10-Q 1 iaci-2015630x10q.htm 10-Q IACI-2015.6.30-10Q


As filed with the Securities and Exchange Commission on July 31, 2015


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2015
Or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________to__________                            
Commission File No. 0-20570
 
IAC/INTERACTIVECORP
(Exact name of registrant as specified in its charter)
Delaware
 (State or other jurisdiction of
incorporation or organization)
 
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)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer o
Non-accelerated filer o
 (Do not check if a smaller
reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý
As of July 24, 2015, the following shares of the registrant's common stock were outstanding:
Common Stock
77,130,396

Class B Common Stock
5,789,499

Total outstanding Common Stock
82,919,895

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of July 24, 2015 was $6,259,982,574. For the purpose of the foregoing calculation only, all directors and executive officers of the registrant are assumed to be affiliates of the registrant.



TABLE OF CONTENTS






PART I
FINANCIAL INFORMATION
Item 1.    Consolidated Financial Statements
IAC/INTERACTIVECORP
CONSOLIDATED BALANCE SHEET
(Unaudited)
 
June 30, 2015
 
December 31, 2014
 
(In thousands, except share data)
ASSETS
 
 
 
Cash and cash equivalents
$
656,409

 
$
990,405

Marketable securities
233,523

 
160,648

Accounts receivable, net of allowance of $15,730 and $12,437, respectively
223,106

 
236,086

Other current assets
209,724

 
166,742

Total current assets
1,322,762

 
1,553,881

 
 
 
 
Property and equipment, net of accumulated depreciation and amortization of $294,400 and $279,534, respectively
297,158

 
302,459

Goodwill
1,778,830

 
1,754,926

Intangible assets, net of accumulated amortization of $116,626 and $98,937, respectively
472,082

 
491,936

Long-term investments
131,385

 
114,983

Other non-current assets
72,841

 
56,693

TOTAL ASSETS
$
4,075,058

 
$
4,274,878

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
LIABILITIES:
 
 
 
Current portion of long-term debt
$
80,000

 
$

Accounts payable, trade
79,434

 
81,163

Deferred revenue
232,673

 
194,988

Accrued expenses and other current liabilities
322,750

 
397,803

Total current liabilities
714,857

 
673,954

 
 
 
 
Long-term debt, net of current portion
1,000,000

 
1,080,000

Income taxes payable
24,768

 
32,635

Deferred income taxes
432,688

 
409,529

Other long-term liabilities
59,182

 
45,191

 
 
 
 
Redeemable noncontrolling interests
28,177

 
40,427

 
 
 
 
Commitments and contingencies

 

 
 
 
 
SHAREHOLDERS' EQUITY:
 
 
 
Common stock $.001 par value; authorized 1,600,000,000 shares; issued 253,641,102 and 252,170,058 shares, respectively and outstanding 76,871,835 and 78,356,057 shares, respectively
254

 
252

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
11,452,662

 
11,415,617

Retained earnings
354,099

 
325,118

Accumulated other comprehensive loss
(130,295
)
 
(87,700
)
Treasury stock 187,137,267 and 184,182,001 shares, respectively
(9,861,350
)
 
(9,661,350
)
Total IAC shareholders' equity
1,815,386

 
1,991,953

Noncontrolling interests

 
1,189

Total shareholders' equity
1,815,386

 
1,993,142

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
4,075,058

 
$
4,274,878


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

3



IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands, except per share data)
Revenue
$
771,132

 
$
756,315

 
$
1,543,644

 
$
1,496,562

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
183,276

 
210,730

 
374,829

 
419,964

Selling and marketing expense
319,397

 
272,490

 
677,063

 
571,089

General and administrative expense
129,349

 
109,897

 
244,143

 
204,986

Product development expense
46,430

 
38,845

 
91,687

 
77,661

Depreciation
15,500

 
15,257

 
31,068

 
30,075

Amortization of intangibles
14,411

 
13,406

 
26,966

 
25,385

Total operating costs and expenses
708,363

 
660,625

 
1,445,756

 
1,329,160

Operating income
62,769

 
95,690

 
97,888

 
167,402

Interest expense
(15,214
)
 
(14,046
)
 
(29,278
)
 
(28,110
)
Other (expense) income, net
(1,638
)
 
(69,750
)
 
5,350

 
(71,708
)
Earnings from continuing operations before income taxes
45,917

 
11,894

 
73,960

 
67,584

Income tax benefit (provision)
11,968

 
(29,889
)
 
5,788

 
(51,274
)
Earnings (loss) from continuing operations
57,885

 
(17,995
)
 
79,748

 
16,310

Loss from discontinued operations, net of tax
(153
)
 
(868
)
 
(28
)
 
(1,682
)
Net earnings (loss)
57,732

 
(18,863
)
 
79,720

 
14,628

Net loss attributable to noncontrolling interests
1,573

 
867

 
5,990

 
3,261

Net earnings (loss) attributable to IAC shareholders
$
59,305

 
$
(17,996
)
 
$
85,710

 
$
17,889

 
 
 
 
 
 
 
 
Per share information attributable to IAC shareholders:
 
 
 
 
 
 
Basic earnings (loss) per share from continuing operations
$
0.72

 
$
(0.21
)
 
$
1.03

 
$
0.24

Diluted earnings (loss) per share from continuing operations
$
0.68

 
$
(0.21
)
 
$
0.98

 
$
0.22

Basic earnings (loss) per share
$
0.72

 
$
(0.22
)
 
$
1.03

 
$
0.22

Diluted earnings (loss) per share
$
0.68

 
$
(0.22
)
 
$
0.97

 
$
0.20

 
 
 
 
 
 
 
 
Dividends declared per share
$
0.34

 
$
0.24

 
$
0.68

 
$
0.48

 
 
 
 
 
 
 
 
Stock-based compensation expense by function:
 
 
 
 
 
 
 
Cost of revenue
$
294

 
$
459

 
$
539

 
$
451

Selling and marketing expense
3,119

 
657

 
4,842

 
853

General and administrative expense
20,039

 
13,707

 
34,637

 
21,659

Product development expense
2,497

 
1,729

 
4,842

 
3,202

Total stock-based compensation expense
$
25,949

 
$
16,552

 
$
44,860

 
$
26,165

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

4



IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Net earnings (loss)
$
57,732

 
$
(18,863
)
 
$
79,720

 
$
14,628

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Change in foreign currency translation adjustment
8,613

 
(187
)
 
(48,001
)
 
5,190

Change in unrealized gains and losses of available-for-sale securities (net of tax benefits of $126 and $182 for the three and six months ended June 30, 2015, respectively, and net of tax benefits of $865 and $1,438 for the three and six months ended June 30, 2014, respectively)
3,615

 
(2,139
)
 
4,249

 
(2,250
)
Total other comprehensive income (loss), net of tax
12,228

 
(2,326
)
 
(43,752
)
 
2,940

Comprehensive income (loss)
69,960

 
(21,189
)
 
35,968

 
17,568

Comprehensive loss attributable to noncontrolling interests
2,323

 
984

 
7,147

 
3,461

Comprehensive income (loss) attributable to IAC shareholders
$
72,283

 
$
(20,205
)
 
$
43,115

 
$
21,029

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

5



IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
 
 
 
 
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
 
 Retained Earnings
 
 
Treasury
Stock
 
 
Noncontrolling
Interests
 
Total
Shareholders'
Equity
 
$
 
Shares
 
$
 
Shares
 
 
 
 
 
 
(In thousands)
 
 
Balance as of December 31, 2014
$
40,427

 
 
$
252

 
252,170

 
$
16

 
16,157

 
$
11,415,617

 
$
325,118

 
$
(87,700
)
 
$
(9,661,350
)
 
$
1,991,953

 
$
1,189

 
$
1,993,142

Net (loss) earnings for the six months ended June 30, 2015
(5,990
)
 
 

 

 

 

 

 
85,710

 

 

 
85,710

 

 
85,710

Other comprehensive loss, net of tax
(1,157
)
 
 

 

 

 

 

 

 
(42,595
)
 

 
(42,595
)
 

 
(42,595
)
Stock-based compensation expense
3,509

 
 

 

 

 

 
38,189

 

 

 

 
38,189

 

 
38,189

Issuance of common stock upon exercise of stock options, vesting of restricted stock units and other, net of withholding taxes

 
 
2

 
1,471

 

 

 
(20,668
)
 

 

 

 
(20,666
)
 

 
(20,666
)
Income tax benefit related to the exercise of stock options, vesting of restricted stock units and other

 
 

 

 

 

 
24,636

 

 

 

 
24,636

 

 
24,636

Dividends

 
 

 

 

 

 

 
(56,729
)
 

 

 
(56,729
)
 

 
(56,729
)
Purchase of treasury stock

 
 

 

 

 

 

 

 

 
(200,000
)
 
(200,000
)
 

 
(200,000
)
Purchase of redeemable noncontrolling interests
(15,338
)
 
 

 

 

 

 

 

 

 

 

 

 

Adjustment of redeemable noncontrolling interests to fair value
5,320

 
 

 

 

 

 
(5,320
)
 

 

 

 
(5,320
)
 

 
(5,320
)
Transfer from noncontrolling interests to redeemable noncontrolling interests
1,189

 
 

 

 

 

 

 

 

 

 

 
(1,189
)
 
(1,189
)
Other
217

 
 

 

 

 

 
208

 

 

 

 
208

 

 
208

Balance as of June 30, 2015
$
28,177

 
 
$
254

 
253,641

 
$
16

 
16,157

 
$
11,452,662

 
$
354,099

 
$
(130,295
)
 
$
(9,861,350
)
 
$
1,815,386

 
$

 
$
1,815,386

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

6



IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2015
 
2014
 
(In thousands)
Cash flows from operating activities attributable to continuing operations:
 
 
 
Net earnings
$
79,720

 
$
14,628

Less: loss from discontinued operations, net of tax
(28
)
 
(1,682
)
Earnings from continuing operations
79,748

 
16,310

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities attributable to continuing operations:
 
 
 
Stock-based compensation expense
44,860

 
26,165

Depreciation
31,068

 
30,075

Amortization of intangibles
26,966

 
25,385

Excess tax benefits from stock-based awards
(36,465
)
 
(32,889
)
Deferred income taxes
7,260

 
5,849

Impairment of long-term investments
500

 
64,281

Equity in losses of unconsolidated affiliates
477

 
8,785

Acquisition-related contingent consideration fair value adjustments
(16,946
)
 
500

Other adjustments, net
8,369

 
5,362

Changes in assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable
2,710

 
(5,718
)
Other assets
(6,458
)
 
(19,238
)
Accounts payable and other current liabilities
(33,231
)
 
(31,242
)
Income taxes payable
(63,304
)
 
29,299

Deferred revenue
40,407

 
25,851

Other changes in assets and liabilities, net
(182
)
 
(4
)
Net cash provided by operating activities attributable to continuing operations
85,779

 
148,771

Cash flows from investing activities attributable to continuing operations:
 
 
 
Acquisitions, net of cash acquired
(43,286
)
 
(103,380
)
Capital expenditures
(26,816
)
 
(26,557
)
Proceeds from maturities and sales of marketable debt securities
14,613

 
998

Purchases of marketable debt securities
(93,134
)
 
(78,380
)
Purchases of long-term investments
(12,840
)
 
(14,701
)
Other, net
8,599

 
2,187

Net cash used in investing activities attributable to continuing operations
(152,864
)
 
(219,833
)
Cash flows from financing activities attributable to continuing operations:
 
 
 
Purchase of treasury stock
(200,000
)
 

Dividends
(56,729
)
 
(40,086
)
Issuance of common stock, net of withholding taxes
(20,656
)
 
(13,823
)
Excess tax benefits from stock-based awards
36,465

 
32,889

Purchase of noncontrolling interests
(15,338
)
 
(30,000
)
Funds returned from escrow for Meetic tender offer

 
12,354

Acquisition-related contingent consideration payments
(5,705
)
 
(7,630
)
Other, net
430

 
(141
)
Net cash used in financing activities attributable to continuing operations
(261,533
)
 
(46,437
)
Total cash used in continuing operations
(328,618
)
 
(117,499
)
Total cash used in discontinued operations
(243
)
 
(157
)
Effect of exchange rate changes on cash and cash equivalents
(5,135
)
 
4,538

Net decrease in cash and cash equivalents
(333,996
)
 
(113,118
)
Cash and cash equivalents at beginning of period
990,405

 
1,100,444

Cash and cash equivalents at end of period
$
656,409

 
$
987,326


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

7


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
IAC is a leading media and Internet company. The Company is organized into four segments: The Match Group, which consists of dating, education and fitness businesses with brands such as Match, OkCupid, Tinder, The Princeton Review and DailyBurn; Search & Applications, which includes brands such as About.com, Ask.com, Dictionary.com and Investopedia; Media, which includes businesses such as Vimeo, Electus, The Daily Beast and CollegeHumor; and eCommerce, which includes HomeAdvisor and ShoeBuy. IAC's brands and products are among the most recognized in the world, reaching users in over 200 countries.
On June 25, 2015, the Company announced the intent to pursue an initial public offering ("IPO") of less than 20% of the common stock of The Match Group. The IPO is expected to be completed during the fourth quarter of 2015.
All references to "IAC," the "Company," "we," "our" or "us" in this report are to IAC/InterActiveCorp.
Basis of Presentation
The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").
Basis of Consolidation and Accounting for Investments
The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. Intercompany transactions and accounts have been eliminated.
Investments in the common stock or in-substance common stock of entities in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee, but does not have a controlling financial interest, are accounted for using the equity method and are included in "Long-term investments" in the accompanying consolidated balance sheet.
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.
Accounting Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
On an ongoing basis, the Company evaluates its estimates and judgments including those related to: the fair values of marketable securities and other investments; the recoverability of goodwill and indefinite-lived intangible assets; the useful lives and recovery of definite-lived intangible assets and property and equipment; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts and revenue reserves; the fair value of acquisition-related contingent consideration; the liabilities for uncertain tax positions; the valuation allowance for deferred income tax assets; 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.

8


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Certain Risks and Concentrations
A substantial portion of the Company's revenue is derived from online advertising, the market for which is highly competitive and rapidly changing. Significant changes in this industry or changes in advertising spending behavior or in customer buying behavior could adversely affect our operating results. Most of the Company's online advertising revenue is attributable to a services agreement with Google Inc. ("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 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 three and six months ended June 30, 2015, revenue earned from Google is $308.2 million and $647.8 million, respectively. For the three and six months ended June 30, 2014, revenue earned from Google is $349.5 million and $704.6 million, respectively. This revenue is earned by the businesses comprising the Search & Applications segment. Accounts receivable related to revenue earned from Google totaled $108.3 million and $118.7 million at June 30, 2015 and December 31, 2014, respectively.
Recent Accounting Pronouncement
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which clarifies the principles for recognizing revenue and develops a common standard for all industries. In July 2015, the FASB decided to defer the effective date for annual reporting periods beginning after December 15, 2017. Early adoption is permitted beginning on the original effective date of December 15, 2016. Upon adoption, ASU No. 2014-09 may either be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the new standard will have a material impact on its consolidated financial statements or the method and timing of adoption.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2—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 they 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 the liabilities for uncertain tax positions 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 realization 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 six months ended June 30, 2015, the Company recorded an income tax benefit for continuing operations of $12.0 million and $5.8 million, respectively. The income tax benefit for the three and six months ended June 30, 2015 are due primarily to the realization of certain deferred tax assets, a reduction in tax reserves and related interest due to the expiration of statutes of limitations, and the non-taxable gain on contingent consideration fair value adjustments in the current year period, partially offset by state taxes. For the three and six months ended June 30, 2014, the Company recorded an income tax provision for continuing operations of $29.9 million and $51.3 million, respectively, which represents effective income tax rates of 251% and 76%, respectively. The effective rates for the three and six months ended June 30, 2014 are higher than the statutory rate of 35% due primarily to the largely unbenefited loss associated with the write-downs of certain of the Company's

9


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

investments, interest on reserves for income tax contingencies, and state taxes, partially offset by foreign income taxed at lower rates.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Included in the income tax provision for continuing operations for the three and six months ended June 30, 2015, is a $0.1 million benefit and a $0.2 million benefit, respectively, net of related deferred taxes, for interest on unrecognized tax benefits. At June 30, 2015 and December 31, 2014, the Company has accrued $2.2 million and $2.8 million, respectively, for the payment of interest. At June 30, 2015 and December 31, 2014, the Company has accrued $2.3 million and $2.9 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 is currently auditing the Company’s federal income tax returns for the years ended December 31, 2010 through 2012. Various other jurisdictions are open to examination for various tax years beginning with 2009. 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 audits and amounts previously provided may be material. Differences between the reserves for uncertain tax positions and the amounts owed by the Company are recorded in the period they become known.
At June 30, 2015 and December 31, 2014, unrecognized tax benefits, including interest and penalties, are $25.9 million and $33.2 million, respectively. If unrecognized tax benefits at June 30, 2015 are subsequently recognized, $23.9 million, net of related deferred tax assets and interest, would reduce income tax provision for continuing operations. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $3.4 million within twelve months of June 30, 2015 primarily due to settlements and expiration of statutes of limitations.
NOTE 3—MARKETABLE SECURITIES
At June 30, 2015, current available-for-sale marketable securities are as follows:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
Corporate debt securities
$
232,766

 
$
151

 
$

 
$
232,917

Equity security
97

 
509

 

 
606

Total marketable securities
$
232,863

 
$
660

 
$

 
$
233,523


At December 31, 2014, current available-for-sale marketable securities are as follows:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
Corporate debt securities
$
159,418

 
$
34

 
$
(255
)
 
$
159,197

Equity security
98

 
1,353

 

 
1,451

Total marketable securities
$
159,516

 
$
1,387

 
$
(255
)
 
$
160,648

The unrealized gains and losses in the tables above are included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet.

10


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The contractual maturities of debt securities classified as current available-for-sale at June 30, 2015 are as follows:
 
Amortized
Cost
 
Fair
Value
 
(In thousands)
Due in one year or less
$
95,946

 
$
95,979

Due after one year through five years
136,820

 
136,938

Total
$
232,766

 
$
232,917

The following table presents the proceeds from maturities and sales of current and non-current available-for-sale marketable securities and the related gross realized gains:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Proceeds from maturities and sales of available-for-sale marketable securities
$
8,563

 
$
3,462

 
$
14,613

 
$
3,462

Gross realized gains
5

 
2,299

 
5

 
2,299

There were no gross realized losses from the maturities and sales of available-for-sale marketable securities for the three and six months ended June 30, 2015 and 2014. However, during the second quarter of 2015, the Company recognized $0.3 million in losses that were deemed to be other-than-temporary related to various corporate debt securities that are expected to be sold by the Company in the third quarter of 2015, in part, to fund its cash needs related to The Match Group's acquisition of PlentyOfFish for $575 million.
Gross realized gains from the maturities and sales of available-for-sale marketable securities and losses that were deemed to be other-than-temporary are included in "Other (expense) income, net" in the accompanying consolidated statement of operations.
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.
NOTE 4—FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
Level 1: Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.
Level 2: Other inputs, which 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.
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:

11


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
June 30, 2015
 
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
$
207,014

 
$

 
$

 
$
207,014

Commercial paper

 
76,789

 

 
76,789

Time deposits

 
32,457

 

 
32,457

Marketable securities:
 
 
 
 
 
 
 
Corporate debt securities

 
232,917

 

 
232,917

   Equity security
606

 

 

 
606

Long-term investments:
 
 
 
 
 
 
 
Auction rate security

 

 
6,630

 
6,630

Marketable equity security
11,388

 

 

 
11,388

Total
$
219,008

 
$
342,163

 
$
6,630

 
$
567,801

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Contingent consideration arrangements
$

 
$

 
$
(31,858
)
 
$
(31,858
)

 
December 31, 2014
 
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
$
174,720

 
$

 
$

 
$
174,720

Commercial paper

 
388,801

 

 
388,801

Time deposits

 
42,914

 

 
42,914

Marketable securities:
 
 
 
 
 
 
 
Corporate debt securities

 
159,197

 

 
159,197

Equity security
1,451

 

 

 
1,451

Long-term investments:
 
 
 
 
 
 
 
Auction rate security

 

 
6,070

 
6,070

Marketable equity security
7,410

 

 

 
7,410

Total
$
183,581

 
$
590,912

 
$
6,070

 
$
780,563

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Contingent consideration arrangements
$

 
$

 
$
(30,140
)
 
$
(30,140
)

12


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The following tables present the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
 
Three Months Ended June 30,
 
2015
 
2014
 
Auction Rate
Security
 
Contingent
Consideration
Arrangements
 
Auction Rate
Security
 
Contingent
Consideration
Arrangements
 
(In thousands)
Balance at April 1
$
6,190

 
$
(20,964
)
 
$
9,150

 
$
(48,758
)
Total net gains (losses):
 
 


 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
Fair value adjustments

 
9,950

 

 
(527
)
Foreign currency exchange losses

 
(4
)
 

 

Included in other comprehensive income (loss)
440

 
384

 
100

 
499

Fair value at date of acquisition

 
(26,749
)
 

 

Settlements

 
5,525

 

 
7,389

Balance at June 30
$
6,630

 
$
(31,858
)
 
$
9,250

 
$
(41,397
)

 
Six Months Ended June 30,
 
2015
 
2014
 
Auction Rate
Security
 
Contingent
Consideration
Arrangements
 
Auction Rate
Security
 
Contingent
Consideration
Arrangements
 
(In thousands)
Balance at January 1
$
6,070

 
$
(30,140
)
 
$
8,920

 
$
(45,828
)
Total net gains (losses):
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
Fair value adjustments

 
16,946

 

 
(500
)
Foreign currency exchange gains

 
626

 

 

Included in other comprehensive income (loss)
560

 
2,117

 
330

 
136

Fair value at date of acquisition

 
(27,112
)
 

 
(2,835
)
Settlements

 
5,705

 

 
7,630

Balance at June 30
$
6,630

 
$
(31,858
)
 
$
9,250

 
$
(41,397
)
Auction rate security
The Company's auction rate security is valued by discounting the estimated future cash flow streams of the security over the life of the security. Credit spreads and other risk factors are also considered in establishing fair value. The cost basis of the auction rate security is $10.0 million, with gross unrealized losses of $3.4 million and $3.9 million at June 30, 2015 and December 31, 2014, respectively. The unrealized losses are included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. At June 30, 2015, the auction rate security is rated BBB- and matures in 2035. The Company does not consider the auction rate security to be other-than-temporarily impaired at June 30, 2015, due to its 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.

13


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Contingent Consideration Arrangements
As of June 30, 2015, there are nine contingent consideration arrangements related to business acquisitions. Eight of the contingent consideration arrangements have limits as to the maximum amount that can be paid; the maximum contingent payments related to these arrangements is $240.7 million and the fair value of these arrangements at June 30, 2015 is $31.4 million. The fair value of the one contingent consideration arrangement without a limit on the maximum amount is $0.5 million at June 30, 2015. The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics such as monthly active users. The Company typically determines the fair value of the contingent consideration arrangements by using a probability-weighted analysis to determine the amount of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that captures the risks associated with the obligation. The number of scenarios in the probability-weighted analyses can vary; generally, more scenarios are prepared for longer duration and more complex arrangements. The contingent consideration arrangements fair values at June 30, 2015 reflect discount rates ranging from 12-25%.
The fair values of the contingent consideration arrangements are sensitive to changes in the forecasts of earnings and/or the relevant operating metrics and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, and changes are recognized in “General and administrative expense” in the accompanying consolidated statement of operations. The contingent consideration arrangement liability at June 30, 2015 includes a current portion of $2.8 million and non-current portion of $29.1 million, which are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet.
Assets measured at fair value on a nonrecurring basis
The Company's non-financial assets, such as goodwill, intangible assets and property and equipment, as well as equity and cost method investments, are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.
Cost method investments
At June 30, 2015 and December 31, 2014, the carrying values of the Company's investments accounted for under the cost method totaled $103.3 million and $90.9 million, respectively, and are included in "Long-term investments" in the accompanying consolidated balance sheet. The Company evaluates each cost method investment for impairment on a quarterly basis and recognizes an impairment loss if a decline in value is determined to be other-than-temporary. If the Company has not identified events or changes in circumstances that may have a significant adverse effect on the fair value of a cost method investment, then the fair value of such cost method investment is not estimated, as it is impracticable to do so.
In the second quarter of 2014, the Company recorded $64.2 million of other-than-temporary impairment charges for certain cost method investments as a result of our assessment of the near-term prospects and financial condition of the investees. This charge is included in "Other (expense) income, net" in the accompanying consolidated statement of operations.
Equity method investments
In the second quarter of 2014, the Company recorded a $4.2 million other-than-temporary impairment charge on an equity method investment following the sale of a majority of the investee's assets. This charge is included in "Other (expense) income, net" in the accompanying consolidated statement of operations.
Long-term marketable equity securities
The cost basis of the Company's long-term marketable equity security at June 30, 2015 and December 31, 2014 is $8.7 million, with a gross unrealized gain of $2.7 million and loss of $1.2 million at June 30, 2015 and December 31, 2014, respectively. The gross unrealized gain at June 30, 2015 and gross unrealized loss at December 31, 2014 are included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet.

14


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Financial instruments measured at fair value only for disclosure purposes
The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:
 
June 30, 2015
 
December 31, 2014
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
(In thousands)
Current portion of long-term debt
$
(80,000
)
 
$
(80,000
)
 
$

 
$

Long-term debt, net of current portion
(1,000,000
)
 
(1,025,345
)
 
(1,080,000
)
 
(1,099,813
)
The fair value of long-term debt is estimated using market prices or indices for similar liabilities and taking into consideration other factors such as credit quality and maturity, which are Level 3 inputs.

NOTE 5—LONG-TERM DEBT
Long-term debt consists of:
 
June 30, 2015
 
December 31, 2014
 
(In thousands)
4.875% Senior Notes due November 30, 2018 (the "2013 Senior Notes"); interest payable each May 30 and November 30, which commenced May 30, 2014
$
500,000

 
$
500,000

4.75% Senior Notes due December 15, 2022 (the "2012 Senior Notes"); interest payable each June 15 and December 15, which commenced June 15, 2013
500,000

 
500,000

5% New York City Industrial Development Agency Liberty Bonds due September 1, 2035 (the "Liberty Bonds"); interest payable each March 1 and September 1, which commenced March 1, 2006(a)

 
80,000

Total long-term debt
$
1,000,000

 
$
1,080,000

_________________________________________

(a) $80.0 million reflected as short-term debt at June 30, 2015 as the Liberty Bonds are scheduled to be redeemed on September 1, 2015.
The 2013 and 2012 Senior Notes were issued on November 15, 2013 and December 21, 2012, respectively. On December 21, 2012, the Company entered into a $300 million revolving credit facility, which expires on December 21, 2017. The annual fee to maintain the revolving credit facility is 30 basis points. At June 30, 2015 and December 31, 2014, there are no outstanding borrowings under the revolving credit facility.
The 2013 and 2012 Senior Notes are unconditionally guaranteed by certain domestic subsidiaries, which are designated as guarantor subsidiaries. The guarantor subsidiaries are the same for the 2013 and 2012 Senior Notes and the revolving credit facility; any borrowings under the revolving credit facility would also be secured by the stock of certain of our domestic and foreign subsidiaries. See Note 10 for guarantor and non-guarantor financial information.
The indentures governing the 2013 and 2012 Senior Notes restrict our ability to incur additional indebtedness in the event we are not in compliance with the maximum leverage ratio of 3.0 to 1.0. In addition, the terms of the revolving credit facility require that we maintain a leverage ratio of not more than 3.0 to 1.0 and restrict our ability to incur additional indebtedness. As of June 30, 2015, the Company was in compliance with all of these covenants.

15


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

NOTE 6—ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present the components of accumulated other comprehensive (loss) income.
 
Three Months Ended June 30, 2015
 
Foreign Currency Translation Adjustment
 
Unrealized (Losses) Gains On Available-For-Sale Securities
 
Accumulated Other Comprehensive Loss
 
(In thousands)
Balance as of April 1
$
(143,182
)
 
$
(91
)
 
$
(143,273
)
Other comprehensive income, net of tax benefit of $0.2 million related to unrealized losses on available-for-sale securities
9,287

 
3,528

 
12,815

Amounts reclassified to earnings related to unrealized losses on available-for-sale securities, net of a tax benefit of $0.1 million

 
163

 
163

Net current period other comprehensive income
9,287

 
3,691

 
12,978

Balance as of June 30
$
(133,895
)
 
$
3,600

 
$
(130,295
)
 
Three Months Ended June 30, 2014
 
Foreign Currency Translation Adjustment
 
Unrealized Gains (Losses)On Available-For-Sale Securities
 
Accumulated Other Comprehensive Loss
 
(In thousands)
Balance as of April 1
$
(15,132
)
 
$
7,435

 
$
(7,697
)
Other comprehensive loss before reclassifications, net of tax benefit of $0.1 million related to unrealized gains on available-for-sale securities
(150
)
 
(799
)
 
(949
)
Amounts reclassified to earnings related to unrealized losses on available-for-sale securities, net of tax benefit of $0.8 million

 
(1,260
)
 
(1,260
)
Net current period other comprehensive loss
(150
)
 
(2,059
)
 
(2,209
)
Balance as of June 30
$
(15,282
)
 
$
5,376

 
$
(9,906
)

 
Six Months Ended June 30, 2015
 
Foreign Currency Translation Adjustment
 
Unrealized (Losses) Gains On Available-For-Sale Securities
 
Accumulated Other Comprehensive Loss
 
(In thousands)
Balance as of December 31
$
(86,848
)
 
$
(852
)
 
$
(87,700
)
Other comprehensive (loss) income, net of tax benefit of $0.3 million related to unrealized losses on available-for-sale securities
(47,047
)
 
4,289

 
(42,758
)
Amounts reclassified to earnings related to unrealized losses on available-for-sale securities, net of a tax benefit of $0.1 million

 
163

 
163

Net current period other comprehensive (loss) income
(47,047
)
 
4,452

 
(42,595
)
Balance as of June 30
$
(133,895
)
 
$
3,600

 
$
(130,295
)


16


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Six Months Ended June 30, 2014
 
Foreign Currency Translation Adjustment
 
Unrealized Gains (Losses)On Available-For-Sale Securities
 
Accumulated Other Comprehensive Loss
 
(In thousands)
Balance as of December 31
$
(20,352
)
 
$
7,306

 
$
(13,046
)
Other comprehensive income (loss) before reclassifications, net of tax benefit of $0.7 million related to unrealized gains on available-for-sale securities
5,070

 
(670
)
 
4,400

Amounts reclassified to earnings related to unrealized losses on available-for-sale securities, net of tax benefit of $0.8 million

 
(1,260
)
 
(1,260
)
Net current period other comprehensive income (loss)
5,070

 
(1,930
)
 
3,140

Balance as of June 30
$
(15,282
)
 
$
5,376

 
$
(9,906
)

NOTE 7—EARNINGS (LOSS) PER SHARE
The following tables set forth the computation of basic and diluted earnings (loss) per share attributable to IAC shareholders.
 
Three Months Ended June 30,
 
2015
 
2014
 
Basic
 
Diluted
 
Basic
 
Diluted
 
(In thousands, except per share data)
Numerator:
 
 
 
 
 
 
 
Earnings (loss) from continuing operations
$
57,885

 
$
57,885

 
$
(17,995
)
 
$
(17,995
)
Net loss attributable to noncontrolling interests
1,573

 
1,573

 
867

 
867

Earnings (loss) from continuing operations attributable to IAC shareholders
59,458

 
59,458

 
(17,128
)
 
(17,128
)
Loss from discontinued operations attributable to IAC shareholders
(153
)
 
(153
)
 
(868
)
 
(868
)
Net earnings (loss) attributable to IAC shareholders
$
59,305

 
$
59,305

 
$
(17,996
)
 
$
(17,996
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average basic shares outstanding
82,416

 
82,416

 
83,178

 
83,178

Dilutive securities including stock options and RSUs(a)(b)

 
4,674

 

 

Denominator for earnings per share—weighted average shares(a)(b)
82,416

 
87,090

 
83,178

 
83,178

 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to IAC shareholders:
 
 
 
 
 
 
 
Earnings (loss) per share from continuing operations
$
0.72

 
$
0.68

 
$
(0.21
)
 
$
(0.21
)
Discontinued operations

 

 
(0.01
)
 
(0.01
)
Earnings (loss) per share
$
0.72

 
$
0.68

 
$
(0.22
)
 
$
(0.22
)


17


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Six Months Ended June 30,
 
2015
 
2014
 
Basic
 
Diluted
 
Basic
 
Diluted
 
(In thousands, except per share data)
Numerator:
 
 
 
 
 
 
 
Earnings from continuing operations
$
79,748

 
$
79,748

 
$
16,310

 
$
16,310

Net loss attributable to noncontrolling interests
5,990

 
5,990

 
3,261

 
3,261

Earnings from continuing operations attributable to IAC shareholders
85,738

 
85,738

 
19,571

 
19,571

Loss from discontinued operations attributable to IAC shareholders
(28
)
 
(28
)
 
(1,682
)
 
(1,682
)
Net earnings attributable to IAC shareholders
$
85,710

 
$
85,710

 
$
17,889

 
$
17,889

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average basic shares outstanding
82,932

 
82,932

 
82,833

 
82,833

Dilutive securities including stock options and RSUs(a)

 
4,989

 

 
5,150

Denominator for earnings per share—weighted average shares(a)
82,932

 
87,921

 
82,833

 
87,983

 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to IAC shareholders:
 
 
 
 
 
 
 
Earnings per share from continuing operations
$
1.03

 
$
0.98

 
$
0.24

 
$
0.22

Discontinued operations

 
(0.01
)
 
(0.02
)
 
(0.02
)
Earnings per share
$
1.03

 
$
0.97

 
$
0.22

 
$
0.20

_________________________________________

(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 vesting of restricted stock units ("RSUs"). For the three and six months ended June 30, 2015 approximately 1.0 million and 1.2 million potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For the six months ended June 30, 2014, there are no securities that are excluded from the calculation of diluted earnings per share.

(b) For the three months ended June 30, 2014, the Company had a loss from continuing operations and as a result, approximately 11.5 million potentially dilutive securities were excluded 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.

NOTE 8—SEGMENT INFORMATION
The overall concept that IAC employs in determining its operating segments is to present the financial information in a manner consistent with how the chief operating decision maker views the businesses, how the businesses are organized as to segment management, and the focus of the businesses with regards to the types of services or products offered or the target market. Operating segments are combined for reporting purposes if they meet certain aggregation criteria, which principally relate to the similarity of their economic characteristics or, in the case of the eCommerce reportable segment, do not meet the quantitative thresholds that require presentation as separate operating segments.

18


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Revenue:
 
 
 
 
 
 
 
Search & Applications
$
351,366

 
$
395,716

 
$
734,264

 
$
793,751

The Match Group
254,690

 
214,314

 
493,901

 
425,501

Media
36,210

 
36,656

 
79,822

 
73,011

eCommerce
128,986

 
109,949

 
235,996

 
204,791

Inter-segment eliminations
(120
)
 
(320
)
 
(339
)
 
(492
)
Total
$
771,132

 
$
756,315

 
$
1,543,644

 
$
1,496,562

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Operating Income (Loss):
 
 
 
 
 
 
 
Search & Applications
$
68,592

 
$
77,771

 
$
132,892

 
$
148,108

The Match Group
51,441

 
61,198

 
76,753

 
101,001

Media
(13,775
)
 
(9,794
)
 
(29,127
)
 
(18,360
)
eCommerce
(1,004
)
 
8

 
(7,858
)
 
(1,553
)
Corporate
(42,485
)
 
(33,493
)
 
(74,772
)
 
(61,794
)
Total
$
62,769

 
$
95,690

 
$
97,888

 
$
167,402

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Adjusted EBITDA:
 
 
 
 
 
 
 
Search & Applications
$
72,910

 
$
91,258

 
$
151,811

 
$
173,329

The Match Group
64,822

 
69,368

 
90,678

 
116,798

Media
(15,452
)
 
(8,911
)
 
(30,035
)
 
(16,775
)
eCommerce
2,681

 
4,523

 
(456
)
 
7,327

Corporate
(16,282
)
 
(14,806
)
 
(28,162
)
 
(31,152
)
Total
$
108,679

 
$
141,432

 
$
183,836

 
$
249,527

Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Revenue:
 
 
 
 
 
 
 
United States
$
566,224

 
$
511,862

 
$
1,136,237

 
$
1,016,265

All other countries
204,908

 
244,453

 
407,407

 
480,297

 Total
$
771,132

 
$
756,315

 
$
1,543,644

 
$
1,496,562


19


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
June 30,
2015
 
December 31,
2014
 
(In thousands)
Long-lived assets (excluding goodwill and intangible assets):
 
 
 
 United States
$
278,004

 
$
281,879

 All other countries
19,154

 
20,580

Total
$
297,158

 
$
302,459

The Company's primary financial measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. The Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced. Adjusted EBITDA has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses.
The following tables reconcile Adjusted EBITDA to operating income (loss) for the Company's reportable segments:
 
Three Months Ended June 30, 2015
 

Adjusted
EBITDA
 
Stock-Based
Compensation
Expense
 
Depreciation
 
Amortization
of Intangibles
 
Acquisition-related Contingent Consideration Fair Value Adjustments
 
Operating
Income
(Loss)
 
(In thousands)
Search & Applications
$
72,910

 
$

 
$
(3,685
)
 
$
(6,930
)
 
$
6,297

 
$
68,592

The Match Group
64,822

 
(2,056
)
 
(6,647
)
 
(5,901
)
 
1,223

 
51,441

Media
(15,452
)
 
(147
)
 
(228
)
 
(378
)
 
2,430

 
(13,775
)
eCommerce
2,681

 
(420
)
 
(2,063
)
 
(1,202
)
 

 
(1,004
)
Corporate
(16,282
)
 
(23,326
)
 
(2,877
)
 

 

 
(42,485
)
Total
$
108,679

 
$
(25,949
)
 
$
(15,500
)
 
$
(14,411
)
 
$
9,950

 
$
62,769

 
Three Months Ended June 30, 2014
 

Adjusted
EBITDA
 
Stock-Based
Compensation
Expense
 
Depreciation
 
Amortization
of Intangibles
 
Acquisition-related Contingent Consideration Fair Value Adjustments
 
Operating
Income
(Loss)
 
(In thousands)
Search & Applications
$
91,258

 
$

 
$
(5,082
)
 
$
(8,405
)
 
$

 
$
77,771

The Match Group
69,368

 
(170
)
 
(5,589
)
 
(1,684
)
 
(727
)
 
61,198

Media
(8,911
)
 
(161
)
 
(224
)
 
(698
)
 
200

 
(9,794
)
eCommerce
4,523

 

 
(1,896
)
 
(2,619
)
 

 
8

Corporate
(14,806
)
 
(16,221
)
 
(2,466
)
 

 

 
(33,493
)
Total
$
141,432

 
$
(16,552
)
 
$
(15,257
)
 
$
(13,406
)
 
$
(527
)
 
$
95,690


20


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Six Months Ended June 30, 2015
 

Adjusted
EBITDA
 
Stock-Based
Compensation
Expense
 
Depreciation
 
Amortization
of Intangibles
 
Acquisition-related Contingent Consideration Fair Value Adjustments
 
Operating
Income
(Loss)
 
(In thousands)
Search & Applications
$
151,811

 
$

 
$
(7,301
)
 
$
(13,895
)
 
$
2,277

 
$
132,892

The Match Group
90,678

 
(2,669
)
 
(13,712
)
 
(9,778
)
 
12,234

 
76,753

Media
(30,035
)
 
(294
)
 
(432
)
 
(801
)
 
2,435

 
(29,127
)
eCommerce
(456
)
 
(840
)
 
(4,070
)
 
(2,492
)
 

 
(7,858
)
Corporate
(28,162
)
 
(41,057
)
 
(5,553
)
 

 

 
(74,772
)
Total
$
183,836

 
$
(44,860
)
 
$
(31,068
)
 
$
(26,966
)
 
$
16,946

 
$
97,888

 
Six Months Ended June 30, 2014
 

Adjusted
EBITDA
 
Stock-Based
Compensation
Expense
 
Depreciation
 
Amortization
of Intangibles
 
Acquisition-related Contingent Consideration Fair Value Adjustments
 
Operating
Income
(Loss)
 
(In thousands)
Search & Applications
$
173,329

 
$

 
$
(9,547
)
 
$
(15,674
)
 
$

 
$
148,108

The Match Group
116,798

 
(187
)
 
(11,389
)
 
(3,521
)
 
(700
)
 
101,001

Media
(16,775
)
 
(325
)
 
(506
)
 
(954
)
 
200

 
(18,360
)
eCommerce
7,327

 

 
(3,644
)
 
(5,236
)
 

 
(1,553
)
Corporate
(31,152
)
 
(25,653
)
 
(4,989
)
 

 

 
(61,794
)
Total
$
249,527

 
$
(26,165
)
 
$
(30,075
)
 
$
(25,385
)
 
$
(500
)
 
$
167,402

NOTE 9—CONTINGENCIES
In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where we believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against us, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood 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 2 for additional information related to income tax contingencies.
NOTE 10—GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The 2013 and 2012 Senior Notes are unconditionally guaranteed, jointly and severally, by certain domestic subsidiaries that are 100% owned by the Company. The following tables present condensed consolidating financial information at June 30, 2015 and December 31, 2014 and for the three and six months ended June 30, 2015 and 2014 for: IAC, on a stand-alone basis; the combined guarantor subsidiaries of IAC; the combined non-guarantor subsidiaries of IAC; and IAC on a consolidated basis.

21


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Balance sheet at June 30, 2015:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Total Eliminations
 
IAC Consolidated
 
(In thousands)
Cash and cash equivalents
$
431,731

 
$
4,121

 
$
220,557

 
$

 
$
656,409

Marketable securities
232,917

 

 
606

 

 
233,523

Accounts receivable, net
4

 
132,223

 
90,879

 

 
223,106

Other current assets
47,233

 
97,670

 
69,692

 
(4,871
)
 
209,724

Intercompany receivables

 
1,635,189

 
942,583

 
(2,577,772
)
 

Property and equipment, net
4,867

 
228,061

 
64,230

 

 
297,158

Goodwill

 
1,250,801

 
528,029

 

 
1,778,830

Intangible assets, net

 
313,275

 
158,807

 

 
472,082

Investment in subsidiaries
4,971,322

 
932,210

 

 
(5,903,532
)
 

Other non-current assets
69,644

 
20,715

 
115,405

 
(1,538
)
 
204,226

Total assets
$
5,757,718

 
$
4,614,265

 
$
2,190,788

 
$
(8,487,713
)
 
$
4,075,058

 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$

 
$
80,000

 
$

 
$

 
$
80,000

Accounts payable, trade
3,078

 
57,265

 
19,091

 

 
79,434

Other current liabilities
32,661

 
320,261

 
203,239

 
(738
)
 
555,423

Long-term debt, net of current portion
1,000,000

 

 

 

 
1,000,000

Income taxes payable
892

 
4,829

 
19,047

 

 
24,768

Intercompany liabilities
2,577,772

 

 

 
(2,577,772
)
 

Other long-term liabilities
327,929

 
100,370

 
69,242

 
(5,671
)
 
491,870

Redeemable noncontrolling interests

 

 
28,177

 

 
28,177

IAC shareholders' equity
1,815,386

 
4,051,540

 
1,851,992

 
(5,903,532
)
 
1,815,386

Total liabilities and shareholders' equity
$
5,757,718

 
$
4,614,265

 
$
2,190,788

 
$
(8,487,713
)
 
$
4,075,058


22


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Balance sheet at December 31, 2014:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Total Eliminations
 
IAC Consolidated
 
(In thousands)
Cash and cash equivalents
$
766,076

 
$
1,021

 
$
223,308

 
$

 
$
990,405

Marketable securities
159,197

 

 
1,451

 

 
160,648

Accounts receivable, net
13

 
155,262

 
80,811

 

 
236,086

Other current assets
23,923

 
91,105

 
57,487

 
(5,773
)
 
166,742

Intercompany receivables

 
1,688,403

 
970,810

 
(2,659,213
)
 

Property and equipment, net
4,950

 
232,819

 
64,690

 

 
302,459

Goodwill

 
1,249,807

 
505,119

 

 
1,754,926

Intangible assets, net

 
325,771

 
166,165

 

 
491,936

Investment in subsidiaries
5,035,304

 
930,443

 

 
(5,965,747
)
 

Other non-current assets
44,610

 
20,682

 
109,372

 
(2,988
)
 
171,676

Total assets
$
6,034,073

 
$
4,695,313

 
$
2,179,213

 
$
(8,633,721
)
 
$
4,274,878

 
 
 
 
 
 
 
 
 
 
Accounts payable, trade
$
3,059

 
$
55,320

 
$
22,784

 
$

 
$
81,163

Other current liabilities
73,491

 
328,920

 
191,197

 
(817
)
 
592,791

Long-term debt
1,000,000

 
80,000

 

 

 
1,080,000

Income taxes payable
2,240

 
4,771

 
25,624

 

 
32,635

Intercompany liabilities
2,659,213

 

 

 
(2,659,213
)
 

Other long-term liabilities
304,117

 
104,219

 
54,328

 
(7,944
)
 
454,720

Redeemable noncontrolling interests

 

 
40,427

 

 
40,427

IAC shareholders' equity
1,991,953

 
4,122,083

 
1,843,664

 
(5,965,747
)
 
1,991,953

Noncontrolling interests

 

 
1,189

 

 
1,189

Total liabilities and shareholders' equity
$
6,034,073

 
$
4,695,313

 
$
2,179,213

 
$
(8,633,721
)
 
$
4,274,878


23


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Statement of operations for the three months ended June 30, 2015:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Total Eliminations
 
IAC Consolidated
 
(In thousands)
Revenue
$

 
$
586,067

 
$
188,460

 
$
(3,395
)
 
$
771,132

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
294

 
117,383

 
65,792

 
(193
)
 
183,276

Selling and marketing expense
1,010

 
264,647

 
56,949

 
(3,209
)
 
319,397

General and administrative expense
33,942

 
66,336

 
29,064

 
7

 
129,349

Product development expense
2,330

 
30,996

 
13,104

 

 
46,430

Depreciation
426

 
11,110

 
3,964

 

 
15,500

Amortization of intangibles

 
6,226

 
8,185

 

 
14,411

Total operating costs and expenses
38,002

 
496,698

 
177,058

 
(3,395
)
 
708,363

Operating (loss) income
(38,002
)
 
89,369

 
11,402

 

 
62,769

Equity in earnings of unconsolidated affiliates
70,523

 
13,353

 

 
(83,876
)
 

Interest expense
(12,992
)
 
(2,211
)
 
(11
)
 

 
(15,214
)
Other (expense) income, net
(7,506
)
 
17,787

 
(11,919
)
 

 
(1,638
)
Earnings (loss) from continuing operations before income taxes
12,023

 
118,298

 
(528
)
 
(83,876
)
 
45,917

Income tax benefit (provision)
47,435

 
(40,470
)
 
5,003

 

 
11,968

Earnings from continuing operations
59,458

 
77,828

 
4,475

 
(83,876
)
 
57,885

(Loss) earnings from discontinued operations, net of tax
(153
)
 

 
3

 
(3
)
 
(153
)
Net earnings
59,305

 
77,828

 
4,478

 
(83,879
)
 
57,732

Net loss attributable to noncontrolling interests

 

 
1,573

 

 
1,573

Net earnings attributable to IAC shareholders
$
59,305

 
$
77,828

 
$
6,051

 
$
(83,879
)
 
$
59,305

Comprehensive income attributable to IAC shareholders
$
72,283

 
$
79,129

 
$
15,106

 
$
(94,235
)
 
$
72,283



24


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Statement of operations for the three months ended June 30, 2014:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Total Eliminations
 
IAC Consolidated
 
(In thousands)
Revenue
$

 
$
556,162

 
$
203,497

 
$
(3,344
)
 
$
756,315

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
383

 
126,162

 
84,872

 
(687
)
 
210,730

Selling and marketing expense
619

 
220,152

 
54,158

 
(2,439
)
 
272,490

General and administrative expense
26,609

 
48,459

 
34,816

 
13

 
109,897

Product development expense
1,705

 
26,305

 
11,066

 
(231
)
 
38,845

Depreciation
312

 
9,224

 
5,721

 

 
15,257

Amortization of intangibles

 
9,659

 
3,747

 

 
13,406

Total operating costs and expenses
29,628

 
439,961

 
194,380

 
(3,344
)
 
660,625

Operating (loss) income
(29,628
)
 
116,201

 
9,117

 

 
95,690

Equity in earnings of unconsolidated affiliates
8,264

 
5,297

 

 
(13,561
)
 

Interest expense
(12,985
)
 
(1,052
)
 
(9
)
 

 
(14,046
)
Other income (expense), net
6,537

 
(13,834
)
 
(62,453
)
 

 
(69,750
)
(Loss) earnings from continuing operations before income taxes
(27,812
)
 
106,612

 
(53,345
)
 
(13,561
)
 
11,894

Income tax benefit (provision)
10,684

 
(39,785
)
 
(788
)
 

 
(29,889
)
(Loss) earnings from continuing operations
(17,128
)
 
66,827

 
(54,133
)
 
(13,561
)
 
(17,995
)
Loss from discontinued operations, net of tax
(868
)
 

 
(27
)
 
27

 
(868
)
Net (loss) earnings
(17,996
)
 
66,827

 
(54,160
)
 
(13,534
)
 
(18,863
)
Net loss attributable to noncontrolling interests

 

 
867

 

 
867

Net (loss) earnings attributable to IAC shareholders
$
(17,996
)
 
$
66,827

 
$
(53,293
)
 
$
(13,534
)
 
$
(17,996
)
Comprehensive (loss) income attributable to IAC shareholders
$
(20,205
)
 
$
66,163

 
$
(55,879
)
 
$
(10,284
)
 
$
(20,205
)

25


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Statement of operations for the six months ended June 30, 2015:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Total Eliminations
 
IAC Consolidated
 
(In thousands)
Revenue
$

 
$
1,180,868

 
$
368,820

 
$
(6,044
)
 
$
1,543,644

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
539

 
237,124

 
137,556

 
(390
)
 
374,829

Selling and marketing expense
2,065

 
553,272

 
127,345

 
(5,619
)
 
677,063

General and administrative expense
58,006

 
132,089

 
54,083

 
(35
)
 
244,143

Product development expense
4,507

 
62,130

 
25,050

 

 
91,687

Depreciation
827

 
22,690

 
7,551

 

 
31,068

Amortization of intangibles

 
12,496

 
14,470

 

 
26,966

Total operating costs and expenses
65,944

 
1,019,801

 
366,055

 
(6,044
)
 
1,445,756

Operating (loss) income
(65,944
)
 
161,067

 
2,765

 

 
97,888

Equity in earnings of unconsolidated affiliates
124,647

 
17,049

 

 
(141,696
)
 

Interest expense
(25,982
)
 
(3,257
)
 
(39
)
 

 
(29,278
)
Other (expense) income, net
(16,859
)
 
29,179

 
(6,970
)
 

 
5,350

Earnings (loss) from continuing operations before income taxes
15,862

 
204,038

 
(4,244
)
 
(141,696
)
 
73,960

Income tax benefit (provision)
69,876

 
(72,266
)
 
8,178

 

 
5,788

Earnings from continuing operations
85,738

 
131,772

 
3,934

 
(141,696
)
 
79,748

(Loss) earnings from discontinued operations, net of tax
(28
)
 

 
3

 
(3
)
 
(28
)
Net earnings
85,710

 
131,772

 
3,937

 
(141,699
)
 
79,720

Net loss attributable to noncontrolling interests

 

 
5,990

 

 
5,990

Net earnings attributable to IAC shareholders
$
85,710

 
$
131,772

 
$
9,927

 
$
(141,699
)
 
$
85,710

Comprehensive income (loss) attributable to IAC shareholders
$
43,115

 
$
127,288

 
$
(37,762
)
 
$
(89,526
)
 
$
43,115


26


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Statement of operations for the six months ended June 30, 2014:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Total Eliminations
 
IAC Consolidated
 
(In thousands)
Revenue
$

 
$
1,102,488

 
$
400,404

 
$
(6,330
)
 
$
1,496,562

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
355

 
255,463

 
165,793

 
(1,647
)
 
419,964

Selling and marketing expense
811

 
456,493

 
117,922

 
(4,137
)
 
571,089

General and administrative expense
49,055

 
94,134

 
61,771

 
26

 
204,986

Product development expense
3,176

 
53,401

 
21,656

 
(572
)
 
77,661

Depreciation
641

 
18,785

 
10,649

 

 
30,075

Amortization of intangibles

 
18,660

 
6,725

 

 
25,385

Total operating costs and expenses
54,038

 
896,936

 
384,516

 
(6,330
)
 
1,329,160

Operating (loss) income
(54,038
)
 
205,552

 
15,888

 

 
167,402

Equity in earnings of unconsolidated affiliates
62,561

 
5,541

 

 
(68,102
)
 

Interest expense
(25,970
)
 
(2,094
)
 
(46
)
 

 
(28,110
)
Other income (expense), net
16,222

 
(24,361
)
 
(63,569
)
 

 
(71,708
)
(Loss) earnings from continuing operations before income taxes
(1,225
)
 
184,638

 
(47,727
)
 
(68,102
)
 
67,584

Income tax benefit (provision)
20,796

 
(69,729
)
 
(2,341
)
 

 
(51,274
)
Earnings (loss) from continuing operations
19,571

 
114,909

 
(50,068
)
 
(68,102
)
 
16,310

Loss from discontinued operations, net of tax
(1,682
)
 

 
(40
)
 
40

 
(1,682
)
Net earnings (loss)
17,889

 
114,909

 
(50,108
)
 
(68,062
)
 
14,628

Net loss attributable to noncontrolling interests

 

 
3,261

 

 
3,261

Net earnings (loss) attributable to IAC shareholders
$
17,889

 
$
114,909

 
$
(46,847
)
 
$
(68,062
)
 
$
17,889

Comprehensive income (loss) attributable to IAC shareholders
$
21,029

 
$
114,629

 
$
(45,764
)
 
$
(68,865
)
 
$
21,029



27


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Statement of cash flows for the six months ended June 30, 2015:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
IAC Consolidated
 
(In thousands)
Net cash (used in) provided by operating activities attributable to continuing operations
$
(124,420
)
 
$
232,853

 
$
(22,654
)
 
$
85,779

Cash flows from investing activities attributable to continuing operations:
 
 
 
 
 
 
 
Acquisitions, net of cash acquired

 
(3,675
)
 
(39,611
)
 
(43,286
)
Capital expenditures
(988
)
 
(18,242
)
 
(7,586
)
 
(26,816
)
Proceeds from maturities and sales of marketable debt securities
14,613

 

 

 
14,613

Purchases of marketable debt securities
(93,134
)
 

 

 
(93,134
)
Purchases of long-term investments

 

 
(12,840
)
 
(12,840
)
Other, net
3,613

 
(1,086
)
 
6,072

 
8,599

Net cash used in investing activities attributable to continuing operations
(75,896
)
 
(23,003
)
 
(53,965
)
 
(152,864
)
Cash flows from financing activities attributable to continuing operations:
 
 
 
 
 
 
 
Purchase of treasury stock
(200,000
)
 

 

 
(200,000
)
Dividends
(56,729
)
 

 

 
(56,729
)
Issuance of common stock, net of withholding taxes
(20,656
)
 

 

 
(20,656
)
Excess tax benefits from stock-based awards
36,334

 

 
131

 
36,465

Purchase of noncontrolling interests

 

 
(15,338
)
 
(15,338
)
Acquisition-related contingent consideration payments

 
(195
)
 
(5,510
)
 
(5,705
)
Intercompany
107,102

 
(206,557
)
 
99,455

 

Other, net
166

 

 
264

 
430

Net cash (used in) provided by financing activities attributable to continuing operations
(133,783
)
 
(206,752
)
 
79,002

 
(261,533
)
Total cash (used in) provided by continuing operations
(334,099
)
 
3,098

 
2,383

 
(328,618
)
Total cash (used in) provided by discontinued operations
(246
)
 

 
3

 
(243
)
Effect of exchange rate changes on cash and cash equivalents

 
2

 
(5,137
)
 
(5,135
)
Net (decrease) increase in cash and cash equivalents
(334,345
)
 
3,100

 
(2,751
)
 
(333,996
)
Cash and cash equivalents at beginning of period
766,076

 
1,021

 
223,308

 
990,405

Cash and cash equivalents at end of period
$
431,731

 
$
4,121

 
$
220,557

 
$
656,409



28


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Statement of cash flows for the six months ended June 30, 2014:
 
IAC
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
IAC Consolidated
 
(In thousands)
Net cash (used in) provided by operating activities attributable to continuing operations
$
(38,576
)
 
$
193,388

 
$
(6,041
)
 
$
148,771

Cash flows from investing activities attributable to continuing operations:
 
 
 
 
 
 
 
Acquisitions, net of cash acquired

 
(88,205
)
 
(15,175
)
 
(103,380
)
Capital expenditures
(2,390
)
 
(16,477
)
 
(7,690
)
 
(26,557
)
Proceeds from maturities and sales of marketable debt securities
998

 

 

 
998

Purchases of marketable debt securities
(78,380
)
 

 

 
(78,380
)
Purchases of long-term investments
(3,000
)
 
(6,761
)
 
(4,940
)
 
(14,701
)
Other, net

 
11

 
2,176

 
2,187

Net cash used in investing activities attributable to continuing operations
(82,772
)
 
(111,432
)
 
(25,629
)
 
(219,833
)
Cash flows from financing activities attributable to continuing operations:
 
 
 
 
 
 
 
Dividends
(40,086
)
 

 

 
(40,086
)
Issuance of common stock, net of withholding taxes
(13,823
)
 

 

 
(13,823
)
Excess tax benefits from stock-based awards
22,116

 

 
10,773

 
32,889

Purchase of noncontrolling interests

 
(30,000
)
 

 
(30,000
)
Funds returned from escrow for Meetic tender offer

 

 
12,354

 
12,354

Acquisition-related contingent consideration payments

 
(257
)
 
(7,373
)
 
(7,630
)
Intercompany
104,410

 
(51,723
)
 
(52,687
)
 

Other, net
(383
)
 

 
242

 
(141
)
Net cash provided by (used in) financing activities attributable to continuing operations
72,234

 
(81,980
)
 
(36,691
)
 
(46,437
)
Total cash used in continuing operations
(49,114
)
 
(24
)
 
(68,361
)
 
(117,499
)
Total cash used in discontinued operations
(116
)
 

 
(41
)
 
(157
)
Effect of exchange rate changes on cash and cash equivalents

 
24

 
4,514

 
4,538

Net decrease in cash and cash equivalents
(49,230
)
 

 
(63,888
)
 
(113,118
)
Cash and cash equivalents at beginning of period
782,022

 

 
318,422

 
1,100,444

Cash and cash equivalents at end of period
$
732,792

 
$

 
$
254,534

 
$
987,326



29


IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

NOTE 11—SUBSEQUENT EVENT

On July 14, 2015, the Company announced that The Match Group had entered into a definitive agreement to purchase PlentyOfFish for $575 million in cash. The acquisition is expected to close in the fourth quarter of 2015.

30


Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

GENERAL
Management Overview
IAC is a leading media and Internet company. The Company is organized into four segments: The Match Group, which consists of dating, education and fitness businesses with brands such as Match, OkCupid, Tinder, The Princeton Review and DailyBurn; Search & Applications, which includes brands such as About.com, Ask.com, Dictionary.com and Investopedia; Media, which includes businesses such as Vimeo, Electus, The Daily Beast and CollegeHumor; and eCommerce, which includes HomeAdvisor and ShoeBuy. IAC's brands and products are among the most recognized in the world, reaching users in over 200 countries.
On June 25, 2015, the Company announced the intent to pursue an initial public offering ("IPO") of less than 20% of the common stock of The Match Group. The IPO is expected to be completed during the fourth quarter of 2015.
For a more detailed description of the Company's operating businesses, see the Company's annual report on Form 10-K for the year ended December 31, 2014.
A substantial portion of the Company's revenue is derived from online advertising. Most of the Company's online advertising revenue is attributable to our services agreement with Google Inc. ("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 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 three and six months ended June 30, 2015, revenue earned from Google is $308.2 million and $647.8 million, respectively. For the three and six months ended June 30, 2014, revenue earned from Google is $349.5 million and $704.6 million, respectively. This revenue is earned by the businesses comprising the Search & Applications segment.
Factors Affecting Consolidated Results
For the three months ended June 30, 2015, the Company delivered 2% revenue growth; however, Adjusted EBITDA and operating income declined 23% and 34%, respectively. The revenue increase was driven by strong growth from The Match Group and eCommerce, partially offset by declines at Search & Applications. The Adjusted EBITDA and operating income declines were driven by lower revenue at Search & Applications, $9.0 million of costs at The Match Group related to the ongoing consolidation and streamlining of technology systems and European operations at our Dating businesses and increased investment at Media and eCommerce.

For the six months ended June 30, 2015, the Company delivered 3% revenue growth; however, Adjusted EBITDA and operating income declined 26% and 42%, respectively. The consolidated results for the six months were driven primarily by the factors described above.

31



Results of Operations for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014
Revenue
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Search & Applications
$
351,366

 
$
(44,350
)
 
(11)%
 
$
395,716

 
$
734,264

 
$
(59,487
)
 
(7)%
 
$
793,751

The Match Group
254,690

 
40,376

 
19%
 
214,314

 
493,901

 
68,400

 
16%
 
425,501

Media
36,210

 
(446
)
 
(1)%
 
36,656

 
79,822

 
6,811

 
9%
 
73,011

eCommerce
128,986

 
19,037

 
17%
 
109,949

 
235,996

 
31,205

 
15%
 
204,791

Inter-segment eliminations
(120
)
 
200

 
62%
 
(320
)
 
(339
)
 
153

 
31%
 
(492
)
Total
$
771,132

 
$
14,817

 
2%
 
$
756,315

 
$
1,543,644

 
$
47,082

 
3%
 
$
1,496,562

For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
Search & Applications revenue decreased 11% reflecting declines from Websites (which is principally composed of Ask.com, About.com, CityGrid, Dictionary.com, Investopedia, PriceRunner and Ask.fm) and Applications (which includes our direct-to-consumer downloadable desktop search and mobile applications operations ("B2C") and our partnership operations ("B2B")). Websites revenue decreased 20% to $164.8 million due primarily to a decline in revenue at Ask.com and certain legacy businesses, partially offset by strong growth at About.com. Applications revenue decreased 2% to $186.5 million due to lower revenue from our B2B operations, partially offset by 18% growth from our B2C operations driven by higher queries from our desktop search applications and from the contribution from our mobile applications (via our acquisition of Apalon on November 3, 2014).
The Match Group revenue increased 19%, or 25% excluding the effects of foreign exchange, driven by a 7% increase in Dating revenue and 370% increase in non-dating revenue. Dating North America (which includes Match, Chemistry, People Media, OkCupid, Tinder and other dating businesses operating within the United States and Canada) revenue increased 12% to $155.0 million driven by an 11% increase in paid subscribers. Dating International (which includes Meetic, Tinder's international operations and all other dating businesses operating outside of the United States and Canada) revenue decreased 2% despite a 34% increase in paid subscribers, due to foreign exchange effects. Excluding foreign exchange effects, total Dating revenue and Dating International revenue would have increased 14% and 18%, respectively. Non-dating (consisting of The Princeton Review, Tutor.com and DailyBurn) revenue benefited from the acquisition of The Princeton Review on August 1, 2014.
Media revenue decreased 1% despite the contribution from IAC Films and strong growth at Vimeo, driven by lower revenue from Electus, in part to the timing of certain projects. IAC Films released the movie While We're Young in theaters in March 2015.
eCommerce revenue increased 17% due to 26% growth at HomeAdvisor driven by domestic revenue and service requests increasing 41% and 49%, respectively. Excluding foreign exchange effects, HomeAdvisor revenue would have increased 29%.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
Search & Applications revenue decreased 7% reflecting declines from Websites and Applications. Websites and Applications revenue decreased 13% and 1%, respectively, to $354.6 million and $379.9 million, respectively. The decreases in Websites and Applications revenue are primarily due to the factors described above in the three month discussion.
The Match Group revenue increased 16%, or 22% excluding the effects of foreign exchange, driven by a 5% increase in Dating revenue and 371% increase in non-dating revenue, due primarily to the factors described above in the three month discussion. Dating North America revenue increased 10% to $300.3 million and Dating International revenue decreased 5% to $132.8 million. Excluding foreign exchange effects, total Dating revenue and Dating International revenue would have increased 11% and 13%, respectively.

32



Media and eCommerce revenue increased 9% and 15%, respectively, principally due to the factors described above in the three month discussion.
Cost of revenue
Cost of revenue consists primarily of traffic acquisition costs and includes payments made to partners who distribute our 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 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 (including stock-based compensation) and other employee-related costs for personnel engaged in data center functions, rent, energy and hosting fees.
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Cost of revenue (exclusive of depreciation shown separately below)
$183,276
 
$(27,454)
 
(13)%
 
$210,730
As a percentage of revenue
24%
 
 
 
 
 
28%
Cost of revenue in 2015 decreased from 2014 due to a decrease of $47.0 million from Search & Applications, partially offset by an increase of $19.7 million from The Match Group.
The Search & Applications decrease was primarily due to a reduction of $48.3 million in traffic acquisition costs driven by a decline in revenue at Ask.com and our B2B operations.
The Match Group increase was primarily due to the acquisition of The Princeton Review and increases in revenue share payments made in connection with in-app purchases sold through Dating's mobile products and hosting fees.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Cost of revenue (exclusive of depreciation shown separately below)
$374,829
 
$(45,135)
 
(11)%
 
$419,964
As a percentage of revenue
24%
 
 
 
 
 
28%
Cost of revenue in 2015 decreased from 2014 due to a decrease of $84.0 million from Search & Applications, partially offset by increases of $32.7 million from The Match Group and $6.8 million from Media.
The Search & Applications decrease and The Match Group increase are primarily due to the factors described above in the three month discussion.
The Media increase was primarily due to production costs at IAC Films related to the release of the movie While We’re Young in March 2015, partially offset by decreased production costs at Electus due, in part, to the timing of certain projects.
Selling and marketing expense
Selling and marketing expense consists primarily of advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel engaged in sales, sales support and customer service functions. Advertising expenditures include online marketing, including fees paid to search engines and third parties that distribute our B2C downloadable applications, and offline marketing, which is primarily television advertising.
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014

33



 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Selling and marketing expense
$319,397
 
$46,907
 
17%
 
$272,490
As a percentage of revenue
41%
 
 
 
 
 
36%
Selling and marketing expense in 2015 increased from 2014 due to increases of $18.2 million from Search & Applications, $16.7 million from eCommerce, $6.1 million from Media and $5.5 million from The Match Group.
The Search & Applications increase was primarily due to a $17.9 million increase in online marketing, which was primarily related to the growth in About.com and new B2C downloadable applications, partially offset by a decline at Ask.com.
The eCommerce increase was primarily due to increases of $10.9 million in offline and online marketing related to HomeAdvisor and $5.1 million in compensation due, in part, to increased headcount at HomeAdvisor.
The Media increase was primarily due to an increase of $5.4 million in online marketing at Vimeo.
The Match Group increase was primarily due to the acquisition of The Princeton Review and an increase in compensation.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Selling and marketing expense
$677,063
 
$105,974
 
19%
 
$571,089
As a percentage of revenue
44%
 
 
 
 
 
38%
Selling and marketing expense in 2015 increased from 2014 due to increases of $40.2 million from Search & Applications, $32.3 million from eCommerce, $20.8 million from The Match Group and $11.4 million from Media.
The increases from Search & Applications, eCommerce, The Match Group and Media are primarily due to the factors described above in the three month discussion.
The Match Group increase was also impacted by an increase in online marketing at Dating and DailyBurn.
General and administrative expense
General and administrative expense consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax and human resources, facilities costs and fees for professional services.
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
General and administrative expense
$129,349
 
$19,452
 
18%
 
$109,897
As a percentage of revenue
17%
 
 
 
 
 
15%
General and administrative expense in 2015 increased from 2014 due to increases of $14.4 million from The Match Group and $7.7 million from Corporate.

34



The Match Group increase was primarily due to the acquisition of The Princeton Review, an increase in severance expense and costs in the current year related to our ongoing consolidation and streamlining of technology systems and European operations at our Dating businesses.
The Corporate increase was primarily due to an increase in stock-based compensation expense, which was driven by the issuance of equity awards since the prior year.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
General and administrative expense
$244,143
 
$39,157
 
19%
 
$204,986
As a percentage of revenue
16%
 
 
 
 
 
14%
General and administrative expense in 2015 increased from 2014 due to increases of $21.6 million from The Match Group, $9.6 million from Corporate, $5.6 million from eCommerce and $3.9 million from Search & Applications.
The Match Group increase was primarily due to the factors described above in the three month discussion. General and administrative expense was also impacted by a decrease of $12.9 million in acquisition-related contingent consideration fair value adjustments, partially offset by a $3.9 million benefit in the prior year related to the expiration of the statute of limitations for a non-income tax matter.
The Corporate increase was primarily due to an increase in stock-based compensation expense, which was driven by a higher number of forfeited awards in the prior year, the impact of a modification of certain awards in the current year and the issuance of equity awards since the prior year.
The eCommerce increase was primarily due to increases in compensation and employee-related costs as a result of increased headcount and an increase in bad debt expense at HomeAdvisor.
The Search & Applications increase was primarily due to acquisitions and an increase in bad debt expense, partially offset by $2.3 million in acquisition-related contingent consideration fair value adjustments.

Product development expense
Product development expense consists primarily of compensation (including stock-based compensation) and other employee-related costs that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and related technology.
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Product development expense
$46,430
 
$7,585
 
20%
 
$38,845
As a percentage of revenue
6%
 
 
 
 
 
5%
Product development expense in 2015 increased from 2014 due to increases of $5.3 million from The Match Group and $1.9 million from eCommerce.
The Match Group increase is primarily related to severance expense in the current year related to our ongoing consolidation and streamlining of technology systems and European operations at our Dating businesses.
The eCommerce increase is primarily related to an increase in compensation at HomeAdvisor due, in part, to increased headcount.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014

35



 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Product development expense
$91,687
 
$14,026
 
18%
 
$77,661
As a percentage of revenue
6%
 
 
 
 
 
5%
Product development expense in 2015 increased from 2014 due to increases of $9.0 million from The Match Group, $2.8 million from eCommerce and $1.1 million from Media.
The increases from The Match Group and eCommerce are primarily due to the factors described above in the three month discussion.
The Media increase is primarily due to increased headcount at Vimeo.
Depreciation
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Depreciation
$15,500
 
$243
 
2%
 
$15,257
As a percentage of revenue
2%
 
 
 
 
 
2%
Depreciation in 2015 increased from 2014 primarily due to acquisitions.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Depreciation
$31,068
 
$993
 
3%
 
$30,075
As a percentage of revenue
2%
 
 
 
 
 
2%
Depreciation in 2015 increased from 2014 primarily due to acquisitions.
Adjusted EBITDA
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Search & Applications
$
72,910

 
$
(18,348
)
 
(20)%
 
$
91,258

 
$
151,811

 
$
(21,518
)
 
(12)%
 
$
173,329

The Match Group
64,822

 
(4,546
)
 
(7)%
 
69,368

 
90,678

 
(26,120
)
 
(22)%
 
116,798

Media
(15,452
)
 
(6,541
)
 
(73)%
 
(8,911
)
 
(30,035
)
 
(13,260
)
 
(79)%
 
(16,775
)
eCommerce
2,681

 
(1,842
)
 
(41)%
 
4,523

 
(456
)
 
(7,783
)
 
NM
 
7,327

Corporate
(16,282
)
 
(1,476
)
 
(10)%
 
(14,806
)
 
(28,162
)
 
2,990

 
10%
 
(31,152
)
Total
$
108,679

 
$
(32,753
)
 
(23)%
 
$
141,432

 
$
183,836

 
$
(65,691
)
 
(26)%
 
$
249,527

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As a percentage of revenue
14%
 
 
 
 
 
19%
 
12%
 
 
 
 
 
17%
________________________
NM = not meaningful

36



Refer to Note 8 to the consolidated financial statements for reconciliations of Adjusted EBITDA to operating income (loss) by reportable segment.
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
Search & Applications Adjusted EBITDA decreased 20% due primarily to lower revenue and an increase in selling and marketing expense, partially offset by a decrease in cost of revenue. The increase in selling and marketing expense was primarily due to an increase in online marketing related to About.com and new B2C downloadable applications, partially offset by a decline at Ask.com. The decrease in cost of revenue was primarily due to a decrease in traffic acquisition costs driven from lower revenue from Ask.com and our B2B operations.
The Match Group Adjusted EBITDA decreased 7% despite higher revenue primarily due to $9.0 million of costs in the current year related to our ongoing consolidation and streamlining of technology systems and European operations at our Dating businesses, losses from The Princeton Review, which was acquired on August 1, 2014, and higher cost of revenue. The increase in cost of revenue was primarily due to increases in revenue share payments made in connection with in-app purchases sold through Dating's mobile products and hosting fees.
Media Adjusted EBITDA loss was larger than the prior year due primarily to increased investment in online marketing at Vimeo.
eCommerce Adjusted EBITDA decreased 41%, principally due to increased investment in offline and online marketing and higher compensation at HomeAdvisor.
Corporate Adjusted EBITDA loss increased due to higher compensation.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
Search & Applications Adjusted EBITDA decreased 12% due primarily to the factors described above in the three month discussion.
The Match Group Adjusted EBITDA decreased 22% due primarily to the factors described above in the three month discussion. Adjusted EBITDA was further impacted by an increase in selling and marketing expense and a $3.9 million benefit in the prior year related to the expiration of the statute of limitations for a non-income tax matter. The increase in selling and marketing expense was primarily due to an increase in online marketing at Dating and DailyBurn.
Media Adjusted EBITDA loss was larger than the prior year, due primarily to the factors described above in the three month discussion.
eCommerce Adjusted EBITDA turned to a loss in the current year, despite higher revenue, principally due to the factors described above in the three month discussion.
Corporate Adjusted EBITDA loss decreased due to lower compensation.

37



Operating income (loss)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Search & Applications
$
68,592

 
$
(9,179
)
 
(12)%
 
$
77,771

 
$
132,892

 
$
(15,216
)
 
(10)%
 
$
148,108

The Match Group
51,441

 
(9,757
)
 
(16)%
 
61,198

 
76,753

 
(24,248
)
 
(24)%
 
101,001

Media
(13,775
)
 
(3,981
)
 
(41)%
 
(9,794
)
 
(29,127
)
 
(10,767
)
 
(59)%
 
(18,360
)
eCommerce
(1,004
)
 
(1,012
)
 
NM
 
8

 
(7,858
)
 
(6,305
)
 
(406)%
 
(1,553
)
Corporate
(42,485
)
 
(8,992
)
 
(27)%
 
(33,493
)
 
(74,772
)
 
(12,978
)
 
(21)%
 
(61,794
)
Total
$
62,769

 
$
(32,921
)
 
(34)%
 
$
95,690

 
$
97,888

 
$
(69,514
)
 
(42)%
 
$
167,402

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As a percentage of revenue
8%
 
 
 
 
 
13%
 
6%
 
 
 
 
 
11%
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
Operating income in 2015 decreased from 2014 due to the decrease of $32.8 million in Adjusted EBITDA described above and increases of $9.4 million in stock-based compensation and $1.0 million in amortization of intangibles, partially offset by a decrease of $10.5 million in acquisition-related contingent consideration fair value adjustments. The increase in stock-based compensation was primarily due to the issuance of equity awards since the prior year. The decrease in acquisition-related contingent consideration fair value adjustments was the result of an update of the future forecast of earnings and operating metrics related to certain acquired businesses.
At June 30, 2015, there was $186.2 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 2.7 years.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
Operating income in 2015 decreased from 2014 due to the decrease of $65.7 million in Adjusted EBITDA described above and increases of $18.7 million in stock-based compensation, $1.6 million in amortization of intangibles and $1.0 million in depreciation, partially offset by a decrease of $17.4 million in acquisition-related contingent consideration fair value adjustments. The increase in stock-based compensation and decrease in acquisition-related contingent consideration fair value adjustments are primarily due to the factors described above in the three month discussion. Stock-based compensation was also impacted by a higher number of forfeited awards in the prior year and the impact of a modification of certain awards in the current year.
Interest expense
Interest expense relates to our 4.875% Senior Notes due November 30, 2018 ("2013 Senior Notes"), 4.75% Senior Notes due December 21, 2012 ("2012 Senior Notes") and 5% New York City Industrial Development Agency Liberty Bonds due September 1, 2035 ("Liberty Bonds").
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Interest expense
$(15,214)
 
$(1,168)
 
(8)%
 
$(14,046)
Interest expense increased in 2015 from 2014 due to the accelerated amortization of deferred financing costs associated with the planned redemption of the Liberty Bonds on September 1, 2015.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014

38



 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Interest expense
$(29,278)
 
$(1,168)
 
(4)%
 
$(28,110)
Interest expense in 2015 increased from 2014 primarily due to the factor described above in the three month discussion.
Other (expense) income, net
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Other expense, net
$(1,638)
 
$68,112
 
98%
 
$(69,750)
Other expense, net in 2015 decreased from 2014 principally due to the inclusion in the prior year of $64.2 million in other-than-temporary impairment charges related to certain cost method investments. These charges resulted from our assessment of the near-term prospects and financial condition of the investees. Also included in the prior year is a $4.2 million other-than-temporary impairment charge related to an equity method investment following the sale of a majority of the investee's assets.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014
 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Other income (expense), net
$5,350
 
$77,058
 
NM
 
$(71,708)
Other income (expense), net in 2015 increased from 2014 primarily due to the impairment charges described above in the three month discussion and an increase in net foreign currency exchange gains and reduced losses associated with our equity method investments.
Income tax benefit (provision)
For the three months ended June 30, 2015 compared to the three months ended June 30, 2014
 
Three Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Income tax benefit (provision)
$11,968
 
NM
 
NM
 
$(29,889)
Effective income tax rate
NM
 
 
 
 
 
251%
The 2015 income tax benefit is due primarily to the realization of certain deferred tax assets, a reduction in tax reserves and related interest due to the expiration of statutes of limitations, and the non-taxable gain on contingent consideration fair value adjustments in the current year period, partially offset by state taxes. The 2014 effective income tax rate is higher than the statutory rate of 35% due primarily to the largely unbenefited loss associated with the write-downs of certain of the Company's investments, interest on reserves for income tax contingencies and state taxes, partially offset by foreign income taxed at lower rates.
For the six months ended June 30, 2015 compared to the six months ended June 30, 2014

39



 
Six Months Ended June 30,
 
2015
 
$ Change
 
% Change
 
2014
 
(Dollars in thousands)
Income tax benefit (provision)
$5,788
 
NM
 
NM
 
$(51,274)
Effective income tax rate
NM
 
 
 
 
 
76%
The 2015 income tax benefit is due primarily to the factors described above in the three month discussion. The 2014 effective income tax rate is higher than the statutory rate of 35% due primarily to the factors described above in the three month discussion.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in income tax provision. Included in the income tax provision for continuing operations for the three and six months ended June 30, 2015, is a $0.1 million benefit and a $0.2 million benefit, respectively, net of related deferred taxes, for interest on unrecognized tax benefits. At June 30, 2015 and December 31, 2014, the Company has accrued $2.2 million and $2.8 million, respectively, for the payment of interest. At June 30, 2015 and December 31, 2014, the Company has accrued $2.3 million and $2.9 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 is currently auditing the Company’s federal income tax returns for the years ended December 31, 2010 through 2012. Various other jurisdictions are open to examination for various tax years beginning with 2009. 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 audits and amounts previously provided may be material. Differences between the reserves for uncertain tax positions and the amounts owed by the Company are recorded in the period they become known.
At June 30, 2015 and December 31, 2014, unrecognized tax benefits, including interest and penalties, are $25.9 million and $33.2 million, respectively. If unrecognized tax benefits at June 30, 2015 are subsequently recognized, $23.9 million, net of related deferred tax assets and interest, would reduce income tax provision for continuing operations. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $3.4 million within twelve months of June 30, 2015 primarily due to settlements and expiration of statutes of limitations.

40



FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Position
 
 
June 30, 2015
 
December 31, 2014
 
 
(In thousands)
Cash and cash equivalents:
 
 
 
 
United States (1)
 
$
438,730

 
$
770,050

All other countries (2)
 
217,679

 
220,355

Marketable securities (United States) (3)
 
233,523

 
160,648

Total cash and cash equivalents and marketable securities
 
$
889,932

 
$
1,151,053

 
 
 
 
 
Long-term debt:
 
 
 
 
2013 Senior Notes due November 30, 2018
 
$
500,000

 
$
500,000

2012 Senior Notes due December 15, 2022
 
500,000

 
500,000

Liberty Bonds due September 1, 2035 (4)
 

 
80,000

Total long-term debt
 
$
1,000,000

 
$
1,080,000

(1) Domestically, cash equivalents primarily consist of commercial paper rated A2/P2 or better and AAA rated money market funds.
(2) Internationally, cash equivalents primarily consist of AAA rated money market funds and time deposits. If needed for our U.S. operations, most of the cash and cash equivalents held by the Company's foreign subsidiaries could be repatriated; however, under current law, would be subject to U.S. federal and state income taxes. We have not provided for any such tax because the Company currently does not anticipate a need to repatriate these funds to finance our U.S. operations and it is the Company's intent to indefinitely reinvest these funds outside of the U.S.
(3) Marketable securities consist of short-to-medium-term debt securities issued by investment grade corporate issuers and an equity security. The Company invests in marketable debt securities with active secondary or resale markets to ensure portfolio liquidity to fund current operations or satisfy other cash requirements as needed. The Company also invests in equity securities as part of its investment strategy.
(4) $80.0 million reflected as short-term debt at June 30, 2015 as the Liberty Bonds are scheduled to be redeemed on September 1, 2015.
Cash Flow Information
In summary, the Company's cash flows attributable to continuing operations are as follows:
 
 
Six Months Ended June 30,
 
 
2015
 
2014
 
 
(In thousands)
Net cash provided by operating activities
 
$85,779
 
$148,771
Net cash used in investing activities
 
(152,864)
 
(219,833)
Net cash used in financing activities
 
(261,533)
 
(46,437)
2015
Net cash provided by operating activities attributable to continuing operations consists of earnings or loss from continuing operations adjusted for non-cash items, including stock-based compensation expense, depreciation, amortization of intangibles, asset impairment charges, excess tax benefits from stock-based awards, deferred income taxes, equity in earnings or losses of unconsolidated affiliates, acquisition-related contingent consideration fair value adjustments and the effect of changes in

41



working capital. Net cash provided by operating activities attributable to continuing operations in 2015 consists of earnings from continuing operations of $79.7 million and adjustments for non-cash items of $66.1 million, partially offset by a $60.1 million decrease in cash from changes in working capital. Adjustments for non-cash items primarily consist of $44.9 million of stock-based compensation, $31.1 million of depreciation and $27.0 million of amortization of intangibles, partially offset by $36.5 million of excess tax benefits from stock-based awards and $16.9 million in acquisition-related contingent consideration fair value adjustments. The decrease from changes in working capital consist primarily of a decrease in income taxes payable of $63.3 million and a decrease of $33.2 million in accounts payable and other current liabilities, partially offset by an increase in deferred revenue of $40.4 million. The decrease in income taxes payable is primarily due to the payment of 2014 tax liabilities in 2015 and the realization of a capital loss in the current year. The decrease in accounts payable and other current liabilities is due mainly to a decrease in accrued revenue share and accrued advertising expense at the Search & Applications segment, partially offset by an increase in accrued advertising at The Match Group segment. The decrease at Search & Applications in accrued revenue share is due mainly to lower B2B revenue. The decrease at Search & Applications in accrued advertising is due mainly to lower fees paid to search engines and timing of payments. The increase in accrued advertising at The Match Group segment is due mainly to increased online spending. The increase in deferred revenue is due mainly to growth in subscription revenue at The Match Group, Vimeo, and HomeAdvisor, as well as an increase at Electus due to the timing of cash received related to various production deals, and acquisitions.
Net cash used in investing activities attributable to continuing operations in 2015 includes the purchase of marketable debt securities, net of proceeds from maturities and sales, of $78.5 million, the purchase of investments and acquisitions of $56.1 million and capital expenditures of $26.8 million, primarily related to the internal development of software to support our products and services, and computer hardware.
Net cash used in financing activities attributable to continuing operations in 2015 includes $200.0 million for the repurchase of 3.0 million shares of common stock at an average price of $67.68 per share, $56.7 million related to the payment of cash dividends to IAC shareholders, $20.7 million in proceeds related to the issuance of common stock, net of withholding taxes, $15.3 million for the purchase of noncontrolling interests and $5.7 million in contingent consideration payments, partially offset by excess tax benefits from stock-based awards of $36.5 million.
2014
Net cash provided by operating activities attributable to continuing operations in 2014 consists of earnings from continuing operations of $16.3 million and adjustments for non-cash items of $133.5 million, partially offset by a decrease in cash from changes in working capital of $1.0 million. Adjustments for non-cash items primarily consist of $64.3 million in impairments related to long-term investments, $30.1 million of depreciation, $26.2 million of stock-based compensation expense and $25.4 million of amortization of intangibles, partially offset by $32.9 million of excess tax benefits from stock-based awards. The decrease in cash from changes in working capital activities primarily consists of a decrease of $31.2 million in accounts payable and other current liabilities and an increase in other assets of $19.2 million, partially offset by an increase in income taxes payable of $29.3 million and an increase in deferred revenue of $25.9 million. The decrease in accounts payable and other current liabilities is due to a decrease in accrued revenue share, accrued employee compensation and benefits, and a seasonal decrease in payables to suppliers at ShoeBuy, partially offset by an increase in accrued advertising expense at The Match Group. The decrease in accrued revenue share is primarily due to lower B2B revenue in the Search & Applications segment. The decrease in accrued employee compensation and benefits is due to the payment of 2013 cash bonuses in 2014. The increase in other assets is primarily due to a receivable related to amounts collected on our behalf by a third-party and an increase in short-term and long-term production costs at certain of our media businesses that are capitalized as the television program, video or film is being produced. The increase in income taxes payable is due to current year income tax accruals in excess of current year income tax payments. The increase in deferred revenue is primarily due to growth in subscription revenue at The Match Group and Vimeo as well as an increase at Electus due to the timing of cash received related to various production deals.
Net cash used in investing activities attributable to continuing operations in 2014 includes cash consideration used in acquisitions and investments of $118.1 million, which includes the acquisition of the ValueClick O&O website businesses and SlimWare, the purchase of marketable debt securities of $78.4 million and capital expenditures of $26.6 million, primarily related to the internal development of software to support our products and services.
Net cash used in financing activities attributable to continuing operations in 2014 includes $40.1 million, related to the payment of cash dividends to IAC shareholders, $30.0 million for the purchase of noncontrolling interests, $13.8 million in proceeds related to the issuance of common stock, net of withholding taxes and $7.6 million in contingent consideration

42



payments related principally to the 2013 Twoo acquisition, partially offset by excess tax benefits from stock-based awards of $32.9 million and the return of $12.4 million of funds held in escrow related to the Meetic tender offer.
Liquidity and Capital Resources
The Company's principal sources of liquidity are its cash and cash equivalents and marketable securities as well as cash flows generated from operations. The Company has a $300 million revolving credit facility, which expires on December 21, 2017, and is available as an additional source of financing. At June 30, 2015, there were no outstanding borrowings under the revolving credit facility.
The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its operations. The Company expects that 2015 capital expenditures will be higher than 2014. At June 30, 2015, IAC had 5.6 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 July 28, 2015, IAC declared a quarterly cash dividend of $0.34 per share of common and Class B common stock outstanding payable on September 1, 2015 to stockholders of record on August 15, 2015. Future declarations of dividends are subject to the determination of IAC's Board of Directors.
The Company believes its existing cash, cash equivalents and marketable securities, together with its expected positive cash flows generated from operations and available borrowing capacity under its $300 million revolving credit facility, will be sufficient to fund its normal operating requirements, including capital expenditures, 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 $575 million purchase price of the planned acquisition of PlentyOfFish, which was announced on July 14, 2015, is expected to be funded by cash on hand, the proceeds from the sales of marketable securities and the available borrowings under the $300 million revolving credit facility. The Company may make additional acquisitions and investments 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. The indentures governing the 2013 and 2012 Senior Notes restrict our ability to incur additional indebtedness in the event we are not in compliance with the maximum leverage ratio of 3.0 to 1.0. In addition, the terms of the revolving credit facility require that we maintain a leverage ratio of not more than 3.0 to 1.0 and restrict our ability to incur additional indebtedness. As of June 30, 2015, the Company was in compliance with all of these covenants.
    


43



CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
 
Payments Due by Period
Contractual Obligations(a)
Less Than
1 Year
 
1–3
Years
 
3–5
Years
 
More Than
5 Years
 
Total
 
(In thousands)
Long-term debt(b)
$
130,125

 
$
96,250

 
$
559,688

 
$
559,375

 
$
1,345,438

Operating leases(c)
34,699

 
55,593

 
33,252

 
186,959

 
310,503

Purchase obligations(d)
5,079

 
354

 

 

 
5,433

Total contractual cash obligations
$
169,903

 
$
152,197

 
$
592,940

 
$
746,334

 
$
1,661,374

_______________________________________________________________________________
(a) 
The Company has excluded $24.2 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. With the scheduled redemption of the Liberty Bonds (due September 1, 2035) on September 1, 2015, $80.0 million of future interest payments will no longer be made.
(c) 
The Company leases land, office space, data center facilities and equipment used in connection with operations under various operating leases, many of which contain escalation clauses. The Company is also committed to pay a portion of the related operating expenses under a data center lease agreement. These operating expenses are not included in the table above.
(d) 
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.



44



IAC'S PRINCIPLES OF FINANCIAL REPORTING

IAC reports Adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles ("GAAP"). This measure is one of the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. IAC endeavors to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure, which we discuss below.

Definition of IAC's Non-GAAP Measure
        Adjusted EBITDA is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. We believe this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced. Adjusted EBITDA has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses.

Non-Cash Expenses That Are Excluded From IAC's Non-GAAP Measure
        Stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of stock options, restricted stock units ("RSUs") and performance-based RSUs. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method; however, performance-based RSUs are included only to the extent the performance criteria have been met (assuming the end of the reporting period is the end of the contingency period). Upon the exercise of certain stock options and vesting of RSUs and performance-based RSUs, the awards are settled, at the Company's discretion, on a net basis, with the Company remitting the required tax-withholding amount from its current funds.
Depreciation is a non-cash expense relating to our property and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives.
Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as content, technology, customer lists, advertiser and supplier relationships, 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 goodwill or intangible assets, if applicable, are not ongoing costs of doing business.
Gains and losses recognized on changes in the fair value of contingent consideration arrangements are accounting adjustments to report contingent consideration liabilities at fair value. These adjustments can be highly variable and are excluded from our assessment of performance because they are considered non-operational in nature and, therefore, are not indicative of current or future performance or ongoing costs of doing business.

45



RECONCILIATION OF ADJUSTED EBITDA
For a reconciliation of Adjusted EBITDA to operating income (loss) by reportable segment for the three and six months ended June 30, 2015 and 2014, see Note 8 to the consolidated financial statements.


46


Item 3.    Quantitative and Qualitative Disclosures about Market Risk

At June 30, 2015, there have been no material changes to the Company's instruments or positions that are sensitive to interest rate risk and equity price risk since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2014.

Foreign Currency Exchange Risk

The Company conducts business in certain foreign markets, primarily in the European Union. For the three and six months ended June 30, 2015, international revenue accounted for 27% and 26%, respectively, of consolidated revenue. The Company's primary exposure to foreign currency exchange risk relates to investments in foreign subsidiaries that transact business in a functional currency other than the U.S. Dollar, primarily the Euro. 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. The average Euro versus the U.S. Dollar exchange rate was 18% lower in the second quarter of 2015 than 2014. The decrease had a significant impact to the revenue of The Match Group. For the three months ended June 30, 2015, The Match Group revenue, Dating revenue and Dating International revenue would have increased approximately 25%, 14% and 18%, respectively, as compared to the reported increases of 19% and 7% and a decrease of 2%, respectively, had the foreign currency exchange rates been the same as the second quarter of 2014. For the six months ended June 30, 2015, The Match Group revenue, Dating revenue and Dating International revenue would have increased approximately 22%, 11% and 13%, respectively, as compared to the reported increases of 16% and 5% and a decrease of 5%, respectively, had the foreign currency exchange rates been the same as the first six months of 2014.

Historically, the Company has not hedged any foreign currency exposures. Our continued international expansion increases our exposure to exchange rate fluctuations and as a result such fluctuations could have a significant impact on our future results of operations.


47


Item 4.    Controls and Procedures

The Company monitors and evaluates on an ongoing basis its disclosure controls and internal control over financial reporting in order to improve its overall effectiveness. In the course of these evaluations, the Company modifies and refines its internal processes as conditions warrant.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), IAC management, including our principal executive and principal financial officers, or persons performing similar functions, evaluated the effectiveness of the Company's disclosure controls and procedures as defined by Rule 13a-15(e) under the Exchange Act. Based on this evaluation, management has concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report in providing reasonable assurance that information we are required to disclose in our filings with the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and Forms, and include controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There were no changes to the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

48



PART II
OTHER INFORMATION
Item 1A.    Risk Factors

Cautionary Statement Regarding Forward-Looking Information

This quarterly report on Form 10-Q contains "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" and "believes," among others, generally identify forward-looking statements. These forward-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-looking statements are based on IAC management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: changes in senior management at IAC and/or its businesses, changes in our relationship with, or policies implemented by, Google, adverse changes in economic conditions, either generally or in any of the markets or industries in which IAC's businesses operate, adverse trends in the online advertising industry or the advertising industry generally, our ability to convert visitors to our various websites into users and customers, our ability to offer new or alternative products and services in a cost-effective manner and consumer acceptance of these products and services, changes in industry standards and technology, actual tax liabilities that differ materially from our estimates, operational and financial risks relating to acquisitions, our ability to expand successfully into international markets and regulatory changes. Certain of these and other risks and uncertainties are discussed in IAC's filings with the SEC, including in Part I "Item 1A. Risk Factors" of our annual report on Form 10-K for the fiscal year ended December 31, 2014. Other unknown or unpredictable factors that could also adversely affect IAC's business, financial condition and operating results may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of IAC management as of the date of this quarterly report. IAC does not undertake to update these forward-looking statements.

Risk Factors

In addition to the other information set forth in this quarterly report, you should carefully consider the risk factors discussed in Part I "Item 1A. Risk Factors" of our annual report on Form 10-K for the fiscal year ended December 31, 2014, which could materially affect our business, financial condition or future operating results. The risks described in this report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or future operating results.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The Company did not purchase any shares of its common stock during the quarter ended June 30, 2015. As of that date, 5,606,904 shares of common stock remained available for repurchase under the Company's previously announced April 2013 repurchase authorization. IAC may purchase shares pursuant to this repurchase authorization over an indefinite period 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.


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Item 6.    Exhibits
The documents set forth below, numbered in accordance with Item 601 of Regulation S-K, are filed herewith, incorporated by reference to the location indicated or furnished herewith.

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 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)
 
31.2

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)
 
31.3

Certification of the Principal 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 Chairman and Senior Executive pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.(2)
 
32.2

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)
 
32.3

Certification of the Principal 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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:
July 31, 2015
 
 
 
 
 
IAC/INTERACTIVECORP
 
 
 
 
 
 
 
By:
 
/s/ GREGG WINIARSKI
 
 
 
 
Gregg Winiarski
 
 
 
 
Executive Vice President, General Counsel & Secretary (acting Principal Financial Officer)




 
 
 
 
Signature
Title
 
Date
 
 
 
 
/s/ GREGG WINIARSKI
Executive Vice President, General Counsel & Secretary (acting Principal Financial Officer)
 
July 31, 2015
Gregg Winiarski
 
 
 

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