ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2012 | |
Or | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from__________to__________ |
Delaware (State or other jurisdiction of incorporation or organization) | 59-2712887 (I.R.S. Employer Identification No.) | |
555 West 18th Street, New York, New York 10011 (Address of registrant's principal executive offices) | ||
(212) 314-7300 (Registrant's telephone number, including area code) |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Common Stock | 82,665,959 | |
Class B Common Stock | 5,789,499 | |
Total outstanding Common Stock | 88,455,458 |
September 30, 2012 | December 31, 2011 | ||||||
(In thousands, except share data) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 501,779 | $ | 704,153 | |||
Marketable securities | 138,926 | 165,695 | |||||
Accounts receivable, net of allowance of $8,071 and $7,309, respectively | 220,735 | 177,030 | |||||
Other current assets | 126,787 | 112,255 | |||||
Total current assets | 988,227 | 1,159,133 | |||||
Property and equipment, net | 272,317 | 259,588 | |||||
Goodwill | 1,556,833 | 1,358,524 | |||||
Intangible assets, net | 491,485 | 378,107 | |||||
Long-term investments | 169,728 | 173,752 | |||||
Other non-current assets | 103,985 | 80,761 | |||||
TOTAL ASSETS | $ | 3,582,575 | $ | 3,409,865 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
LIABILITIES: | |||||||
Current maturities of long-term debt | $ | 15,844 | $ | — | |||
Accounts payable, trade | 86,810 | 64,398 | |||||
Deferred revenue | 159,498 | 126,297 | |||||
Accrued expenses and other current liabilities | 362,917 | 343,490 | |||||
Total current liabilities | 625,069 | 534,185 | |||||
Long-term debt, net of current maturities | 80,000 | 95,844 | |||||
Income taxes payable | 479,693 | 450,533 | |||||
Deferred income taxes | 304,889 | 302,213 | |||||
Other long-term liabilities | 33,332 | 16,601 | |||||
Redeemable noncontrolling interests | 58,956 | 50,349 | |||||
Commitments and contingencies | |||||||
SHAREHOLDERS' EQUITY: | |||||||
Common stock $.001 par value; authorized 1,600,000,000 shares; issued 248,747,173 and 234,100,950 shares, respectively, and outstanding 82,646,948 and 77,126,881 shares, respectively | 249 | 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 | 16 | 16 | |||||
Additional paid-in capital | 11,627,593 | 11,280,173 | |||||
Accumulated deficit | (359,258 | ) | (477,785 | ) | |||
Accumulated other comprehensive loss | (11,891 | ) | (12,443 | ) | |||
Treasury stock 176,468,225 and 167,342,069 shares, respectively | (9,308,315 | ) | (8,885,146 | ) | |||
Total IAC shareholders' equity | 1,948,394 | 1,905,049 | |||||
Noncontrolling interests | 52,242 | 55,091 | |||||
Total shareholders' equity | 2,000,636 | 1,960,140 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 3,582,575 | $ | 3,409,865 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenue | $ | 714,470 | $ | 516,884 | $ | 2,035,682 | $ | 1,462,501 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenue (exclusive of depreciation shown separately below) | 261,932 | 188,642 | 722,193 | 542,832 | |||||||||||
Selling and marketing expense | 236,763 | 153,296 | 669,671 | 426,764 | |||||||||||
General and administrative expense | 94,876 | 84,628 | 278,895 | 241,472 | |||||||||||
Product development expense | 24,504 | 21,556 | 71,101 | 56,558 | |||||||||||
Depreciation | 13,150 | 17,484 | 37,490 | 43,373 | |||||||||||
Amortization of intangibles | 5,212 | 4,538 | 18,058 | 9,195 | |||||||||||
Total costs and expenses | 636,437 | 470,144 | 1,797,408 | 1,320,194 | |||||||||||
Operating income | 78,033 | 46,740 | 238,274 | 142,307 | |||||||||||
Equity in losses of unconsolidated affiliates | (3,298 | ) | (15,078 | ) | (28,208 | ) | (25,677 | ) | |||||||
Other (expense) income, net | (944 | ) | 4,308 | (1,267 | ) | 10,697 | |||||||||
Earnings from continuing operations before income taxes | 73,791 | 35,970 | 208,799 | 127,327 | |||||||||||
Income tax (provision) benefit | (27,606 | ) | 32,003 | (83,360 | ) | 6,444 | |||||||||
Earnings from continuing operations | 46,185 | 67,973 | 125,439 | 133,771 | |||||||||||
Loss from discontinued operations, net of tax | (5,624 | ) | (3,922 | ) | (6,581 | ) | (8,358 | ) | |||||||
Net earnings | 40,561 | 64,051 | 118,858 | 125,413 | |||||||||||
Net loss (earnings) attributable to noncontrolling interests | 156 | 922 | (331 | ) | 54 | ||||||||||
Net earnings attributable to IAC shareholders | $ | 40,717 | $ | 64,973 | $ | 118,527 | $ | 125,467 | |||||||
Per share information attributable to IAC shareholders: | |||||||||||||||
Basic earnings per share from continuing operations | $ | 0.52 | $ | 0.81 | $ | 1.46 | $ | 1.52 | |||||||
Diluted earnings per share from continuing operations | $ | 0.49 | $ | 0.73 | $ | 1.35 | $ | 1.41 | |||||||
Basic earnings per share | $ | 0.46 | $ | 0.77 | $ | 1.38 | $ | 1.43 | |||||||
Diluted earnings per share | $ | 0.43 | $ | 0.69 | $ | 1.28 | $ | 1.32 | |||||||
Dividends declared per share | $ | 0.24 | $ | — | $ | 0.48 | $ | — | |||||||
Non-cash compensation expense by function: | |||||||||||||||
Cost of revenue | $ | 1,550 | $ | 1,449 | $ | 4,775 | $ | 3,682 | |||||||
Selling and marketing expense | 1,386 | 1,241 | 3,512 | 3,476 | |||||||||||
General and administrative expense | 18,850 | 18,118 | 52,378 | 53,444 | |||||||||||
Product development expense | 1,565 | 2,077 | 4,593 | 5,451 | |||||||||||
Total non-cash compensation expense | $ | 23,351 | $ | 22,885 | $ | 65,258 | $ | 66,053 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Net earnings | $ | 40,561 | $ | 64,051 | $ | 118,858 | $ | 125,413 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Change in foreign currency translation adjustment | 14,609 | (39,619 | ) | (4,940 | ) | (29,631 | ) | ||||||||
Change in net unrealized (losses) gains on available-for-sale securities | (8,758 | ) | (16,624 | ) | 4,685 | 18,192 | |||||||||
Total other comprehensive income (loss) | 5,851 | (56,243 | ) | (255 | ) | (11,439 | ) | ||||||||
Comprehensive income | 46,412 | 7,808 | 118,603 | 113,974 | |||||||||||
Comprehensive (income) loss attributable to noncontrolling interests | (2,026 | ) | 7,078 | 476 | 6,084 | ||||||||||
Comprehensive income attributable to IAC shareholders | $ | 44,386 | $ | 14,886 | $ | 119,079 | $ | 120,058 |
IAC Shareholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||
Class B Convertible Common Stock $.001 Par Value | ||||||||||||||||||||||||||||||||||||||||||||||
Common Stock $.001 Par Value | ||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Total IAC Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||
Redeemable Noncontrolling Interests | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Noncontrolling Interests | Total Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||
$ | Shares | $ | Shares | |||||||||||||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||
Net (loss) earnings for the nine months ended September 30, 2012 | (1,311 | ) | — | — | — | — | — | 118,527 | — | — | 118,527 | 1,642 | 120,169 | |||||||||||||||||||||||||||||||||
Other comprehensive (loss) income, net of tax | (485 | ) | — | — | — | — | — | — | 552 | — | 552 | (322 | ) | 230 | ||||||||||||||||||||||||||||||||
Non-cash compensation expense | — | — | — | — | — | 63,235 | — | — | — | 63,235 | 2,023 | 65,258 | ||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes | — | 3 | 2,918 | — | — | 35,958 | — | — | — | 35,961 | — | 35,961 | ||||||||||||||||||||||||||||||||||
Income tax benefit related to the exercise of stock options, vesting of restricted stock units and other | — | — | — | — | — | 18,865 | — | — | — | 18,865 | — | 18,865 | ||||||||||||||||||||||||||||||||||
Issuance of common stock upon the exercise of warrants | — | 12 | 11,728 | — | — | 284,099 | — | — | — | 284,111 | — | 284,111 | ||||||||||||||||||||||||||||||||||
Dividends | — | — | — | — | — | (45,841 | ) | — | — | — | (45,841 | ) | — | (45,841 | ) | |||||||||||||||||||||||||||||||
Purchase of treasury stock | — | — | — | — | — | — | — | — | (423,169 | ) | (423,169 | ) | — | (423,169 | ) | |||||||||||||||||||||||||||||||
Purchase of redeemable noncontrolling interests | (2,955 | ) | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Fair value of redeemable noncontrolling interests adjustment | 8,896 | — | — | — | — | (8,896 | ) | — | — | — | (8,896 | ) | — | (8,896 | ) | |||||||||||||||||||||||||||||||
Transfer from noncontrolling interests to redeemable noncontrolling interests | 7,192 | — | — | — | — | — | — | — | — | — | (7,192 | ) | (7,192 | ) | ||||||||||||||||||||||||||||||||
Other | (2,730 | ) | — | — | — | — | — | — | — | — | — | 1,000 | 1,000 | |||||||||||||||||||||||||||||||||
Balance as of September 30, 2012 | $ | 58,956 | $ | 249 | 248,747 | $ | 16 | 16,157 | $ | 11,627,593 | $ | (359,258 | ) | $ | (11,891 | ) | $ | (9,308,315 | ) | $ | 1,948,394 | $ | 52,242 | $ | 2,000,636 |
Nine Months Ended | |||||||
September 30, | |||||||
2012 | 2011 | ||||||
(In thousands) | |||||||
Cash flows from operating activities attributable to continuing operations: | |||||||
Net earnings | $ | 118,858 | $ | 125,413 | |||
Less: Discontinued operations, net of tax | (6,581 | ) | (8,358 | ) | |||
Earnings from continuing operations | 125,439 | 133,771 | |||||
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities attributable to continuing operations: | |||||||
Non-cash compensation expense | 65,258 | 66,053 | |||||
Depreciation | 37,490 | 43,373 | |||||
Amortization of intangibles | 18,058 | 9,195 | |||||
Deferred income taxes | 5,410 | (44,548 | ) | ||||
Equity in losses of unconsolidated affiliates | 28,208 | 25,677 | |||||
Gain on sales of investments | (1,876 | ) | (1,861 | ) | |||
Changes in assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | (16,443 | ) | (27,494 | ) | |||
Other current assets | (9,749 | ) | 9,005 | ||||
Accounts payable and other current liabilities | 18,700 | 15,512 | |||||
Income taxes payable | 29,479 | 6,173 | |||||
Deferred revenue | 10,575 | 26,668 | |||||
Other, net | 13,058 | 8,042 | |||||
Net cash provided by operating activities attributable to continuing operations | 323,607 | 269,566 | |||||
Cash flows from investing activities attributable to continuing operations: | |||||||
Acquisitions, net of cash acquired | (377,123 | ) | (278,469 | ) | |||
Capital expenditures | (32,363 | ) | (27,346 | ) | |||
Proceeds from maturities and sales of marketable debt securities | 79,353 | 528,170 | |||||
Purchases of marketable debt securities | (47,902 | ) | (154,718 | ) | |||
Proceeds from sales of long-term investments | 12,744 | 14,021 | |||||
Purchases of long-term investments | (10,031 | ) | (84,441 | ) | |||
Other, net | (12,264 | ) | (11,436 | ) | |||
Net cash used in investing activities attributable to continuing operations | (387,586 | ) | (14,219 | ) | |||
Cash flows from financing activities attributable to continuing operations: | |||||||
Purchase of treasury stock | (434,041 | ) | (389,566 | ) | |||
Issuance of common stock, net of withholding taxes | 320,070 | 62,045 | |||||
Dividends | (43,695 | ) | — | ||||
Excess tax benefits from stock-based awards | 23,486 | 22,878 | |||||
Other, net | (4,696 | ) | (3,699 | ) | |||
Net cash used in financing activities attributable to continuing operations | (138,876 | ) | (308,342 | ) | |||
Total cash used in continuing operations | (202,855 | ) | (52,995 | ) | |||
Total cash used in discontinued operations | (1,866 | ) | (7,379 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 2,347 | (2,414 | ) | ||||
Net decrease in cash and cash equivalents | (202,374 | ) | (62,788 | ) | |||
Cash and cash equivalents at beginning of period | 704,153 | 742,099 | |||||
Cash and cash equivalents at end of period | $ | 501,779 | $ | 679,311 |
(In thousands) | |||||
Cash and cash equivalents | $ | 998 | |||
Other current assets | 23,316 | ||||
Property and equipment | 14,681 | ||||
Goodwill | 176,127 | ||||
Intangible assets | 110,400 | ||||
Other assets | 1,613 | ||||
Total assets | 327,135 | ||||
Current liabilities | (7,543 | ) | |||
Other liabilities | (3,336 | ) | |||
Net assets | $ | 316,256 |
(In thousands) | Weighted-average Amortization Life (Years) | ||||
Indefinite-lived trade names | $ | 37,000 | Indefinite | ||
Content | 48,400 | 4.0 | |||
Technology | 16,100 | 3.0 | |||
Advertiser relationships | 7,400 | 2.0 | |||
Customer lists | 1,500 | 3.0 | |||
Total | $ | 110,400 | 3.6 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenue | $ | 740,086 | $ | 593,545 | $ | 2,115,866 | $ | 1,727,843 | |||||||
Net earnings attributable to IAC shareholders | $ | 47,146 | $ | 83,899 | $ | 144,997 | $ | 161,890 | |||||||
Basic earnings per share attributable to IAC shareholders | $ | 0.53 | $ | 0.99 | $ | 1.69 | $ | 1.84 | |||||||
Diluted earnings per share attributable to IAC shareholders | $ | 0.50 | $ | 0.89 | $ | 1.56 | $ | 1.71 |
September 30, 2012 | December 31, 2011 | ||||||
(In thousands) | |||||||
Goodwill | $ | 1,556,833 | $ | 1,358,524 | |||
Intangible assets with indefinite lives | 388,031 | 351,488 | |||||
Intangible assets with definite lives, net | 103,454 | 26,619 | |||||
Total goodwill and intangible assets, net | $ | 2,048,318 | $ | 1,736,631 |
Balance as of December 31, 2011 | Additions | (Deductions) | Foreign Exchange Translation | Balance as of September 30, 2012 | |||||||||||||||
(In thousands) | |||||||||||||||||||
IAC Search & Media | $ | 526,444 | $ | 182,969 | $ | (218 | ) | $ | — | $ | 709,195 | ||||||||
Search & Applications | 526,444 | 182,969 | (218 | ) | — | 709,195 | |||||||||||||
Match | 667,073 | 13,347 | (3,163 | ) | (10,216 | ) | 667,041 | ||||||||||||
HomeAdvisor | 109,947 | 1,880 | — | (383 | ) | 111,444 | |||||||||||||
CityGrid Media | 17,751 | 14,093 | — | — | 31,844 | ||||||||||||||
Local | 127,698 | 15,973 | — | (383 | ) | 143,288 | |||||||||||||
Connected Ventures | 8,267 | — | — | — | 8,267 | ||||||||||||||
DailyBurn | 7,323 | — | — | — | 7,323 | ||||||||||||||
Media | 15,590 | — | — | — | 15,590 | ||||||||||||||
Shoebuy | 21,719 | — | — | — | 21,719 | ||||||||||||||
Other | 21,719 | — | — | — | 21,719 | ||||||||||||||
Total | $ | 1,358,524 | $ | 212,289 | $ | (3,381 | ) | $ | (10,599 | ) | $ | 1,556,833 |
Cost | Accumulated Amortization | Net | Weighted-Average Amortization Life (Years) | ||||||||||
(In thousands) | |||||||||||||
Content | $ | 48,400 | $ | — | $ | 48,400 | 4.0 | ||||||
Technology | 38,895 | (8,146 | ) | 30,749 | 3.0 | ||||||||
Customer lists | 22,767 | (17,363 | ) | 5,404 | 1.2 | ||||||||
Advertiser and supplier relationships | 17,046 | (6,469 | ) | 10,577 | 4.3 | ||||||||
Other | 13,662 | (5,338 | ) | 8,324 | 8.3 | ||||||||
Total | $ | 140,770 | $ | (37,316 | ) | $ | 103,454 | 3.7 |
Cost | Accumulated Amortization | Net | Weighted-Average Amortization Life (Years) | ||||||||||
(In thousands) | |||||||||||||
Customer lists | $ | 18,050 | $ | (8,837 | ) | $ | 9,213 | 1.0 | |||||
Technology | 16,145 | (3,858 | ) | 12,287 | 2.2 | ||||||||
Supplier relationships | 8,946 | (5,298 | ) | 3,648 | 6.4 | ||||||||
Other | 6,063 | (4,592 | ) | 1,471 | 3.4 | ||||||||
Total | $ | 49,204 | $ | (22,585 | ) | $ | 26,619 | 2.6 |
(In thousands) | ||||
Remainder of 2012 | $ | 11,500 | ||
2013 | 38,943 | |||
2014 | 25,844 | |||
2015 | 16,551 | |||
2016 | 6,467 | |||
2017 | 1,426 | |||
Thereafter | 2,723 | |||
Total | $ | 103,454 |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Corporate debt securities | $ | 15,592 | $ | 40 | $ | — | $ | 15,632 | |||||||
States of the U.S. and state political subdivisions | 112,340 | 653 | (2 | ) | 112,991 | ||||||||||
Total debt securities | 127,932 | 693 | (2 | ) | 128,623 | ||||||||||
Equity security | — | 10,303 | — | 10,303 | |||||||||||
Total marketable securities | $ | 127,932 | $ | 10,996 | $ | (2 | ) | $ | 138,926 |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(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 |
Amortized Cost | Estimated Fair Value | ||||||
(In thousands) | |||||||
Due in one year or less | $ | 55,986 | $ | 56,163 | |||
Due after one year through five years | 71,946 | 72,460 | |||||
Total | $ | 127,932 | $ | 128,623 |
September 30, 2012 | December 31, 2011 | ||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||
(In thousands) | |||||||||||||||
Corporate debt securities | $ | — | $ | — | $ | 12,920 | $ | (15 | ) | ||||||
States of the U.S. and state political subdivisions | 5,895 | (2 | ) | 11,711 | (22 | ) | |||||||||
Total | $ | 5,895 | $ | (2 | ) | $ | 24,631 | $ | (37 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Proceeds from maturities and sales of available-for-sale marketable securities | $ | 40,570 | $ | 128,287 | $ | 88,347 | $ | 542,191 | |||||||
Gross realized gains | 241 | 387 | 2,039 | 2,303 | |||||||||||
Gross realized losses | — | — | — | (18 | ) |
• | Level 1: Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets. |
• | Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are 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. |
• | Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. See below for a discussion of fair value measurements made using Level 3 inputs. |
September 30, 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) | |||||||||||||||
Assets: | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 184,449 | $ | — | $ | — | $ | 184,449 | |||||||
Commercial paper | — | 84,443 | — | 84,443 | |||||||||||
Time deposits | — | 4,400 | — | 4,400 | |||||||||||
Marketable securities: | |||||||||||||||
Corporate debt securities | — | 15,632 | — | 15,632 | |||||||||||
States of the U.S. and state political subdivisions | — | 112,991 | — | 112,991 | |||||||||||
Equity security | 10,303 | — | — | 10,303 | |||||||||||
Long-term investments: | |||||||||||||||
Auction rate security | — | — | 7,330 | 7,330 | |||||||||||
Marketable equity securities | 66,078 | — | — | 66,078 | |||||||||||
Total | $ | 260,830 | $ | 217,466 | $ | 7,330 | $ | 485,626 |
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) | |||||||||||||||
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 | ) |
Three Months Ended September 30, | |||||||||||
2012 | 2011 | ||||||||||
Auction Rate Security | Auction Rate Security | Contingent Consideration Arrangement | |||||||||
(In thousands) | |||||||||||
Balance at July 1 | $ | 6,730 | $ | 8,680 | $ | (10,000 | ) | ||||
Total net gains (losses) (realized and unrealized): | |||||||||||
Included in other comprehensive income | 600 | (2,820 | ) | — | |||||||
Balance at September 30 | $ | 7,330 | $ | 5,860 | $ | (10,000 | ) |
Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | ||||||||||||||
Auction Rate Security | Contingent Consideration Arrangement | Auction Rate Securities | Contingent Consideration Arrangement | ||||||||||||
(In thousands) | |||||||||||||||
Balance at January 1 | $ | 5,870 | $ | (10,000 | ) | $ | 13,100 | $ | — | ||||||
Total net gains (losses) (realized and unrealized): | |||||||||||||||
Included in other comprehensive income | 1,460 | — | (2,240 | ) | — | ||||||||||
Fair value at date of acquisition | — | — | — | (40,000 | ) | ||||||||||
Settlements | — | 10,000 | (5,000 | ) | 30,000 | ||||||||||
Balance at September 30 | $ | 7,330 | $ | — | $ | 5,860 | $ | (10,000 | ) |
September 30, 2012 | December 31, 2011 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | $ | 501,779 | $ | 501,779 | $ | 704,153 | $ | 704,153 | |||||||
Marketable securities | 138,926 | 138,926 | 165,695 | 165,695 | |||||||||||
Long-term marketable equity securities | 66,078 | 66,078 | 74,691 | 74,691 | |||||||||||
Liabilities: | |||||||||||||||
Current maturities of long-term debt | (15,844 | ) | (16,055 | ) | — | — | |||||||||
Long-term debt, net of current maturities | (80,000 | ) | (81,561 | ) | (95,844 | ) | (93,339 | ) |
Three Months Ended September 30, | |||||||||||||||
2012 | 2011 | ||||||||||||||
Basic | Diluted | Basic | Diluted | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Numerator: | |||||||||||||||
Earnings from continuing operations | $ | 46,185 | $ | 46,185 | $ | 67,973 | $ | 67,973 | |||||||
Net loss attributable to noncontrolling interests | 156 | 156 | 922 | 922 | |||||||||||
Earnings from continuing operations attributable to IAC shareholders | 46,341 | 46,341 | 68,895 | 68,895 | |||||||||||
Loss from discontinued operations attributable to IAC shareholders | (5,624 | ) | (5,624 | ) | (3,922 | ) | (3,922 | ) | |||||||
Net earnings attributable to IAC shareholders | $ | 40,717 | $ | 40,717 | $ | 64,973 | $ | 64,973 | |||||||
Denominator: | |||||||||||||||
Weighted average basic shares outstanding | 88,296 | 88,296 | 84,613 | 84,613 | |||||||||||
Dilutive securities including stock options, warrants, RSUs(a)(b) | — | 6,394 | — | 9,129 | |||||||||||
Denominator for earnings per share—weighted average shares(a)(b) | 88,296 | 94,690 | 84,613 | 93,742 | |||||||||||
Earnings (loss) per share attributable to IAC shareholders: | |||||||||||||||
Earnings per share from continuing operations | $ | 0.52 | $ | 0.49 | $ | 0.81 | $ | 0.73 | |||||||
Discontinued operations | (0.06 | ) | (0.06 | ) | (0.04 | ) | (0.04 | ) | |||||||
Earnings per share | $ | 0.46 | $ | 0.43 | $ | 0.77 | $ | 0.69 |
Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | ||||||||||||||
Basic | Diluted | Basic | Diluted | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Numerator: | |||||||||||||||
Earnings from continuing operations | $ | 125,439 | $ | 125,439 | $ | 133,771 | $ | 133,771 | |||||||
Net (earnings) loss attributable to noncontrolling interests | (331 | ) | (331 | ) | 54 | 54 | |||||||||
Earnings from continuing operations attributable to IAC shareholders | 125,108 | 125,108 | 133,825 | 133,825 | |||||||||||
Loss from discontinued operations attributable to IAC shareholders | (6,581 | ) | (6,581 | ) | (8,358 | ) | (8,358 | ) | |||||||
Net earnings attributable to IAC shareholders | $ | 118,527 | $ | 118,527 | $ | 125,467 | $ | 125,467 | |||||||
Denominator: | |||||||||||||||
Weighted average basic shares outstanding | 85,766 | 85,766 | 87,898 | 87,898 | |||||||||||
Dilutive securities including stock options, warrants, RSUs(a)(b) | — | 7,026 | — | 6,992 | |||||||||||
Denominator for earnings per share—weighted average shares(a)(b) | 85,766 | 92,792 | 87,898 | 94,890 | |||||||||||
Earnings (loss) per share attributable to IAC shareholders: | |||||||||||||||
Earnings per share from continuing operations | $ | 1.46 | $ | 1.35 | $ | 1.52 | $ | 1.41 | |||||||
Discontinued operations | (0.08 | ) | (0.07 | ) | (0.09 | ) | (0.09 | ) | |||||||
Earnings per share | $ | 1.38 | $ | 1.28 | $ | 1.43 | $ | 1.32 |
(a) | 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") and |
(b) | At September 30, 2012, there were approximately 2.3 million PSUs included in the calculation of diluted earnings per share, as their performance conditions have been met. Prior to September 30, 2012, no PSUs were included in diluted earnings per share. For the three and nine months ended September 30, 2012, approximately 0.6 million PSUs are excluded from the calculation of diluted earnings per share. For the three and nine months ended September 30, 2011, approximately 3.3 million PSUs are excluded from the calculation of diluted earnings per share. |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Revenue: | |||||||||||||||
Search & Applications | $ | 370,227 | $ | 258,875 | $ | 1,062,187 | $ | 731,054 | |||||||
Match | 178,190 | 132,328 | 530,883 | 360,354 | |||||||||||
Local | 84,314 | 80,124 | 245,938 | 231,465 | |||||||||||
Media | 52,736 | 18,692 | 107,015 | 51,811 | |||||||||||
Other | 29,064 | 27,023 | 89,899 | 88,442 | |||||||||||
Inter-segment elimination | (61 | ) | (158 | ) | (240 | ) | (625 | ) | |||||||
Total | $ | 714,470 | $ | 516,884 | $ | 2,035,682 | $ | 1,462,501 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Operating Income (Loss): | |||||||||||||||
Search & Applications | $ | 69,036 | $ | 45,508 | $ | 216,593 | $ | 144,780 | |||||||
Match | 56,078 | 36,677 | 143,083 | 101,105 | |||||||||||
Local | 7,343 | 7,324 | 22,802 | 22,484 | |||||||||||
Media | (13,178 | ) | (2,837 | ) | (27,152 | ) | (10,545 | ) | |||||||
Other | (2,685 | ) | (1,648 | ) | (6,581 | ) | (3,891 | ) | |||||||
Corporate | (38,561 | ) | (38,284 | ) | (110,471 | ) | (111,626 | ) | |||||||
Total | $ | 78,033 | $ | 46,740 | $ | 238,274 | $ | 142,307 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Operating Income Before Amortization: | |||||||||||||||
Search & Applications | $ | 69,192 | $ | 46,280 | $ | 216,771 | $ | 145,742 | |||||||
Match | 59,980 | 40,207 | 159,953 | 107,530 | |||||||||||
Local | 7,817 | 7,767 | 23,599 | 23,836 | |||||||||||
Media | (12,236 | ) | (2,651 | ) | (25,426 | ) | (10,301 | ) | |||||||
Other | (2,259 | ) | (1,339 | ) | (5,412 | ) | (2,970 | ) | |||||||
Corporate | (15,898 | ) | (16,101 | ) | (47,895 | ) | (46,282 | ) | |||||||
Total | $ | 106,596 | $ | 74,163 | $ | 321,590 | $ | 217,555 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Depreciation: | |||||||||||||||
Search & Applications | $ | 3,343 | $ | 9,824 | $ | 10,019 | $ | 21,389 | |||||||
Match | 4,502 | 2,481 | 11,781 | 7,059 | |||||||||||
Local | 2,463 | 2,738 | 7,739 | 7,325 | |||||||||||
Media | 424 | 153 | 898 | 546 | |||||||||||
Other | 286 | 209 | 787 | 623 | |||||||||||
Corporate | 2,132 | 2,079 | 6,266 | 6,431 | |||||||||||
Total | $ | 13,150 | $ | 17,484 | $ | 37,490 | $ | 43,373 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Revenue: | |||||||||||||||
United States | $ | 499,409 | $ | 393,398 | $ | 1,417,622 | $ | 1,150,895 | |||||||
All other countries | 215,061 | 123,486 | 618,060 | 311,606 | |||||||||||
Total | $ | 714,470 | $ | 516,884 | $ | 2,035,682 | $ | 1,462,501 |
September 30, 2012 | December 31, 2011 | ||||||
(In thousands) | |||||||
Long-lived assets (excluding goodwill and intangible assets): | |||||||
United States | $ | 257,150 | $ | 246,550 | |||
All other countries | 15,167 | 13,038 | |||||
Total | $ | 272,317 | $ | 259,588 |
Three Months Ended September 30, 2012 | |||||||||||||||
Operating Income Before Amortization | Non-Cash Compensation Expense | Amortization of Intangibles | Operating Income (Loss) | ||||||||||||
(In thousands) | |||||||||||||||
Search & Applications | $ | 69,192 | $ | (9 | ) | $ | (147 | ) | $ | 69,036 | |||||
Match | 59,980 | (560 | ) | (3,342 | ) | 56,078 | |||||||||
Local | 7,817 | — | (474 | ) | 7,343 | ||||||||||
Media | (12,236 | ) | (62 | ) | (880 | ) | (13,178 | ) | |||||||
Other | (2,259 | ) | (57 | ) | (369 | ) | (2,685 | ) | |||||||
Corporate | (15,898 | ) | (22,663 | ) | — | (38,561 | ) | ||||||||
Total | $ | 106,596 | $ | (23,351 | ) | $ | (5,212 | ) | $ | 78,033 |
Three Months Ended September 30, 2011 | |||||||||||||||
Operating Income Before Amortization | Non-Cash Compensation Expense | Amortization of Intangibles | Operating Income (Loss) | ||||||||||||
(In thousands) | |||||||||||||||
Search & Applications | $ | 46,280 | $ | (4 | ) | $ | (768 | ) | $ | 45,508 | |||||
Match | 40,207 | (423 | ) | (3,107 | ) | 36,677 | |||||||||
Local | 7,767 | — | (443 | ) | 7,324 | ||||||||||
Media | (2,651 | ) | (186 | ) | — | (2,837 | ) | ||||||||
Other | (1,339 | ) | (89 | ) | (220 | ) | (1,648 | ) | |||||||
Corporate | (16,101 | ) | (22,183 | ) | — | (38,284 | ) | ||||||||
Total | $ | 74,163 | $ | (22,885 | ) | $ | (4,538 | ) | $ | 46,740 |
Nine Months Ended September 30, 2012 | |||||||||||||||
Operating Income Before Amortization | Non-Cash Compensation Expense | Amortization of Intangibles | Operating Income (Loss) | ||||||||||||
(In thousands) | |||||||||||||||
Search & Applications | $ | 216,771 | $ | (26 | ) | $ | (152 | ) | $ | 216,593 | |||||
Match | 159,953 | (2,023 | ) | (14,847 | ) | 143,083 | |||||||||
Local | 23,599 | — | (797 | ) | 22,802 | ||||||||||
Media | (25,426 | ) | (566 | ) | (1,160 | ) | (27,152 | ) | |||||||
Other | (5,412 | ) | (67 | ) | (1,102 | ) | (6,581 | ) | |||||||
Corporate | (47,895 | ) | (62,576 | ) | — | (110,471 | ) | ||||||||
Total | $ | 321,590 | $ | (65,258 | ) | $ | (18,058 | ) | $ | 238,274 |
Nine Months Ended September 30, 2011 | |||||||||||||||
Operating Income Before Amortization | Non-Cash Compensation Expense | Amortization of Intangibles | Operating Income (Loss) | ||||||||||||
(In thousands) | |||||||||||||||
Search & Applications | $ | 145,742 | $ | 210 | $ | (1,172 | ) | $ | 144,780 | ||||||
Match | 107,530 | (423 | ) | (6,002 | ) | 101,105 | |||||||||
Local | 23,836 | — | (1,352 | ) | 22,484 | ||||||||||
Media | (10,301 | ) | (241 | ) | (3 | ) | (10,545 | ) | |||||||
Other | (2,970 | ) | (255 | ) | (666 | ) | (3,891 | ) | |||||||
Corporate | (46,282 | ) | (65,344 | ) | — | (111,626 | ) | ||||||||
Total | $ | 217,555 | $ | (66,053 | ) | $ | (9,195 | ) | $ | 142,307 |
September 30, 2012 | December 31, 2011 | ||||||
(In thousands) | |||||||
Buildings and leasehold improvements | $ | 235,275 | $ | 235,737 | |||
Computer equipment and capitalized software | 206,210 | 186,016 | |||||
Furniture and other equipment | 43,813 | 43,156 | |||||
Projects in progress | 17,677 | 7,643 | |||||
Land | 5,117 | 5,117 | |||||
508,092 | 477,669 | ||||||
Less: accumulated depreciation and amortization | (235,775 | ) | (218,081 | ) | |||
Property and equipment, net | $ | 272,317 | $ | 259,588 |
September 30, 2012 | December 31, 2011 | ||||||
(In thousands) | |||||||
Foreign currency translation adjustment, net of tax | $ | (29,306 | ) | $ | (25,174 | ) | |
Unrealized gains on available-for-sale securities, net of tax | 17,415 | 12,731 | |||||
Accumulated other comprehensive loss | $ | (11,891 | ) | $ | (12,443 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In thousands) | |||||||||||||||
Interest income | $ | 789 | $ | 1,224 | $ | 2,849 | $ | 3,676 | |||||||
Interest expense | (1,391 | ) | (1,425 | ) | (4,102 | ) | (4,135 | ) | |||||||
Gain on sales of investments | 217 | 317 | 1,876 | 1,861 | |||||||||||
Non-income tax refunds related to Match Europe, which was sold in 2009 | — | — | — | 4,630 | |||||||||||
Foreign currency exchange (losses) gains, net | (526 | ) | 3,748 | (1,564 | ) | 4,050 | |||||||||
Other | (33 | ) | 444 | (326 | ) | 615 | |||||||||
Other (expense) income, net | $ | (944 | ) | $ | 4,308 | $ | (1,267 | ) | $ | 10,697 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2012 | $ Change | % Change | 2011 | 2012 | $ Change | % Change | 2011 | ||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Search & Applications | $ | 370,227 | $ | 111,352 | 43% | $ | 258,875 | $ | 1,062,187 | $ | 331,133 | 45% | $ | 731,054 | |||||||||||||
Match | 178,190 | 45,862 | 35% | 132,328 | 530,883 | 170,529 | 47% | 360,354 | |||||||||||||||||||
Local | 84,314 | 4,190 | 5% | 80,124 | 245,938 | 14,473 | 6% | 231,465 | |||||||||||||||||||
Media | 52,736 | 34,044 | 182% | 18,692 | 107,015 | 55,204 | 107% | 51,811 | |||||||||||||||||||
Other | 29,064 | 2,041 | 8% | 27,023 | 89,899 | 1,457 | 2% | 88,442 | |||||||||||||||||||
Inter-segment elimination | (61 | ) | 97 | 62% | (158 | ) | (240 | ) | 385 | 62% | (625 | ) | |||||||||||||||
Total | $ | 714,470 | $ | 197,586 | 38% | $ | 516,884 | $ | 2,035,682 | $ | 573,181 | 39% | $ | 1,462,501 |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Cost of revenue | $261,932 | $73,290 | 39% | $188,642 | |||
As a percentage of revenue | 37% | 16 bp | 36% |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Cost of revenue | $722,193 | $179,361 | 33% | $542,832 | |||
As a percentage of revenue | 35% | (164) bp | 37% |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Selling and marketing expense | $236,763 | $83,467 | 54% | $153,296 | |||
As a percentage of revenue | 33% | 348 bp | 30% |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Selling and marketing expense | $669,671 | $242,907 | 57% | $426,764 | |||
As a percentage of revenue | 33% | 372 bp | 29% |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
General and administrative expense | $94,876 | $10,248 | 12% | $84,628 | |||
As a percentage of revenue | 13% | (309) bp | 16% |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
General and administrative expense | $278,895 | $37,423 | 15% | $241,472 | |||
As a percentage of revenue | 14% | (281) bp | 17% |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Product development expense | $24,504 | $2,948 | 14% | $21,556 | |||
As a percentage of revenue | 3% | (74) bp | 4% |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Product development expense | $71,101 | $14,543 | 26% | $56,558 | |||
As a percentage of revenue | 3% | (37) bp | 4% |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Depreciation expense | $13,150 | $(4,334) | (25)% | $17,484 | |||
As a percentage of revenue | 2% | (154) bp | 3% |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Depreciation expense | $37,490 | $(5,883) | (14)% | $43,373 | |||
As a percentage of revenue | 2% | (112) bp | 3% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2012 | $ Change | % Change | 2011 | 2012 | $ Change | % Change | 2011 | ||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Search & Applications | $ | 69,192 | $ | 22,912 | 50% | $ | 46,280 | $ | 216,771 | $ | 71,029 | 49% | $ | 145,742 | |||||||||||||
Match | 59,980 | 19,773 | 49% | 40,207 | 159,953 | 52,423 | 49% | 107,530 | |||||||||||||||||||
Local | 7,817 | 50 | 1% | 7,767 | 23,599 | (237 | ) | (1)% | 23,836 | ||||||||||||||||||
Media | (12,236 | ) | (9,585 | ) | (362)% | (2,651 | ) | (25,426 | ) | (15,125 | ) | (147)% | (10,301 | ) | |||||||||||||
Other | (2,259 | ) | (920 | ) | (69)% | (1,339 | ) | (5,412 | ) | (2,442 | ) | (82)% | (2,970 | ) | |||||||||||||
Corporate | (15,898 | ) | 203 | 1% | (16,101 | ) | (47,895 | ) | (1,613 | ) | (3)% | (46,282 | ) | ||||||||||||||
Total | $ | 106,596 | $ | 32,433 | 44% | $ | 74,163 | $ | 321,590 | $ | 104,035 | 48% | $ | 217,555 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2012 | $ Change | % Change | 2011 | 2012 | $ Change | % Change | 2011 | ||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Search & Applications | $ | 69,036 | $ | 23,528 | 52% | $ | 45,508 | $ | 216,593 | $ | 71,813 | 50% | $ | 144,780 | |||||||||||||
Match | 56,078 | 19,401 | 53% | 36,677 | 143,083 | 41,978 | 42% | 101,105 | |||||||||||||||||||
Local | 7,343 | 19 | —% | 7,324 | 22,802 | 318 | 1% | 22,484 | |||||||||||||||||||
Media | (13,178 | ) | (10,341 | ) | (365)% | (2,837 | ) | (27,152 | ) | (16,607 | ) | (157)% | (10,545 | ) | |||||||||||||
Other | (2,685 | ) | (1,037 | ) | (63)% | (1,648 | ) | (6,581 | ) | (2,690 | ) | (69)% | (3,891 | ) | |||||||||||||
Corporate | (38,561 | ) | (277 | ) | (1)% | (38,284 | ) | (110,471 | ) | 1,155 | 1% | (111,626 | ) | ||||||||||||||
Total | $ | 78,033 | $ | 31,293 | 67% | $ | 46,740 | $ | 238,274 | $ | 95,967 | 67% | $ | 142,307 |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Equity in losses of unconsolidated affiliates | $(3,298) | $11,780 | 78% | $(15,078) |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Equity in losses of unconsolidated affiliates | $(28,208) | $(2,531) | (10)% | $(25,677) |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Other (expense) income, net | $(944) | $(5,252) | NM | $4,308 |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Other (expense) income, net | $(1,267) | $(11,964) | NM | $10,697 |
Three Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Income tax (provision) benefit | $(27,606) | $(59,609) | NM | $32,003 |
Nine Months Ended September 30, | |||||||
2012 | $ Change | % Change | 2011 | ||||
(Dollars in thousands) | |||||||
Income tax (provision) benefit | $(83,360) | $(89,804) | NM | $6,444 |
Nine Months Ended September 30, | ||||
2012 | 2011 | |||
(In thousands) | ||||
Net cash provided by operating activities | $323,607 | $269,566 | ||
Net cash used in investing activities | (387,586) | (14,219) | ||
Net cash used in financing activities | (138,876) | (308,342) |
Payments Due by Period | |||||||||||||||||||
Contractual Obligations(a) | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | ||||||||||||||
(In thousands) | |||||||||||||||||||
Long-term debt, including current maturities(b) | $ | 188,399 | $ | 20,399 | $ | 8,000 | $ | 8,000 | $ | 152,000 | |||||||||
Purchase obligations(c) | 43,479 | 13,395 | 29,948 | 136 | — | ||||||||||||||
Operating leases | 305,151 | 21,599 | 41,416 | 34,746 | 207,390 | ||||||||||||||
Total contractual cash obligations | $ | 537,029 | $ | 55,393 | $ | 79,364 | $ | 42,882 | $ | 359,390 |
(a) | The Company has excluded $328.9 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 2 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. |
Period | (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) | ||||||||
July 2012 | 1,295,000 | $ | 47.12 | 1,295,000 | 9,497,676 | |||||||
August 2012 | — | $ | — | — | 9,497,676 | |||||||
September 2012 | — | $ | — | — | 9,497,676 | |||||||
Total | 1,295,000 | $ | 47.12 | 1,295,000 | 9,497,676 |
(1) | Reflects the average price paid per share of IAC common stock. |
(2) | Reflects repurchases made pursuant to repurchase authorizations previously announced in July 2011 and May 2012. |
(3) | Represents the total number of shares of common stock that remained available for repurchase as of September 30, 2012 pursuant to the May 2012 repurchase authorization. IAC may purchase shares pursuant to the May 2012 repurchase authorization 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. |
Exhibit Number | Description | Location | |
3.1 | 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. | |
3.2 | 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. | |
3.3 | 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. | |
31.1 | Certification of the Chief Executive Officer pursuant to Rule 13a‑14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.(1) | ||
31.2 | Certification of the Chairman and Senior Executive pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.(1) | ||
31.3 | Certification of the Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.(1) | ||
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.(2) | ||
32.2 | Certification of the Chairman and Senior Executive pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.(2) | ||
32.3 | Certification of the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.(2) | ||
101.INS | XBRL Instance | ||
101.SCH | XBRL Taxonomy Extension Schema | ||
101.CAL | XBRL Taxonomy Extension Calculation | ||
101.DEF | XBRL Taxonomy Extension Definition | ||
101.LAB | XBRL Taxonomy Extension Labels | ||
101.PRE | XBRL Taxonomy Extension Presentation |
(1) | Filed herewith. |
(2) | Furnished herewith. |
Dated: | November 8, 2012 | |||
IAC/INTERACTIVECORP | ||||
By: | /s/ JEFFREY W. KIP | |||
Jeffrey W. Kip | ||||
Executive Vice President and Chief Financial Officer |
Signature | Title | Date | |
/s/ JEFFREY W. KIP | Executive Vice President and Chief Financial Officer | November 8, 2012 | |
Jeffrey W. Kip |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2012 of IAC/InterActiveCorp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | November 8, 2012 | /s/ GREGORY R. BLATT | |
Gregory R. Blatt Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2012 of IAC/InterActiveCorp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | November 8, 2012 | /s/ BARRY DILLER | |
Barry Diller Chairman and Senior Executive |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2012 of IAC/InterActiveCorp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | November 8, 2012 | /s/ JEFFREY W. KIP | |
Jeffrey W. Kip Executive Vice President & Chief Financial Officer |
(1) | the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012 of IAC/InterActiveCorp (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of IAC/InterActiveCorp. |
Dated: | November 8, 2012 | /s/ GREGORY R. BLATT | |
Gregory R. Blatt Chief Executive Officer |
(1) | the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012 of IAC/InterActiveCorp (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of IAC/InterActiveCorp. |
Dated: | November 8, 2012 | /s/ BARRY DILLER | |
Barry Diller Chairman and Senior Executive |
(1) | the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012 of IAC/InterActiveCorp (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of IAC/InterActiveCorp. |
Dated: | November 8, 2012 | /s/ JEFFREY W. KIP | |
Jeffrey W. Kip Executive Vice President & Chief Financial Officer |
EARNINGS PER SHARE (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||
Numerator: Basic | ||||||||||
Earnings from continuing operations | $ 46,185 | $ 67,973 | $ 125,439 | $ 133,771 | ||||||
Net loss attributable to noncontrolling interests | 156 | 922 | (331) | 54 | ||||||
Earnings from continuing operations attributable to IAC shareholders | 46,341 | 68,895 | 125,108 | 133,825 | ||||||
Loss from discontinued operations attributable to IAC shareholders | (5,624) | (3,922) | (6,581) | (8,358) | ||||||
Net earnings attributable to IAC shareholders | 40,717 | 64,973 | 118,527 | 125,467 | ||||||
Numerator: Diluted | ||||||||||
Earnings from continuing operations | 46,185 | 67,973 | 125,439 | 133,771 | ||||||
Net loss attributable to noncontrolling interests | 156 | 922 | (331) | 54 | ||||||
Earnings from continuing operations attributable to IAC shareholders | 46,341 | 68,895 | 125,108 | 133,825 | ||||||
Loss from discontinued operations attributable to IAC shareholders | (5,624) | (3,922) | (6,581) | (8,358) | ||||||
Net earnings attributable to IAC shareholders | $ 40,717 | $ 64,973 | $ 118,527 | $ 125,467 | ||||||
Denominator: Basic | ||||||||||
Weighted average basic shares outstanding | 88,296 | 84,613 | 85,766 | [1],[2] | 87,898 | [1],[2] | ||||
Denominator: Diluted | ||||||||||
Weighted average basic shares outstanding | 88,296 | 84,613 | 85,766 | [1],[2] | 87,898 | [1],[2] | ||||
Dilutive securities including stock options, warrants and RSUs (in shares) | 6,394 | 9,129 | 7,026 | [1],[2] | 6,992 | [1],[2] | ||||
Denominator for earnings per share-weighted average shares (in shares) | 94,690 | 93,742 | 92,792 | [1],[2] | 94,890 | [1],[2] | ||||
Earnings (loss) per share attributable to IAC shareholders: Basic | ||||||||||
Earnings per share from continuing operations (in dollars per share) | $ 0.52 | $ 0.81 | $ 1.46 | $ 1.52 | ||||||
Discontinued operations (in dollars per share) | $ (0.06) | $ (0.04) | $ (0.08) | $ (0.09) | ||||||
Earnings per share (in dollars per share) | $ 0.46 | $ 0.77 | $ 1.38 | $ 1.43 | ||||||
Earnings (loss) per share attributable to IAC shareholders: Diluted | ||||||||||
Earnings per share from continuing operations (in dollars per share) | $ 0.49 | $ 0.73 | $ 1.35 | $ 1.41 | ||||||
Discontinued operations (in dollars per share) | $ (0.06) | $ (0.04) | $ (0.07) | $ (0.09) | ||||||
Earnings per share (in dollars per share) | $ 0.43 | $ 0.69 | $ 1.28 | $ 1.32 | ||||||
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CONTINGENCIES (Details)
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9 Months Ended |
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Sep. 30, 2012
lawsuit
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Loss Contingency [Abstract] | |
Minimum number of lawsuits that could have material impact on the liquidity, results of operations, or financial condition | 1 |
EARNINGS PER SHARE (Tables)
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted earnings per share attributable to IAC shareholders.
_______________________
|
SEGMENT INFORMATION (Details 2) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Dec. 31, 2011
|
|
Revenue and long-lived assets by geography | |||||
Revenue | $ 714,470 | $ 516,884 | $ 2,035,682 | $ 1,462,501 | |
Long-lived assets (excluding goodwill and intangible assets) | 272,317 | 272,317 | 259,588 | ||
United States
|
|||||
Revenue and long-lived assets by geography | |||||
Revenue | 499,409 | 393,398 | 1,417,622 | 1,150,895 | |
Long-lived assets (excluding goodwill and intangible assets) | 257,150 | 257,150 | 246,550 | ||
All other countries
|
|||||
Revenue and long-lived assets by geography | |||||
Revenue | 215,061 | 123,486 | 618,060 | 311,606 | |
Long-lived assets (excluding goodwill and intangible assets) | $ 15,167 | $ 15,167 | $ 13,038 |
FAIR VALUE MEASUREMENTS (Details 1) (USD $)
|
3 Months Ended | 9 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Dec. 31, 2011
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Dec. 31, 2011
OkCupid
|
Sep. 30, 2012
Auction rate security
|
Sep. 30, 2011
Auction rate security
|
Sep. 30, 2012
Auction rate security
|
Sep. 30, 2011
Auction rate security
|
Dec. 31, 2011
Auction rate security
|
Sep. 30, 2012
Contingent Consideration Arrangement
|
Sep. 30, 2011
Contingent Consideration Arrangement
|
Jun. 30, 2011
Contingent Consideration Arrangement
|
|
Changes in assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) | |||||||||||
Balance at the beginning of the period, assets | $ 6,730,000 | $ 8,680,000 | $ 5,870,000 | $ 13,100,000 | |||||||
Total net gains (losses) (realized and unrealized) included in other comprehensive income, assets | 600,000 | (2,820,000) | 1,460,000 | (2,240,000) | |||||||
Settlements, assets | (5,000,000) | ||||||||||
Balance at the end of the period, assets | 7,330,000 | 5,860,000 | 7,330,000 | 5,860,000 | |||||||
Changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) | |||||||||||
Balance at the beginning of the period, liabilities | (10,000,000) | 0 | (10,000,000) | ||||||||
Fair value at date of acquisition, liabilities | (40,000,000) | ||||||||||
Settlements, liabilities | 10,000,000 | 30,000,000 | |||||||||
Balance at the end of the period, liabilities | 0 | (10,000,000) | (10,000,000) | ||||||||
Auction rate securities | |||||||||||
Cost basis | 10,000,000 | 10,000,000 | |||||||||
Gross unrealized losses | 2,000 | 37,000 | 2,700,000 | 2,700,000 | 4,100,000 | ||||||
Acquisition information | |||||||||||
Fair value of contingent consideration arrangement | $ 10,000,000 |
INCOME TAXES
|
9 Months Ended |
---|---|
Sep. 30, 2012
|
|
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES At the end of each interim period, the Company makes its best estimate of the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or income tax contingencies is recognized in the interim period in which the change occurs. The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or our tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision in the quarter in which the change occurs. For the three and nine months ended September 30, 2012, the Company recorded an income tax provision for continuing operations of $27.6 million and $83.4 million, respectively, which represents effective income tax rates of 37% and 40%, respectively. The effective rate for the three months ended September 30, 2012 is higher than the statutory rate of 35% due primarily to state taxes and interest on reserves for tax contingencies, partially offset by foreign income taxed at lower rates. The effective rate for the nine months ended September 30, 2012 is higher than the statutory rate of 35% due primarily to an increase in reserves for and interest on reserves for tax contingencies, a valuation allowance on the deferred tax asset created by The Newsweek/Daily Beast Company ("Newsweek Daily Beast") non-cash re-measurement charge related to our acquisition of a controlling interest, and state taxes, partially offset by foreign income taxed at lower rates and a net decrease in the valuation allowance on the beginning of the year deferred tax assets related to investments in unconsolidated affiliates. For the three and nine months ended September 30, 2011, the Company recorded an income tax benefit for continuing operations of $32.0 million and $6.4 million, respectively, despite pre-tax income of $36.0 million and $127.3 million , respectively. The income tax benefit for the three months ended September 30, 2011 is due principally to the reversal of a previously established deferred tax liability of $43.6 million associated with the 2009 gain that was recognized upon the exchange of Match Europe for a 27% interest in Meetic S.A. ("Meetic"). In connection with the acquisition of a controlling interest in Meetic in 2011, the Company concluded that it intends to indefinitely reinvest the earnings of Match's international operations related to Meetic, including the 2009 gain on the sale of Match Europe outside of the United States. This income tax benefit was partially offset by the non-deductible nature of the non-cash re-measurement charge related to Match's 27% equity method investment in Meetic that was recorded upon our acquisition of a controlling interest. The income tax benefit for the nine months ended September 30, 2011 is due principally to the release of a previously established deferred tax liability as described above in the three month discussion, foreign income taxed at lower rates, and the reduction in state tax accruals resulting from income tax provision to tax return reconciliations and expirations of statutes of limitations, partially offset by interest on reserves for tax contingencies, states taxes, and the non-deductible nature of the non-cash re-measurement charge as described above in the three month discussion. At September 30, 2012 and December 31, 2011, unrecognized tax benefits, including interest, were $485.8 million and $462.8 million, respectively. Unrecognized tax benefits, including interest, at September 30, 2012 increased $23.0 million from December 31, 2011 due principally to a net increase in deductible timing differences and additions for tax positions related to prior years. Of the total unrecognized tax benefits at September 30, 2012, $468.5 million is included in "Income taxes payable," $12.1 million relates to deferred tax assets included in "Deferred income taxes" and $5.2 million is included in "Accrued expenses and other current liabilities" in the accompanying consolidated balance sheet. Included in unrecognized tax benefits at September 30, 2012 is $79.8 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 at September 30, 2012 are subsequently recognized, $94.7 million and $226.4 million, net of related deferred tax assets and interest, would reduce income tax expense for continuing operations and discontinued operations, respectively. 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 three months ended September 30, 2012 is a $1.6 million expense and a $0.4 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 nine months ended September 30, 2012 is a $3.3 million expense and a $3.8 million benefit, respectively, net of related deferred taxes, for interest on unrecognized tax benefits. At September 30, 2012 and December 31, 2011, the Company has accrued $112.2 million and $111.2 million, respectively, for the payment of interest. At September 30, 2012 and December 31, 2011, the Company has accrued $2.8 million and $2.5 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 audit of the Company's tax returns for the years ended December 31, 2001 through 2006. The settlement of these tax years has not yet been submitted to the Joint Committee of Taxation for approval. The IRS began its audit 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 2009 has been extended to December 31, 2013. 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 $68.9 million within twelve months of the current reporting date, of which approximately $13.3 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. |
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