance, which is its seasonally strongest quarter. The indefinite-lived intangible asset impairment charge at IAC Search & Media is primarily due to lower future revenue projections associated with a trade namecustomer acquisition costs. The decrease in general 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 charges at the Search segment related to the write-down of the goodwill and intangible assets of IAC Search & Media of $916.9 million and $128.3 million, respectively. The impairments reflected lower projections for revenue and profits at IAC Search & Media in future years that reflected the Company's consideration of industry growth rates, competitive dynamics and IAC Search & Media's operating strategies and the impact of these factors on the fair value of IAC Search & Media and its goodwill and intangible assets.Other income (expense) Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $(36,300 ) $(10,624 ) 41 % $(25,676 ) $(11,662 ) 83 % $(14,014 ) Equity in losses of unconsolidated affiliates in 2011 increased from 2010administrative expense is primarily due to the inclusion in 2011the prior year of losses related$4.0 million in transaction fees associated with the Meetic acquisition. the Company's investment in The Newsweek/Daily Beast Company and a loss of $11.7$44.8 million related to marking downreflecting the carrying valueconsolidation of Match's 27% equity method investmentNews_Beast beginning June 1, 2012. Included in Meetic to fair value (i.e., the tender offer priceresults of €15.00 per share) upon achieving control. Partially offsetting these losses are earnings from our investmentNews_Beast is $7.0 million in Meetic through August 31, 2011. The Company recognized a loss in 2010restructuring costs related to its investment in Meetic primarily due to the amortization of intangibles, which was required by purchase accounting rules. Equity in losses of unconsolidated affiliates in 2010 includes an $18.3 million impairment charge to write-down one of the Company's equity method investments to fair value, described below. Equity in losses of unconsolidated affiliates in 2010 increased from 2009 primarily due to an $18.3 million impairment charge to write-down one of the Company's equity method investments to fair value. The decline in value was determined to be other-than-temporary due to the investee's continued losses and negative operating cash flows. The Company estimated the fair value of its investment using a multiple of revenue approach. Equity in losses of unconsolidated affiliates also includes reduced losses related to the Company's investment in Meetic due, in part,transition to a decrease in amortization of intangibles. Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $10,060 $11,493 NM $(1,433 ) $(106,435 ) NM $105,002 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 Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $ 4,047 NM NM $ (32,079 ) $ (22,605 ) 239 % $ (9,474 ) 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 taxbenefits. At December 31, 2011 and 2010, the Company has accrued $111.2 million and $97.7 million, respectively, for the payment of interest. At December 31, 2011 and 2010, the Company has accrued $2.5 million and $5.0 million, respectively, for penalties. The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service ("IRS") has substantially completed its review of the Company's tax returns for the years ended December 31, 2001 through 2006. The settlement has not yet been submitted to the Joint Committee of Taxation for approval. The IRS began its review of the Company's tax returns for the years ended December 31, 2007 through 2009 in July 2011. The statute of limitations for the years 2001 through 2008 has been extended to December 31, 2012. Various state and local jurisdictions are currently under examination, the most significant of which are California, New York and New York City for various tax years beginning with 2005. Income taxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns. Changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed by the Company are recorded in the period they become known. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $60.3 million within twelve months of the current reporting date, of which approximately $13.1 million could decrease income tax provision, primarily due to settlements, expirations of statutes of limitations, and the reversal of deductible temporary differences that will primarily result in a corresponding decrease in net deferred tax assets. An estimate of other changes in unrecognized tax benefits, while potentially significant, cannot be made.Discontinued operations Years Ended December 31, 2011 $ Change % Change 2010 $ Change % Change 2009 (Dollars in thousands) $ — $ (140,768 ) NM $ 140,768 $ 140,768 NM $ — $ (3,992 ) $ 33,031 (89 )% $ (37,023 ) $ (13,584 ) 58 % $ (23,439 ) Discontinued operations in the accompanying consolidated statement of operations include InstantAction, which ceased operations during the fourth quarter of 2010, and Evite, Gifts.com and IAC Advertising Solutions through December 1, 2010. The Company recognized after-tax gains of $140.8 million on the tax-free exchange of Evite, Gifts.com and IAC Advertising Solutions in 2010. The 2011 loss is primarily due to interest on income tax contingencies, partially offset by foreign currency exchange gains related to the liquidation of certain inactive subsidiaries. The 2010 loss is primarily due to losses of InstantAction, which includes a pre-tax impairment charge related to goodwill of $31.6 million. The 2009 loss is principally due to losses of InstantAction and tax return to provision adjustments related to the spun-off businesses and interest on tax contingencies.Segment Results In addition to the discussion of consolidated results above, the following is a discussion of the results of each segment.Search Our Search segment includes Mindspark, a digital consumer products business consisting of our B2C operations, through which we develop, market and distribute downloadable applications, and our B2B operations, through which we provide customized browser-based applications for software and media companies; destination websites, including Ask.com and Dictionary.com, through which we provide search and additional services; and CityGrid Media, an online media company that aggregates and integrates local content and advertising for distribution to publishers across web and mobile platforms. Revenue increased 31% to $1.1 billion, reflecting strong growth from Mindspark's B2B operations and destination websites as well as growth from Mindspark's B2C operations and CityGrid Media. The revenue growth in Mindspark's B2B operations was driven by increased contribution from both existing and new partners. The increase in Mindspark's B2C revenue was driven primarily by new products launched since the year ago period. The revenue growth in destination websites reflects strong query gains driven primarily by increased marketing and content optimization. The increase in revenue at CityGrid Media primarily reflects growth from existing resellers and increased display advertising.62%46% to $203.1$205.0 million, benefiting from the higher revenue noted above and decreases of $8.5 million in depreciation, $7.1$10.9 million in general and administrative expense, $10.3 million in depreciation, and lower product development expense as a percentage of revenue, partially offset by increases of $115.3$111.2 million in traffic acquisition costs and $63.7$66.8 million in selling and marketing expense. The decrease in general and administrative expense is primarily due to a decrease in compensation and other employee-related costs, lower professional fees, including a decrease in litigation related expenses, and the inclusion in 2010 of lease termination costs associated with the Ask.com restructuring. The decrease in depreciation is due to the write-off of certain assets in the prior year, period, partially offset by the write-off of $4.9 million in capitalized software costs in the third quarter of 2011 associated with the exit from our direct sponsored listings business. The decrease in general and administrative expense is primarily due to lower professional fees, including a decrease in litigation related expenses, and the inclusion in 2010 of lease termination costs associated with the Ask.com restructuring, partially offset by an increase in compensation and other employee-related costs at Mindspark and CityGrid Media. As a percentage of revenue, product development expense decreased primarily due to staff reductions that took place during the fourth quarter of 2010. The increase in traffic acquisition costs is primarily due to an increase in revenue. As a percentage of revenue, traffic acquisition costs increased over the prior year period due to an increase in the proportion of revenue from customized browser-based applications at Mindspark's B2B operations and other arrangements with third parties who direct traffic to our websites. The increase in selling and marketing expense is primarily due to an increase in advertising and promotional expenditures, partially offset by a decrease in bad debt expense at CityGrid Media. The increase in advertising and promotional expenditures was driven primarily by increased online marketing related to our destination websites and new product launches at Mindspark's B2C operations since the year ago period. Operating income increased 79% to $201.7 million, primarily due to the increase in Operating Income Before Amortization described above and a decrease of $10.9 million in amortization of intangibles and a slight decrease in non-cash compensation expense. The decrease in amortization of intangibles in 2011 is principally due to the inclusion in the prior year of an indefinite-lived intangible asset impairment charge of $11.0 million as described below.For the year ended December 31, 2010 compared to the year ended December 31, 2009 Revenue increased 23% to $837.1 million, reflecting growth in Mindspark's B2B and B2C operations and destination websites. The increase in revenue from Mindspark's B2B operations was attributable to new partners and growth from existing partners, while the increase in revenue from Mindspark's B2C operations and destination websites was driven by increased traffic acquisition efforts and enhancements within our proprietary toolbar business. CityGrid Media revenue increased primarily due to the contribution from new resellers and growth from existing resellers. Operating Income Before Amortization increased 37% to $125.5 million, primarily due to the higher revenue noted above and a decrease of $13.4 million in selling and marketing expense, partially offset by increases of $108.5 million in traffic acquisition costs and $5.5 million in general and administrative expense. The decrease in selling and marketing expense is primarily due to a decrease of $7.2 million in advertising and promotional expenditures, as 2009 included expenditures associated with the NASCAR partnership and an ad campaign to rebrand the Ask Jeeves UK website, as well as a decrease in compensation and other employee-related costs at CityGrid Media, due in part, to a decrease in average headcount. The increase in traffic acquisition costs is primarily due to an increase in revenue. As a percentage of revenue, traffic acquisition costs increased over the prior year due to an increase in the proportion of revenue from our B2B customized browser-based applications at Mindspark's B2B operations and other arrangements with third parties who direct traffic to our websites, as well as a shift in partner mix to partners carrying higher traffic acquisition costs.websites. The increase in generalselling and administrativemarketing expense is driven primarily due to an increase in compensation and other employee-related costs associated with growth in Mindspark's operations and employee termination costs associated with the Ask.com restructuring that took place in the fourth quarter of 2010, partially offset by a decrease in litigation related expenses. Operating income increased $1.1 billion to $112.9 million, primarily due to the inclusion in 2009 of goodwill and intangible asset impairment charges totaling $1.045 billiononline marketing expenditures related to IAC Search & Media. In 2010 the Company identifiedAsk.com and recorded an indefinite-lived intangible asset impairment charge of $11.0 million. The charge is 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 2009 the Company identified and recorded a goodwill and indefinite-lived intangible asset impairment charge of $916.9 million and $128.3 million, respectively. The impairment charges reflected lower projections for revenue and profits at IAC Search & Media in future years that reflected the Company's consideration of industry growth rates, competitive dynamics and IAC Search & Media's operating strategies and the impact of these factors on the fair value of IAC Search & Media and its goodwill and intangible assets. Further contributing to the increase in operating income in the current year is an increase in Operating Income Before Amortization described above and decreases of $18.3 million in amortization of intangibles, exclusive of the impairment charges, and $6.5 million in amortization of non-cash marketing.For the year ended December 31, 2011 compared to the year ended December 31, 2010 Revenue increased 29% to $518.0 million benefiting from growth within its Core and Developing operations and the contribution of Meetic, which was consolidated beginning September 1, 2011. Core revenue increased 18% to $398.6 million driven by an increase in subscribers. Developing, which consists of OkCupid, Singlesnet, mobile-only products and its non-Meetic international operations, increased revenue 19% to $73.3 million driven primarily from display advertising revenue from the acquisition in 2011 of OkCupid, as well as from Match's venture with Meetic in Latin America, which was not reflected in the full prior year period, partially offset by lower subscription revenue from Singlesnet, as we continue to reduce marketing of this service. Meetic revenue of $46.1 million wasnegatively impacted by the write-off of $32.6 million of deferred revenue in connection with its acquisition. Excluding the results of Meetic, revenue grew 18% to $471.9 million. Revenue in the prior year period was negatively impacted by the write-off of $4.1 million in deferred revenue associated with the Singlesnet acquisition and the formation of our venture with Meetic in Latin America.an increase in professional fees due, in part, to $4.0 million in transaction fees associated with the Meetic acquisition, as well as operating expenses from OkCupid, which was not in the prior year period.year. The increase in product development expense is primarily due to an increase in compensation and other employee-related costs related to an increase in headcount.incomeIncome Before Amortization increased 19%165% to $137.6$28.3 million, primarily due to profitability at CityGrid Media in the current year as compared to a loss in the prior year. Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Search & Applications $ 305,644 $ 101,638 50 % $ 204,006 $ 75,650 59 % $ 128,356 Match 205,492 67,937 49 % 137,555 22,188 19 % 115,367 Local 21,735 (3,798 ) (15 )% 25,533 17,128 204 % 8,405 Media (51,776 ) (35,501 ) (218 )% (16,275 ) 7,110 30 % (23,385 ) Other (7,689 ) (3,793 ) (97 )% (3,896 ) 27,704 88 % (31,600 ) Corporate (149,838 ) (677 ) — % (149,161 ) (1,813 ) (1 )% (147,348 ) Total $ 323,568 $ 125,806 64 % $ 197,762 $ 147,967 297 % $ 49,795 partially offset by increasesand a decrease of $10.2 million in amortization of intangibles and $1.8$3.0 million in non-cash compensation expense. These increases are primarily due to the Meetic acquisition.For the year ended December 31, 2010 compared to the year ended December 31, 2009 Revenue increased 17% to $400.7 million, reflecting solid growth in its Core operations, including the contribution from People Media, acquired July 13, 2009. Revenue in 2010 also increased due to Singlesnet, acquired March 2, 2010, and a venture with Meetic in Latin America, which was formed on March 10, 2010. These increases in revenue were partially offset by the effects of the sale of Match Europe to Meetic on June 5, 2009. Excluding the results of People Media from both 2010 and 2009, Match Europe from 2009 and Singlesnet and the Latin America venture from 2010, revenue grew 11%. Operating Income Before Amortization increased 30% to $122.1 million primarily due to the increase in revenue noted above, partially offset by increases of $15.1 million in selling and marketing expense, $10.3 million in cost of revenue and $3.3 million in product development expense. The increases in these expenses reflect the acquisitions of People Media and Singlesnet and the formation of the Latin America venture, partially offset by the sale of Match Europe. The increase in selling and marketing expense was further impacted by an increase in advertising and promotional expenditures due to an advertising agreement entered into during the second quarter of 2010 with Yahoo. Operating income increased 36% to $115.4 million, primarily due to the increase in Operating Income Before Amortization described above. Operating income also includes the impact in 2009 of $4.4 million in amortization of non-cash marketing, partially offset by an increase in 2010 of $1.9$13.7 million in amortization of intangibles. The increase in amortization of intangibles relatingis primarily related to the acquisitionThe About Group and News_Beast.Singlesnet and the formationunrecognized compensation cost, net of the Latin America venture.ServiceMagic Revenue13% to $205.1 million, benefiting from growth in both its domestic and international operations. Domestic revenue growth reflects an 8% increase in service request accepts, which was driven, in part, by a 9% increase in service requests. Domestic growth also reflects anincrease in revenue from website design and hosting services. International revenue growth reflects a 43% increase in service request accepts, which was driven, in part, by a 44% increase in service requests and a 15% increase in service professionals. A service request can be transmitted to more than one service professional and is deemed accepted upon transmission. Operating Income Before Amortization increased 31% to $23.9 million,2010 primarily due to the higher revenue noted above and lower selling and marketing expense and general and administrative expense as a percentagean increase of revenue. Operating Income Before Amortization in 2010 benefited from the reversal of a $2.5$118.8 million provision for contingent consideration related to the 2009 acquisition of Market Hardware, which was not earned. Operating income increased 30% to $21.4 million, primarily due to the increase in Operating Income Before Amortization described above and decreases of $28.0 million in goodwill and $15.5 million in intangible asset impairment charges, described below, partially offset by an increase of $0.8 million in amortization of intangibles.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 service request accepts domestically and from growth internationally, partially offset by lower average lead acceptance fees. The increase in service requests was driven primarily by increased online and offline marketing efforts. The increase in service request accepts was driven, in part, by a 22% increase in service providers. Operating Income Before Amortization decreased 15% to $18.2 million despite the increase in revenue described above, primarily due to increases of $21.0 million in selling and marketing expense and $5.6 million in general and administrative expense. The increase in selling and marketing expense is primarily driven by increases of $14.0 million and $7.0 million in marketing and compensation and other employee-related costs, respectively. The increase in compensation and other employee-related costs is due, in part, to the expansion of ServiceMagic's sales force. The increase in general and administrative expense is primarily due to an increase in compensation and other employee-related costs driven by growth in international headcount. Operating Income Before Amortization reflects the reversal in 2010 of a $2.5 million provision for contingent consideration related to the 2009 acquisition of Market Hardware, which was not earned. Operating income increased 23% to $16.4 million, despite the decrease in Operating Income Before Amortization described above, primarily due to the inclusion in the prior year of $5.0 million in non-cash marketing and a decrease of $1.0 million in amortization of intangibles.Media & OtherFor the year ended December 31, 2011 compared to the year ended December 31, 2010 Revenue increased 11% to $243.8 million primarily reflecting growth at Shoebuy, Electus, Notional and Vimeo, partially offset by a decrease in revenue from The Daily Beast, which following the formation of the joint venture with Harman Newsweek on January 31, 2011, has been accounted for as an equity method investment, a decline at Pronto and the inclusion in 2010 of revenue associated with profit participations related to our former interest in Reveille. Operating Income Before Amortization loss increased by $0.1 million to a loss of $12.1 million. Losses increased primarily due to increased operating expenses at Electus; reduced profitability at Pronto due to lower revenue; and Hatch Labs, which was not in the full prior year period. The increase in Operating Income Before Amortization loss was almost entirely offset by the inclusion in 2010 of losses related to The Daily Beast, which has been accounted for as an equity method investment since January 31, 2011 as described above, and the inclusion of profit participations related to our former interest in Reveille. Operating loss decreased by $33.8 million to $13.7 million despite the increase in Operating Income Before Amortization loss described above, primarily due to the inclusion in 2010 of goodwill and indefinite-lived intangible asset impairment charges related to Shoebuy of $28.0 million and $4.5 million, respectively. Further contributing to the decrease in operating loss are decreases of $1.0 million in amortization of intangibles, exclusive of the impairment charge, and $0.4 million in non-cash compensation expense.For the year ended December 31, 2010 compared to the year ended December 31, 2009 Revenue increased 30% to $219.9 million reflecting the contribution from Notional and Electus, which were not in the full prior year period, and growth at Pronto, Shoebuy, CollegeHumor and Vimeo. Also impacting revenue is the inclusion in 2010 of revenue associated with profit participations related to our interests in Reveille. Operating Income Before Amortization loss decreased by $7.7 million to a loss of $12.0 million. Losses decreased due primarily to $10.1 million in cost savings related to certain businesses that have been sold or shutdown and $2.9 million in profit participations related to our interests in Reveille noted above, partially offset by Electus, which is not in the full prior year period, and increased operating expenses associated with The Daily Beast. Operating loss increased by $25.5 million to $47.5 million despite the decrease in Operating Income Before Amortization loss described above, primarily due to goodwill and indefinite-lived intangible asset impairment charges related to Shoebuy of $28.0 million and $4.5 million, respectively. Also contributing to the increase in operating loss is an increase of $0.6 million in amortization of intangibles, exclusive of the impairment charge noted above.CorporateFor the year ended December 31, 2011 compared to the year ended December 31, 2010 Operating Income Before Amortization loss decreased by $1.4 million to a loss of $62.8 million reflecting $5.3 million in transaction expenses in 2010 related to the Liberty Exchange, partially offset by higher compensation and other employee-related costs. Operating loss increased $1.8 million to $149.2 million despite the decrease in Operating Income Before Amortization loss described above, due to an increase of $3.2$4.3 million in non-cash compensation expense. The increase in non-cash compensation expense is primarily related to equity grants issued subsequent to 2010 and the impact of the cancellation and acceleration of certain equity awards during the second and third quarters of 2011, respectively, partially offset by awards becoming fully vested.ForEquity in losses of unconsolidated affiliates Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Equity in losses of unconsolidated affiliates $(25,345) $10,955 30% $(36,300) $(10,624) (41)% $(25,676) Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Other (expense) income, net $(9,161) $(19,221) NM $10,060 $11,493 NM $(1,433) Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Income tax (provision) benefit $(119,215) NM NM $4,047 NM NM $(32,079) 2010 compared to2012 is a $5.2 million expense and a $2.8 million benefit, respectively, net of related deferred taxes, for interest on unrecognized tax benefits. 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, respectively, for interest on unrecognized tax benefits. At December 31, 2012 and 2011, the Company has accrued $117.5 million and $111.2 million, respectively, for the payment of interest. At December 31, 2012 and 2011, the Company has accrued $5.0 million and $2.5 million, respectively, for penalties. Operating has been extended to December 31, 2013, and we expect it to be extended further. Various state and local jurisdictions are currently under examination, the most significant of which are California, New York and New York City for various tax years beginning with 2005. Income Before Amortization loss decreasedtaxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns. Changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed by $1.3the Company are recorded in the period they become known. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $122.2 million to a loss within twelve months of $64.2the current reporting date, of which approximately $13.4 million could decrease income tax provision, primarily due to lower depreciationsettlements, expirations of statutes of limitations, and salary expense, partially offset by $5.3 millionthe reversal of deductible temporary differences that will primarily result in transaction expenses in 2010 related to the Liberty Exchange. Operating loss increased $13.6 million to $147.3 million despite thea corresponding decrease in Operating Income Before Amortizationnet deferred tax assets. An estimate of other changes in unrecognized tax benefits, while potentially significant, cannot be made. Years Ended December 31, 2012 $ Change % Change 2011 $ Change % Change 2010 (Dollars in thousands) Gain on Liberty Exchange $— $— —% $— $(140,768) NM $140,768 Loss from discontinued operations, net of tax $(9,051) $(5,059) (127)% $(3,992) $33,031 89% $(37,023) described above,is primarily due to an increase of $14.9 million in non-cash compensation expense.reserves for income tax contingencies. The increase in non-cash compensation expense2011 loss is primarily relateddue to an increase in expense attributable to awards granted subsequent to the second quarter of 2009,interest on reserves for income tax contingencies, partially offset by awards having become fully vested.foreign currency exchange gains related to the liquidation of certain inactive subsidiaries. The 2010 loss is primarily due to losses of InstantAction, which includes a pre-tax impairment charge related to goodwill of $31.6 million.2011,2012, the Company had $704.2$750.0 million of cash and cash equivalents, $165.7$20.6 million of marketable securities and $95.8$595.8 million of long-term debt.debt, including current maturities of $15.8 million. Domestically, cash equivalents primarily consist of AAA rated treasury and government agency money market funds and commercial paper rated A2/P2 or better.funds. Internationally, cash equivalents primarily consist of AAA prime and governmentrated money market funds and time deposits. Marketable securities primarily consist of short-to-intermediate-term debt securities issued by states of the U.S. and subdivisions thereof and investment grade corporate issuers. The Company only invests in marketable securities with active secondary or resale markets to ensure portfolio liquidity and the ability to readily convert investments into cash to fund current operations or satisfy other cash requirements as needed. From time to time, the Company may invest in marketable equity securities as part of its investment strategy. Long-term debt, including current maturities, is comprised of $500.0 million in 2012 Senior Notes due December 15, 2022, $80.0 million in Liberty Bonds due September 1, 2035 and $15.8 million in 2002 Senior Notes, duewhich was paid on January 15, 2013.2011, $158.32012, $244.0 million of the $704.2$750.0 million of cash and cash equivalents and none of the $165.7$20.6 million of marketable securities were held by the Company's foreign subsidiaries. No U.S. federal or state income taxes have been provided on the permanentlyindefinitely reinvested earnings of certainany of the Company's foreign subsidiaries that hold this cash and cash equivalents. If needed for our operations in the U.S., most of the cash and cash equivalents held by the Company's foreign subsidiaries could be repatriated to the U.S., but, under current law, would be subject to U.S. federal and state income taxes. However, the Company's intent is to permanentlyindefinitely reinvest these funds outside of the U.S. and,The Company currently the Company does not anticipate a need to repatriate them to fund our U.S. operations. December 31, December 31, 2011 2010 2009 2012 2011 2010 (In thousands) (In thousands) $ 372,386 $ 340,707 $ 348,547 $ 354,527 $ 372,386 $ 340,707 (25,186 ) (118,096 ) (422,640 ) (352,088 ) (25,186 ) (118,096 ) (372,233 ) (717,210 ) (405,797 ) Net cash provided by (used in) financing activities 44,301 (372,233 ) (717,210 ) gains or losses on the sales of investments, and the effect of changes in working capital. capital activities. Net cash provided by operating activities attributable to continuing operations in 2012 was $354.5 million and consists of earnings from continuing operations of $169.8 million, adjustments for non-cash items of $261.3 million and cash used in working capital activities of $76.6 million. Adjustments for non-cash items primarily consists of $85.6 million of non-cash compensation expense, $52.5 million of depreciation, $37.1 million of deferred income taxes and $25.3 million of equity in losses of unconsolidated affiliates, which includes a non-cash charge of $18.6 million to re-measure the carrying value of our investment in News_Beast to fair value in connection with our acquisition of a controlling interest. The deferred income tax provision primarily relates to the vesting of restricted stock units, the exercise of stock options and the accelerated payment of 2012 bonuses. The decrease in cash from changes in working capital activities primarily consists of an increase of $31.0 million in accounts receivable, an increase of $23.0 million in other current assets, a decrease in accounts payable and other current liabilities of $14.4 million and a decrease in income taxes payable of $10.1 million. The increase in accounts receivable is primarily due to the growth in revenue at Search & Applications earned from our services agreement with Google; the related receivable from Google was $125.3 million and $105.7 million at December 31, 2012 and 2011, respectively. While our Match and HomeAdvisor businesses experienced growth, the accounts receivable at these businesses are principally credit card receivables and, accordingly, are not significant in relation to the revenue of these businesses. The increase in other current assets is primarily related to a receivable for insurance claims related to Hurricane Sandy, an increase in capitalized downloadable search toolbar costs and an increase in short-term production costs at certain of our Media businesses that are capitalized as the television program, video or film is being produced. The decrease in accounts payable and other current liabilities is primarily due to a decrease in accrued employee compensation and benefits, partially offset by an increase in accrued advertising expense. The decrease in accrued employee compensation and benefits is due to the payment of the 2012 and 2011 bonuses in 2012. The increase in accrued advertising expense is primarily due to an increase in advertising and promotional expenditures at Search & Applications. The decrease in income taxes payable is due to current year income tax payments in excess of current year income tax accruals.$372.4$372.4 million and consists of earnings from continuing operations of $175.6$175.6 million, adjustments for non-cash items of $176.9 million and cash provided by working capital activities of $19.9 million. Adjustments for non-cash items primarily consistedconsists of $88.6$88.6 million of non-cash compensation expense, $56.7$56.7 million of depreciation, $36.3$36.3 million of equity in losses of unconsolidated affiliates, which includes a non-cash charge of $11.7 million to re-measure the carrying value of our investment in Meetic to fair value in connection with our acquisition of a controlling interest, partially offset by $35.5$35.5 million of deferred income taxes. The deferred income tax benefit primarily relates to the releasereversal of a previously established deferred tax liability in connection with the acquisition of a controlling interest in Meetic. The increase in cash from changes in working capital activities primarily consists of an increase of $57.2$57.2 million in accounts payable and other current liabilities and an increase of $48.9 million in deferred revenue, partially offset by an increase in accounts receivable of $58.3$58.3 million and a decrease in income taxes payable of $29.2 million.$29.2 million. The increase in accounts payable and other current liabilities is primarily due to an increase in accrued advertising expense, an increase in accrued employee compensation and benefits and an increase in accrued revenue share expense. The increase in accrued advertising expense is primarily due to an increase in advertising and promotional expenditures at Search due to increased online marketing related to its destination websites and newproduct launches at Mindspark's B2C operations since the year ago period.& Applications. The increase in accrued employee compensation and benefits is primarily due to the increase in the 2011 discretionary cash bonus accrual to bewhich was paid entirely in the first quarter of 2012 as compared to the 2010 discretionary cash bonus accrual which was partially paid in December of 2010 and the remainder in the first quarter of 2011. The increase in accrued revenue share expense is primarily due to an increase in traffic acquisition costs at Search related to the increase in revenue from customized browser-based applications at Mindspark's B2B operations and other arrangements with third parties who direct traffic to our websites.& Applications. The increase in deferred revenue is primarily due to the growth in subscription revenue at Match, which includes an increase of $29.5 million in deferred revenue at Meetic, as well as growth at Electus, Vimeo and Notional. The increase in accounts receivable is primarily due to the growth in revenue earned from our paid listing supplyservices agreement with Google; the related receivable from Google was $105.7$$70.5$70.5 million at December 31, 2011 and 2010, respectively. While our Match, Media & Other and ServiceMagicHomeAdvisor businesses experienced strong growth, the accounts receivable at these businesses are principally credit card receivables and, accordingly, are not significant in relation to the revenue of these businesses. The decrease in income taxes payable is primarily attributable to excess tax benefits of $22.2 million from stock-based awards that were recorded in 2011 related to the income tax benefit realized from the exercise of stock options and the vesting of restricted stock units. To the extent such deductions reduce income taxes payable, they are reported as financing activities in the consolidated statement of cash flows. In addition, current year income tax payments in 2011 were in excess of current year income tax accruals.$25.2$25.2 million includes cash consideration used in acquisitions and investments of $368.7 million primarily related to the acquisitions of Meetic and OkCupid and the investment in Zhenai Inc. and capital expenditures of $40.0$40.0 million primarily related to the internal development of software to support our products and services, partially offset by net maturities and sales of marketable debt securities and sales of $381.0long-term investments of $396.2 million.$372.2$372.2 million includes $507.8$507.8 million for the repurchase of 13.6 million shares of common stock at an average price of $38.20 per share and $10.7 million related to the payment of cash dividends to IAC shareholders, partially offset by proceeds related to the issuance of common stock, net of withholding taxes, of $132.8$132.8 million, and excess tax benefits from stock-based awards of $22.2 million.$22.2 million. Included in the proceeds related to the issuance of common stock are proceeds of $76.0 million from the exercise of warrants to acquire 3.2 million shares of IAC common stock. The weighted average strike price of the warrants was $26.90 per share. On February 1, 2012, IAC's Board of Directors declared a quarterly cash dividend of $0.12 per share of common and Class B common stock outstanding to be paid to stockholders of record as of the close of business on February 15, 2012, with a payment date of March 1, 2012. Based on our current shares outstanding, we estimate the payment for this dividend will be $10.4 million. Future declarations of dividends are subject to the determination of IAC's Board of Directors.$340.7$340.7 million and consists of a loss from continuing operations of $9.4$9.4 million, adjustments for non-cash items of $241.0 million and cash provided by working capital activities of $109.1 million. Adjustments for non-cash items primarily consists of $84.3$84.3 million of non-cash compensation expense, $63.9$63.9 million of depreciation, $28.0$28.0 million of goodwill impairment, $27.5$27.5 million of amortization of intangibles, which includes an impairment charge of $15.5 million and $25.7$25.7 million of equity in losses of unconsolidated affiliates. The increase in cash from changes in working capital activities primarily consistedconsists of an increase of $76.7$76.7 million in$54.2$54.2 million in accounts payable and other current liabilities and an increase in deferred revenue of $19.7$19.7 million, partially offset by an increase in accounts receivable of $32.9 million.$32.9 million. The increase in income taxes payable was primarily a result of income tax refunds received in 2010 related to the federal carrybackpaid listing supplyservices agreement with Google; the related receivable from Google was $70.5$$53.7$53.7 million at December 31, 2010 and 2009, respectively. While our Match, Media & Other and ServiceMagicHomeAdvisor businesses experienced strong growth, the accounts receivable at these businesses are principally credit card receivables and, accordingly, are not significant in relation to the revenue of these businesses.$118.1$118.1 million includes net purchases of marketable debt securities of $74.8$74.8 million, capital expenditures of $39.8$39.8 million primarily related to the internal development of software to support our offerings and our increased number of users, cash consideration used in acquisitions and investments of $19.6$19.6 million primarily related to the acquisitions of Singlesnet and DailyBurn.com, partially offset by a cash dividend of $11.4$11.4 million received from Meetic.$717.2$717.2 million includes $539.6$539.6 million for the repurchase of 23.1 million shares of common stock at an average price of $22.98 per share and $217.9$217.9 million in cash related to the Liberty Exchange described below, partially offset by proceeds related to the issuance of common stock, net of withholding taxes of $25.9$25.9 million and excess tax benefits from stock-based awards of $14.3 million.$14.3 million. On December 1, 2010, the Company completed the tax-free exchange of Evite, Gifts.com, IAC Advertising Solutions and $217.9$217.9 million in cash for substantially all of Liberty's equity stake in IAC, representing 8.5 million shares of Class B common stock and 4.3 million shares of IAC common stock. Net cash provided by operating activities attributable to continuing operations in 2009 was $348.5 million and consists of a loss from continuing operations of $956.5 million, adjustments for non-cash items of $1.2 billion and cash provided by working capital of $130.4 million. Adjustments for non-cash items primarily consists of $916.9 million of goodwill impairment, $157.0 million of amortization of intangibles, which includes an impairment charge of $128.3 million, $70.1 million of non-cash compensation expense, $61.4 million of depreciation and a $58.1 million decrease in the fair value of the derivative asset related to ARO stock, partially offset by the gains on the sale of Match Europe of $132.2 million and the sales of long-term investments of $28.8 million. The increase in cash from changes in working capital activities primarily consisted of an increase of $109.0 million in income taxes payable, an increase of $18.8 million in accounts payable and other current liabilities and an increase in deferred revenue of $14.2 million, partially offset by an increase in accounts receivable of $18.1 million. The increase in income taxes payable was primarily a result of income tax refunds received in 2009 related to the federal carryback of net capital losses generated from the Company's investment in Tree.com, which were recorded as an income tax receivable in 2008 and the receipt of state income tax refunds. The increases in accounts payable and other current liabilities and deferred revenue are primarily a result of the growth in our businesses. The increase in accounts receivable is primarily due to the growth in revenue in the fourth quarter of 2009 relative to the fourth quarter of2008 earned from our paid listing supply agreement with Google; the related receivable from Google was $53.7 million and $43.0 million at December 31, 2009 and 2008, respectively. Net cash used in investing activities attributable to continuing operations in 2009 of $422.6 million includes net purchases of marketable debt securities of $356.7 million, cash consideration used in acquisitions and investments of $92.0 million primarily related to the acquisition of People Media, capital expenditures of $33.9 million, partially offset by proceeds of $64.0 million related to the sales of investments. Net cash used in financing activities attributable to continuing operations in 2009 of $405.8 million includes $545.5 million for the repurchase of 32.1 million shares of common stock at an average price of $17.25 per share and the settlement of vested stock-based awards denominated in subsidiaries' equity of $14.3 million, partially offset by proceeds related to the issuance of common stock, net of withholding taxes of $151.9 million. Included in the proceeds related to the issuance of common stock are aggregate proceeds of $150.8 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.currently does not have in place any formal arrangements that would provide it with external sources of financing such ashas a $300.0 million revolving credit or other similar facility. The Company has two tranchesfacility, which is available as an additional source of warrants outstanding; both with expiration dates of May 7, 2012.financing. At December 31, 2011,2012, there were no outstanding borrowings under the first tranche consists of warrants to acquire 9.8 million shares of IAC common stock at a strike price of $26.86 per share and the second tranche consists of warrants to acquire 4.5 million shares of IAC common stock at a strike price of $31.75 per share. The Company's closing common stock price on February 1, 2012 was $45.78. Assuming all these warrants were exercised on May 7, 2012, the total proceeds that the Company would receive would be $264.2 million for the first tranche and $143.3 million for the second tranche.20122013 capital expenditures will be higher than 2011.2012. At December 31, 2011,2012, IAC had 8.63.1 million shares remaining in its share repurchase authorization. IAC may purchase shares over an indefinite period of time on the open market and in privately negotiated transactions, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook. On February 5, 2013, IAC declared a quarterly cash dividend of $0.24 per share of common and Class B common stock outstanding; the dividend is payable on March 1, 2013 to stockholders of record on February 15, 2013. Future declarations of dividends are subject to the determination of IAC's Board of Directors.20122013 and available borrowing capacity under its $300.0 million revolving credit facility will be sufficient to fund its normal operating requirements, including capital expenditures, share repurchases, quarterly cash dividends, and investing and other commitments for the foreseeable future. Our liquidity could be negatively affected by a decrease in demand for our products and services. The Company may make acquisitions and investments that could reduce its cash, cash equivalents and marketable securities balances and as a result, the Company may need to raise additional capital through future debt or equity financing to provide for greater financial flexibility. Additional financing may not be available at all or on terms favorable to us. Payments Due by Period Total (In thousands) $ 925,503 $ 43,753 $ 55,500 $ 55,500 $ 770,750 41,109 18,785 22,233 91 — Operating leases 328,107 24,071 49,377 43,861 210,798 Total contractual cash obligations $ 1,294,719 $ 86,609 $ 127,110 $ 99,452 $ 981,548 (a) The Company has excluded $340.9 million in unrecognized tax benefits and related interest from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid. For additional information on income taxes, see Note 4 to the consolidated financial statements. (b) Represents contractual amounts due including interest. (c) The purchase obligations primarily include advertising commitments, which commitments are reducible or terminable such that these commitments can never exceed associated revenue by a meaningful amount. Purchase obligations also include minimum payments due under telecommunication contracts related to data transmission lines. Payments Due by Period Total Less Than
1 Year 1–3
Years 3–5
Years More Than
5 Years (In thousands) $ 193,508 $ 5,109 $ 24,399 $ 8,000 $ 156,000 55,757 19,394 31,697 4,666 — 280,288 22,209 35,009 26,972 196,098 $ 529,553 $ 46,712 $ 91,105 $ 39,638 $ 352,098 (a)The Company has excluded $303.1 million in unrecognized tax benefits and related interest from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid. For additional information on income taxes, see Note 4 to the consolidated financial statements.(b)Represents contractual amounts due including interest.(c)The purchase obligations primarily include advertising commitments, which commitments are reducible or terminable such that these commitments can never exceed associated revenue by a meaningful amount. Purchase obligations also include minimum payments due under telecommunication contracts related to data transmission lines. Amount of Commitment Expiration Per Period Total (In thousands) Letters of credit $ 2,780 $ 2,780 $ — $ — $ — (d) Commercial commitments are funding commitments that could potentially require registrant performance in the event of demands by third parties or contingent events. Amount of Commitment Expiration Per Period Total Amounts
Committed Less Than
1 Year 1–3
Years 3–5
Years More Than
5 Years (In thousands) $ 8,676 $ 8,676 $ — $ — $ — *Commercial commitments are funding commitments that could potentially require registrant performance in the event of demands by third parties or contingent events, such as under a guarantee of debt or under lines of credit extended.2011.2012.of non-cash marketing, (3) amortization and impairment of intangibles, (4)(3) goodwill impairment, and (5)(4) one-time items. We believe this measure is useful to investors because it represents the consolidated operating results from IAC's segments, taking into account depreciation, which we believe is an ongoing 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, and acquisition-related accounting.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 its partnership interests in VUE (collectively referred to as "NBC Universal Advertising"). The NBC Universal Advertising was available for television advertising on various NBC Universal network and cable channels without any cash cost. There are no NBC Universal Advertising credits available as all credits were used prior to December 31, 2009. The NBC Universal Advertising is excluded from Operating Income Before Amortization because it is non-cash and generally is incremental to the advertising the Company otherwise secures as a resultof 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 a result, management believes that treating the NBC Universal Advertising as an expense does not appropriately reflect its true cost/benefit relationship, nor does it best reflect the Company's long-term level of advertising expenditures. Nonetheless, while the benefits directly attributable to television advertising are always difficult to determine, and especially so with respect to the NBC Universal Advertising due to its incrementality and heavy concentration, it is likely that the Company does derive benefits from it, though management believes such benefits are generally less than those received through its regular advertising for the reasons stated above. Operating Income Before Amortization therefore has the limitation of including those benefits while excluding the associated expense.customer lists,content, technology, advertiser and supplier agreements,relationships and customer lists, are valued and amortized over their estimated lives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. While it is likely that we will have significant intangible amortization expense as we continue to acquire companies, we believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.2010 and 2009,2010, see Note 15 to the consolidated financial statements.testedassessed annually for impairment as of October 1 or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value. The annual assessments identified impairment charges in 2010 related to the Shoebuy and IAC Search & MediaApplications reporting units and in 2009 related to the IAC Search & Media reporting unit.units. These impairment charges are more fully described above in "Results of Operations for the Years Ended December 31, 2012, 2011 2010 and 2009".2010." The value of goodwill and indefinite-lived intangible assets that is subject to annual assessment for impairment is $1.4$1.6 billion and $351.5$379.0 million, respectively, at December 31, 2011.impairmentfor Impairment," which gives companies the option to qualitatively assess whether it is determinedmore likely than not that the fair value of a reporting unit is less than its carrying value. If it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit's goodwill is necessary. If it is more likely than not that the fair value of the reporting unit is less than the carrying value then goodwill must be tested for impairment using a two-step process. The first step involves a comparison of the estimated fair value of each of the Company's reporting units to its carrying value, including goodwill. In performing the first step, the Company determines the fair value of a reporting unit using a discounted cash flow ("DCF") analysis. Determining fair value requires the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed annually based on the reporting units' current results and forecast, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual goodwill impairment assessment ranged from 13% to 25% in 2012 and 13% to 20% in both 2011 and 2010.2011. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying value of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its carrying value to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess. The impairment test for indefinite-lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Theestimates of fair value of indefinite-lived intangible assets are determined using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the 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. 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 related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessment ranged from 13% to 20% in both 2011 and 2010, and the royalty rates used ranged from 1% to 9% in 2011 and 1% to 10% in 2010.sixseven reporting units, excluding Tutor which was acquired in December 2012, exceed their carrying values by more than 20% at October 1, 2011,2012, the date of our most recent annual impairment assessment. Any impairment charge that might result in the future would be determined based upon the excess of the carrying value of goodwill over its implied fair value using the second step of the impairment analysis that is described above but, in any event, would not be expected to be lower than the excess of the carrying value of the reporting unit over its fair value. The primary driver in the DCF valuation analyses and the determination of the fair values of the Company's reporting units is the estimate of future revenue and profitability. Generally, the Company would expect to record an impairment if forecasted revenue and profitability are no longer expected to be achieved and as a result, the carrying value of a reporting unit(s) exceeds its fair value. This assessment would be based, in part, upon the performance of its businesses relative to budget, the Company's assessment of macroeconomic factors, industry and competitive dynamics and the strategies of its businesses in response to these factors.and 2010 the Company wrote-off certain capitalized software costs. These charges are more fully described above in "Results of Operations for the Years Ended December 31, 2012, 2011 2010 and 2009".2010." The carrying value of property and equipment and definite-lived intangible assets is $286.2$374.5 million at December 31, 2011.2011,2012, the balance of deferred tax liabilities, net, is $260.1$303.0 million. Actual income taxes could vary from these estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the IRS,various tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results.The second stepA tax position that meets the more likely than not recognition threshold is to measure the tax benefitthen measured for purposes of financial statement recognition as the largest amount of benefit which is more than 50% likely of being realized upon ultimate settlement. This measurement2011,2012, the Company has unrecognized tax benefits of $462.8$496.8 million, including interest. Changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed by the Company are recorded in the period they become known.Stock Based2010 and 20092010 using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 2.3%0.6%, 2.4%2.3% and 2.1%2.4%, respectively, a dividend yield of 1.2%, zero and zero, respectively, volatility factors of 30%31%, 30% and 59%30%, respectively, based on the historical stock price volatilities of IAC for 2011 and 2010 and peer companies operating in the same industry sector as IAC for 2009 and a weighted average expected term of the stock options of 4.4 years, 6.1 years and 5.6 years, and 4.9 years, respectively. The historical stock price volatilities in 2009 of peer companies was used due to the lack of sufficient historical IAC stock price volatilities subsequent to the 2008 spin-off. For stock options, including unvested stock options assumed in acquisitions, the value of the stock option is measured at the grant date (or acquisition date, if applicable) at fair value and expensed over the remaining vesting term. The impact on non-cash compensation expense for the year ended December 31, 2011,2012, assuming a 1% increase in the risk-free interest rate, a 10% increase in the volatility factor, and a one year increase in the weighted average expected term of the outstanding options would be an increase of $1.9$2.2 million, $9.1$10.4 million, and $5.7$5.0 million, respectively. The Company also issues RSUs and performance-based RSUs. For RSUs issued, the value of the instrument is measured at the grant date as the fair value of IAC common stock and expensed as non-cash compensation expense over the vesting term. For performance-based RSUs issued, the value of the instrument is measured at states of the U.S. and subdivisions thereof and investment grade corporate issuers. The unrealized gains and losses on marketable securities, net of tax, are included in accumulated other comprehensive income as a separate component of shareholders' equity. The specific-identification method is used to determine the cost of securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income into earnings.2010,2010." During 2011, the Company did not consider any of its marketable securities to be other-than-temporarily impaired.debt. states of the U.S. and subdivisions thereof and investment grade corporate issuers. The Company employs a methodology that considers available evidence in evaluating potential impairment of its investments. Investments are considered to be impaired when a decline in fair value below the amortized cost basis is determined to be other-than-temporary. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. During 2011,2012, the Company did not record any other-than-temporary impairment charges related to its cash equivalents and marketable debt securities.2011,2012, a 100 basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of these securities by $1.9less than $0.1 million. Such potential increase or decrease in fair value is based on certain simplifying assumptions, including a constant level and rate of debt securities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period. Conversely, since almost all of the Company's cash and cash equivalents balance of $704.2$750.0 million is invested in short-term fixed or variable rate money market instruments, the Company would also earn more (less) interest income due to such an increase (decrease) in interest rates.2011,2012, the Company's outstanding debt is $95.8$595.8 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. A 100 basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by $10.8$49.9 million. Such potential increase or decrease in fair value is based on certain simplifying assumptions, including a constant level and rate of fixed-rate debt for all maturities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period.2011,2012, the Company has fourthree investments in equity securities of publicly traded companies. These available-for-sale marketable equity securities are reported at fair value based on their quoted market prices with any unrealized gain or loss, net of tax, included as a component of "Accumulated other comprehensive (loss) income"loss" in the accompanying consolidated balance sheet. Investments in equity securities of publicly traded companies are exposed to significant fluctuations in fair value due to the volatility of the stock market. During 2011,2012, the Company did not record anyrecorded an $8.7 million other-than-temporary impairment chargescharge related to one of its available-for-sale marketable equity securities.2010 and 2009.2010. As foreign currency exchange rates change, translation of the statements of operations of the Company's international businesses into U.S. dollars affects year-over-year comparability of operating results. Historically, the Company has not hedged foreign currency exchange risks because cash flows from international operations are generally reinvested locally. However, the Company periodically reviews its strategy for hedging foreign currency exchange risks. The
IAC/InterActiveCorp20112012 and 2010,2011, and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2011.2012. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.20112012 and 2010,2011, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011,2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.2011,2012, based on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2012March 1, 2013 expressed an unqualified opinion thereon.February 29, 2012 December 31, December 31, 2011 2010 2012 2011 (In thousands, except share data) (In thousands, except share data) $ 704,153 $ 742,099 $ 749,977 $ 704,153 165,695 563,997 20,604 165,695 177,030 119,581 Accounts receivable, net of allowance of $11,088 and $7,309, respectively 229,830 177,030 112,255 118,308 156,339 112,255 1,159,133 1,543,985 1,156,750 1,159,133 259,588 267,928 270,512 259,588 1,358,524 989,493 1,616,154 1,358,524 378,107 245,044 482,904 378,107 173,752 200,721 161,278 173,752 80,761 81,908 118,230 80,761 $ 3,409,865 $ 3,329,079 $ 3,805,828 $ 3,409,865 Current maturities of long-term debt $ 15,844 $ — $ 64,398 $ 56,375 98,314 64,398 126,297 78,175 155,499 126,297 343,490 222,323 355,232 343,490 534,185 356,873 624,889 534,185 95,844 95,844 Long-term debt, net of current maturities 580,000 95,844 450,533 475,685 479,945 450,533 302,213 270,501 323,403 302,213 16,601 20,239 31,830 16,601
50,349
59,869 58,126 50,349 234 226 16 16 Common stock $.001 par value; authorized 1,600,000,000 shares; issued 250,982,079 and 234,100,950 shares, respectively, and outstanding 78,471,784 and 77,126,881 shares, respectively 251 234 Class B convertible common stock $.001 par value; authorized 400,000,000 shares; issued 16,157,499 shares and outstanding 5,789,499 shares, respectively 16 16 11,280,173 11,047,884 11,607,367 11,280,173 (477,785 ) (652,018 ) (318,519 ) (477,785 ) (12,443 ) 17,546 (8,885,146 ) (8,363,586 ) Accumulated other comprehensive loss (32,169 ) (12,443 ) Treasury stock 182,878,295 and 167,342,069 shares, respectively (9,601,218 ) (8,885,146 ) 1,905,049 2,050,068 1,655,728 1,905,049 55,091 — 51,907 55,091 1,960,140 2,050,068 1,707,635 1,960,140 $ 3,409,865 $ 3,329,079 $ 3,805,828 $ 3,409,865 Years Ended December 31, Years Ended December 31, 2011 2010 2009 2012 2011 2010 (In thousands, except per share data) (In thousands, except per share data) $ 2,059,444 $ 1,636,815 $ 1,346,695 $ 2,800,933 $ 2,059,444 $ 1,636,815 761,244 593,816 429,849 992,470 761,244 593,816 614,174 492,206 463,439 898,761 614,174 492,206 328,728 316,500 282,393 396,013 328,728 316,500 78,760 65,097 57,843 101,869 78,760 65,097 56,719 63,897 61,391 52,481 56,719 63,897 22,057 27,472 157,031 35,771 22,057 27,472 — — 15,868 — 28,032 916,868 — — 28,032 1,861,682 1,587,020 2,384,682 2,477,365 1,861,682 1,587,020 197,762 49,795 (1,037,987 ) Operating income 323,568 197,762 49,795 (36,300 ) (25,676 ) (14,014 ) (25,345 ) (36,300 ) (25,676 ) 10,060 (1,433 ) 105,002 171,522 22,686 (946,999 ) 4,047 (32,079 ) (9,474 ) Other (expense) income, net (9,161 ) 10,060 (1,433 ) Earnings from continuing operations before income taxes 289,062 171,522 22,686 Income tax (provision) benefit (119,215 ) 4,047 (32,079 ) 175,569 (9,393 ) (956,473 ) 169,847 175,569 (9,393 ) — 140,768 — — — 140,768 (3,992 ) (37,023 ) (23,439 ) (9,051 ) (3,992 ) (37,023 ) 171,577 94,352 (979,912 ) 2,656 5,007 1,090 $ 174,233 $ 99,359 $ (978,822 ) Net earnings 160,796 171,577 94,352 Net (earnings) loss attributable to noncontrolling interests (1,530 ) 2,656 5,007 Net earnings attributable to IAC shareholders $ 159,266 $ 174,233 $ 99,359 $ 2.05 $ (0.04 ) $ (6.89 ) $ 1.95 $ 2.05 $ (0.04 ) $ 1.89 $ (0.04 ) $ (6.89 ) $ 1.81 $ 1.89 $ (0.04 ) $ 2.01 $ 0.93 $ (7.06 ) $ 1.85 $ 0.93 $ (7.06 ) Basic earnings per share $ 1.85 $ 2.01 $ 0.93 Diluted earnings per share $ 1.71 $ 1.85 $ 0.93 Dividends declared per share $ 0.72 $ 0.12 $ — $ 5,359 $ 4,510 $ 3,137 $ 6,219 $ 5,359 $ 4,510 4,807 4,228 3,191 4,760 4,807 4,228 70,894 69,082 58,905 68,640 70,894 69,082 7,528 6,460 4,848 6,006 7,528 6,460 $ 88,588 $ 84,280 $ 70,081 $ 85,625 $ 88,588 $ 84,280 SHAREHOLDERS' EQUITYCOMPREHENSIVE INCOME Class B
Convertible
Common
Stock $.001
Par Value Common
Stock $.001
Par Value Accumulated
Other
Comprehensive
Income (Loss) Additional
Paid-in
Capital Accumulated
Deficit Treasury
Stock Noncontrolling
Interests $ Shares $ Shares Total (In thousands) $ 210 210,217 $ 16 16,157 $ 10,731,149 $ 227,445 $ 2,180 $ (6,914,329 ) $ — $ 4,046,671 — — — — — (978,822 ) — — — (978,822 ) — — — — — — 14,918 — — 14,918 — — — — — — 7,405 — — 7,405 — (956,499 ) — — — — 69,629 — — — — 69,629 1 834 — — 7,430 — — — — 7,431 — — — — (11,737 ) — — — — (11,737 ) 12 11,607 — — 152,682 — — — — 152,694 — — — — — — — (554,203 ) — (554,203 ) — — — — (1,033 ) — — — — (1,033 ) — — — — (10,044 ) — — — — (10,044 ) — — — — 4,052 — — — — 4,052 $ 223 222,658 $ 16 16,157 $ 10,942,128 $ (751,377 ) $ 24,503 $ (7,468,532 ) $ — $ 2,746,961 — — — — — 99,359 — — — 99,359 — — — — — — (4,237 ) — — (4,237 ) — — — — — — (2,720 ) — — (2,720 ) — 92,402 — — — — 85,048 — — — — 85,048 3 2,864 — — 30,930 — — — — 30,933 — — — — (12,237 ) — — — — (12,237 ) — — — — — — — (530,885 ) — (530,885 ) — — — — — — — (364,169 ) — (364,169 ) — — — — 2,059 — — — — 2,059 — 352 — — (44 ) — — — — (44 ) $ 226 225,874 $ 16 16,157 $ 11,047,884 $ (652,018 ) $ 17,546 $ (8,363,586 ) $ — $ 2,050,068 — — — — — 174,233 — — (2,417 ) 171,816 — — — — — — (41,201 ) — (5,269 ) (46,470 ) — — — — — — 11,212 — — 11,212 (7,686 ) 136,558 — — — — — — — — 64,831 64,831 — — — — 86,725 — — — 1,049 87,774 5 5,010 — — 56,731 — — — — 56,736 — — — — 28,363 — — — — 28,363 3 3,217 — — 76,039 — — — — 76,042 — — — — (11,296 ) — — — (3,103 ) (14,399 ) — — — — — — — (518,637 ) — (518,637 ) — — — — — — — (2,923 ) — (2,923 ) — — — — (4,273 ) — — — — (4,273 ) $ 234 234,101 $ 16 16,157 $ 11,280,173 $ (477,785 ) $ (12,443 ) $ (8,885,146 ) $ 55,091 $ 1,960,140 Years Ended December 31, 2012 2011 2010 (In thousands) Net earnings $ 160,796 $ 171,577 $ 94,352 Other comprehensive income (loss): Change in foreign currency translation adjustment (net of tax benefit of $4,711 in 2010) 712 (49,438 ) (4,504 ) (19,827 ) 11,212 (2,720 ) Total other comprehensive loss (19,115 ) (38,226 ) (7,224 ) Comprehensive income 141,681 133,351 87,128 Comprehensive (income) loss attributable to noncontrolling interests (2,141 ) 10,893 5,274 Comprehensive income attributable to IAC shareholders $ 139,540 $ 144,244 $ 92,402 CASH FLOWSSHAREHOLDERS' EQUITY Years Ended December 31, 2011 2010 2009 (In thousands) $ 171,577 $ 94,352 $ (979,912 ) 3,992 (103,745 ) 23,439 175,569 (9,393 ) (956,473 ) 88,588 84,280 70,081 56,719 63,897 61,391 22,057 27,472 157,031 — — 15,868 — 28,032 916,868 — 7,844 4,936 (35,483 ) (6,074 ) 27,707 36,300 25,676 14,014 — — (132,244 ) (1,974 ) (3,989 ) (28,835 ) — — 58,097 (58,314 ) (32,901 ) (18,121 ) 1,287 (8,636 ) 6,458 57,228 54,188 18,825 (29,215 ) 76,749 109,009 48,950 19,653 14,238 10,674 13,909 9,697 372,386 340,707 348,547 (278,469 ) (17,333 ) (85,534 ) (39,954 ) (39,829 ) (33,938 ) 584,935 763,326 229,583 (203,970 ) (838,155 ) (586,274 ) 15,214 5,324 64,046 (90,245 ) (2,283 ) (6,482 ) — 11,355 — (12,697 ) (501 ) (4,041 ) (25,186 ) (118,096 ) (422,640 ) (507,765 ) (539,598 ) (545,489 ) 132,785 25,939 151,933 (10,668 ) — — 22,166 14,291 796 — — (14,331 ) — (217,921 ) — (8,751 ) 79 1,294 (372,233 ) (717,210 ) (405,797 ) (25,033 ) (494,599 ) (479,890 ) (8,417 ) (7,545 ) (24,708 ) (4,496 ) (1,754 ) 5,601 (37,946 ) (503,898 ) (498,997 ) 742,099 1,245,997 1,744,994 $ 704,153 $ 742,099 $ 1,245,997 IAC Shareholders' Equity Common Stock $.001 Par Value Class B Convertible Common Stock $.001 Par Value $ Shares $ Shares Accumulated Deficit (In thousands) Balance as of December 31, 2009 $ 28,180 $ 223 222,658 $ 16 16,157 $ 10,942,128 $ (751,377 ) $ 24,503 $ (7,468,532 ) $ 2,746,961 $ — $ 2,746,961 Net (loss) earnings for the year ended December 31, 2010 (5,007 ) — — — — — 99,359 — — 99,359 — 99,359 Other comprehensive loss, net of tax (267 ) — — — — — — (6,957 ) — (6,957 ) — (6,957 ) Noncontrolling interests related to acquisitions 23,583 — — — — — — — — — — — Noncontrolling interests created by a decrease in the ownership of a subsidiary contributed to a consolidated Latin American venture 15,750 — — — — — — — — — — — Non-cash compensation expense — — — — — 85,048 — — — 85,048 — 85,048 Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes — 3 2,864 — — 30,930 — — — 30,933 — 30,933 Income tax provision related to the exercise of stock options, vesting of restricted stock units and other — — — — — (12,237 ) — — — (12,237 ) — (12,237 ) Purchase of treasury stock — — — — — — — — (530,885 ) (530,885 ) — (530,885 ) Receipt of stock in the Liberty Exchange — — — — — — — — (364,169 ) (364,169 ) — (364,169 ) Adjustment of redeemable noncontrolling interests to fair value (2,059 ) — — — — 2,059 — — — 2,059 — 2,059 Other (311 ) — 352 — — (44 ) — — — (44 ) — (44 ) Balance as of December 31, 2010 $ 59,869 $ 226 225,874 $ 16 16,157 $ 11,047,884 $ (652,018 ) $ 17,546 $ (8,363,586 ) $ 2,050,068 $ — $ 2,050,068 Net (loss) earnings for the year ended December 31, 2011 (239 ) — — — — — 174,233 — — 174,233 (2,417 ) 171,816 Other comprehensive loss, net of tax (2,968 ) — — — — — — (29,989 ) — (29,989 ) (5,269 ) (35,258 ) Noncontrolling interests related to acquisition of Meetic S.A. 36,656 — — — — — — — — — 64,831 64,831 Decrease in redeemable noncontrolling interests in a consolidated Latin American venture resulting from the acquisition of Meetic (37,917 ) — — — — — — — — — — — Non-cash compensation expense — — — — — 86,725 — — — 86,725 1,049 87,774 Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes — 5 5,010 — — 56,731 — — — 56,736 — 56,736 Income tax benefit related to the exercise of stock options, vesting of restricted stock units and other — — — — — 28,363 — — — 28,363 — 28,363 Issuance of common stock upon the exercise of warrants — 3 3,217 — — 76,039 — — — 76,042 — 76,042 Dividends — — — — — (11,296 ) — — — (11,296 ) (3,103 ) (14,399 ) Purchase of treasury stock — — — — — — — — (518,637 ) (518,637 ) — (518,637 ) Receipt of stock in the Liberty Exchange — — — — — — — — (2,923 ) (2,923 ) — (2,923 ) Purchase of noncontrolling interests (5,779 ) — — — — — — — — — — — Adjustment of redeemable noncontrolling interests to fair value 4,273 — — — — (4,273 ) — — — (4,273 ) — (4,273 ) Other (3,546 ) — — — — — — — — — — — Balance as of December 31, 2011 $ 50,349 $ 234 234,101 $ 16 16,157 $ 11,280,173 $ (477,785 ) $ (12,443 ) $ (8,885,146 ) $ 1,905,049 $ 55,091 $ 1,960,140 IAC Shareholders' Equity Common Stock $.001 Par Value Class B Convertible Common Stock $.001 Par Value $ Shares $ Shares Accumulated Deficit (In thousands) Net (loss) earnings for the year ended December 31, 2012 (1,118 ) — — — — — 159,266 — — 159,266 2,648 161,914 Other comprehensive income (loss), net of tax 207 — — — — — — (19,726 ) — (19,726 ) 404 (19,322 ) Non-cash compensation expense — — — — — 82,807 — — — 82,807 2,818 85,625 Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes — 5 5,153 — — (16,503 ) — — — (16,498 ) — (16,498 ) Income tax benefit related to the exercise of stock options, vesting of restricted stock units and other — — — — — 49,967 — — — 49,967 — 49,967 Issuance of common stock upon the exercise of warrants — 12 11,728 — — 284,099 — — — 284,111 — 284,111 Dividends — — — — — (68,901 ) — — — (68,901 ) — (68,901 ) Purchase of treasury stock — — — — — — — — (716,072 ) (716,072 ) — (716,072 ) Purchase of redeemable noncontrolling interests (2,955 ) — — — — — — — — — — — Adjustment of redeemable noncontrolling interests to fair value 4,275 — — — — (4,275 ) — — — (4,275 ) — (4,275 ) Transfer from noncontrolling interests to redeemable noncontrolling interests 10,049 — — — — — — — — — (10,049 ) (10,049 ) Other (2,681 ) — — — — — — — — — 995 995 Balance as of December 31, 2012 $ 58,126 $ 251 250,982 $ 16 16,157 $ 11,607,367 $ (318,519 ) $ (32,169 ) $ (9,601,218 ) $ 1,655,728 $ 51,907 $ 1,707,635 Years Ended December 31, 2012 2011 2010 (In thousands) Cash flows from operating activities attributable to continuing operations: Net earnings $ 160,796 $ 171,577 $ 94,352 Less: (loss) earnings from discontinued operations, net of tax (9,051 ) (3,992 ) 103,745 Earnings (loss) from continuing operations 169,847 175,569 (9,393 ) Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by operating activities attributable to continuing operations: Non-cash compensation expense 85,625 88,588 84,280 Depreciation 52,481 56,719 63,897 Amortization of intangibles 35,771 22,057 27,472 Goodwill impairment — — 28,032 Impairment of long-term investments 8,685 — 7,844 Deferred income taxes 37,076 (35,483 ) (6,074 ) Equity in losses of unconsolidated affiliates 25,345 36,300 25,676 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable (30,991 ) (58,314 ) (32,901 ) Other current assets (22,991 ) 1,287 (8,636 ) Accounts payable and other current liabilities (14,384 ) 57,228 54,188 Income taxes payable (10,091 ) (29,215 ) 76,749 Deferred revenue 1,864 48,950 19,653 Other, net 16,290 8,700 9,920 Net cash provided by operating activities attributable to continuing operations 354,527 372,386 340,707 Cash flows from investing activities attributable to continuing operations: Acquisitions, net of cash acquired (411,035 ) (278,469 ) (17,333 ) Capital expenditures (51,201 ) (39,954 ) (39,829 ) Proceeds from maturities and sales of marketable debt securities 195,501 584,935 763,326 Purchases of marketable debt securities (53,952 ) (203,970 ) (838,155 ) Proceeds from sales of long-term investments 14,194 15,214 5,324 Purchases of long-term investments (36,094 ) (90,245 ) (2,283 ) Dividend received from Meetic S.A. — — 11,355 Other, net (9,501 ) (12,697 ) (501 ) Net cash used in investing activities attributable to continuing operations (352,088 ) (25,186 ) (118,096 ) Cash flows from financing activities attributable to continuing operations: Proceeds from issuance of long-term debt 500,000 — — Purchase of treasury stock (691,830 ) (507,765 ) (539,598 ) Issuance of common stock, net of withholding taxes 262,841 132,785 25,939 Dividends (68,163 ) (10,668 ) — Excess tax benefits from stock-based awards 57,101 22,166 14,291 Liberty Exchange — — (217,921 ) Other, net (15,648 ) (8,751 ) 79 Net cash provided by (used in) financing activities attributable to continuing operations 44,301 (372,233 ) (717,210 ) Total cash provided by (used in) continuing operations 46,740 (25,033 ) (494,599 ) Total cash used in discontinued operations (3,472 ) (8,417 ) (7,545 ) Effect of exchange rate changes on cash and cash equivalents 2,556 (4,496 ) (1,754 ) Net increase (decrease) in cash and cash equivalents 45,824 (37,946 ) (503,898 ) Cash and cash equivalents at beginning of period 704,153 742,099 1,245,997 Cash and cash equivalents at end of period $ 749,977 $ 704,153 $ 742,099 operatesis a leading media and internet company comprised of more than 50 leading150 brands and diversified Internet businessesproducts, including Ask.com, About.com, Match.com, HomeAdvisor.com and Vimeo.com. Focused in the areas of search, applications, online dating, local and media, IAC's family of websites is one of largest in the world, with more than a billion monthly visits across 30 countries... our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world.than 30 countries. IAC includes the businesses comprising its Search segment; its& Applications, Match, Local, Media and ServiceMagic segments; the businesses comprising its Media & Other segment;segments, as well as investments in unconsolidated affiliates.of Mindspark, a digital consumer products business consisting of our B2C operations, through which we develop, market and distribute downloadable applications, and our B2B operations, through which we provide customized browser-based applications for software and media companies; destination websites,of: Websites, including Ask.com, About.com and Dictionary.com, through which we provide search services and additional services;content; and CityGrid Media, an online media company that aggregatesApplications, including our direct to consumer downloadable applications business ("B2C") and integrates local contentour partnership operations ("B2B"), as well as our Ask.com and advertising for distribution to publishers across web and mobile platforms.Matchadvertiser-supportedad-supported online personals services in the United StatesNorth America, Europe, Latin America, Australia and various jurisdictions abroad.Asia. We provide these services through websites and applications that we own and operate, as well asoperate. Our European operations are conducted through our mobile applications. Through Match, we own an 81% stake in Meetic, S.A. ("Meetic"), a European online dating companywhich is based in France. See Note 5 for additional information related to the Meetic acquisition.ServiceMagic ServiceMagicStates thatStates. HomeAdvisor connects consumers, by way of patented proprietary technologies, with home and other local serviceservices professionals, all of which are pre-screened and the majority of which are customer-rated. Through ServiceMagic International, we operatea majority investment, HomeAdvisor also operates businesses in the local lead generationonline home services space in France and the United Kingdom.& Other & Other segment consists primarily of Vimeo, Electus, Connected Ventures (which operates CollegeHumor Media and Notional), Vimeo, Pronto,News_Beast (formerly The Newsweek/DailyBeast Company) and DailyBurn.Hatch Labs.$217.9$217.9 million in cash for substantially all of Liberty Media Corporation's ("Liberty") equity stake in IAC (the "Liberty Exchange"). See Note 12 for additional information related to this exchange. In addition, during the fourth quarter of 2010, InstantAction ceased operations. Evite, Gifts.com, IAC Advertising Solutions and InstantAction were previously reported in IAC's former Media & Other segment. IAC Advertising Solutions was previouslyIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 1—ORGANIZATION (Continued)reported in IAC's Search segment through December 31, 2009 and IAC's Media & Other segment for the year ended December 31, 2010.interest, whether through voting interests or variable interests. The Company's consolidated financial statements include one variable interest entity, in which the Company has a controlling financial interest through voting rights and is also the primary beneficiary.interest. Intercompany transactions and accounts have been eliminated.toto: the fair values of marketable securities and other investments,investments; the recoverability of goodwill and indefinite-lived intangible assets,assets; the useful lives and recovery of definite-lived intangible assets and property and equipment,equipment; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts and other revenue related reserves,reserves; the reserves for income tax contingencies,contingencies; the valuation allowance for deferred income tax assetsassets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets and other factors that the Company considers relevant.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Match Match'sRevenue of media businesses included in this segment is generated primarily through advertising, media production and subscriptions. Advertising revenue consists primarily ofis recognized every time an ad is displayed or over the period earned, media production revenue is recognized based on delivery and acceptance and subscription fee revenue generated from customers who subscribe to online personals services on Match.com and most of Match's other personals websites. Subscription fee revenue is recognized over the terms of the applicable subscriptions, which primarily range from are one to six months. Deferred revenue at Match totaled $94.9 million and $57.4 million at December 31, 2011 and 2010, respectively. Match also earns revenue from online advertising, primarily from OkCupid, which was acquired in January 2011. Online advertising revenue is recognized every time an ad is displayed.ServiceMagic month or ServiceMagic's lead acceptance revenue is generated and recognized when an in-network home service professional is delivered a consumer lead. ServiceMagic's activation revenue is generated through the enrollment and activation of a new home service professional. Activation revenue is initially deferred and recognized over 24 months. Prior to 2010, the period of recognition was 36 months. The change was based on an updated estimate of the economic life of an in-network home service professional. Deferred revenue totaled $3.8 million and $5.0 million at December 31, 2011 and 2010, respectively.
OtherIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Media & OtherAllowancesAccruals for returned merchandise are based 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 generated primarily through online advertising, media production and subscriptions. Online advertising revenue is recognized every time an ad is displayed or over the period earned, media production revenue is recognized based on delivery and acceptance and subscription fee revenue is recognized over the terms of the applicable subscriptions, which are one month or one year.treasury and government agency money market funds and commercial paper rated A2/P2 or better.funds. Internationally, cash equivalents primarily consist of AAA prime and governmentrated money market funds and time deposits. states of the U.S. and subdivisions thereof and investment grade corporate issuers. The Company only invests in marketable securities with active secondary or resale markets to ensure portfolio liquidity and the ability to readily convert investments into cash to fund current operations or satisfy other cash requirements as needed. From time to time, the Company may invest in marketable equity securities as part of its investment strategy. All marketable securities are classified as available-for-sale and are reported at fair value. The unrealized gains and losses on marketable securities, net of tax, are included in accumulated other comprehensive income as a separate component of shareholders' equity. The specific-identification method is used to determine the cost of securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income into earnings.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Asset Category Estimated3 to 39 Years 2 to 3 Years 3 to 10 Years amounted to $29.2is $33.4 million and $33.9$29.2 million as of at December 31, 2012 and 2011, and 2010, respectively.testsassesses goodwill and indefinite-lived intangible assets for impairment annually as of October 1, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value. In 2012, the Company adopted Accounting Standards Update ("ASU") 2011-08, "Testing Goodwill for Impairment", which gives companies the option to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit's goodwill is necessary. If it is more likely than not that the fair value of the reporting unit is less than its carrying value, then the goodwill must be tested using a two-step process based on prior accounting guidance, and if the carrying value of a reporting unit's goodwill exceeds its implied fair value, an impairment loss equal to the excess is recorded. IfThe Company also adopted Accounting Standards Update 2012-02 "Testing Indefinite-Lived Intangible Assets for Impairment" in 2012, which gives companies the carryingoption to qualitatively assess whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. If it is not more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value, the fair value of the asset does not need to be determined. If it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value, then the indefinite-lived intangible asset must be tested based on prior accounting guidance, and if its carrying value exceeds its estimated fair value, an impairment loss equal to the excess is recorded. See Note 6 for discussion of impairment charges recorded in 2010 and 2009.2010. There wereare no impairment charges recorded in 2012 and 2011.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)IAC Search & MediaApplications Search CityGrid MediaSearch & ApplicationsMatch Match ServiceMagicHomeAdvisor ServiceMagicLocalShoebuyCityGrid Media Media & OtherLocalConnected Ventures Media & DailyBurn Media Shoebuy Other Tutor Other &and Other includesinclude other operating segments that do not have goodwill. See Note 15 for additional information regarding the Company's method of determining operating and reportable segments.sixseven reporting units, excluding Tutor which was acquired in December 2012, exceed their carrying values by more than 20% at October 1, 2011,2012, the date of our most recent annual impairment assessment.••isare primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.•IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)assetassets or liability.liabilities. See Note 9 for a discussion of assets measured at fair value measurements made using Level 3 inputs.measured atadjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs. See Note 6 for a discussion of goodwill and intangible asset impairment charges and Note 8 for a discussion of impairment charges related to equity and cost method investments.Mindspark'sour B2B customized browser-based applications, integrate our paid listings into their websites or direct traffic to our 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. (excluding Amortization of Non-Cash Marketing)Mindspark'sour B2C downloadable applications, and offline marketing, principally television and radio advertising. Advertising expense was $497.2is $779.7 million $371.2, $497.2 million and $347.8$371.2 million for the years ended December 31, 2012, 2011 and 2010, and 2009, respectively.Mindspark'sour B2C operations. These fees are amortized over the estimated useful lives of the access points to the extent the Company can reasonably estimate a probable future economic benefit and the period over which such benefit will be realized (generally 18 months). Otherwise, the fees are charged to expense as incurred.Amortization of Non-Cash Marketing Amortization of non-cash marketing 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 (collectively referred to as the "NBC Universal Advertising"). The NBC Universal Advertising was available for television advertising on various NBC Universal network and cable channels without any cash cost. All NBC Universal Advertising credits were used prior to December 31, 2009.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)vestvested resulting in the issuance of common stock that could share in the earnings of the Company.(expense), net.$9.2$9.2 million during the year ended December 31, 2011, and are included in "Loss from discontinued operations, net of tax" in the accompanying consolidated statement of operations.fivefour years. During 2011, one of these arrangements became exercisable. There were are no put and call arrangements that became exercisable during 2012 and 2010. During 2011, one of these arrangements became exercisable. These putIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2010 and 2009,2010, the Company recorded adjustments of $4.3$4.3 million $(2.1), $4.3 million and $1.0$(2.1) million, respectively, to increase (reduce) these interests to fair value. in accordance with Accounting Standards Update ("ASU") 2009-04, "Accounting for Redeemable Equity Investments-Amendment to ASC 480-10-599", securities that are redeemable at the option of the holder and not solely within the control of the issuer, must be classified outside of shareholders' equity. Accordingly, if redemption of the noncontrolling interests is outside the control of the Company, the interests are included outside of shareholders' equity in the mezzanine section of the accompanying consolidated balance sheet, outside of shareholders' equity.&and Other segment.segments. Redeemable noncontrolling interests at December 31, 2010 primarily relate to the international operations of Match and certain operations included in the Media &and Other segment. Redeemable noncontrolling interests at December 31, 2009 primarily relate to certain operations included in the Media & Other segment.attributable toderived from online advertising, the market for which is highly competitive and rapidly changing. Significant changes in this industry or changes in customer buyingadvertising spending behavior or advertiser spendingin customer buying behavior could adversely affect our operating results. Most of the Company's online advertising revenue is attributable to a paid listing supplyservices agreement with Google, which expires on March 31, 2016. Our services agreement requires that we comply with certain guidelines promulgated by Google. Subject to certain limitations, Google may unilaterally update its policies and guidelines, which could in turn require modifications to, or prohibit and/or render obsolete certain of, our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results of operations. For the years ended December 31, 2012, 2011 2010 and 2009,2010, revenue earned from Google was $970.4is $1.4 billion, $970.4 million $727.9 and $727.9 million and $561.9 million,, respectively. The majority of thisThis revenue wasis earned by the businesses comprising the Search & Applications segment. Accounts receivable related to revenue earned from Google totaled $105.7$125.3 million and $70.5$105.7 million at December 31, 20112012 and 2010,2011, respectively. December 31, 2012 2011 (In thousands) Other current assets: Income taxes receivable $ 27,437 $ 7,728 Prepaid expenses 22,877 19,769 Capitalized downloadable search toolbar costs, net 22,205 17,704 Deferred income taxes 20,343 41,045 Production costs 20,099 12,538 Other 43,378 13,471 Other current assets $ 156,339 $ 112,255 December 31, 2012 2011 (In thousands) Property and equipment, net: Buildings and leasehold improvements $ 238,652 $ 235,737 Computer equipment and capitalized software 197,402 186,016 Furniture and other equipment 42,949 43,156 Projects in progress 19,303 7,643 Land 5,117 5,117 503,423 477,669 Accumulated depreciation and amortization (232,911 ) (218,081 ) Property and equipment, net $ 270,512 $ 259,588 NOTE 3—CONSOLIDATED FINANCIAL STATEMENT DETAILSOther current assets December 31, 2011 2010 (In thousands) $ 41,045 $ 34,921 19,769 14,560 17,704 15,804 7,728 19,831 26,009 33,192 $ 112,255 $ 118,308 December 31, 2012 2011 (In thousands) Other non-current assets: Income taxes receivable $ 79,130 $ 58,870 Other 39,100 21,891 Other non-current assets $ 118,230 $ 80,761 Property and equipment, net December 31, 2011 2010 (In thousands) $ 235,737 $ 234,328 186,016 183,055 43,156 41,930 7,643 2,944 5,117 5,117 477,669 467,374 (218,081 ) (199,446 ) $ 259,588 $ 267,928 December 31, 2012 2011 (In thousands) Accrued expenses and other current liabilities: Accrued revenue share expense $ 78,196 $ 80,628 Accrued advertising expense 73,381 68,782 Accrued employee compensation and benefits 51,537 83,692 Unsettled treasury stock purchases 35,113 10,871 Income taxes payable 17,679 3,630 Other 99,326 95,887 Accrued expenses and other current liabilities $ 355,232 $ 343,490 Other non-current assets December 31, 2011 2010 (In thousands) $ 58,870 $ 56,675 21,891 25,233 $ 80,761 $ 81,908 December 31, 2012 2011 (In thousands) Accumulated other comprehensive loss: Foreign currency translation adjustment, net of tax $ (25,073 ) $ (25,174 ) Unrealized (losses) gains on available-for-sale securities, net of tax (7,096 ) 12,731 Accumulated other comprehensive loss $ (32,169 ) $ (12,443 ) Years Ended December 31, 2012 2011 2010 (In thousands) Revenue: Service revenue $ 2,639,409 $ 1,932,289 $ 1,522,217 Product revenue 161,524 127,155 114,598 Revenue $ 2,800,933 $ 2,059,444 $ 1,636,815 Years Ended December 31, 2012 2011 2010 (In thousands) Cost of revenue: Cost of service revenue $ 837,113 $ 666,424 $ 508,640 Cost of product revenue 155,357 94,820 85,176 Cost of revenue $ 992,470 $ 761,244 $ 593,816 NOTE 3—CONSOLIDATED FINANCIAL STATEMENT DETAILS (Continued)Accrued expenses and other current liabilities December 31, 2011 2010 (In thousands) $ 83,692 $ 56,878 80,434 58,097 68,782 43,418 110,582 63,930 $ 343,490 $ 222,323 Redeemable noncontrolling interests Years Ended December 31, 2011 2010 2009 (In thousands) $ 59,869 $ 28,180 $ 22,771 36,656 — — — 20,250 — — 15,750 — — 3,333 3,561 (37,917 ) — — (5,779 ) — (216 ) (1,755 ) — — 199 79 1,750 (239 ) (5,007 ) (1,090 ) 4,273 (2,059 ) 1,033 (2,968 ) (267 ) 371 (1,990 ) (390 ) — $ 50,349 $ 59,869 $ 28,180 Years Ended December 31, 2012 2011 2010 (In thousands) Other (expense) income, net: Interest income $ 3,462 $ 5,205 $ 6,517 Interest expense (6,149 ) (5,430 ) (5,404 ) Non-income tax refunds related to Match Europe, which was sold in 2009 — 4,630 — Foreign currency exchange (losses) gains, net (1,050 ) 3,660 314 Gains on sales of investments 3,326 1,974 3,989 Impairment of long-term investments (8,685 ) — (7,844 ) Other (65 ) 21 995 Other (expense) income, net $ (9,161 ) $ 10,060 $ (1,433 ) IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 3—CONSOLIDATED FINANCIAL STATEMENT DETAILS (Continued)Accumulated other comprehensive (loss) income December 31, 2011 2010 (In thousands) $ (25,174 ) $ 16,027 12,731 1,519 $ (12,443 ) $ 17,546 Revenue Years Ended December 31, 2011 2010 2009 (In thousands) $ 1,932,289 $ 1,522,217 $ 1,240,787 127,155 114,598 105,908 $ 2,059,444 $ 1,636,815 $ 1,346,695 Cost of revenue Years Ended December 31, 2011 2010 2009 (In thousands) $ 666,424 $ 508,640 $ 352,824 94,820 85,176 77,025 $ 761,244 $ 593,816 $ 429,849 Other income (expense), net Years Ended December 31, 2011 2010 2009 (In thousands) $ 5,205 $ 6,517 $ 10,218 (5,430 ) (5,404 ) (5,823 ) 4,630 — — 3,660 314 1,228 1,974 3,989 28,835 — (7,844 ) (343 ) — — 132,244 — — (4,593 ) — — (58,097 ) 21 995 1,333 $ 10,060 $ (1,433 ) $ 105,002 IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (loss) from continuing operations before income taxes are as follows: Years Ended December 31, Years Ended December 31, 2011 2010 2009 2012 2011 2010 (In thousands) (In thousands) $ 142,623 $ 20,603 $ (1,046,009 ) $ 214,675 $ 142,623 $ 20,603 28,899 2,083 99,010 74,387 28,899 2,083 $ 171,522 $ 22,686 $ (946,999 ) $ 289,062 $ 171,522 $ 22,686 provision for income taxes attributable to continuing operations are as follows: Years Ended December 31, Years Ended December 31, 2011 2010 2009 2012 2011 2010 (In thousands) (In thousands) $ 49,450 $ 27,271 $ (23,186 ) $ 56,439 $ 49,450 $ 27,271 (26,510 ) 7,785 2,744 9,204 (26,510 ) 7,785 8,496 3,097 2,209 16,496 8,496 3,097 31,436 38,153 (18,233 ) Current income tax provision 82,139 31,436 38,153 Deferred income tax provision (benefit): (23,293 ) (7,031 ) 29,287 40,414 (23,293 ) (7,031 ) 639 1,646 (769 ) 1,978 639 1,646 (12,829 ) (689 ) (811 ) (5,316 ) (12,829 ) (689 ) (35,483 ) (6,074 ) 27,707 $ (4,047 ) $ 32,079 $ 9,474 Deferred income tax provision (benefit) 37,076 (35,483 ) (6,074 ) Income tax provision (benefit) $ 119,215 $ (4,047 ) $ 32,079 $18.0$57.1 million $5.2, $22.2 million and $0.8$10.0 million for the years ended December 31, 2012, 2011 2010 and 2009,2010, respectively, for excess tax deductions attributable to stock-based compensation. The related income tax benefits were recorded as amounts credited to additional paid-in capital or a reduction in goodwill. In addition, the current income tax payable was reduced by $4.1 million, $4.8 million and $4.3 million for the years ended December 31, 2011, 2010 and 2009, respectively, for excess tax deductions attributable tocompensation including settlements of vested stock-based awards denominated in subsidiaries' equity. The related income tax benefits wereare recorded as amounts creditedincreases to additional paid-in-capital.paid-in capital.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 4—INCOME TAXES (Continued) December 31, December 31, 2011 2010 2012 2011 (In thousands) (In thousands) $ 25,130 $ 18,361 $ 13,708 $ 25,130 31,000 35,298 27,177 31,000 10,518 12,765 5,095 10,518 84,543 68,633 66,962 84,543 57,016 64,191 60,596 57,016 — 10,339 Fair value investments 11,474 578 12,850 — 13,809 12,850 22,490 32,103 14,089 21,912 243,547 241,690 212,910 243,547 (45,084 ) (40,266 ) (60,783 ) (45,084 ) 198,463 201,424 152,127 198,463 (16,264 ) (16,648 ) (6,018 ) (16,264 ) (374,282 ) (378,704 ) (373,652 ) (374,282 ) (56,597 ) — (60,830 ) (56,597 ) — (32,601 ) (11,437 ) (8,124 ) (14,602 ) (11,437 ) (458,580 ) (436,077 ) (455,102 ) (458,580 ) $ (260,117 ) $ (234,653 ) $ (302,975 ) $ (260,117 ) 20112012 and 20102011 is a current deferred tax asset of $41.0$20.3 million and $34.9$41.0 million, respectively, and included in "Other non-current assets" in the accompanying consolidated balance sheet at December 31, 20112012 and 20102011 is a non-current deferred tax asset of $1.4$0.1 million and $0.9$1.4 million, respectively. In addition, included in "Accrued expenses and other current liabilities" in the accompanying consolidated balance sheet at December 31, 2011 is a current deferred tax liability of $0.4 million.$0.4 million.2011,2012, the Company hadhas federal and state net operating losses ("NOLs") of $35.1$29.6 million and $115.6$92.1 million, respectively. If not utilized, the federal NOLs will expire at various times between 2023 and 2031,2032, and the state NOLs will expire at various times between 20122013 and 2031.2032. Utilization of federal NOLs will be subject to limitations under Section 382 of the Internal Revenue Code 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, 2011,2012, the Company hadhas foreign NOLs of $48.2$46.5 million available to offset future income. Of these foreign NOLs, $42.1$40.0 million can be carried forward indefinitely and $6.1$6.5 million will expire at various timesIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 4—INCOME TAXES (Continued)20122013 and 2031.2032. During 2011,2012, the Company recognized tax benefits related to NOLs of $2.7 million.was $1.1is $0.6 million of tax benefits of acquired attributes which was recorded as a reduction in goodwill. At December 31, 2011,2012, the Company had $3.1has $8.9 million of federal capital losses and $267.4$248.4 million of state capital losses. If not utilized, the federal capital losses will expire in 2015, and the state capital losses will expire between 2013 and 2015.2017. Utilization of capital losses will be limited to the Company's ability to generate future capital gains.2011,2012, the Company hadhas tax credit carryforwards of $12.1 million.$14.9 million. Of this amount, $6.2$4.6 million related to federal credits for foreign taxes, $4.9$8.8 million related to state tax credits for research activities, and $1.0$1.4 million related to various state and local tax credits. Of these credit carryforwards, $5.9$10.2 million can be carried forward indefinitely and $6.2$4.6 million will expire within ten years.2011,2012, the Company's valuation allowance increased by $4.8$15.7 million primarily due to an unbenefited other-than-temporary impairment and unrealized losses fromin long-term marketable equity method investments. Of this amount, $1.8 million relates to a changesecurities included in judgment about the realizability of beginning of the year deferred tax assets.accumulated other comprehensive income and an increase in federal net operating losses. At December 31, 2011,2012, the Company hadhas a valuation allowance of $45.1$60.8 million related to the portion of tax loss carryforwards and other items for which it is more likely than not that the tax benefit will not be realized. provision to the amounts computed by applying the statutory federal income tax rate to earnings (loss) from continuing operations before income taxes is shown as follows: Years Ended December 31, 2011 2010 2009 (In thousands) $ 60,033 $ 7,940 $ (331,450 ) (43,696 ) — — (15,493 ) 8,696 14,558 (11,774 ) (4,957 ) (182 ) (7,298 ) (38 ) (370 ) 4,595 2,420 1,947 5,592 5,310 1,916 (1,076 ) (5,255 ) (5,200 ) — 13,661 315,886 — — 9,175 5,070 4,302 3,194 $ (4,047 ) $ 32,079 $ 9,474 Years Ended December 31, 2012 2011 2010 (In thousands) Income tax provision at the federal statutory rate of 35% $ 101,172 $ 60,033 $ 7,940 Reversal of deferred tax liability associated with investment in Meetic — (43,696 ) — Change in tax reserves, net 17,703 (15,493 ) 8,696 Foreign income taxed at a different statutory tax rate (16,240 ) (11,774 ) (4,957 ) Net adjustment related to the reconciliation of income tax provision accruals to tax returns (3,876 ) (7,298 ) (38 ) Federal valuation allowance on equity method investments 979 4,595 2,420 State income taxes, net of effect of federal tax benefit 7,650 5,592 5,310 Foreign tax credits — (1,076 ) (5,255 ) Non-deductible impairments of goodwill and intangible assets — — 13,661 Other, net 11,827 5,070 4,302 Income tax provision (benefit) $ 119,215 $ (4,047 ) $ 32,079 NOTE 4—INCOME TAXES (Continued) U.S. federal or state income taxes have been provided on permanentlyindefinitely reinvested earnings of certain foreign subsidiaries aggregating $353.2$402.2 million at December 31, 2011.2012. The amount of the unrecognized deferred U.S. federal and state income tax liability with respect to such earnings is $92.7 million. December 31, December 31, 2011 2010 2009 2012 2011 2010 (In thousands) (In thousands) $ 389,909 $ 394,294 $ 372,633 $ 351,561 $ 389,909 $ 394,294 1,749 3,060 2,333 6,278 1,749 3,060 9,560 9,897 35,432 45,287 9,560 9,897 (26,595 ) (13,164 ) (14,991 ) (17,545 ) (26,595 ) (13,164 ) (16,810 ) (1,025 ) (1,113 ) (5,349 ) (16,810 ) (1,025 ) (6,252 ) (3,153 ) — (951 ) (6,252 ) (3,153 ) $ 351,561 $ 389,909 $ 394,294 $ 379,281 $ 351,561 $ 389,909 20112012 and 2010,2011, unrecognized tax benefits, including interest, were $462.8are $496.8 million and $487.6$462.8 million, respectively. The total unrecognized tax benefits as of at December 31, 20112012 include $12.3$14.5 million that have been netted against the related deferred tax assets. TheOf the remaining balance, of $450.5$468.2 million is reflected in "non-current income taxes payable" and $14.1 million is reflected in "accrued expenses and other current liabilities" in the accompanying consolidated balance sheet at December 31, 2011.2012. Unrecognized tax benefits, including interest, for the year ended December 31, 2011 decreased2012 increased by $38.3$34.0 million due principally to the expiration of statutes of limitations, the effective settlement of audits and a net decreaseincrease in deductible temporary differences.timing differences and additions for tax positions related to prior years. Included in unrecognized tax benefits at December 31, 20112012 is $88.5$75.7 million relating to tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. If unrecognized tax benefits as of at December 31, 20112012 are subsequently recognized, $89.5$110.8 million and $213.6$222.3 million, net of related deferred tax assets and interest, would reduce income tax expense from continuing operations and discontinued operations, respectively. If unrecognized tax benefits as of at December 31, 20102011 are subsequently recognized, $103.1$89.5 million and $206.9$213.6 million, net of related deferred tax assets and interest, would reduce income tax expense from continuing operations and discontinued operations, respectively. In addition, a continuing operations tax provision of $5.1 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. 2010 and 20092010 is a $1.4$5.2 million expense, $9.1$1.4 million expense and $8.3$9.1 million expense, respectively, net of related deferred taxes of $0.9$3.1 million $5.8, $0.9 million and $5.5$5.8 million, respectively, for interest on unrecognized tax benefits. Included in income tax 2010 and 20092010 is a $6.7$2.8 million expense, $7.0 benefit, $6.7 million expense and $3.7$7.0 million expense, respectively, net of related deferred taxes of $4.2$1.7 million $4.4, $4.2 million and $2.5$4.4 million, respectively, for interest on unrecognized tax benefits. AtIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 4—INCOME TAXES (Continued)20112012 and 2010,2011, the Company has accrued $111.2$117.5 million and $97.7$111.2 million, respectively, for the payment of interest. Included in the income tax provision for continuing operations for the year ended December 31, 2012 is a $0.4 million expense for an increase in penalties on unrecognized tax benefits. Included in income tax provision for continuing operations for the year ended December 31, 2011 is a $2.5$2.5 million benefit for a reduction in penalties on unrecognized tax benefits. Included in income tax expense from continuing operations and discontinued operations for the year ended At December 31, 2009 is a $3.1 million expense2012 and a $1.3 million expense, respectively, for penalties on unrecognized tax benefits. At December 31, 2011 and 2010,, the Company has accrued $2.5$5.0 million and $5$2.5 million, respectively, for penalties.reviewaudit of the Company's tax returns for the years ended December 31, 2001 through 2006.2009. The settlement of these tax years has not yet been submitted to the Joint Committee of Taxation for approval. The IRS began its review of the Company's tax returns for the years ended December 31, 2007 through 2009 in July 2011. The statute of limitations for the years 2001 through 20082009 has currently been extended to December 31, 2012.2013, and we expect it to be extended further. Various state and local jurisdictions are currently under examination, the most significant of which are California, New York and New York City for various tax years beginning with 2005. Income taxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns. Changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed by the Company are recorded in the period they become known. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $60.3$122.2 million within twelve months of the current reporting date, of which approximately $13.1$13.4 million could decrease income tax provision, primarily due to settlements, expirations of statutes of limitations, and the reversal of deductible temporary differences that will primarily result in a corresponding decrease in net deferred tax assets. An estimate of other changes in unrecognized tax benefits, while potentially significant, cannot be made.(In thousands) Cash and cash equivalents $ 998 Other current assets 22,657 Property and equipment 8,988 Goodwill 190,616 Intangible assets 103,289 Other assets 770 Total assets 327,318 Current liabilities (7,027 ) Other long-term liabilities (3,179 ) Net assets $ 317,112 (In thousands) Indefinite-lived trade names $ 33,700 Indefinite Content 47,800 4.0 Technology 12,789 3.0 Advertiser relationships 7,500 2.0 Customer lists 1,500 3.0 Total $ 103,289 3.6 Acquisitionaccounting.accounting through August 31, 2011. During the third quarter of 2011, Match acquired an additional 12.5 million shares of Meetic for $272.0$272.0 million in cash pursuant to a tender offer. These additional shares increased Match's voting interest and ownership interest in Meetic to 79% and 81%, respectively, resulting in Match obtaining a controlling financial interest in Meetic. Accordingly, this purchase was accounted for under the acquisition method of accounting and the financial results of Meetic are included within IAC's consolidated financial statements and the Match operating segment beginning September 1, 2011. For the year ended December 31, 2011, the Company included $46.1$46.1 million of revenue, net of a $32.6$32.6 million write-off of deferred revenue, and a net loss of $8.6$8.6 million in its consolidated statement of operations related to Meetic. In connection with the acquisition, Match's 27% equity method investment in Meetic was reduced to its fair value of $132.7 million, resulting in a loss of $11.7 million, which is included within "Equity in losses of unconsolidated affiliates" in the accompanying consolidated statement of operations.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 5—BUSINESS COMBINATIONS (Continued)Included in this loss is $3.2 million of foreign currency translation gains, which were reclassified out of accumulated other comprehensive income into earnings. Additionally, Match measured and recorded the acquisition-date fair value of the 19% noncontrolling interest in Meetic, which totaled $101.5 million. The fair values of the 27% equity method investment and the noncontrolling interests were based on the tender offer price of €15.00 per share. Meetic's fair value at the date of acquisition consists of the following components: (In thousands) $ 272,032 132,652 101,487 $ 506,171 The table below summarizes the allocation of Meetic's fair value at the date of acquisition to its assets and liabilities: (In thousands) $ 74,562 22,356 9,269 313,314 162,493 40,800 622,794 (49,382 ) (12,289 ) (2,575 ) (52,377 ) $ 506,171 The purchase price the Company paid for the additional 54% interest in Meetic was based on the expected financial performance of Meetic, not on the value of the identifiable assets at the time of acquisition, which resulted in a significant portion of the purchase price being allocated to goodwill. The Company's expected financial performance of Meetic reflects anticipated synergies between Match and Meetic. Meetic's business model is similar to Match's businesses and we believe increasing our ownership stake allows us to leverage Match's skill in product development, marketing and technology innovation in the online dating space across Europe.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 5—BUSINESS COMBINATIONS (Continued) Intangible assets are as follows: (In thousands) Weighted-Average
Amortization
Life (Years) $ 129,438 Indefinite 18,138 1 14,917 2 $ 162,493 Meetic's other current assets, property and equipment, other assets, current liabilities and other liabilities were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair value of the trade names was determined using an avoided royalty discounted cash flow analysis. Customer lists includes both paid subscribers and registered users who are not paid subscribers. The fair value relating to the paid subscribers was determined using an excess earnings methodology and the fair value relating to the registered users who are not paid subscribers was determined using a cost methodology. The fair value of the developed technology was determined using replacement cost methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require estimates, including the amount and timing of future cash flows, royalty rates and discount rates. The current deferred tax liability primarily relates to the excess of tax basis over book basis on deferred revenue, which was recorded at fair value in conjunction with the acquisition. The non-current deferred tax liabilities primarily relate to the excess of book basis over tax basis on acquired intangible assets. None of the goodwill is tax deductible.MeeticThe About Group as if the acquisition of The About Group had occurred on January 1, 2011 and the acquisition of Meetic had occurred as ofon January 1, 2010. The pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of what the results would have been had the acquisitionacquisitions actually occurred on the aforementioned date. Pro forma adjustments reflected below include a $31.0 million reduction in revenue for the year ended December 31, 2010 relating to a write-off of Meetic's deferred revenue, and amortization of Meetic's intangible assets totaling $7.2 million and $23.4 million fordates specified above. For the years ended December 31, 2012 and 2011, pro forma adjustments reflected below include2010,an increase of $24.3 million in amortization of intangible assets, respectively. Years Ended December 31, Years Ended December 31, 2011 2010 2012 2011 (In thousands, except per share data) (In thousands, except per share data) $ 2,263,986 $ 1,853,199 $ 2,881,117 $ 2,374,812 213,350 94,457 179,839 228,116 2.46 0.89 2.09 2.63 2.26 0.89 1.93 2.42 NOTE 5—BUSINESS COMBINATIONS (Continued)OkCupid Acquisition On January 20, 2011, Match acquired OkCupid for $50.0 million in cash, plus potential additional consideration of up to $40.0 million that was contingent upon OkCupid's 2011 earnings performance. During the second quarter of 2011, the provisions of this contingent consideration arrangement were amended. Pursuant to the amendment, $30.0 million was paid to the former owners of OkCupid, and a potential additional payment of up to $10.0 million was contingent upon revised performance goals. In the fourth quarter of 2011 the revised performance goals were achieved and, accordingly, a liability of $10.0 million relating to the additional payment is included in "Accrued expenses and other current liabilities" in the accompanying consolidated balance sheet at December 31, 2011.testsassesses goodwill and indefinite-lived intangible assets for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value. The Company also reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of a definite-lived intangible asset may not be recoverable. The Company performs its annual assessment for impairment of goodwill and indefinite-lived intangible assets as of October 1 in connection with the preparation of its annual financial statements.20%25% in both 20112012 and 2010.13% to 20% in 2011.13%10% to 20%18% in both2012 and 13% to 20% in 2011, and 2010, and the royalty rates used ranged from 1% to 9% in 2011both 2012 and 1% to 10% in 2010.Media & Other segment related to the write-down of the goodwill andIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 6—GOODWILL AND INTANGIBLE ASSETS (Continued)$28.0$4.5$4.5 million, respectively, and at the Search segment related to the write-down of an indefinite-lived intangible asset of IAC Search & MediaApplications of $11.0 million.$11.0 million. The indefinite-lived intangible asset impairment charge at Shoebuy related to trade names and trademarks. The goodwill and indefinite-lived intangible asset impairment charges at Shoebuy reflected expectations of lower revenue and profit performance in future years due to Shoebuy's 2010 fourth quarter revenue and profit performance, which is its seasonally strongest quarter. The indefinite-lived intangible asset impairment charge at IAC Search & MediaApplications was 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 connection with its annual assessment and its review of definite-lived intangible assets in 2009, the Company identified and recorded impairment charges at the Search segment related to the write-down of the goodwill and indefinite-lived and definite-lived intangible assets of IAC Search & Media of $916.9 million, $104.1 million and $24.2 million, respectively. The goodwill and indefinite-lived intangible asset impairment charges reflected lower projections for revenue and profits at IAC Search & Media in future years that reflected the Company's consideration of industry growth rates, competitive dynamics and IAC Search & Media's 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 related to trade names and trademarks. The definite-lived intangible asset impairment charge primarily related to certain technology and advertiser relationships, the carrying values of which were no longer considered recoverable based upon an assessment of future cash flows related to these assets. Accordingly, these assets were written down to fair value. December 31, December 31, 2011 2010 2012 2011 (In thousands) (In thousands) $ 1,358,524 $ 989,493 $ 1,616,154 $ 1,358,524 351,488 237,021 378,964 351,488 26,619 8,023 103,940 26,619 $ 1,736,631 $ 1,234,537 $ 2,099,058 $ 1,736,631 NOTE 6—GOODWILL AND INTANGIBLE ASSETS (Continued)2011: Balance as of
December 31, 2010 Additions (Deductions) Foreign
Exchange
Translation Balance as of
December 31, 2011 (In thousands) Additions (Deductions) $ 534,004 $ — $ (237 ) $ — $ 533,767 (In thousands) Search & Applications $ 526,444 $ 197,458 $ (252 ) $ — $ 723,650 Match 667,073 23,250 (555 ) (5,833 ) 683,935 HomeAdvisor 109,947 1,880 — (169 ) 111,658 17,450 301 — — 17,751 17,751 14,373 — — 32,124 551,454 301 (237 ) — 551,518
297,974
397,115
—
(28,016
)
667,073
109,917
—
(3
)
33
109,947 Local 127,698 16,253 — (169 ) 143,782 Connected Ventures 8,267 — — — 8,267 DailyBurn 7,323 — — — 7,323 Media 15,590 — — — 15,590
21,712
7
—
—
21,719 21,719 — — — 21,719 8,436 — (169 ) — 8,267 30,148 7 (169 ) — 29,986 Tutor — 27,478 — — 27,478 Other 21,719 27,478 — — 49,197 $ 989,493 $ 397,423 $ (409 ) $ (27,983 ) $ 1,358,524 $ 1,358,524 $ 264,439 $ (807 ) $ (6,002 ) $ 1,616,154 principallyprimarily relate to the acquisitionsacquisition of Meetic and OkCupid. Both the December 31, 2011 and 2010 goodwill balances include accumulated impairment losses of $916.9 million, $28.0 million and $11.6 million at IAC Search & Media, Shoebuy and Connected Ventures, respectively.2010: Balance as of
December 31, 2009 Additions (Deductions) Impairment Foreign
Exchange
Translation Balance as of
December 31, 2010 (In thousands) Additions (Deductions) $ 527,604 $ 7,323 $ (923 ) $ — $ — $ 534,004 (In thousands) Search & Applications $ 526,681 $ — $ (237 ) $ — $ 526,444 Match 297,974 397,115 — (28,016 ) 667,073 HomeAdvisor 109,917 — (3 ) 33 109,947 17,450 — — — — 17,450 17,450 301 — — 17,751 545,054 7,323 (923 ) — — 551,454
253,812
37,375
—
—
6,787
297,974
110,689
—
—
—
(772
)
109,917 Local 127,367 301 (3 ) 33 127,698 Connected Ventures 8,436 — (169 ) — 8,267 DailyBurn 7,323 — — — 7,323 Media 15,759 — (169 ) — 15,590
49,744
—
—
(28,032
)
—
21,712 21,712 7 — — 21,719 8,436 — — — — 8,436 58,180 — — (28,032 ) — 30,148 Other 21,712 7 — — 21,719 $ 967,735 $ 44,698 $ (923 ) $ (28,032 ) $ 6,015 $ 989,493 $ 989,493 $ 397,423 $ (409 ) $ (27,983 ) $ 1,358,524 Meetic's Latin American operations ("Parperfeito"), SinglesnetMeetic and DailyBurn.com. OkCupid.20092012, 2011 and 2010 goodwill balance includesIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 6—GOODWILL AND INTANGIBLE ASSETS (Continued)$916.9$11.6$11.6 million at IAC Search & MediaApplications, Shoebuy and Connected Ventures, respectively.2011,2012, intangible assets with definite lives are as follows: Cost Accumulated
Amortization Net Weighted-Average
Amortization
Life (Years) (In thousands) Net (In thousands) Content $ 47,800 $ (4,733 ) $ 43,067 4.0 Technology 37,545 (11,663 ) 25,882 2.9 Trade names 22,742 (7,044 ) 15,698 3.6 Advertiser and supplier relationships 16,446 (7,676 ) 8,770 4.4 $ 18,050 $ (8,837 ) $ 9,213 1.0 11,800 (1,277 ) 10,523 3.7 16,145 (3,858 ) 12,287 2.2 8,946 (5,298 ) 3,648 6.4 6,063 (4,592 ) 1,471 3.4 $ 49,204 $ (22,585 ) $ 26,619 2.6 $ 136,333 $ (32,393 ) $ 103,940 3.7 2010,2011, intangible assets with definite lives are as follows: Cost Accumulated
Amortization Net Weighted-Average
Amortization
Life (Years) (In thousands) Net $ 7,100 $ (4,668 ) $ 2,432 6.7 (In thousands) 5,534 (5,298 ) 236 1.3 $ 18,050 $ (8,837 ) $ 9,213 1.0 3,100 (1,817 ) 1,283 3.0 16,145 (3,858 ) 12,287 2.2 8,871 (4,799 ) 4,072 4.2 Supplier relationships 8,946 (5,298 ) 3,648 6.4 Trade names 6,063 (4,592 ) 1,471 3.4 $ 24,605 $ (16,582 ) $ 8,023 4.1 $ 49,204 $ (22,585 ) $ 26,619 2.6 2011,2012, amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows: (In thousands) (In thousands) $ 18,712 6,176 $ 45,110 669 30,637 607 17,157 455 7,435 $ 26,619 2017 2,472 Thereafter 1,129 Total $ 103,940 (In thousands) Corporate debt securities $ 13,608 $ 19 $ — $ 13,627 Total debt securities 13,608 19 — 13,627 Equity security — 6,977 — 6,977 Total marketable securities $ 13,608 $ 6,996 $ — $ 20,604 NOTE 7—MARKETABLE SECURITIES At December 31, 2011, available-for-sale marketable securities are as follows: (In thousands) Corporate debt securities $ 48,621 $ 99 $ (15 ) $ 48,705 States of the U.S. and state political subdivisions 111,758 587 (22 ) 112,323 Total debt securities 160,379 686 (37 ) 161,028 Equity security 4,656 11 — 4,667 Total marketable securities $ 165,035 $ 697 $ (37 ) $ 165,695 At December 31, 2010, available-for-sale marketable securities are as follows: Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value (In thousands) $ 237,406 $ 773 $ (16 ) $ 238,163 110,478 373 (230 ) 110,621 199,881 18 — 199,899 547,765 1,164 (246 ) 548,683 12,896 2,418 — 15,314 $ 560,661 $ 3,582 $ (246 ) $ 563,997 (loss) income"loss" in the accompanying consolidated balance sheet.20112012 are as follows: Amortized
Cost Estimated
Fair Value (In thousands) (In thousands) $ 68,375 $ 68,545 $ 12,606 $ 12,607 92,004 92,483 Due after one year through two years 1,002 1,020 $ 160,379 $ 161,028 $ 13,608 $ 13,627 IAC/INTERACTIVECORP AND SUBSIDIARIESAt NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)December 31, 2012NOTE 7—MARKETABLE SECURITIES (Continued) The following table summarizes there are no investments in marketable debt securities (twelvethat are in total at December 31, 2011) that have been in a continuousan unrealized loss position for less than twelve months: December 31, 2011 2010 (In thousands) Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses $ 12,920 $ (15 ) $ 34,552 $ (16 ) 11,711 (22 ) 39,171 (230 ) $ 24,631 $ (37 ) $ 73,723 $ (246 ) and 2010,, there are no investments in marketable securities that have been in a continuous unrealized loss position for twelve months or longer. Substantially all of the Company's The following table summarizes investments in marketable debt securities are rated investment grade. The gross unrealized losses on the marketable debt securities relate to changes in interest rates. Because the Company does not intend to sell any marketable debt securities and it is not more likely than not that the Company will be required to sell any marketable debt securities before recovery of their amortized cost bases, which may be maturity, the Company does not consider any of its marketable debt securities to be other-than-temporarily impaired at 2011. (In thousands) Corporate debt securities $ 12,920 $ (15 ) States of the U.S. and state political subdivisions 11,711 (22 ) Total $ 24,631 $ (37 ) December 31, December 31, 2011 2010 2009 2012 2011 2010 (In thousands) (In thousands) $ 600,149 $ 768,650 $ 293,629 $ 205,944 $ 600,149 $ 768,650 2,482 4,802 42,372 4,075 2,482 4,802 (41 ) (19 ) (12,414 ) (5 ) (41 ) (19 ) (expense), net" in the accompanying consolidated statement of operations. (expense), net related to the maturities and sales of available-for-sale securities for the years ended December 31, 2012, 2011 2010 and 2009 were $2.82010 are $2.1 million $3.2, $2.8 million and $0.7$3.2 million, respectively.Investment in ARO 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 contingent value right ("CVR") (See Note 9 for additional information on the CVR). During 2009, the Company sold its 5.5 million shares of ARO stock, resulting in a pre-tax loss of $12.3 million, which is included in the gross realized losses for the year ended December 31, 2009 disclosed above. 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 on June 9, 2009, and recorded impairment charges totaling $4.6 million. December 31, 2011 2010 (In thousands) $ 10,873 $ 148,607 82,318 39,014 5,870 13,100 74,691 — $ 173,752 $ 200,721 Equity method investments The carrying values of the Company's equity method investments, along with the principal market that the investee operates include: December 31, 2012 2011 (In thousands) Cost method investments $ 113,830 $ 82,318 Long-term marketable equity securities 31,244 74,691 Equity method investments 8,104 10,873 Auction rate security 8,100 5,870 Total long-term investments $ 161,278 $ 173,752 December 31, Percent
Ownership
of Common
Stock 2011 2010 (In thousands) $ — $ 130,043 See Note 5 10,873 18,564 10,873 148,607
(8,186
)
—
50
% $ 2,687 $ 148,607 The Company's equity method investment in The Newsweek/Daily Beast Company is a negative balance representing IAC's commitment to fund. Summarized aggregated financial information for the Company's equity method investments is as follows: December 31, 2011 2010 (In thousands) $ 42,527 $ 83,948 45,852 388,518 (47,085 ) (89,505 ) (11,044 ) (18,900 ) IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 8—LONG-TERM INVESTMENTS (Continued) Twelve Months Ended
December 31, 2011 2010 2009 (In thousands) $ 368,433 $ 275,584 $ 114,128 105,749 67,716 36,900 (17,636 ) 14,083 (4,966 ) (a)Summarized financial information for the Company's equity method investments is presented for the periods during which the Company holds or held an equity ownership interest. The summarized financial information for certain equity method investments is presented on a one quarter lag. During the first quarter of 2010, the Company recorded an $18.3 million impairment charge to write-down an investment accounted for using the equity method to fair value. The decline in value was determined to be other-than-temporary due to the investee's continued losses and negative operating cash flows. The Company estimated the fair value of its investment using a multiple of revenue approach. The impairment charge is included within "Equity in losses of unconsolidated affiliates" in the accompanying consolidated statement of operations. During$7.8$7.8 million impairment charge related to the write-down of an investment accounted for using thea cost method investment to fair value. 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 financing. The impairment charge is included in "Other (expense) income, (expense), net" in the accompanying consolidated statement of operations.Auction rate securities See Note 9 for information regarding auction rate securities.was $53.1is $53.1 million, with gross unrealized gains of $29.8$29.8 million and a gross unrealized loss of $8.2$8.2 million included in "Accumulated other comprehensive (loss) income"loss" in the accompanying consolidated balance sheet. At December 31, 2012, the Company's long-term marketable equity securities are both in an unrealized loss position. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the unrealized losses. The Company recorded an $8.7 million other-than-temporary impairment charge related to the security that was in a continuous unrealized loss position for more than one year, based on the Company's evaluation of the near-term prospects of the issuer in relation to the severity (fair value was 50 percent less than cost) and short duration of the unrealized loss. The impairment charge is included in “Other (expense) income, net” in the accompanying consolidated statement of operations. The Company does not consider the second security to be other-than-temporarily impaired at December 31, 2012 based on the Company's evaluation of the near term prospects of the issuer in relation to the severity and duration, less than two months, of the unrealized loss and based on that evaluation and the Company's ability andIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 8—LONG-TERM INVESTMENTS (Continued)investmentsecurity for a reasonable period of time sufficient for a forecastedan expected recovery of fair value,value.does not consider thisrecorded a pre-tax non-cash charge of $18.6 million related to the re-measurement of the carrying value of our equity method investment in News_Beast to fair value in connection with our acquisition of a controlling interest in June 2012. The re-measurement charge is included in "Equity in losses of unconsolidated affiliates" in the accompanying consolidated statement of operations.other-than-temporarily impairedother-than-temporary due to the investee's continued losses and negative operating cash flows. The Company estimated the fair value of its investment using a multiple of revenue2011. There were no long-term marketable equity securities2011 is primarily comprised of News_Beast and the balance sheet data at December 31, 2010.2012 is comprised of our equity method investments other than Meetic and News_Beast. During 2010 and through August 31, 2011 we accounted for our 27% ownership interest in Meetic as an equity method investment. In 2011 we acquired a controlling interest in Meetic and as a result, Meetic is included within our consolidated financial statements beginning September 1, 2011. During 2011 and through May 31, 2012 we accounted for our 50% ownership interest in News_Beast as an equity method investment. In 2012 we acquired a controlling interest in News_Beast and as a result, News_Beast is included within our consolidated financial statements beginning June 1, 2012. December 31, 2012 2011 (In thousands) Current assets $ 10,603 $ 42,527 Non-current assets 25,472 45,852 Current liabilities (20,227 ) (47,085 ) Non-current liabilities (5,962 ) (11,044 ) Twelve Months Ended December 31, 2012 2011 2010 (In thousands) Net sales $ 78,058 $ 368,433 $ 275,584 Gross profit 16,777 105,749 67,716 Net (loss) income (30,761 ) (17,636 ) 14,083 (a) Summarized financial information for the Company's equity method investments is presented for the periods during which the Company holds or held an equity ownership interest. The summarized financial information for certain equity method investments is presented on a one quarter lag. December 31, 2011 Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Total
Fair Value
Measurements (In thousands) $ 321,314 $ — $ — $ 321,314 — 237,942 — 237,942 — 4,750 — 4,750 — 48,705 — 48,705 — 112,323 — 112,323 4,667 — — 4,667 — — 5,870 5,870 74,691 — — 74,691 $ 400,672 $ 403,720 $ 5,870 $ 810,262 $ — $ — $ (10,000 ) $ (10,000 ) NOTE 9—FAIR VALUE MEASUREMENTS (Continued) December 31, 2010 December 31, 2012 Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant Unobservable Inputs (Level 3) Total
Fair Value
Measurements (In thousands) (In thousands) $ 275,108 $ — $ — $ 275,108 — 309,183 — 309,183 Money market funds $ 545,290 $ — $ — $ 545,290 — 26,050 — 26,050 — 11,994 — 11,994 — 238,163 — 238,163 — 13,627 — 13,627 — 110,621 — 110,621 199,899 — — 199,899 15,314 — — 15,314 6,977 — — 6,977 — — 13,100 13,100 Auction rate security — — 8,100 8,100 Marketable equity securities 31,244 — — 31,244 $ 490,321 $ 684,017 $ 13,100 $ 1,187,438 $ 583,511 $ 25,621 $ 8,100 $ 617,232 December 31, 2011 (In thousands) Assets: Cash equivalents: Treasury and government agency money market funds $ 321,314 $ — $ — $ 321,314 Commercial paper — 237,942 — 237,942 Time deposits — 4,750 — 4,750 Marketable securities: Corporate debt securities — 48,705 — 48,705 States of the U.S. and state political subdivisions — 112,323 — 112,323 Equity security 4,667 — — 4,667 Long-term investments: Auction rate security — — 5,870 5,870 Marketable equity securities 74,691 — — 74,691 Total $ 400,672 $ 403,720 $ 5,870 $ 810,262 Liabilities: Contingent consideration arrangement $ — $ — $ (10,000 ) $ (10,000 ) table presentstables present 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 For the Year Ended December 31, 2011 December 31, 2010 December 31, 2012 December 31, 2011 Auction Rate
Securities Contingent
Consideration
Arrangement Auction Rate
Securities (In thousands) (In thousands) $ 13,100 $ — $ 12,635 $ 5,870 $ (10,000 ) $ 13,100 $ — (2,230 ) — 465 Total net gains (losses) (realized and unrealized): Included in other comprehensive loss 2,230 — (2,230 ) — — (40,000 ) — — — — (40,000 ) (5,000 ) 30,000 — — 10,000 (5,000 ) 30,000 $ 5,870 $ (10,000 ) $ 13,100 $ 8,100 $ — $ 5,870 $ (10,000 ) For the year ended December 31, 2009, a loss of $57.2 million was included in earnings related to the CVR, which was accounted for as a derivative asset and maintained at fair value relying on significant unobservable inputs. This loss is unrealized and included in "Other income (expense), net" in the accompanying consolidated statement of operations.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 9—FAIR VALUE MEASUREMENTS (Continued)securitiessecurities aresecurity is valued by discounting the estimated future cash flow streams of the securitiessecurity over the liveslife of the securities.security. Credit spreads and other risk factors are also considered in establishing fair value. During the first quarter of 2011, one of the auction rate securities was redeemed at its par value of $5.0 million. The cost basis of the auction rate securitiessecurity is $10.0$10.0 million and $15.0 million at December 31, 2011 and December 31, 2010, respectively,, with gross unrealized losses of $4.1$1.9 million and $1.9$4.1 million at December 31, 2012 and December 31, 2011 and December 31, 2010,, respectively. The unrealized losses are included in "Accumulated other comprehensive (loss) income"loss" in the accompanying consolidated balance sheet. At December 31, 2011,2012, the remaining auction rate security is rated A/A-/WR and matures in 2035. The Company does not consider the auction rate security to be other-than-temporarily impaired at December 31, 2011,2012, due to its high credit rating and because the Company does not intend to sell this security, and it is not more likely than not that the Company will be required to sell this security, before the recovery of its amortized cost basis, which may be maturity. See Note 5information regarding$50.0 million in cash, plus potential additional consideration of up to $40.0 million that was contingent upon OkCupid's 2011 earnings performance. During the second quarter of 2011, the provisions of this contingent consideration arrangement relatedwere amended. Pursuant to the amendment, $30.0 million was paid to the former owners of OkCupid, acquisition. December 31, 2011 December 31, 2010 Carrying
Value Fair
Value Carrying
Value Fair
Value (In thousands) $ 704,153 $ 704,153 $ 742,099 $ 742,099 165,695 165,695 563,997 563,997 5,870 5,870 13,100 13,100 74,691 74,691 — — 3,424 3,058 3,316 2,818 (10,000 ) (10,000 ) — — (95,844 ) (93,339 ) (95,844 ) (83,363 ) (5,000 ) (5,000 ) — — N/A (312 ) N/A (362 ) December 31, 2012 December 31, 2011 (In thousands) Assets: Cash and cash equivalents $ 749,977 $ 749,977 $ 704,153 $ 704,153 Marketable securities 20,604 20,604 165,695 165,695 Long-term marketable equity securities 31,244 31,244 74,691 74,691 Liabilities: Current maturities of long-term debt (15,844 ) (15,875 ) — — Long-term debt, net of current maturities (580,000 ) (581,994 ) (95,844 ) (93,339 ) notes receivable is based on discounting the expected future cash flow streams using yields of the underlying credit. The fair value of long-term debt, including current maturities, is estimated using quoted market prices or indices for similar liabilities and taking intoThe carrying value and fair value of the guarantee of the equity method investee's debtIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 10—FINANCIAL INSTRUMENTS (Continued)represents the amount the Company expects to pay to settle this obligation. The fair value of the letters of credit and surety bond are based on the present value of the costs associated with maintaining these instruments over their expected term. See Note 2 for discussiondescription of the method used to determine the fair value of marketable securities and long-term marketable equity securities, Note 9 for discussion of thesecurities. The fair value of the auction rate securitieslong-term debt, including current maturities, is determined only for disclosure purposes and Note 5 for discussion of the fair value of the contingent consideration arrangement related to the OkCupid acquisition. December 31, 2011 2010 (In thousands) $ 15,844 $ 15,844 80,000 80,000 $ 95,844 $ 95,844 December 31, 2012 2011 (In thousands) 7.00% Senior Notes due January 15, 2013 (the "2002 Senior Notes"); interest payable each January 15 and July 15 which commenced July 15, 2003 $ 15,844 $ 15,844 4.75% Senior Notes due December 15, 2022 (the "2012 Senior Notes"); interest payable each June 15 and December 15 commencing June 15, 2013 500,000 — 5% New York City Industrial Development Agency Liberty Bonds due September 1, 2035; interest payable each March 1 and September 1 which commenced March 1, 2006 80,000 80,000 Total long-term debt 595,844 95,844 Less current maturities (15,844 ) — Long-term debt, net of current maturities $ 580,000 $ 95,844 Year Percentage 2017 102.375 % 2018 101.583 % 2019 100.792 % 2020 and thereafter 100.000 % $80$80 million 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 in respect of the Liberty Bonds pursuant to certain security and payment arrangements between IAC and the Agency, which arrangements were entered into in connection with the closing of the Liberty Bond issuance. IAC's payment obligation under the Liberty Bonds is collateralized by a mortgage interest in the corporate headquarters building. Aggregate contractual of long-term debt are as follows: (In thousands) (In thousands) $ 15,844 $ 15,844 2022 500,000 80,000 80,000 $ 95,844 Total $ 595,844 IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 12—SHAREHOLDERS' EQUITY (Continued)one-for-oneone-for-one basis, from time to time until September 1, 2011 up to 1.5 million shares of common stock for shares of Class B common stock. During 2011, Mr. Diller exchanged 1.5 million shares of common stock for 1.5 million shares of Class B common stock.$217.9$217.9 million in cash.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 12—SHAREHOLDERS' EQUITY (Continued)through his own holdings, has stock representing 42.9%stock.and 2010 there wasis no preferred stock issued and outstanding.Dividend On November 2, 2011, IAC's Board of Directors declared a quarterly cash dividend of $0.12 per share of common stock and Class B common stock outstanding, which was paid on December 1, 2011 to stockholders of record as of the close of business on November 15, 2011.warrants, and other matters, 42.019.8 million shares of IAC common stock wereare reserved as ofat December 31, 2011. December 31, 2011 Number of IAC
Common Shares
Underlying Warrants Weighted
Average
Strike Price (Shares in thousands) 18,297 $ 28.07 (3,949 ) 26.90 14,348 $ 28.40 December 31, 2012 (Shares in thousands) Outstanding at January 1, 2012 14,348 $ 28.40 Exercised (14,348 ) 28.40 Outstanding at December 31, 2012 — $ — yearsyear ended December 31, 2010 and 2009 there2011, 3.9 million warrants were zero and approximately 11.6 million warrants exercised, respectively.exercised. No warrants were grantedexercised during the year ended December 31, 2010. No warrants were issued during the years ended December 31, 2012, 2011 2010 and 2009.IAC/INTERACTIVECORP AND SUBSIDIARIES2010.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 12—SHAREHOLDERS' EQUITY (Continued) At December 31, 2011, 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, 2011 Average Strike
per IAC Share (In thousands) 5/7/12 9,836 $ 26.86 5/7/12 4,512 $ 31.75 14,348 $ 28.40 20112012 and 2010,2011, the Company purchased 15.5 million and 13.6 million and 23.1 million shares of IAC common stock for aggregate consideration, on a trade date basis, of $518.6$716.1 million and $530.9$518.6 million, respectively. In addition, on December2010, the Company completed the tax-free exchange of Evite, Gifts.com, IAC Advertising Solutions and $217.9 million in cash for substantially all of Liberty's equity stake in IAC, representing 8.5 million shares of Class B common stock and 4.3 million shares of common stock; in the first quarter of 2011, the Company received from Liberty 0.1 million shares of IAC common stock in fulfillment of post-closing working capital adjustments. On July 26, 2011,2012, IAC's Board of Directors authorized the repurchase of up to an additional 152011,2012, the Company hadhas approximately 8.63.1 million shares remaining in its share repurchase authorization.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2011 2010 2009 Basic Diluted Basic Diluted Basic Diluted (In thousands, except per share data) $ 175,569 $ 175,569 $ (9,393 ) $ (9,393 ) $ (956,473 ) $ (956,473 ) 2,656 2,656 5,007 5,007 1,090 1,090 178,225 178,225 (4,386 ) (4,386 ) (955,383 ) (955,383 ) (3,992 ) (3,992 ) 103,745 103,745 (23,439 ) (23,439 ) $ 174,233 $ 174,233 $ 99,359 $ 99,359 $ (978,822 ) $ (978,822 ) 86,755 86,755 106,274 106,274 138,599 138,599 — 7,566 — — — — 86,775 94,321 106,274 106,274 138,599 138,599 $ 2.05 $ 1.89 $ (0.04 ) $ (0.04 ) $ (6.89 ) $ (6.89 ) (0.04 ) (0.04 ) 0.97 0.97 (0.17 ) (0.17 ) $ 2.01 $ 1.85 $ 0.93 $ 0.93 $ (7.06 ) $ (7.06 ) (a)Amounts in 2010 include the gain on the Liberty Exchange.(b)If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options and warrants and vesting of restricted stock units ("RSUs"). For the year ended December 31, 2011, approximately 1.0 million shares related to potentially dilutive securities are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.(c)For the years ended December 31, 2010 and 2009, the Company had losses from continuing operations and as a result, no potentially dilutive securities were included in the denominator for computing dilutive earnings per share because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute all earnings per share amounts. For the years ended December 31, 2010 and 2009, approximately 36.3 million and Years Ended December 31, 2012 2011 2010 Basic Diluted Basic Diluted Basic Diluted (In thousands, except per share data) Numerator: Earnings (loss) from continuing operations $ 169,847 $ 169,847 $ 175,569 $ 175,569 $ (9,393 ) $ (9,393 ) Net (earnings) loss attributable to noncontrolling interests (1,530 ) (1,530 ) 2,656 2,656 5,007 5,007 Earnings (loss) from continuing operations attributable to IAC shareholders 168,317 168,317 178,225 178,225 (4,386 ) (4,386 ) (9,051 ) (9,051 ) (3,992 ) (3,992 ) 103,745 103,745 Net earnings attributable to IAC shareholders $ 159,266 $ 159,266 $ 174,233 $ 174,233 $ 99,359 $ 99,359 Denominator: Weighted average basic shares outstanding 86,247 86,247 86,755 86,755 106,274 106,274 — 6,842 — 7,566 — — 86,247 93,089 86,755 94,321 106,274 106,274 Earnings (loss) per share attributable to IAC shareholders: Earnings (loss) per share from continuing operations $ 1.95 $ 1.81 $ 2.05 $ 1.89 $ (0.04 ) $ (0.04 ) Discontinued operations (0.10 ) (0.10 ) (0.04 ) (0.04 ) 0.97 0.97 Earnings per share $ 1.85 $ 1.71 $ 2.01 $ 1.85 $ 0.93 $ 0.93 NOTE 13—EARNINGS PER SHARE (Continued)36.2 million shares, respectively, related to potentially dilutive securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.(d)There are no performance-based units ("PSUs") included in the denominator for earnings per share as the performance conditions have not been met for the respective reporting periods. For the years ended December 31, 2011, 2010 and 2009 approximately 3.1 million, 2.9 million and 1.8 million PSUs are excluded from the calculation of diluted earnings per share.(a) Amounts in 2010 include the gain on the Liberty Exchange. (b) (c) (d) granted, whichgranted. These plans 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") and the IAC 2005 Stock and Annual Incentive Plan (the "2005 Plan"). Under the 2008 Plan, the Company was originally authorized to grant stock options, RSUs, PSUs, restricted stock and other equity based awards for up to 20.0 million shares of IAC common stock. Under the 2005 Plan, the Company was originally authorized to grant stock options, RSUs, PSUs, restricted stock and other 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. The active plans described above authorize the Company to grant awards to its employees, officers, directors and consultants. At December 31, 2011,2012, there were 9.2are 3.6 million shares available for grant under the Company's stock-based compensation plans.described abovewere adopted in 2005 and 2008, have a stated term of ten years, and provide that the exercise price of stock options 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 of awards as those determinations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee"). Each grant agreement reflects the vestingfour-yearfour-year period and RSU awards to date havecurrently outstanding generally vestedvest in equal annual installments over a five-yearthree-year period, in each case, from the grant date. PSU awards to date generally cliff vest at the end of a two to three-yearthree-year period from the date of grant. In addition to equity awards outstanding under the two active plans, described above, stock options and other equity awards outstanding under terminated plans and plans assumed in acquisitions are reflected in the information set forth below. 2010 and 20092010 related to stock-based compensation was $32.7is $31.3 million $32.2, $32.7 million and $26.8$32.2 million, respectively.2011,2012, there was $107.8is $92.4 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.12.4 years.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 14—STOCK-BASED COMPENSATION (Continued) December 31, 2011 Shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value December 31, 2012 (Shares and intrinsic value in thousands) Shares 13,418 $ 22.06 (Shares and intrinsic value in thousands) Outstanding at January 1, 2012 10,525 $ 24.88 2,563 32.37 3,639 47.42 (4,733 ) 22.03 (2,974 ) 19.57 (683 ) 17.66 (643 ) 33.69 (40 ) 19.79 (87 ) 25.83 10,525 $ 24.88 7.1 $ 186,474 Outstanding at December 31, 2012 10,460 $ 33.68 7.2 $ 146,556 3,871 $ 23.30 5.2 $ 74,704 4,518 $ 25.33 5.2 $ 99,010 as of at December 31, 2011: Options Outstanding Options Exercisable Options Outstanding Options Exercisable Outstanding at
December 31,
2011 Weighted-
Average
Remaining
Contractual
Life in Years Weighted-
Average
Exercise
Price Exercisable at
December 31,
2011 Weighted-
Average
Remaining
Contractual
Life Weighted-
Average
Exercise
Price (Shares in thousands) (Shares in thousands) 28 1.4 $ 4.46 28 1.4 $ 4.46 10 0.8 $ 4.63 10 0.8 $ 4.63 3,080 6.3 16.54 1,650 5.7 16.31 1,549 5.1 16.84 1,468 5.0 16.83 3,483 6.6 22.02 1,473 5.6 22.56 2,099 5.8 22.29 1,551 5.3 22.40 3,156 9.2 32.20 19 2.1 33.79 2,594 8.2 32.36 768 8.0 32.27 778 4.1 41.76 701 3.4 41.80 3,878 8.0 45.38 721 2.6 41.81 $50.01 to $60.00 330 9.1 59.15 — — — 10,460 7.2 $ 33.68 4,518 5.2 $ 25.33 10,525 7.1 $ 24.88 3,871 5.2 $ 23.30 20112012 and the exercise price, multiplied by the number of in-the-money options)2011.2012. This amount changes based on the fair market value of IAC's common stock. The total intrinsic value of stock options exercised during the years ended December 31, 2012, 2011 2010 and 2009 was $70.62010 is $84.8 million $16.4, $70.6 million and $2.8$16.4 million, respectively. and 0.9 million stock options were granted by the Company during the years ended December 31, 2012, 2011 2010 and 2009,2010, respectively.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 14—STOCK-BASED COMPENSATION (Continued)For purposes of this model, no dividends have been assumed. During 2012, 2011 and 2010, expected stock price volatilities were estimated based on the Company's historical volatility. Prior to 2010, due to the lack of sufficient historical IAC stock price volatilities subsequent to the 2008 spin-off, expected stock price volatilities were estimated based on historical stock price volatilities of peer companies operating in the same industry sector as IAC. The risk-free interest rates are based on U.S. Treasury yields for notes with comparable terms as the awards, in effect at the grant date. The following are the weighted average assumptions used in the Black-Scholes option pricing model: Years Ended December 31, Years Ended December 31, 2011 2010 2009 2012 2011 2010 30 % 30 % 59 % 31 % 30 % 30 % 2.3 % 2.4 % 2.1 % 0.6 % 2.3 % 2.4 % 6.1 years 5.6 years 4.9 years 4.4 years 6.1 years 5.6 years 0 0 0 1.2 — — 2010 and 20092010 with exercise prices equal to the market prices of IAC's common stock on the date of grant was $11.08, $6.38are $10.69, $11.08 and $8.95,$6.38, respectively. There were no stock options issued during the years ended December 31, 2011 and 2009 with exercise prices greater than the market value of IAC's common stock on the date of grant. The weighted average exercise price and weighted average fair value of stock options granted during the yearyears ended December 31, 2012 and 2010 with exercise prices greater than the market value of IAC's common stock on the date of grant were $32.00are $60.00 and $11.05,$7.61, and $32.00 and $11.05, respectively. 2010 and 2009 were: $89.82010 are: $58.2 million and $25.5 million; $39.1$74.3 million; $89.8 million and $8.6 million;$25.5 million; and $3.8$39.1 million and $0.8$8.6 million, respectively.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 14—STOCK-BASED COMPENSATION (Continued)as of at 20112012 and changes during the year ended December 31, 2011 were2012 are as follows: RSUs PSUs (Shares in thousands) Nonvested at January 1, 2012 560 $ 31.06 4,541 $ 24.41 Granted 191 46.03 16 48.75 Vested (381 ) 27.08 (2,671 ) 21.19 Forfeited — — (616 ) 28.44 Nonvested at December 31, 2012 370 $ 39.94 1,270 $ 29.39 (a) RSUs PSUs Number
of shares Weighted
Average
Grant Date
Fair Value Number
of shares(a) Weighted
Average
Grant Date
Fair Value (Shares in thousands) 1,568 $ 24.78 3,898 $ 21.52 126 35.27 1,332 32.14 (1,060 ) 22.79 — — (74 ) 23.91 (689 ) 22.95 560 $ 31.06 4,541 $ 24.41 (a)Included in the table are PSUs which cliff vest at the end of two or three years in varying amounts depending upon certain performance conditions. The PSU table above includes these awards at their maximum. 2010 and 20092010 based on market prices of IAC's common stock on the grant date was $32.41, $23.05$46.24, $32.41 and $19.95,$23.05, respectively. The total fair value of RSUs and PSUs that vested during the years ended December 31, 2012, 2011 2010 and 20092010 was $33.2$139.0 million $23.6, $33.2 million and $5.3$23.6 million, respectively.2016.2019. The expense associated with these equity awards is initially measured at fair value at the grant date and is expensed as non-cash compensation over the vesting term. The aggregate number of IAC common shares that would be required to settle these interests at current estimated fair values, including vested and unvested interests, as of at December 31, 20112012 is 2.22.0 million shares, which is included in the calculation of diluted earnings per share if the effect is dilutive. The comparable amount as of at December 31, 2010 was 3.02011 is 2.2 million shares.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Media & Other, do not meet the quantitative thresholds that require presentation as separate operating segments. Years Ended December 31, 2011 2010 2009 (In thousands) $ 1,093,863 $ 837,134 $ 681,781 518,027 400,723 342,598 205,079 181,423 155,813 243,814 219,896 168,787 (1,339 ) (2,361 ) (2,284 ) $ 2,059,444 $ 1,636,815 $ 1,346,695 Years Ended December 31, 2011 2010 2009 (In thousands) $ 201,695 $ 112,867 $ (980,231 ) 137,555 115,367 84,655 21,380 16,448 13,383 (13,707 ) (47,539 ) (22,061 ) (149,161 ) (147,348 ) (133,733 ) $ 197,762 $ 49,795 $ (1,037,987 ) Years Ended December 31, 2011 2010 2009 (In thousands) $ 203,136 $ 125,549 $ 91,615 156,274 122,057 94,124 23,857 18,165 21,286 (12,073 ) (12,009 ) (19,699 ) (62,787 ) (64,183 ) (65,465 ) $ 308,407 $ 189,579 $ 121,861 NOTE 15—SEGMENT INFORMATION (Continued) Years Ended December 31, 2012 2011 2010 (In thousands) Revenue: Search & Applications $ 1,465,795 $ 1,040,507 $ 805,284 Match 713,449 518,027 400,723 Local 322,627 303,418 263,749 Media 164,824 70,164 49,692 Other 134,555 128,065 118,749 Inter-segment elimination (317 ) (737 ) (1,382 ) Total $ 2,800,933 $ 2,059,444 $ 1,636,815 Years Ended December 31, 2012 2011 2010 (In thousands) Operating Income (Loss): Search & Applications $ 305,644 $ 204,006 $ 128,356 Match 205,492 137,555 115,367 Local 21,735 25,533 8,405 Media (51,776 ) (16,275 ) (23,385 ) Other (7,689 ) (3,896 ) (31,600 ) Corporate (149,838 ) (149,161 ) (147,348 ) Total $ 323,568 $ 197,762 $ 49,795 Years Ended December 31, 2012 2011 2010 (In thousands) Search & Applications $ 313,146 $ 204,980 $ 140,792 Match 225,765 156,274 122,057 Local 24,932 28,284 10,671 Media (44,827 ) (15,845 ) (21,849 ) Other (6,095 ) (2,499 ) 2,091 Corporate (67,957 ) (62,787 ) (64,183 ) Total $ 444,964 $ 308,407 $ 189,579 December 31, 2011 2010 December 31, (In thousands) 2012 2011 $ 271,298 $ 280,773 (In thousands) Search & Applications $ 355,159 $ 246,459 190,338 196,177 225,781 190,338 13,862 13,834 49,219 43,674 Local 46,842 46,581 Media 71,495 25,429 Other 28,842 15,910 1,148,517 1,560,084 978,651 1,148,517 $ 1,673,234 $ 2,094,542 $ 1,706,770 $ 1,673,234 Years Ended December 31, 2011 2010 2009 (In thousands) $ 29,885 $ 38,341 $ 33,118 10,780 11,042 9,821 4,769 3,986 3,344 2,772 2,285 3,936 8,513 8,243 11,172 $ 56,719 $ 63,897 $ 61,391 Years Ended December 31, 2011 2010 2009 (In thousands) $ 13,022 $ 21,934 $ 19,590 17,447 10,087 7,814 3,966 4,884 3,565 2,884 2,289 2,734 2,635 635 235 $ 39,954 $ 39,829 $ 33,938 (a)The Company's primary metric is Operating Income Before Amortization, which is defined as operating income excluding, if applicable: (1) non-cash compensation expense, (2) amortization of non-cash marketing, (3) amortization and impairment of intangibles, (4) goodwill impairment and (5) one-time items. The Company believes this measure is useful to investors because it represents the operating results from IAC's segments, taking into account depreciation, which it believes is an ongoing 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, and acquisition related accounting. IAC endeavors to compensate forNOTE 15—SEGMENT INFORMATION (Continued)the limitations of the non-U.S. GAAP measure presented by providing the comparable U.S. GAAP measure with equal or greater prominence, financial statements prepared in accordance with U.S. GAAP, and descriptions of the reconciling items, including quantifying such items, to derive the non-U.S. GAAP measure.(b)Consistent with the Company's primary metric (described in (a) above), the Company excludes, if applicable, goodwill and intangible assets from the measure of segment assets presented above. Years Ended December 31, 2012 2011 2010 (In thousands) Depreciation: Search & Applications $ 14,995 $ 25,484 $ 35,754 Match 16,339 10,780 11,042 Local 10,136 10,388 7,785 Media 1,398 703 245 Other 1,074 851 828 Corporate 8,539 8,513 8,243 Total $ 52,481 $ 56,719 $ 63,897 Years Ended December 31, 2012 2011 2010 (In thousands) Capital expenditures: Search & Applications $ 15,320 $ 8,698 $ 17,169 Match 19,853 17,447 10,087 Local 6,666 9,299 10,513 Media 1,178 905 474 Other 1,819 970 951 Corporate 6,365 2,635 635 Total $ 51,201 $ 39,954 $ 39,829 (a) The Company's primary metric is Operating Income Before Amortization, which is defined as operating income excluding, if applicable: (1) non-cash compensation expense, (2) amortization and impairment of intangibles, (3) goodwill impairment and (4) one-time items. The Company believes this measure is useful to investors because it represents the operating results from IAC's segments, taking into account depreciation, which it believes is an ongoing 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 and acquisition related accounting. IAC endeavors to compensate for the limitations of the non-U.S. GAAP measure presented by providing the comparable U.S. GAAP measure with equal or greater prominence, financial statements prepared in accordance with U.S. GAAP, and descriptions of the reconciling items, including quantifying such items, to derive the non-U.S. GAAP measure. (b) Consistent with the Company's primary metric (described in (a) above), the Company excludes, if applicable, goodwill and intangible assets from the measure of segment assets presented above. Years Ended December 31, Years Ended December 31, 2011 2010 2009 2012 2011 2010 (In thousands) (In thousands) $ 1,583,322 $ 1,359,655 $ 1,138,820 $ 1,966,383 $ 1,583,322 $ 1,359,655 476,122 277,160 207,875 834,550 476,122 277,160 $ 2,059,444 $ 1,636,815 $ 1,346,695 $ 2,800,933 $ 2,059,444 $ 1,636,815 December 31, December 31, 2011 2010 2012 2011 (In thousands) (In thousands) $ 246,550 $ 267,060 $ 251,379 $ 246,550 13,038 868 19,133 13,038 $ 259,588 $ 267,928 $ 270,512 $ 259,588 Year Ended December 31, 2012 (In thousands) Search & Applications $ 313,146 $ (34 ) $ (7,468 ) $ 305,644 Match 225,765 (2,818 ) (17,455 ) 205,492 Local 24,932 — (3,197 ) 21,735 Media (44,827 ) (770 ) (6,179 ) (51,776 ) Other (6,095 ) (122 ) (1,472 ) (7,689 ) Corporate (67,957 ) (81,881 ) — (149,838 ) Total $ 444,964 $ (85,625 ) $ (35,771 ) $ 323,568 Year Ended December 31, 2011 (In thousands) Search & Applications $ 204,980 $ 202 $ (1,176 ) $ 204,006 Match 156,274 (1,642 ) (17,077 ) 137,555 Local 28,284 — (2,751 ) 25,533 Media (15,845 ) (427 ) (3 ) (16,275 ) Other (2,499 ) (347 ) (1,050 ) (3,896 ) Corporate (62,787 ) (86,374 ) — (149,161 ) Total $ 308,407 $ (88,588 ) $ (22,057 ) $ 197,762 Year Ended December 31, 2011 Operating
Income
Before
Amortization Non-Cash
Compensation
Expense Amortization
of Intangibles Operating
Income
(Loss) (In thousands) $ 203,136 $ — $ (1,441 ) $ 201,695 156,274 (1,642 ) (17,077 ) 137,555 23,857 — (2,477 ) 21,380 (12,073 ) (572 ) (1,062 ) (13,707 ) (62,787 ) (86,374 ) — (149,161 ) $ 308,407 $ (88,588 ) $ (22,057 ) $ 197,762 NOTE 15—SEGMENT INFORMATION (Continued) Year Ended December 31, 2010 Operating
Income
Before
Amortization Non-Cash
Compensation
Expense Amortization
of Intangibles Goodwill
Impairment Operating
Income
(Loss) (In thousands) $ 125,549 $ (334 ) $ (12,348 ) $ — $ 112,867 122,057 153 (6,843 ) — 115,367 18,165 — (1,717 ) — 16,448 (12,009 ) (934 ) (6,564 ) (28,032 ) (47,539 ) (64,183 ) (83,165 ) — — (147,348 ) $ 189,579 $ (84,280 ) $ (27,472 ) $ (28,032 ) $ 49,795 Year Ended December 31, 2010 Operating
Income
Before
Amortization Non-Cash
Compensation
Expense Amortization
of Intangibles (In thousands) Search & Applications $ 140,792 $ (630 ) $ (11,806 ) $ — $ 128,356 Match 122,057 153 (6,843 ) — 115,367 Local 10,671 — (2,266 ) — 8,405 Media (21,849 ) (458 ) (1,078 ) — (23,385 ) Other 2,091 (180 ) (5,479 ) (28,032 ) (31,600 ) Corporate (64,183 ) (83,165 ) — — (147,348 ) Total $ 189,579 $ (84,280 ) $ (27,472 ) $ (28,032 ) $ 49,795 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 (In thousands) $ 91,615 $ (588 ) $ (147,896 ) $ (6,494 ) $ (916,868 ) $ (980,231 ) 94,124 (154 ) (4,940 ) (4,375 ) — 84,655 21,286 (150 ) (2,754 ) (4,999 ) — 13,383 (19,699 ) (921 ) (1,441 ) — — (22,061 ) (65,465 ) (68,268 ) — — — (133,733 ) $ 121,861 $ (70,081 ) $ (157,031 ) $ (15,868 ) $ (916,868 ) $ (1,037,987 ) December 31, 2012 Segment Assets Goodwill Total Assets (In thousands) Search & Applications $ 355,159 $ 723,650 $ 197,304 $ 64,457 $ 1,340,570 Match 225,781 683,935 158,098 5,612 1,073,426 Local 46,842 143,782 5,382 21,104 217,110 Media 71,495 15,590 1,800 2,020 90,905 Other 28,842 49,197 16,380 10,747 105,166 978,651 — — — 978,651 Total $ 1,706,770 $ 1,616,154 $ 378,964 $ 103,940 $ 3,805,828 December 31, 2011 Segment Assets Goodwill Total Assets (In thousands) Search & Applications $ 246,459 $ 526,444 $ 163,604 $ 6 $ 936,513 Match 190,338 667,073 156,699 21,501 1,035,611 Local 46,581 127,698 18,205 1,293 193,777 Media 25,429 15,590 1,800 — 42,819 Other 15,910 21,719 11,180 3,819 52,628 1,148,517 — — — 1,148,517 Total $ 1,673,234 $ 1,358,524 $ 351,488 $ 26,619 $ 3,409,865 December 31, 2011 Segment Assets Goodwill Indefinite-Lived
Intangible Assets Definite-Lived
Intangible Assets Total Assets (In thousands) $ 271,298 $ 551,518 $ 168,986 $ 500 $ 992,302 190,338 667,073 156,699 21,501 1,035,611 13,862 109,947 12,823 793 137,425 49,219 29,986 12,980 3,825 96,010 1,148,517 — — — 1,148,517 $ 1,673,234 $ 1,358,524 $ 351,488 $ 26,619 $ 3,409,865 (c) Corporate assets consist primarily of cash and cash equivalents, marketable securities and IAC's headquarters building. IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 15—SEGMENT INFORMATION (Continued) December 31, 2010 Segment Assets Goodwill Indefinite-Lived
Intangible Assets Definite-Lived
Intangible Assets Total Assets (In thousands) $ 280,773 $ 551,454 $ 168,500 $ 1,941 $ 1,002,668 196,177 297,974 42,118 979 537,248 13,834 109,917 12,823 3,231 139,805 43,674 30,148 13,580 1,872 89,274 1,560,084 — — — 1,560,084 $ 2,094,542 $ 989,493 $ 237,021 $ 8,023 $ 3,329,079 (c)Corporate assets consist primarily of cash and cash equivalents, marketable securities and IAC's headquarters building.(d)Included in the segment assets of Match at December 31, 2010 is its investment in Meetic, which was accounted for as an equity method investment. During the third quarter of 2011, Match obtained a controlling financial interest in Meetic. Accordingly, this purchase was accounted for under the acquisition method of accounting.thea data center lease agreement. These operating expenses are not included in the table below. (In thousands) (In thousands) $ 22,209 19,515 $ 24,071 15,494 25,565 13,685 23,812 13,287 23,268 2017 20,593 196,098 210,798 $ 280,288 $ 328,107 were $31.3are $30.6 million $31.1, $31.3 million and $26.4$31.1 million for the years ended December 31, 2012, 2011 and 2010, and 2009, respectively.66%55% of the future minimum payments due under all operating lease agreements in the table above.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 16—COMMITMENTS (Continued)such as under letters of credit extended as follows: Amount of Commitment Expiration Per Period Total
Amounts
Committed Less Than
1 Year 1-3
Years 3-5
Years More Than
5 Years Amount of Commitment Expiration Per Period (In thousands) $ 8,676 $ 8,676 $ — $ — $ — (In thousands) Letters of credit $ 2,780 $ 2,780 $ — $ — 55,757 19,394 31,697 4,666 — 41,109 18,785 22,233 91 $ 64,433 $ 28,070 $ 31,697 $ 4,666 $ — $ 43,889 $ 21,565 $ 22,233 $ 91 The guarantee relates to the Company's guarantee of an equity method investee's debt. taxincome and non-tax contingencies, to assess the probabilitylikelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company. See Note 4 for additional information related to income tax contingencies.Supplemental Disclosure of Non-Cash Transactions for 2011 On February 8, 2011, in connection with the Liberty Exchange, the Company received 0.1 million shares of IAC common stock, valued at $2.9 million, in fulfillment of post-closing working capital adjustments. On January 31, 2011, IAC contributed The Daily Beast, previously reported in IAC's Media & Other segment, to a newly formed venture with Harman Newsweek called The Newsweek/Daily Beast Company. IAC and Harman Newsweek operate The Newsweek/Daily Beast Company jointly. The consideration for the acquisition of OkCupid on January 20, 2011 includes a contingent consideration arrangement which is described in Note 5.IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 18—SUPPLEMENTAL CASH FLOW INFORMATION (Continued)$217.9$217.9 million in cash and all the outstanding shares of Celebrate Interactive, Inc., a wholly owned subsidiary of IAC that held all the equity interests of Evite, Inc., Giftco, Inc. and IAC Advertising, LLC, for substantially all of Liberty's shares of IAC common$364.2$364.2 million based on the closing price of IAC common stock on December 1, 2010.$3.0$3.0 million payment from Match to Meetic, resulted in each party owning a 50% equity interest in the newly formed venture, which was valued at $72 million.$72 million. No gain or loss was recognized on this transaction as the fair value of the consideration received by Match equaled the fair value of the assets exchanged.Supplemental Disclosure of Non-Cash Transactions for 2009 The Company recorded a $4.1 million reduction to the 2008 spin-off distribution. This reflects a reduction in the Company's income tax liability and a corresponding increase in the income tax liability of the spun-off businesses as of the date of the spin-off. This reduced tax liability is primarily due to 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. 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 at $6.2 million. The promissory note was subsequently paid in the fourth quarter of 2009. On January 31, 2009, IAC completed the sale of ReserveAmerica to The Active Network, Inc. ("Active"). In exchange for ReserveAmerica, IAC received approximately 3.5 million shares of Active convertible preferred stock, valued at $33.3 million. No gain or loss was recognized on the sale of ReserveAmerica as the fair value of the Active convertible preferred stock received was equivalent to the carrying value of ReserveAmerica.$11.4$11.4 million from Meetic, which the Company deemed to be a partial return of its investment. Accordingly, the dividend is reflected as a cash flowinflow from an investing activity in the accompanying consolidated statement of cash flows. Years Ended December 31, 2011 2010 2009 Years Ended December 31, (In thousands) 2012 2011 2010 (In thousands) Cash paid (received) during the year for: $ 5,128 $ 5,113 $ 5,682 $ 5,214 $ 5,128 $ 5,113 42,094 19,311 8,397 43,316 42,094 19,311 (3,609 ) (72,198 ) (136,435 ) (8,187 ) (3,609 ) (72,198 ) IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)TransactionsFor the years ended December 31, 2012, 2011 and 2010, transactions related to these agreements have in recent years, been immaterial. The Company and Expedia are related parties since they are under common control, given that Mr. Diller serves as Chairman and Senior Executive of both IAC and Expedia.From 2009 through For the years ended December 31, 2012, 2011 and 2010, total payments made to this entity by the Company were immaterial.2009 were $5.0$4.9 million $4.9 million and $4.5 million,, respectively. The increase in matching contributions in 2012 is primarily related to increased participation in the plan. Matching contributions are invested in the same manner as each participant's voluntary contributions in the investment options provided under the plan. Investment options in the plan include IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock.2009 were $1.4$0.4 million $0.4 million and $0.5 million,, respectively. The increase in contributions for both 2012 and 2011 relates primarily to the acquisition of Meetic.Meetic, consolidated beginning September 1, 2011. (In thousands, except per share data) Year Ended December 31, 2012 Revenue $ 640,600 $ 680,612 $ 714,470 $ 765,251 Cost of revenue 223,571 236,690 261,932 270,277 Operating income 62,765 97,476 78,033 85,294 Earnings from continuing operations 31,153 48,101 46,185 44,408 Earnings (loss) from discontinued operations, net of tax 3,684 (4,641 ) (5,624 ) (2,470 ) Net earnings 34,837 43,460 40,561 41,938 Net earnings attributable to IAC shareholders 34,478 43,332 40,717 40,739 Per share information attributable to IAC shareholders: $ 0.37 $ 0.56 $ 0.52 $ 0.49 $ 0.34 $ 0.52 $ 0.49 $ 0.46 $ 0.42 $ 0.50 $ 0.46 $ 0.46 $ 0.38 $ 0.47 $ 0.43 $ 0.43 (In thousands, except per share data) Year Ended December 31, 2011 Revenue $ 460,213 $ 485,404 $ 516,884 $ 596,943 Cost of revenue 172,718 181,472 188,642 218,412 Operating income 37,336 58,231 46,740 55,455 Earnings from continuing operations 20,168 45,630 67,973 41,798 (Loss) earnings from discontinued operations, net of tax (1,948 ) (2,488 ) (3,922 ) 4,366 Net earnings 18,220 43,142 64,051 46,164 Net earnings attributable to IAC shareholders 18,070 42,424 64,973 48,766 Per share information attributable to IAC shareholders: $ 0.22 $ 0.50 $ 0.81 $ 0.53 $ 0.21 $ 0.46 $ 0.73 $ 0.48 $ 0.20 $ 0.47 $ 0.77 $ 0.58 $ 0.19 $ 0.44 $ 0.69 $ 0.53 Quarter Ended
March 31 Quarter Ended
June 30 Quarter Ended
September 30(a) Quarter Ended
December 31 (In thousands, except per share data) $ 460,213 $ 485,404 $ 516,884 $ 596,943 172,718 181,472 188,642 218,412 37,336 58,231 46,740 55,455 20,168 45,630 67,973 41,798 (1,948 ) (2,488 ) (3,922 ) 4,366 18,220 43,142 64,051 46,164 18,070 42,424 64,973 48,766 $ 0.22 $ 0.50 $ 0.81 $ 0.53 $ 0.21 $ 0.46 $ 0.73 $ 0.48 $ 0.20 $ 0.47 $ 0.77 $ 0.58 $ 0.19 $ 0.44 $ 0.69 $ 0.53 Quarter Ended
March 31(b) Quarter Ended
June 30 Quarter Ended
September 30 Quarter Ended
December 31(c)(e) (In thousands, except per share data) $ 378,178 $ 394,244 $ 412,966 $ 451,427 131,149 140,638 147,933 174,096 8,925 24,633 37,684 (21,447 ) (14,597 ) 15,421 22,440 (32,657 ) (4,727 ) (2,586 ) (4,795 ) 115,853 (19,324 ) 12,835 17,645 83,196 (18,705 ) 13,591 17,509 86,964 $ (0.12 ) $ 0.15 $ 0.22 $ (0.30 ) $ (0.12 ) $ 0.14 $ 0.21 $ (0.30 ) $ (0.16 ) $ 0.12 $ 0.17 $ (0.90 ) $ (0.16 ) $ 0.12 $ 0.16 $ (0.90 ) (a)The third quarter of 2011 includes an after-tax loss of $11.7 million related to marking down the carrying value of Match's 27% equity method investment in Meetic to fair value (i.e., the tender offer price of €15.00 per share) upon achieving control. The third quarter of 2011 also includes the(a) (b) (c) Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period. IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 21—QUARTERLY RESULTS (UNAUDITED) (Continued)release of a previously established deferred tax liability of $43.6 million in connection with the acquisition of Meetic.(b)The first quarter of 2010 includes an after-tax impairment charge of $18.3 million related to the write-down of one of the Company's equity method investments to fair value.(c)The fourth quarter of 2010 includes after-tax impairment charges of $30.8 million related to the write-down of the goodwill and intangible assets of Shoebuy and $11.0 million related to the write-down of an indefinite-lived intangible asset of IAC Search & Media and an after-tax impairment charge of $4.6 million related to the write-down of one of the Company's cost method investments to fair value.(d)Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.Discontinued operations(e)The fourth quarter of 2010 includes a gain of $140.8 million related to the tax-free exchange of Evite, 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 On February 1, 2012, IAC's Board of Directors declared a quarterly cash dividend of $0.12 per share of common and Class B common stock outstanding to be paid to stockholders of record as of the close of business on February 15, 2012, with a payment date of March 1, 2012. Based on the Company's current shares outstanding, the total amount of this dividend will be approximately $10.4 million. Between January 1, 2012 and January 27, 2012, IAC repurchased 1.8 million shares of common stock for aggregate consideration of $74.1 million.2011.2012. In making this assessment, our management used the criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that, as of December 31, 2011,2012, the Company's internal control over financial reporting is effective. The effectiveness of our internal control over financial reporting as of December 31, 20112012 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report, included herein.20112012 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company implemented a materialBased on that evaluation, there has be no such change in internal control over financial reporting during the quarter ended December 31, 2011. The change related to the remediation of a material weakness in internal controls related to the accounting for deferred income taxes that led to the restatement of its consolidated financial statements included in the Company's2012.Form 10-K for the year ended December 31, 2010 and in the Forms 10-Q for the quarterly periods ended March 31, 2011, June 30, 2011 and September 30, 2011. Specifically, the Company increased the level of review of work performed by Company personnel and third-party tax professionals in the identification and calculation of deferred income tax liabilities. The Company has completed its testing of the additional control processes outlined above and concludes that the material weakness has been satisfactorily remediated as of December 31, 2011.
Report of Independent Registered Public Accounting Firm2011,2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). IAC/InterActiveCorp's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.2011,2012, based on the COSO criteria.20112012 and 2010,2011, and the related consolidated statements of operations, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 20112012 and our report dated February 29, 2012March 1, 2013 expressed an unqualified opinion thereon.February 29, 201220122013 Annual Meeting of Stockholders, or the 20122013 Proxy Statement, as set forth below, in accordance with General Instruction G(3) of Form 10-K.20122013 Proxy Statement and is incorporated herein by reference. The information required by subsections (c)(3), (d)(4) and (d)(5) of Item 407 of Regulation S-K is set forth in the sections entitled "Corporate Governance" and "The Board and Board Committees" in the 20122013 Proxy Statement and is incorporated herein by reference.20122013 Proxy Statement and is incorporated herein by reference. The information required by subsections (e)(4) and (e)(5) of Item 407 of Regulation S-K is set forth in the sections entitled "The Board and Board Committees," "Compensation Committee Report" and "Compensation Committee Interlocks and Insider Participation" in the 20122013 Proxy Statement and is incorporated herein by reference; provided, that the information set forth in the section entitled "Compensation Committee Report" shall be deemed furnished herein and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.20122013 Proxy Statement and is incorporated herein by reference.20122013 Proxy Statement and is incorporated herein by reference.20122013 Proxy Statement and is incorporated herein by reference.20112012 and 2010.2010 and 2009.2010 and 2009.2010 and 2009.ScheduleNumberII Valuation and Qualifying Accounts. DescriptionLocation2.1 Description Location 2.1 Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on August 22, 2008.
3.13.1
Restated Certificate of Incorporation of IAC/InterActiveCorp.
Exhibit 3.1 to the Registrant's Registration Statement on Form 8-A/A, filed on August 12, 2005.
3.23.2
Certificate of Amendment of the Restated Certificate of Incorporation of IAC/InterActiveCorp.
Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on August 22, 2008.
3.33.3
Amended and Restated By-laws of IAC/InterActiveCorp.
Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on December 6, 2010.ExhibitNo.DescriptionLocation4.1 4.1 Equity Warrant Agreement,Indenture for 4.75% Senior Notes due 2022, dated as of May 7, 2002, betweenDecember 21, 2012, among IAC/InterActiveCorp, the RegistrantGuarantors named therein and Computershare Inc. (successor to BNY Mellon Shareowner Services and The Bank of New York)Trust Company, N.A., as equity warrant agent.Trustee.(2) Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed on May 17, 2002.
4.24.2
In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain instruments relating to long-term obligations of the Registrant have been omitted but will be furnished to the Commission upon request.
10.110.1
Amended and Restated Governance Agreement, dated as of August 9, 2005, by and between the Registrant and Barry Diller.
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005.
10.210.2
Letter Agreement, dated as of December 1, 2010, by and among the Registrant, Liberty Media Corporation, Liberty USA Holdings, LLC and Barry Diller.
Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on December 6, 2010.
10.310.3
Letter Agreement, dated as of December 1, 2010, by and between the Registrant and Barry Diller.
Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on December 6, 2010.
10.410.4
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.
Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on August 22, 2008.
10.510.5
IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1)
Annex F to the Registrant's Definitive Proxy Statement, filed on July 10, 2008.
10.610.6
Form of Terms and Conditions of Stock Options under the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1)
Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
10.710.7Form of Terms and Conditions of Restricted Stock Units under the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1)(2) 10.8 Amended and Restated IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(1)
Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
10.910.8
Form of Terms and Conditions of Stock Options under the IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(1)
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008.
10.1010.9
Summary of Non-Employee Director Compensation Arrangements.(1)
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009.
10.1110.10
2011 IAC/InterActiveCorp Deferred Compensation Plan for Non-Employee Directors.(1)
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011.10.11IAC/InterActiveCorp Executive Deferred Compensation Plan.(1)Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2004.DescriptionLocation Description Location 10.12 Stock Option Agreement between the Registrant and Barry Diller, dated as of June 7, 2005.(1) Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005.
10.1310.13
Match.com, Inc. Equity Program(1)Program.(1)
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009.
10.1410.14
Employment Agreement between Gregory R. Blatt and the Registrant, dated as of December 22, 2010.(1)
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
10.1510.15
Second Amended and Restated Employment Agreement between Victor A. Kaufman and the Registrant, dated as of February 26, 2010.March 15, 2012.(1)
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.2012.
10.1610.16
Amended and Restated Employment Agreement between Thomas J. McInerneyJeffrey W. Kip and the Registrant, dated as of December 1, 2010.March 20, 2012.(1)
Exhibit 10.1910.2 to the Registrant's AnnualQuarterly Report on Form 10-K10-Q for the fiscal year ended DecemberMarch 31, 2010.2012.
10.1710.17
Employment Agreement between Gregg Winiarski and the Registrant, dated as of February 26, 2010.(1)
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.
10.1810.18
Google Services Agreement, dated as of January 1, 2008, between the Registrant and Google.Google Inc.
Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
10.1910.19
Amendment No. 4 to Google Services Agreement, dated as of April 1, 2011, between the Registrant and Google.Google Inc.
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011.
10.20Credit Agreement, dated as of December 21, 2012, among IAC/InterActiveCorp, as Borrower, the Lenders party thereto, JPMorgan Chase, Bank, N.A., as Administrative Agent, and the other parties thereto.(2) 21.1 Subsidiaries of the Registrant as of December 31, 2011.2012.(2)
23.123.1
Consent of Ernst & Young LLP.(2)
31.131.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(2)
31.231.2
Certification of the Chairman and Senior Executive pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(2)
31.331.3
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(2)
DescriptionLocation Description Location 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(3)
32.232.2
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)
32.332.3
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)
101.INS101.INS
XBRL Instance(4)Instance
101.SCH101.SCH
XBRL Taxonomy Extension Schema(4)Schema
101.CAL101.CAL
XBRL Taxonomy Extension Calculation(4)Calculation
101.DEF101.DEF
XBRL Taxonomy Extension Definition(4)Definition
101.LAB101.LAB
XBRL Taxonomy Extension Labels(4)Labels
101.PRE101.PRE
XBRL Taxonomy Extension Presentation(4)Presentation
(1)Reflects management contracts and management and director compensatory plans.(2)Filed herewith.(3)Furnished herewith.(4)Pursuant to applicable securities laws and regulations, the Registrant is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud or other liability provisions of the federal securities laws as long as the Registrant has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. In addition, users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.(1) Reflects management contracts and management and director compensatory plans. (2) Filed herewith. (3) Furnished herewith. February 29, 2012March 1, 2013 IAC/INTERACTIVECORP
By:
/s/ GREGORY R. BLATTFebruary 29, 2012:March 1, 2013:Signature Title
Title/s/ BARRY DILLER Barry Diller Chairman of the Board, Senior Executive and Director
Barry Diller/s/ GREGORY R. BLATT Gregory R. Blatt
Chief Executive Officer and Director
Gregory R. Blatt/s/ VICTOR A. KAUFMAN Victor A. Kaufman
Vice Chairman and Director
Victor A. Kaufman/s/ THOMAS J. MCINERNEYThomas J. McInerneyJEFFREY W. KIP
Executive Vice President and Chief Financial Officer
Jeffrey W. Kip/s/ MICHAEL H. SCHWERDTMAN Michael H. Schwerdtman
Senior Vice President and Controller (Chief Accounting Officer)
Michael H. Schwerdtman/s/ EDGAR BRONFMAN, JR. Edgar Bronfman, Jr.Director/s/ CHELSEA CLINTONChelsea ClintonDirector/s/ SONALI DE RYCKERSonali De RyckerDirectorSignatureTitle/s/ MICHAEL D. EISNERMichael D. Eisner Director
Edgar Bronfman, Jr./s/ CHELSEA CLINTON Director Chelsea Clinton /s/ SONALI DE RYCKER Director Sonali De Rycker /s/ MICHAEL D. EISNER Director Michael D. Eisner /s/ DONALD R. KEOUGH Director Donald R. Keough
Director/s/ BRYAN LOURD Bryan Lourd
Director
Bryan Lourd/s/ ARTHUR C. MARTINEZ Director Arthur C. Martinez
Director/s/ DAVID S. ROSENBLATT Director David S. Rosenblatt
Director/s/ ALAN G. SPOON Alan G. Spoon
Director
David S. Rosenblatt/s/ ALEXANDER VON FURSTENBERG Director Alexander von Furstenberg
Director/s/ RICHARD F. ZANNINO Director Richard F. Zannino
DirectorDescription Deductions (In thousands) 2012 Allowance for doubtful accounts and revenue reserves $ 7,309 $ 12,237 (1) $ 654 $ (11,425 ) (5) $ 8,775 Magazine publishing allowance for newsstand returns — 10,426 (2) 33 (8,146 ) 2,313 Sales returns accrual 1,020 17,728 — (17,504 ) 1,244 Deferred tax valuation allowance 45,084 9,320 (3) 6,379 (4) — 60,783 Other reserves 2,119 1,925 2011 Allowance for doubtful accounts and revenue reserves $ 8,848 $ 8,898 (1) $ (329 ) $ (10,108 ) (5) $ 7,309 Sales returns accrual 913 16,573 — (16,466 ) 1,020 Deferred tax valuation allowance 40,266 5,732 (7) (914 ) (8) — 45,084 Other reserves 1,555 2,119 2010 Allowance for doubtful accounts and revenue reserves $ 10,515 $ 9,013 (1) $ 81 $ (10,761 ) (5) $ 8,848 Sales returns accrual 873 14,026 — (13,986 ) 913 Deferred tax valuation allowance 35,331 4,511 (9) 424 (4) — 40,266 Other reserves 2,666 1,555 Balance at
Beginning
of Period Charges to
Earnings Charges to
Other Accounts Deductions Balance at
End of Period (In thousands) $ 8,848 $ 8,898 (1) $ (329 ) $ (10,108 )(4) $ 7,309 913 107 — — 1,020 40,266 5,732 (2) (914 )(3) — 45,084 1,555 2,119 $ 10,515 $ 9,013 (1) $ 81 $ (10,761 )(4) $ 8,848 873 40 — — 913 35,331 4,511 (5) 424 (6) — 40,266 2,666 1,555 $ 10,293 $ 10,361 (1) $ (520 ) $ (9,619 )(4) $ 10,515 794 79 — — 873 39,515 (1,728 )(7) (2,456 )(8) — 35,331 3,079 2,666 (1)Additions to the allowance for doubtful accounts is charged to expense. Additions to the revenue reserve is charged against revenue.(2)Amount is primarily related to losses from equity method investments.(3)Amount is primary related to the net release of the valuation allowance on net benefited losses for 2011 unrealized gains on available-for-sale securities included in accumulated other comprehensive income.(4)Write-off of fully reserved accounts receivable.(5)Amount is primarily related to net unbenefited unrealized losses including an impairment charge from equity method investments and an increase in foreign net operating losses partially offset by a write-off of previously unbenefited deferred tax assets for state capital loss carryforwards.(6)Amount is primary related to unbenefited unrealized losses on available-for-sale securities included in accumulated other comprehensive income.(7)Amount is primarily related to a decrease in state net operating losses partially offset by an increase for unbenefited state capital loss carryforwards and foreign net operating losses.(8)Amount is primarily related to the release of a valuation allowance on net benefited losses for 2009 unrealized gains on available-for-sale securities included in accumulated other comprehensive income.(1) Additions to the allowance for doubtful accounts are charged to expense. Additions to the revenue reserves are charged against revenue. (2) Additions to the magazine publishing allowance for newsstand returns are related to magazine publishing at News_Beast and are charged against revenue. (3) Amount is primarily related to an unbenefited other-than-temporary impairment charge related to a long-term marketable equity security, an increase in deferred tax assets for investments in subsidiaries and an increase in federal net operating losses. (4) Amount is primary related to unbenefited unrealized losses on available-for-sale securities included in accumulated other comprehensive income. (5) Write-off of fully reserved accounts receivable. (6) Amount represents returns of magazines at News_Beast. (7) Amount is primarily related to losses from equity method investments. (8) Amount is primary related to the net release of the valuation allowance on net benefited losses for 2011 unrealized gains on available-for-sale securities included in accumulated other comprehensive income. (9) Amount is primarily related to net unbenefited unrealized losses including an impairment charge from equity method investments and an increase in foreign net operating losses partially offset by a write-off of previously unbenefited deferred tax assets for state capital loss carryforwards.