Table of Contents

As filed with the Securities and Exchange Commission on April 29, 2016

February 28, 2017




UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K

(Amendment No. 1)


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2015

2016

Commission File No. 0-20570

000-20570

IAC/INTERACTIVECORP

(Exact name of registrant as specified in its charter)

Delaware

59-2712887

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
(Address
 (Address of Registrant’sRegistrant's principal executive offices)

10011
(Zip
 (Zip Code)

(212) 314-7300

(Registrant’sRegistrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of exchange on which registered

Common Stock, par value $0.001

The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x   No o

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No x

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 x    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 x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’sRegistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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"large accelerated filer,” “accelerated" "accelerated filer," and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o
(Do
 (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 x

As of January 29, 2016,27, 2017, the following shares of the Registrant’sRegistrant's Common Stock were outstanding:

Common Stock

77,275,479

Common Stock71,947,127
Class B Common Stock

5,789,499


Total

83,064,978

77,736,626


The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 20152016 was $6,083,825,075.$4,111,134,940. For the purpose of the foregoing calculation only, all directors and executive officers of the Registrant are assumed to be affiliates of the Registrant.



Documents Incorporated By Reference:

TablePortions of Contentsthe Registrant's proxy statement for its 2017 Annual Meeting of Stockholders are incorporated by reference into Part III herein.




TABLE OF CONTENTS

Page
Number

PART III

Page
Number

2

8

23

27

29

30



PART I

EXPLANATORY NOTE

Item 1.    Business
OVERVIEW
Who We Are
IAC is a leading media and Internet company comprised of widely known consumer brands, such as HomeAdvisor, Vimeo, Dictionary.com, The Registrant hereby amends Part III contained in its Annual Report on Form 10-K forDaily Beast, Investopedia, and Match Group's online dating portfolio, which includes Match, Tinder, PlentyOfFish and OkCupid.
For information regarding the year ended December 31, 2015 (the “Original Form 10-K”). This Amendment No. 1 on Form 10-K/A to the Original Form 10-K is being filed to update the Original Form 10-K to include information required by Part IIIresults of Form 10-K concerning the Registrant’s directors and executive officers, executive compensation, beneficial ownershipoperations of the Registrant’s securities, certain relationships and related transactions and principal accountant fees and services.

This Amendment No. 1 only reflects the changes discussed above. No other information included in the Original Form 10-K has been amended by this Form 10-K/A, whether to reflect any information or events subsequent to the filing of the Original Form 10-K or otherwise.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

CERTAIN INFORMATION CONCERNING DIRECTORS

IAC’s Board of Directors currently consists of 12 directors. Background information concerning each of these directors is set forth below.

Edgar Bronfman, Jr., age 60, has been a director of IAC since February 1998. Mr. Bronfman currently serves as a Managing Partner of Accretive, LLC, a private equity firm. Mr. Bronfman previously served as Chairman of Warner Music Group from August 2011 to January 2012. Prior to this time, Mr. Bronfman served as Chief Executive Officer and President of Warner Music Group from July 2011 to August 2011 and as Chairman and Chief Executive Officer of Warner Music Group from March 2004 to July 2011. Mr. Bronfman also served as a member of the board of directors of Warner Music Group from March 2004 through May 2013. Prior to joining Warner Music Group, Mr. Bronfman served as Chairman and Chief Executive Officer of Lexa Partners LLC, which he founded, from April 2002. Mr. Bronfman was appointed Executive Vice Chairman of Vivendi Universal, S.A. in December 2000. Mr. Bronfman resigned from his position as an executive officer and as Vice Chairman of the board of directors of Vivendi Universal, S.A. in March 2002 and December 2003, respectively. Prior to December 2000, Mr. Bronfman served as President and Chief Executive Officer of The Seagram Company Ltd., a post he had held since June 1994, and from 1989 to June 1994 he served as the President and Chief Operating Officer of Seagram. Mr. Bronfman has served as a member of the board of Accretive Health, Inc., which became a publicly traded company in May 2010, since October 2006. In his not-for-profit affiliations, Mr. Bronfman serves as Chairman of the Board of Endeavor Global, Inc. and is currently a member of the Board of NYU Elaine A. and Kenneth G. Langone Medical Center and The Council on Foreign Relations. In nominating Mr. Bronfman, the Board considered his experience as a member of senior management of various public and global companies, which the Board believes gives him particular insight into business strategy and leadership, marketing, consumer branding and international operations,segments, as well as their respective contributions to IAC’s consolidated results of operations, see “Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8-Consolidated Financial Statements and Supplementary Data.”

All references to “IAC,” the “Company,” “we,” “our” or “us” in this report are to IAC/InterActiveCorp.
Our History
IAC, initially a high levelhybrid media/electronic retailing company, was incorporated in 1986 in Delaware under the name Silver King Broadcasting Company, Inc. After several name changes (first to HSN, Inc., then to USA Networks, Inc., USA Interactive and InterActiveCorp, and finally, to IAC/InterActiveCorp) and the completion of financial literacy and insighta number of significant corporate transactions over the years, the Company transformed itself into thea leading media and Internet company.
From 1997 through 2002, the Company acquired a controlling interest in Ticketmaster Group, Hotel Reservations Network (later renamed Hotels.com) and Expedia, as well as acquired Match.com and other smaller e-commerce companies. In 2002, the Company contributed its entertainment industries. The Board also considered Mr. Bronfman’s private equity experience, whichassets to Vivendi Universal Entertainment LLLP, a joint venture, and sold its interests in that venture to NBC Universal in 2005.
In 2003, the Board believes gives him particular insight into investments in, and the developmentCompany continued to grow its portfolio of early stage companies.

Chelsea Clinton, age 36, has been a director of IAC since September 2011. Since March 2013, Ms. Clinton has served as Vice Chaire-commerce companies by acquiring all of the Clinton Foundation, where her work emphasizes improving global and domestic health, creating service opportunities and empowering the next generation of leaders. Prior to assuming this role, Ms. Clinton served as a member of the board of directors of the Clinton Foundation from September 2011. Ms. Clinton has also served as a member of the board of directors of the Clinton Health Access Initiative since September 2011. From March 2010 through May 2013, Ms. Clinton served as an Assistant Vice Provost at New York University, where she focused on interfaith initiatives and the university’s Global Expansion Program. From November 2011 to August 2014, Ms. Clinton also worked as a special correspondent for NBC news. Prior to these efforts, Ms. Clinton worked as an associate at McKinsey & Company, a consulting firm, from August 2003 to October 2006, and as an associate at Avenue Capital Group, an investment firm, from October 2006 to November 2009. Ms. Clinton also currently serves on the boards of directors of The School of American Ballet, the Africa Center and the Weill Cornell Medical College and as Co-Chair of the Advisory Board of the Of Many Institute at New York University. In nominating Ms. Clinton, the Board considered her broad public policy experience and keen intellectual acumen, which together the Board believes bring a fresh and youthful perspective to IAC’s businesses and initiatives.

Barry Diller, age 74, has been a director and Chairman and Senior Executive of IAC since December 2010. Mr. Diller previously served as a director and Chairman and Chief Executive Officer of IAC (and its predecessors) from August 1995 to November 2010. Mr. Diller also serves as Chairman and Senior Executiveshares of Expedia, Inc., which position he has held since August 2005. Prior to joining the Company, Mr. Diller was Chairman of the BoardHotels.com and Chief Executive Officer of QVC, Inc. from December 1992 through December 1994. From 1984 to 1992, Mr. Diller served as the Chairman of the Board and Chief Executive Officer of Fox, Inc. Prior to joining Fox, Inc., Mr. Diller served for 10 years as Chairman of the Board and Chief Executive Officer of Paramount Pictures Corporation. Mr. Diller served as Chairman (in a non-executive capacity) of the board of directors of Live Nation Entertainment, Inc. (and its predecessor companies, Ticketmaster Entertainment and Ticketmaster) (“Live Nation”) from August 2008 to October 2010, and continued to serve as a member of the board of directors of Live Nation through January 2011. Mr. Diller also served as Chairman and Senior Executive of TripAdvisor, Inc. (“TripAdvisor”) from December 2011 to December 2012, served as a member of the board of directors of TripAdvisor from December 2011 through April 2013 and has served as a special advisor to the Chief Executive Officer of TripAdvisor since April 2013. Mr. Diller is also currently a member of the board of directors of The Coca-Cola Company and Graham Holdings Company (formerly The Washington Post Company), which positions he has held during the past five years. In addition to his for profit affiliations, Mr. Diller is a member of the Board of Councilors for the University of Southern California’s School of Cinematic Arts, the New York University Board of Trustees and the Executive Board for the Medical Sciences of University of California, Los Angeles. The Board nominated Mr. Diller because he has been Chairman and Senior Executive since 2010 and prior to that time, served as Chairman and Chief Executive Officer of the Company since 1995, and as a result, possesses a great depth of knowledge and experience regarding the Company and its businesses. In addition, the Board noted Mr. Diller’s ability to exercise influence (subject to the Company’s organizational documents and Delaware law) over the outcome of matters involving the Company that require stockholder approval given his significant ownership stake in the Company and related rights.

Michael D. Eisner, age 74, has been a director of IAC since March 2011. Mr. Eisner currently serves as Chairman of The Tornante Company, LLC, a privately held company that invests in, acquires, incubates and operates media and entertainment companies (“Tornante”). Mr. Eisner also previously served as Chairman of two Tornante portfolio companies, The Topps Company, a leading creator and marketer of sports cards, distinctive confectionery and other entertainment products, and Vuguru, a studio focusing on the production of groundbreaking programming for the Internet and other digital platforms. Mr. Eisner served as Chairman of The Topps Company from October 2007 to April 2013 and as Chairman of Vuguru from October 2009 to December 2014, when Tornante acquired that portion of Vuguru that it did not already own. Prior to founding Tornante in 2005, Mr. Eisner served as Chairman and Chief Executive Officer of The Walt Disney Company from 1984. In addition to his for profit affiliations, Mr. Eisner serves on the boards of directors of Denison University, The Aspen Institute, the Yale School of Architecture Dean’s Council and The Eisner Foundation. In nominating Mr. Eisner, the Board considered his experiencepreviously own, together with Tornante, which the Board believes gives him particular insight into investments in, and the development and operation of, media and entertainment companies that focus on programming and content for emerging platforms. The Board also considered Mr. Eisner’s experience as the Chairman and Chief Executive Officer of The Walt Disney Company, which the Board believes gives him particular insight into business strategy and leadership, marketing and consumer branding, as well as a high level of financial literacy and insight into the media and entertainment industries.

Bonnie S. Hammer, age 65, has been a director of IAC since September 2014. Ms. Hammer has been Chairman of NBCUniversal Cable Entertainment since February 2013. In this capacity, Ms. Hammer has executive oversight over a number of other e-commerce companies (including LendingTree and Hotwire).

In 2005, IAC acquired Ask Jeeves, Inc. and completed the separation of its travel and travel‑related businesses and investments into an independent public company called Expedia, Inc. In 2008, IAC separated into five independent, publicly traded companies: IAC, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster (now Live Nation, Inc.) and Tree.com, Inc.
In 2009, we sold the European operations of Match.com to Meetic, a leading cable brands (USA Network, Syfy, E! Entertainment, Bravo, Oxygen, Esquire Network, Sprout, Chiller, Cloo and Universal HD), as well as Universal Cable Productions, which generates scripted contentEuropean online dating company based in France, in exchange for cable and broadcast networks, and Wilshire Studios, which generates reality programming. Prior to her tenure as Chairman of NBCUniversal Cable Entertainment, Ms. Hammer served as Chairman of NBCUniversal Cable Entertainment and Cable Studios since November 2010. In this capacity, Ms. Hammer had executive oversight over certain leading cable brands (USA, Syfy, E! Entertainment, Chiller, Cloo and Universal HD), as well as Universal Cable Productions and Wilshire Studios. The networks led by Ms. Hammer are industry frontrunners, consistently generating innovative consumer social and digital experiences reflective of their brands. Prior to joining NBCUniversala 27% interest in May 2004, Ms. Hammer served as President of Syfy from 2001 to 2004 and held other senior executive positions at Syfy and USA Network from 1989 to 2000. Before that, she was an original programming executive at Lifetime Television Network from 1987 to 1989. Ms. Hammer has served on the boards of directors of ShopNBC, a 24 hour TV shopping network, the International Radio and Television Society (IRTS) and the Ad Council. Ms. Hammer has served as a member of the board of directors of eBay, Inc. since January 2015 and also currently serves on the strategic planning committee for Boston University’s College of Communication. In nominating Ms. Hammer, the Board considered her experience as the Chairman of NBCUniversal Cable Entertainment, as well as her prior roles with NBCUniversal Media, LLC, USA Network and Lifetime Television Network, which the Board believes give her particular insight into business strategy and leadership, as well as a high level of financial literacyMeetic and a seasoned insight into€5 million note. In 2010, we exchanged the media and entertainment industries, particularly pay television network programming and production and multiplatform branding.

Victor A. Kaufman, age 72, has beenstock of a director of IAC (and its predecessors) since December 1996 and has been Vice Chairman of IAC since October 1999. Mr. Kaufman also serves as Vice Chairman of Expedia, Inc., which position he has held since August 2005. Previously, Mr. Kaufman served in the Office of the Chairman from January 1997 to November 1997 and as Chief Financial Officer of IAC from November 1997 to October 1999. Prior to his tenure with IAC, Mr. Kaufman served as Chairman and Chief Executive Officer of Savoy Pictures Entertainment, Inc. from March 1992 and as a director of Savoy from February 1992. Mr. Kaufman was the founding Chairman and Chief Executive Officer of Tri-Star Pictures, Inc. and served in such capacities from 1983 until December 1987, at which time he became President and Chief Executive Officer of Tri-Star’s successor company, Columbia Pictures Entertainment, Inc. He resigned from these positions at the end of 1989 following the acquisition of Columbia by Sony USA, Inc. Mr. Kaufman joined Columbia in 1974 and served in a variety of senior positions at Columbia and its affiliates prior to the founding of Tri-Star. Mr. Kaufman also served as Vice Chairman of the board of directors of Live Nation from August 2008 through January 2010, and continued to serve as a member of the board of directors of Live Nation from January 2010 through December 2010. In addition, Mr. Kaufman served as a member of the board of directors of TripAdvisor from December 2011 to February 2013. In nominating Mr. Kaufman, the Board considered the unique knowledge and experience regarding the Company and its businesses that he has gained through his involvement with the Company in various roles since 1996, as well as his high level of financial literacy and expertise regarding mergers, acquisitions, investments and other strategic transactions.

Joseph Levin, age 36, has been a director and Chief Executive Officer of IAC since June 2015.  Prior to his appointment as Chief Executive Officer of IAC, Mr. Levin served as Chief Executive Officer of IAC Search & Applications, overseeing the desktop software, mobile applications, and media properties that comprised IAC’s former Search & Applications segment, since January 2012. From November 2009 to January 2012, Mr. Levin served as Chief Executive Officer of Mindspark Interactive Network, an IACwholly-owned subsidiary that builds, marketsheld our Evite, Gifts.com and delivers a wide rangeIAC Advertising Solutions businesses and approximately $218 million in cash for substantially all of consumer software products,Liberty Media Corporation’s equity stake in IAC.

In 2011, we increased our ownership stake in Meetic to 81%. In 2012, we acquired About.com.
In 2014, we acquired the remaining publicly traded shares of Meetic, ValueClick’s “owned and previously served in various capacities at IAC in Strategic Planning, Mergers & Acquisitionsoperated” website businesses, including Investopedia and Finance since joining IAC in 2003.  Prior to joining IAC, Mr. Levin worked in the Technology Mergers & Acquisitions group for Credit Suisse First Boston (now Credit Suisse) advising public and private technology and e-commerce companies on a variety of transactions. Mr. Levin has served on the board of directors of Match Group, Inc. since October 2015, as well as on the boards of directors of LendingTree, Inc. from August 2008 through November 2014PriceRunner, and The Active Network beginning prior to its 2011 initial public offering through its sale in December 2013. Princeton Review.
In nominating Mr. Levin, the Board considered the unique knowledge and experience regarding the Company and its businesses that he has gained through his various roles with the Company since 2003, most recently his role as Chief Executive Officer of IAC Search & Applications since 2012, as well as his high level of financial literacy and expertise regarding mergers, acquisitions, investments and other strategic transactions.

Bryan Lourd, age 55, has been a director of IAC since April 2005. Mr. Lourd has served as partner and Managing Director of Creative Artists Agency (“CAA”) since October 1995. CAA is among the world’s leading entertainment agencies and is based in Los Angeles, California, with offices in Nashville, New York, London and Beijing. He is a graduate of the University of Southern California. In connection with the nomination of Mr. Lourd, the Board considered his extensive experience as a principal of CAA, which the Board believes gives him particular insight into business strategy and leadership, as well as unique and specialized experience regarding the entertainment industry and marketing.

David Rosenblatt, age 48, has been a director of IAC since December 2008. Mr. Rosenblatt currently serves as the Chief Executive Officer of 1stdibs.com, Inc., an online marketplace for design, including furniture, art, jewelry and fashion. Mr. Rosenblatt previously served as President, Global Display Advertising, of Google, Inc. from October 2008 through May 2009. Mr. Rosenblatt joined Google in March 2008 in connection with Google’s acquisition of DoubleClick, Inc., a provider of digital marketing technology and services. Mr. Rosenblatt joined DoubleClick in 1997 as part of its initial management team and held several executive positions during his tenure, including Chief Executive Officer of DoubleClick from July 2005 through March 2008 and President of DoubleClick from 2000 through July 2005. Mr. Rosenblatt also currently serves as a member of the boards of directors of Twitter, which position he has held since January 2011, and Narrative Science,2015, we acquired Plentyoffish Media Inc., a leading provider of natural language communications technology that helps organizations analyzesubscription-based and transform data into narrative reports, which position he has held since April 2010. ad-supported online personals servicing North America, Europe, Latin America and Australia, for $575 million in cash, and completed the initial public offering of Match Group, Inc.

In connection with the nomination of Mr. Rosenblatt, the Board considered his extensive and unique experience in the online advertising and digital marketing technology and services industries,2016, we acquired VHX, a platform for premium over-the-top (OTT) subscription video channels, as well as his management experience with DoubleClick, Googlea controlling interest in MyHammer Holding AG, the leading home services marketplace in Germany, and 1stdibs.com, Inc., which the Board believes give him particular insight into business strategysold PriceRunner, ASKfm and leadership, as well as a deep understanding of the internet sector.

Alan G. Spoon, age 64,ShoeBuy.

EQUITY OWNERSHIP AND VOTE
IAC has been a director of IAC since February 2003. Since May 2000, Mr. Spoon has been a Partner at Polaris Partners (formerly Managing General Partner and now Partner Emeritus). Polaris is a private investment firm that provides venture capital and management assistance to development-stage information technology and life sciences companies. Mr. Spoon was Chief Operating Officer and a director of The Washington Post Company (now known as Graham Holdings Company) from March 1991 through May 2000 and served as President from September 1993 through May 2000. Prior to that, he held a wide variety of positions at The Washington Post Company, including President of Newsweek from September 1989 to May 1991. Mr. Spoon has served as a member of the board of directors of Danaher Corporation since July 1999, CableOne since July 2015 and Match Group, Inc. since November 2015. In his not-for-profit affiliations, Mr. Spoon was a member of the Board of Regents at the Smithsonian

Institution (formerly Vice Chairman) and is now a member of the MIT Corporation, where he also serves as a member of the board of directors of edX (an online education platform). In nominating Mr. Spoon, the Board considered his extensive private and public company board experience and public company management experience with The Washington Post Company, all of which the Board believes give him particular insight into business strategy, leadership and marketing in the media industry. The Board also considered Mr. Spoon’s private equity experience, which the Board believes gives him particular insight into trends in the internet and technology industries, as well as into acquisition strategy and financing.

Alexander von Furstenberg, age 46, has been a director of IAC since December 2008. Mr. von Furstenberg currently serves as Chief Investment Officer of Ranger Global Advisors, LLC, a family office focused on value-based investing (“Ranger”), which he founded in June 2011. Prior to his tenure with Ranger, Mr. von Furstenberg founded Arrow Capital Management, LLC, a private investment firm focused on global public equities, where he served as Co-Managing Member and Chief Investment Officer since 2003. Mr. von Furstenberg has served as member of the board of directors of Expedia, Inc. since December 2015 and served as a member of the board of directors of W.P. Stewart & Co. Ltd., a Bermuda based asset management firm, during the past five years. Since 2001, he has acted as Chief Investment Officer of Arrow Investments, Inc., the private investment office which serves his family. Mr. von Furstenberg also serves as a partner and director of Diane von Furstenberg Studio, LLC. In addition to the philanthropic work accomplished through his position as a director of The Diller-von Furstenberg Family Foundation, Mr. von Furstenberg also serves on the board of directors of Friends of the High Line. In nominating Mr. von Furstenberg, the Board considered his private investment and board experience, which the Board believes give him particular insight into capital markets and investment strategy, as well as a high level of financial literacy. Mr. von Furstenberg is Mr. Diller’s stepson.

Richard F. Zannino, age 57, has been a director of IAC since June 2009. Since July 2009, Mr. Zannino has been a Managing Director at CCMP Capital Advisors, LLC, a private equity firm, where he also serves as a member of the firm’s Investment Committee and as co-head of the firm’s consumer retail investment efforts. Mr. Zannino has also served as a member of the board of directors of The Estée Lauder Companies, Inc. since January 2010, Olli’s Bargain Outlet since July 2015 and Francesca’s Collections during the past five years. Mr. Zannino previously served as Chief Executive Officer and a member of the board of directors of Dow Jones & Company from February 2006 through December 2007, when Mr. Zannino resigned from these positions upon the acquisition of Dow Jones by News Corp. Prior to this time, Mr. Zannino served as Chief Operating Officer of Dow Jones from July 2002 through February 2006 and as Executive Vice President and Chief Financial Officer of Dow Jones from February 2001 through June 2002. Prior to his tenure at Dow Jones, Mr. Zannino served in a number of executive capacities at Liz Claiborne from 1998 through January 2001, and prior to that time served as Executive Vice President and Chief Financial Officer of General Signal and in a number of executive capacities at Saks Fifth Avenue. In his not-for-profit affiliations, Mr. Zannino serves as a member of the Board of Trustees of Pace University. In connection with the nomination of Mr. Zannino, the Board considered his extensive public company management experience, which the Board believes gives him particular insight into business strategy, leadership and marketing, as well as a high level of financial literacy. The Board also considered Mr. Zannino’s private equity experience, which the Board believes gives him particular insight into acquisition and investment strategy and financing.

CERTAIN INFORMATION CONCERNING EXECUTIVE OFFICERS

Background information concerning those individuals who currently serve as executive officers of IAC (other than those who also serve as directors) and served as named executives in 2015 is set forth below.

Jeffrey W. Kip, age 47, served as Chief Financial Officer of IAC from March 2012 through June 2015 and has remained an employee (in a capacity other than as an executive officer) of the Company since that time. Prior to joining IAC, Mr. Kip served as Executive Vice President, Chief Financial Officer of Panera Bread Company, a national bakery-cafe concept in the United States and Canada (“Panera”), since May 2006. From November 2003 until May 2006, Mr. Kip served as Panera’s Vice President, Finance and Planning and as Vice President, Corporate Development from May 2003 until November 2003. From November 2002 until April 2003, Mr. Kip served as an Associate Director and Director at UBS, an investment banking firm, and from August 1999 until November 2002, Mr. Kip was an Associate at Goldman Sachs, an investment banking firm.

Glenn H. Schiffman, age 46, has served as Chief Financial Officer of IAC since April 2016. Prior to joining IAC, Mr. Schiffman served as Senior Managing Director at Guggenheim Securities, the investment banking and capital markets business of Guggenheim Partners, since March 2013.  Prior to his tenure at Guggenheim Securities, Mr. Schiffman was a partner at The Raine Group, a merchant bank focused on advising and investing in the technology, media and telecommunications industries, from September 2011 to March 2013.  Prior to joining The Raine Group, Mr. Schiffman served as Co-Head of Global Media at Lehman Brothers from 2005 to 2007 and Head of Investment Banking Asia-Pacific at Lehman Brothers (and subsequently Nomura) from April 2007 to January 2010, as well as Head of Investment Banking, Americas for Nomura following Nomura’s acquisition of Lehman’s Asia business from January 2010 to April 2011. In his not-for-profit

affiliations, Mr. Schiffman is a member of the National Committee on United States-China Relations and serves as a Member of the Board of Visitors for the Duke University School of Medicine.

Mark Stein, age 48, has served as Executive Vice President and Chief Strategy Officer of IAC since January 2016 and prior to that time, served as Senior Vice President and Chief Strategy Officer of IAC from September 2015.  Mr. Stein previously served as both Senior Vice President of Corporate Development at IAC (since January 2008) and Chief Strategy Officer of IAC Search & Applications, the desktop software, mobile applications and media properties that comprised IAC’s former Search & Applications segment (since November 2012). Prior to his service in these roles, Mr. Stein served in several other capacities for IAC and its businesses, including as Chief Strategy Officer of Mindspark Interactive Network from 2009 to 2012, and prior to that time as Executive Vice President of Corporate and Business Development of IAC Search & Media.

Gregg Winiarski, age 45, has served as Executive Vice President, General Counsel and Secretary of IAC since February 2014 and previously served as Senior Vice President, General Counsel and Secretary of IAC from February 2009 to February 2014. Mr. Winiarski previously served as Associate General Counsel of IAC since February 2005, during which time he had primary responsibility for all legal aspects of IAC’s mergers and acquisitions and other transactional work. Prior to joining IAC in February 2005, Mr. Winiarski was an associate with Skadden, Arps, Slate, Meagher & Flom LLP, a global law firm, from 1996 to February 2005. Prior to joining Skadden, Mr. Winiarski was a certified public accountant with Ernst & Young in New York.

CERTAIN LEGAL PROCEEDINGS

In June 2010, Mr. Bronfman was part of a trial in the Trial Court in Paris involving six other individuals, including the former Chief Executive Officer, Chief Financial Officer and Chief Operating Officer of Vivendi Universal. The other individuals faced various criminal charges and civil claims relating to Vivendi, including Vivendi’s financial disclosures, the appropriateness of executive compensation and trading in Vivendi stock. Mr. Bronfman previously served as the Vice Chairman of Vivendi and faced a charge and claims relating to certain trading in Vivendi stock in January 2002. At the trial, the public prosecutor and the lead civil claimant both took the position that Mr. Bronfman should be acquitted. In January 2011, the court found Mr. Bronfman guilty of the charge relating to his trading in Vivendi stock, found him not liable to the civil claimants and imposed a fine of 5 million euros and a suspended sentence of fifteen months. Mr. Bronfman appealed the Trial Court decision to the Paris Court of Appeal. In November 2013, Mr. Bronfman participated in a re-trial before a new judicial panel as part of his appeal of the Paris Trial Court’s 2011 ruling. In May 2014, the new judicial panel rendered its decision, affirming the Paris Trial Court’s finding that Mr. Bronfman was guilty of the charge, but stated that its finding would appear only in French judicial records (and not in Mr. Bronfman’s public record), removed the suspended sentence imposed by the Paris Trial Court and suspended 2.5 million euros of the original fine of 5 million euros. The new judicial panel affirmed the Paris Trial Court’s finding that Mr. Bronfman was not liable to the civil claimants. Mr. Bronfman has appealed the verdict and believes that his trading in Vivendi stock was proper. Under French law, the penalty is suspended pending the final outcome of the case.

BOARD COMMITTEES

The Board currently has four standing committees: the Audit Committee, the Compensation and Human Resources Committee, the Nominating Committee and the Executive Committee.

Board Committee Membership

The following table sets forth the members of each Board committee during 2015. Each committee member identified below served in the capacities set forth in the table for all of 2015.

Name

Audit
Committee

Compensation
and Human
Resources
Committee

Nominating
Committee

Executive
Committee

Edgar Bronfman, Jr.*

X

X

Chelsea Clinton*

Barry Diller

X

Michael D. Eisner*

X

Bonnie Hammer*

X

Victor A. Kaufman

X

Joseph Levin

Bryan Lourd*

X

David Rosenblatt*

Chair

Alan G. Spoon*

Chair

Alexander von Furstenberg

Richard F. Zannino*

X


*                                         Independent director.

Audit Committee

The Audit Committee functions pursuant to a written charter adopted by the Board of Directors, the most recent version of which was filed as Appendix A to IAC’s 2014 Annual Meeting proxy statement. The Audit Committee is appointed by the Board to assist the Board with a variety of matters described in the charter, which include monitoring: (i) the integrity of IAC’s financial statements, (ii) the effectiveness of IAC’s internal control over financial reporting, (iii) the qualifications and independence of IAC’s independent registered public accounting firm, (iv) the performance of IAC’s internal audit function and independent registered public accounting firm, (v) IAC’s risk assessment and risk management policies as they relate to financial and other risk exposures and (vi) the compliance by IAC with legal and regulatory requirements. In fulfilling its purpose, the Audit Committee maintains free and open communication among itself, the Company’s independent registered public accounting firm, the Company’s internal audit function and Company management.

The Board has previously concluded that Mr. Spoon is an “audit committee financial expert,” as such term is defined in applicable rules of the U.S. Securities and Exchange Commission, as well as those of The Nasdaq Stock Market LLC (the “Marketplace Rules”).

Compensation and Human Resources Committee

The Compensation and Human Resources Committee functions pursuant to a written charter adopted by the Board of Directors, the most recent version of which was filed as Appendix B to IAC’s 2014 Annual Meeting proxy statement. The Compensation and Human Resources Committee is appointed by the Board to assist the Board with all matters relating to the compensation of the Company’s executive officers and has overall responsibility for approving and evaluating all compensation plans, policies and programs of the Company as they affect the Company’s executive officers. The Compensation and Human Resources Committee may form and delegate authority to subcommittees and may delegate authority to one or more of its members. The Compensation and Human Resources Committee may also delegate to one or more of the Company’s executive officers the authority to make grants of equity-based compensation to eligible individuals (other than directors or executive officers) to the extent allowed under applicable law. For additional information on IAC’s processes and procedures for the consideration and determination of executive compensation and the related roles of the Compensation and Human Resources Committee, Company management and consultants, see the discussion under Compensation Discussion and Analysis generally beginning on page 8. The formal report of the Compensation and Human Resources Committee is also set forth on page 8.

Nominating Committee

The Nominating Committee functions pursuant to a written charter adopted by the Board of Directors, the most recent version of which was filed as Appendix C to IAC’s 2014 Annual Meeting proxy statement. The Nominating Committee is appointed by the Board to assist the Board by: (i) identifying, reviewing and evaluating individuals qualified to become Board members, (ii) recommending director nominees for the next annual meeting of stockholders (and nominees to fill vacancies on the Board as necessary) and (iii) making recommendations with respect to the compensation and benefits of directors.

Executive Committee

The Executive Committee has all the power and authority of the Board of Directors of IAC, except those powers specifically reserved to the Board by Delaware law or IAC’s organizational documents.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership (Forms 4 and 5)outstanding shares of common stock, and other equity securities of the Company with the SEC. Officers, directors and greater than 10% beneficial owners are required by SEC rules to furnish the Company with copies of all such forms they file. Based solely on a review of the copies of such forms furnished to the Company and/or written representations that no additional forms were required, the Company believes that its officers, directors and greater than 10% beneficial owners complied with these filing requirements in 2015.

Item 11.    Executive Compensation

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The membership of the Compensation and Human Resources Committee consisted of Mr. Rosenblatt and Ms. Hammer during 2015. Neither of them has been an officer or employee of IAC at any time during their respective service on the committee.

COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT

The Compensation and Human Resources Committee has reviewed the Compensation Discussion and Analysis and discussed it with Company management. In reliance on its review and the discussions referred to above, the Compensation and Human Resources Committee recommended to the Board that the Compensation Discussion and Analysis be included in IAC’s 2015 Annual Report on Form 10-K.

Members of the Compensation and Human Resources Committee

David Rosenblatt (Chair)

Bonnie S. Hammer

COMPENSATION DISCUSSION AND ANALYSIS

Philosophy and Objectives

Our executive officers whose compensation is discussed in this compensation discussion and analysis (the “CD&A”) and who we refer to as our named executive officers in this CD&A (the “NEOs”) are:

·                  Barry Diller, Chairman and Senior Executive;

·                  Victor Kaufman, Vice Chairman;

·                  Joey Levin, Chief Executive Officer commencing June 2015;

·                  Gregg Winiarski, Executive Vice President and General Counsel; and

·                  Jeffrey Kip, Chief Financial Officer through June 2015.

Our executive officer compensation program is designed to increase long-term stockholder value by attracting, retaining, motivating and rewarding leaders with the competence, character, experience and ambition necessary to enable the Company to meet its growth objectives.

Though IAC is a publicly traded company, we attempt to foster an entrepreneurial culture, and attract and retain senior executives with entrepreneurial backgrounds, attitudes and aspirations. Accordingly, when attempting to recruit and retain our executive officers, as well as other executives who may become executive officers at a later time, we compete not only with other public companies, but also with earlier stage companies, companies funded by private equity and venture capital firms and professional firms. We structure our compensation program so that we can compete in this varied marketplace for talent, with an emphasis on variable, contingent compensation and long-term equity ownership.

While we consider market data in establishing broad compensation programs and practices and may periodically benchmark the compensation associated with particular executive positions, we do not definitively rely on competitive survey data or any benchmarking information in establishing executive compensation. The Company makes decisions based on a host of factors particular to a given executive’s situation, including its firsthand experience with the competition for recruiting executives and its understanding of the current environment, and believes that over-reliance on survey data, or a benchmarking approach, is too rigid and stale for the dynamic and fast changing marketplace for talent in which we compete.

Similarly, we believe that arithmetic approaches to measuring and rewarding short-term performance often fail to adequately take into account the multiple factors that contribute to success at the individual and business level. In any given period, the Company may have multiple objectives, and these objectives, and their relative importance, often change as the competitive and strategic landscapes shift. Accordingly, we have historically avoided the use of strict formulas in our annual bonus program, believing that they often over-compensate or under-compensate a given performance level. We instead rely

primarily on an approach that, while based on clear objectives, is not formulaic and allows for the exercise of discretion in setting final bonus amounts.

In addition, we are of the view that long-term incentive compensation in the form of equity awards aligns the interests of executives and long-term shareholders, and to further this important goal, equity awards play a prominent role in our overall compensation program. We have used non-qualified stock options as the predominant equity incentive vehicle for our executives for many years.   We use this equity incentive instrument primarily for the sake of simplicity given that the value from stock option awards is directly dependent on appreciation in the Company’s stock price and therefore provides an objectively measurable goal, and a belief that it would, in general, make the Company more competitive in recruiting talented executives and employees. From time to time, however, executives have been awarded restricted stock units in addition to, or in lieu of, stock option awards, depending on the individual circumstances, and in 2015 one of our executives was awarded restricted stock units as described below.

We believe that the Company’s executive officer compensation program puts the substantial majority of compensation at risk, rewards both individual and corporate performance in a targeted fashion, pays amounts appropriate to attract and retain those key individuals necessary to grow the Company and aligns the interests of our key executives with the interests of our stockholders. We continuously evaluate our program and make changes as we deem appropriate.

Roles and Responsibilities

The Compensation and Human Resources Committee of the Company’s Board of Directors (for purposes of this CD&A, the “Committee”) has primary responsibility for establishing the compensation of the Company’s executive officers. All compensation decisions referred to throughout this CD&A have been made by the Committee, based (in part) on recommendations from Mr. Diller and Mr. Levin (as described below). The Committee currently consists of Mr. Rosenblatt and Ms. Hammer.

The executive officers participate in structuring Company-wide compensation programs and in establishing appropriate bonus and equity pools. In early 2016, Messrs. Diller and Levin met with the Committee and discussed their views of corporate and individual executive officer performance for 2015 for Messrs. Kaufman and Winiarski, and their recommendations for annual bonuses for those executive officers. Mr. Diller also discussed Mr. Levin’s performance, and his views on his own performance, with the Committee. Following these discussions, the Committee met in executive sessions to discuss these recommendations.  After consideration of these recommendations, the Committee ultimately determined the annual bonus amount for each executive officer.

In establishing a given executive officer’s compensation package, each individual component is evaluated independently and in relation to the package as a whole. Prior earning histories and outstanding long-term compensation arrangements are also reviewed and taken into account. However, we do not believe in any formulaic relationship or targeted allocation between these elements. Instead, each individual’s situation is evaluated on a case-by-case basis each year, considering the variety of relevant factors at that time.

From time to time, the Committee has solicited the advice of consulting firms and engaged legal counsel. Except as noted below, no such consulting firms or legal counsel were engaged during 2015.

In addition, from time to time, the Company may solicit survey or peer compensation data from various consulting firms. In 2015, the Company engaged Mercer (US) Inc. to provide comparative market data in connection with the Company’s own analysis of its equity compensation practices, but neither Mercer nor any other compensation consultant engaged by the Company had any role in determining or recommending the amount or form of executive compensation for 2015.

In 2015, the Committee engaged Compensation Advisory Partners LLC (“CAP”) to assist the Committee in its consideration of long-term incentive awards for Mr. Diller and Mr. Levin, as discussed further below under the heading “2015 Equity Awards.”

Compensation Elements

Our compensation packages for executive officers primarily consist of salary, annual bonuses, IAC equity awards and, in certain instances, perquisites and other benefits.

Salary

We typically negotiate a new executive officer’s starting salary upon arrival, based on the executive’s prior compensation history, prior compensation levels for the particular position within the Company, the Company’s New York City location, salary levels of other executives within the Company and salary levels available to the individual in alternative opportunities. Salaries can increase based on a number of factors, including the assumption of additional responsibilities and other factors which demonstrate an executive’s increased value to the Company. No executive officer’s salary was adjusted during 2015.

Annual Bonuses

General.  We establish bonus levels through a two-pronged process. First, at the beginning of each year, the Committee sets performance objectives, which historically have been tied to the achievement of EBITDA (as defined below), revenue or share price performance targets during the forthcoming year, and maximum bonus amounts. In general, these performance targets are minimum acceptable performance conditions, but with respect to which there is substantial uncertainty when we establish them. The establishment of performance targets and maximum bonus amounts is undertaken primarily to satisfy the requirements of Section 162(m) of the Internal Revenue Code, as amended. Satisfaction of one or more of the performance targets established by the Committee allows for the payment of bonuses that will be deductible by the Company for federal income tax purposes, should any bonuses be awarded to the Company’s named executive officers.  However, satisfaction of the applicable performance targets does not obligate the Committee to approve any specific bonus amount for any executive officer, and the Committee has historically reduced the maximum bonus amount based on a discretionary assessment of Company and, to a lesser extent, individual performance. In making its determinations regarding individual annual bonus amounts, the Committee considers a variety of factors, such as growth in profitability or achievement of strategic objectives by the Company, and an individual’s performance and contribution to the Company. The Committee does not quantify the weight given to any specific element or otherwise follow a formulaic calculation. Rather, the Committee engages in an overall assessment of appropriate bonus levels based on a subjective interpretation of all relevant criteria. This process is designed to permit the Company to deduct the bonus compensation paid to executives for income tax purposes.

The definition of EBITDA used for establishing Section 162(m) performance objectives comes from IAC’s 2013 Stock and Annual Incentive Plan, and is as follows: “EBITDA” means for any period, operating profit (loss) plus, if applicable: (i) depreciation, (ii)  amortization and impairment of intangibles, (iii) goodwill impairment, (iv) non-cash compensation expense, (v) restructuring charges, (vi) non cash write-downs of assets, (vii) charges relating to disposal of lines of business, (viii) litigation settlement amounts and (ix) costs incurred for proposed and completed acquisitions.

2015 Bonuses.  For 2015, the Committee predicated the payment of bonuses to executive officers on attaining: (i) EBITDA in any of the four consecutive calendar quarters beginning with the first quarter of 2015 at least equal to EBITDA in the corresponding calendar quarter twelve months before, (ii) revenue in any of the four consecutive calendar quarters beginning with the first quarter of 2015 at least equal to revenue in the corresponding calendar quarter twelve months before or (iii) share price growth of at least 5% over $63.83 (the closing price of the Company’s common stock on December 31, 2014) on any 20 trading days during the period beginning on January 1, 2015 through December 31, 2015. Two of the targets were met.  After concluding that the threshold performance targets for the payment of bonuses had been achieved, the Committee then exercised its right to reduce bonus amounts for each individual executive officer from the maximum level established. In setting actual bonus levels, the Committee considered a variety of factors, including:

·Successful Completion of Match Group IPO.  In November 2015, Match Group successfully completed its initial public offering.  The Company believes that this transaction has positioned both IAC and Match Group to enhance the ability of shareholders of both companies to realize value over the long term.  At December 31, 2015, the Company’s ownership interest and voting interest in Match Group were 84.6% and 98.2%, respectively;

·Successful Completion of Other Transactions.  The Company amended and extended its services agreement with Google and continued its disciplined approach to acquisitions, including the acquisition of PlentyOfFish;

·Capitalization and Cash Position.  The Company repatriated a significant amount of cash to stockholders during 2015 by way of share repurchases and quarterly cash dividends. In addition, during 2015: (i) the Company amended and extended its $300 million revolving credit facility, and (ii) Match Group entered into a credit agreement providing for a $500 million credit facility and an $800 million term loan and exchanged $445.3 million of IAC’s 4.75% senior notes for $445.2 of Match Group 6.75% senior notes, providing for appropriate capital structures for both entities as they continue to invest in their businesses and identify new opportunities for expansion; and

·Revenue and Adjusted EBITDA Results.  Revenue increased modestly over the prior year, reflecting growth in The Match Group, HomeAdvisor and Video segments. Adjusted EBITDA declined 11% for the year, reflecting increased selling and marketing expenses, as well as lower revenue in certain segments.

While the factors noted above were the primary ones considered in setting bonus award amounts, the Committee also considered each executive’s role and responsibilities, the relative contributions made by each executive officer during the year and the relative size of the bonuses paid to the other executive officers.  Notwithstanding many significant achievements during the year, Mr. Diller did not receive a bonus for 2015 due to the Company’s disappointing financial performance.  With respect to bonuses for other executives, the Committee considered the following: (i)  with respect to Mr. Levin, his new role as Chief Executive Officer of the Company, including his focus on managing the day-to-day business operations of the Company, as well as his participation in the major initiatives undertaken during 2015 and his role in developing strategic initiatives for the Company, (ii) with respect to Mr. Kaufman, his participation in strategic oversight of the Company, and (iii) with respect to Mr. Winiarski, his role in managing the successful completion of the Match Group initial public offering and related debt transactions, as well as the PlentyOfFish acquisition.

As noted above, in setting individual bonus amounts, the Committee did not quantify the weight assigned to any specific factor, nor apply a formulaic calculation. In setting bonus amounts, the Committee generally considered the Company’s overall performance, the amount of bonus for each named executive relative to other Company executives and the recommendations of the Chairman and Senior Executive and the Chief Executive Officer. In addition, the Committee considered achievements in 2015 as compared to achievements and bonus levels in prior years.

Executive officer bonuses tend to be highly variable from year-to-year depending on the performance of the Company and, in certain circumstances, individual performance. Accordingly, we believe our executive officer bonus program provides strong incentives to reach the Company’s annual goals.

Long-Term Incentives

General.  Due to our entrepreneurial philosophy, we believe that providing a meaningful equity stake in our business is essential to create compensation opportunities that can compete, on a risk-adjusted basis, with entrepreneurial employment alternatives. In addition, we believe that ownership shapes behavior, and that by providing compensation in the form of equity awards, we align executive incentives with stockholder interests in a manner that we believe drives superior performance over time.

While there is currently no formal stock ownership or holding requirement for executive officers, our executive officers generally have historically held a significant portion of their stock awards (net of tax withholdings) well beyond the relevant vesting dates.

In establishing equity awards for an executive for any given period, the amount of outstanding unvested and/or unexercised equity awards, as well as previously earned or exercised awards, is reviewed and evaluated on an individual-by-individual basis. In setting particular award levels, the predominant considerations are providing the executive with effective retention incentives, appropriate reward for past performance, incentives for strong future performance and competitive conditions. The annual corporate performance factors relevant to setting bonus amounts, while taken into account, are generally less relevant in determining the type and level of equity awards, as the awards tend to be more forward looking, and are a longer-term retention and reward instrument relative to our annual bonuses.

The Company’s usual practice is to schedule the Committee meetings at which awards are to be made in advance, without regard to the timing of the release of earnings or other material information.

2015 Equity Awards.  In February 2015, the Committee granted 100,000 stock options to each of Messrs. Kip and Winiarski. The options vest 25% a year, on the first four anniversaries of the grant date, and have an exercise price equal to the closing price of the Company’s common stock on the grant date.  Also in February 2015, Mr. Kaufman received a restricted stock unit award with a dollar value of $350,000 in accordance with the terms of his employment agreement. The restricted stock units will vest in three equal installments on each of the first three anniversaries of the grant date.

In February and June 2015, to assist the Committee as it considered new equity awards for Mr. Diller and Mr. Levin, respectively, the Company engaged CAP to evaluate various long-term incentive alternatives for each of those executives and, in the case of Mr. Diller, make recommendations to the Committee.

In March 2015, the Committee awarded Mr. Diller 1,000,000 stock options which will vest 25% a year on the first four anniversaries of the grant date. One half of the options have an exercise price equal to, and the other half of the options have an exercise price equal to 125% of, the closing price of the Company’s common stock on the trading day immediately preceding the grant date.

In making this grant to Mr. Diller, the Committee considered that the last time Mr. Diller received an equity award was in 2011, and prior to that was in 2005. The Committee also noted that the options granted in 2005 were set to expire in June 2015 and that the last tranche of the options granted in 2011 fully vested in February 2015. As a result, the Committee determined it was in the best interest of the Company to provide Mr. Diller an additional long-term incentive award.  In finalizing the structure of the award, the Committee took into account a variety of factors, including:

·                  competitive pay and performance data among comparator groups of companies;

·                  the vesting and expiration schedules of Mr. Diller’s existing long-term incentive arrangements;

·                  the nature of Mr. Diller’s outstanding long-term incentive arrangements;

·                  the incentive to create additional shareholder value inherent in the premium option pricing component of the new package;

·                  the Committee’s substantial desire to retain Mr. Diller’s services for the long-term; and

·                  the Company’s history of granting Mr. Diller equity awards once every few years (and the Committee’s intention to remain consistent with that approach).

The Committee also considered the value realized by Mr. Diller from his exercise of stock options over the years and the intrinsic value of his currently outstanding options. They took note that Mr. Diller had generally exercised options after holding them for substantial periods of time after grant, and as a result, the Committee considered the realization of value by Mr. Diller to be primarily a function of both personal investment decisions by him and the timing of the relevant option expiration dates, and not compensation for the periods in which it would be realized.

On June 24, 2015, Mr. Levin was appointed as the Company’s Chief Executive Officer.  In his former role as Chief Executive Officer of IAC Search, a portion of his long-term incentives were tied to that business.  When the Company asked Mr. Levin to become Chief Executive Officer, the Committee desired to have a compensation structure for him that provided incentives directly aligned with the performance of the Company as a whole.  In June 2015, the Committee awarded Mr. Levin 400,000 stock options which will vest 25% a year, on the first four anniversaries of the grant date, and have an exercise price equal to the closing price of the Company’s common stock on the grant date, with 50% of these options becoming exercisable only if the closing pricevote per share, of the Company’s common stock during any 20 consecutive days equals or exceeds 150% of the closing price of the Company’s common stock on the grant date.  In connection with this new award, Mr. Levin surrendered to the Company equity awards previously granted to him  that were tied solely to the IAC Search business.  In finalizing the structure of the award, the Committee took into account a variety of factors, including many of those considered in connection with Mr. Diller’s award, as discussed above.

We believe these awards provide meaningful retention and performance incentives for our executive officers.

2016 Equity Awards.  In February 2016, the Committee granted 200,000 stock options to Mr. Levin and 100,000 stock options to Mr. Winiarski.  The options vest 25% a year, on the first four anniversaries of the grant date, and have an exercise price equal to the closing price of the Company’s common stock on the grant date.  Also in February 2016, Mr. Levin received 100,000 restricted stock units, vesting in one lump sum installment on the third anniversary of the grant date, and Mr. Kaufman received a restricted stock unit award with a dollar value of $350,000 in accordance with the terms of his employment agreement, vesting in thirds on the first three anniversaries of the grant date.

Change of Control

The Company’s equity awards for senior executives generally include a so-called “double-trigger” change of control provision, which provides for the acceleration of the vesting of outstanding equity awards in connection with a change of control only when an award recipient suffers an involuntary termination of employment within two years of such change of control. The Committee believes that providing for the acceleration of the vesting of equity awards after an involuntary termination will assist in the retention of our executives through a change of control transaction. For purposes of this discussion and the discussion below under the heading “Severance,” we use the term “involuntary termination” to mean both a termination by the Company without “cause” and a resignation by the executive for “good reason” or similar construct.

Severance

We generally provide executive officers with some amount of salary continuation and some amount of accelerated vesting of equity awards in the event of an involuntary termination of employment. Because we tend to promote our executive officers from within, after competence and commitment have generally been established, we believe that the likelihood of the vesting of equity awards being accelerated is typically low, and yet we believe that through providing this benefit we increase the retentive effect of our equity program, which serves as our most important retention incentive. The Company generally does not provide for the acceleration of the vesting of equity awards in the event an executive voluntarily resigns from the Company.

Other Compensation

General.  We provide Mr. Diller with various non-cash benefits as part of his overall compensation program. Under certain limited circumstances, other executive officers have also received non-cash benefits. The value of these benefits is calculated under appropriate rules and is taken into account as a component of compensation when establishing overall compensation levels. The value of all non-cash benefits is reported under the “All Other Compensation” column in the Summary Compensation Table on page 14 pursuant to applicable rules. Our executive officers do not participate in any deferred compensation or retirement programs other than the Company’s 401(k) plan. During 2015, we did not (and generally do not) gross-up any benefits provided to any executive officer. Other than those described specifically below, our executive officers do not partake in any benefit programs, or receive any significant perquisites, distinct from the Company’s other employees.

Mr. Diller.  Pursuant to Company policy, Mr. Diller is required to travel, both for business and personal purposes, on corporate aircraft. In addition to serving general security interests, this means of travel permits him to travel non-stop and without delay, to remain in contact with the Company while he is traveling, to change his plans quickly in the event Company business requires and to conduct confidential Company business while flying, be it telephonically, by e-mail or in person. These interests are similarly furthered on both business and personal flights, as Mr. Diller typically provides his services to the Company while traveling in either case. Nonetheless, the incremental cost to the Company of his travel for personal purposes is reflected as compensation to Mr. Diller from the Company, and is taken into account in establishing his overall compensation package. For certain personal use of Company-owned aircraft, Mr. Diller reimburses the Company at the maximum rate allowable under applicable rules of the Federal Aviation Administration.

Additionally, the Company provides Mr. Diller with a cash car allowance, as well as providing access to certain automobiles for business and personal use. We also provide certain Company-owned office space and IT equipment for use by certain individuals who work for Mr. Diller personally. These uses are valued by the Company at their incremental cost to the Company or, in the case of the use of office space (where there is no discernible incremental cost), at the cost used for internal allocations of office space for corporate purposes.

Mr. Kaufman.  Mr. Kaufman is entitled to use corporate aircraft for a certain amount of personal travel annually. However, Mr. Kaufman reimburses the Company for the Company’s incremental cost of such travel and therefore the value of such travel is not treated as compensation to Mr. Kaufman. Typically, Mr. Kaufman’s spouse accompanies him on personal and business flights at no incremental cost to the Company.

Mr. Levin.  Pursuant to Company policy, Mr. Levin is encouraged to travel, both for business and personal purposes, on corporate aircraft for the same reasons as set forth above for Mr. Diller. The incremental cost to the Company of his travel for personal purposes is reflected as compensation to Mr. Levin from the Company, and is taken into account in establishing his overall compensation package.

Tax Deductibility

Whenever possible, we endeavor to structure our compensation program so that the compensation we pay is deductible by the Company for federal income tax purposes. Because of the use of performance conditions in connection with our equity awards and annual bonuses, and the fact that no salaries are in excess of $1 million, these three components are generally deductible by the Company. However, under applicable IRS rules, the personal use of corporate aircraft leads to a disallowance of the deduction of certain airplane and related costs.

EXECUTIVE COMPENSATION

Overview

The Executive Compensation section sets forth certain information regarding total compensation earned by our named executives in 2015, as well as equity awards made to our named executives in 2015, equity awards held by our named executives on December 31, 2015 and the dollar value realized by our named executives upon the vesting and exercise of equity awards during 2015.

Summary Compensation Table

 

 

 

 

 

 

 

 

Stock

 

Option

 

All Other

 

 

 

 

 

 

 

Salary

 

Bonus

 

Awards

 

Awards

 

Compensation

 

Total

 

Name and Principal Position

 

Year

 

($)

 

($)

 

($)(1)

 

($)(2)

 

($)(3)

 

($)

 

Barry Diller

 

2015

 

$

500,000

 

 

 

$

14,220,000

 

$

1,136,025

 

$

15,856,025

 

Chairman and Senior Executive

 

2014

 

$

500,000

 

$

2,200,000

 

 

 

$

967,978

 

$

3,667,978

 

 

 

2013

 

$

500,000

 

$

2,750,000

 

 

 

$

753,090

 

$

4,003,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joseph Levin

 

2015

 

$

1,000,000

 

$

1,250,000

 

 

$

8,066,000

(4)

$

340,622

 

$

10,656,622

 

Chief Executive Officer (since June 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Victor A. Kaufman

 

2015

 

$

100,000

 

$

100,000

 

$

349,972

 

 

$

16,796

 

$

566,768

 

Vice Chairman

 

2014

 

$

100,000

 

$

100,000

 

$

349,947

 

 

$

18,083

 

$

568,030

 

 

 

2013

 

$

100,000

 

$

200,000

 

$

349,976

 

 

$

14,499

 

$

664,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey W. Kip

 

2015

 

$

575,000

 

$

1,250,000

 

 

$

1,476,000

 

$

7,950

 

$

3,308,950

 

Former Executive Vice President and Chief Financial Officer (through June 2015)

 

2014

 

$

575,000

 

$

1,000,000

 

 

$

2,447,500

 

$

7,800

 

$

4,030,300

 

 

2013

 

$

575,000

 

$

1,250,000

 

$

749,995

 

$

753,140

 

$

7,650

 

$

3,335,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregg Winiarski

 

2015

 

$

500,000

 

$

1,500,000

 

 

$

1,476,000

 

$

7,950

 

$

3,483,950

 

Executive Vice President, General Counsel and Secretary

 

2014

 

$

500,000

 

$

1,000,000

 

 

$

2,447,500

 

$

7,800

 

$

3,955,300

 

 

2013

 

$

500,000

 

$

1,125,000

 

$

500,013

 

$

502,097

 

$

7,650

 

$

2,634,760

 


(1)Reflects the dollar value of RSU awards, calculated by multiplying the closing market price of IAC common stock on the grant date by the number of RSUs awarded.

(2)In 2015, Messrs. Diller, Levin, Kip and Winiarski were granted stock option awards with vesting tied to continued service and Mr. Levin was granted a performance stock option award with vesting tied to continued service and exercisability tied to the satisfaction of certain performance-based conditions related to the Company’s stock price.  Accordingly, for Messrs. Diller, Kip and Winiarski, these amounts represent the grant date fair value of their stock option awards using the Black-Scholes option pricing model. And for Mr. Levin, $3,980,000 of this amount represents the grant date fair value of stock option awards using the Black-Scholes option pricing model and $4,086,000 of this amount represents the grant date fair value of the performance stock option award using a lattice model that incorporates a Monte Carlo simulation of the Company’s stock price. For details regarding the assumptions used to calculate these amounts in 2015, see footnotes 4 and 7 to the Grants of Plan-Based Awards in 2015 table on page 16.

(3)Additional information regarding all other compensation amounts for each named executive in 2015 is as follows:

 

 

Barry
Diller

 

Victor A.
Kaufman

 

Joseph Levin

 

Jeffrey W.
Kip

 

Gregg
Winiarski

 

Personal use of Company aircraft(a)

 

$

1,048,579

 

 

$

332,972

 

 

 

Parking garage

 

 

$

10,796

 

 

 

 

401(k) plan Company match

 

$

7,950

 

$

6,000

 

$

7,650

 

$

7,950

 

$

7,950

 

Miscellaneous(b)

 

$

79,496

 

 

 

 

 

 

 

$

1,136,025

 

$

16,796

 

$

340,622

 

$

7,950

 

$

7,950

 


(a)Pursuant to the Company’s Airplane Travel Policy, Mr. Diller is required to travel by Company-owned or chartered aircraft for both business and personal purposes and Mr. Levin is encouraged to use Company aircraft for business and personal travel when doing so would serve the interests of the Company.  See the discussion regarding airplane travel under Compensation Discussion and Analysis on page 13. We calculate the incremental cost to the Company for personal use of Company aircraft based on the average variable operating costs to the Company. Variable operating costs include fuel, certain maintenance costs, navigation fees, on-board catering, landing fees, crew travel expenses and other miscellaneous variable costs. The total annual variable costs are divided by the annual number of miles the Company aircraft flew to derive an average variable cost per mile. This average variable cost per mile is then multiplied by the miles flown for personal use. Incremental costs do not include fixed costs that do not change based on usage, such as pilots’ salaries, the purchase costs of Company-owned aircraft, insurance, scheduled maintenance and non-trip related hangar expenses. Messrs. Diller and Levin occasionally had family members or other guests accompany them on business and personal trips. While travel by family members or other guests does not result in any incremental cost to the Company, such travel does result in the imputation of taxable income to Messrs. Diller and Levin, the amount of which is calculated in accordance with applicable IRS regulations.

(b)Represents the total amount of other benefits provided to Mr. Diller, none of which individually exceeded 10% of the total value of all perquisites and personal benefits. The total amount of other benefits provided reflects: (i) lease payments, parking, fuel, maintenance and other costs associated with Mr. Diller’s personal use of an automobile leased and maintained by IAC and a cash car allowance, (ii) an allocation (based on square footage) of costs for the use of IAC office space by certain individuals who work for Mr. Diller personally, (iii) an allocation (based on the number of personal computers and communication devices supported by IAC) of costs relating to the use by such individuals of the Company’s IT technical support and certain communications equipment and (iv) costs incurred for Mr. Diller’s personal use of other car services.

(4)In connection with the grant of IAC stock options to Mr. Levin at the time he was appointed Chief Executive Officer of IAC in June 2015, Mr. Levin surrendered equity awards tied solely to the value of IAC’s Search business.

Grants of Plan-Based Awards in 2015

The table below provides information regarding all stock options and RSUs granted to our named executives in 2015.

Name

 

Grant Date

 

All Other
Stock
Awards:
Number of
Shares
of Stock or
Units (#)(1)

 

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(1)

 

Exercise
or Base
Price of
Option
Awards
($/Sh)

 

Grant Date
Fair Value
of Stock
and Option
Awards
($)

 

Barry Diller

 

3/29/15

 

 

500,000

(2)

$

67.45

(3)

$

8,220,000

(4)

 

 

3/29/15

 

 

500,000

(2)

$

84.31

(5)

$

6,000,000

(4)

 

 

 

 

 

 

 

 

 

 

 

 

Joseph Levin

 

6/24/15

 

 

200,000

(2)

$

77.26

(3)

$

3,980,000

(4)

 

 

6/24/15

 

 

200,000

(6)

$

77.26

(3)

$

4,086,000

(7)

 

 

 

 

 

 

 

 

 

 

 

 

Victor A. Kaufman

 

2/11/15

 

5,674

(8)

 

 

$

349,972

(9)

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey W. Kip

 

2/11/15

 

 

100,000

(2)

$

61.68

(3)

$

1,476,000

(4)

 

 

 

 

 

 

 

 

 

 

 

 

Gregg Winiarski

 

2/11/15

 

 

100,000

(2)

$

61.68

(3)

$

1,476,000

(4)


(1)                                 For information on the treatment of stock options and RSUs upon a termination of employment (including certain terminations during specified periods following a change in control of IAC), see the discussion under Estimated Potential Payments Upon Termination or Change in Control of IAC beginning on page 19.

(2)                                 These stock options vested/vest in four equal installments on the first four anniversaries of the applicable grant date, subject to continued employment.

(3)                                 The exercise price is equal to the fair market value per share (as defined in the applicable stock and annual incentive plan) of IAC common stock on the grant date.

(4)                                 Reflects the grant date fair value of stock option awards using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions, including expected volatility (based on the historical volatility of IAC common stock), risk-free interest rates (based on U.S. Treasury yields for notes with terms comparable to those of the stock options, in effect at the grant date), expected term (based on the historical exercise behavior of our employees) and dividend yield (based on IAC’s historical dividend payments). The assumptions used to calculate the amounts in the table above for stock option awards granted to our named executive are as follows:

Named Executive

 

Expected Volatility

 

Risk-Free
Interest Rate

 

Expected Term

 

Dividend Yield

 

Barry Diller

 

29.48

%

1.638

%

6.07 years

 

2.02

%

Joseph Levin

 

29.41

%

1.936

%

6.07 years

 

1.76

%

Jeffrey W. Kip

 

29.49

%

1.737

%

6.07 years

 

2.2

%

Gregg Winiarski

 

29.49

%

1.737

%

6.07 years

 

2.2

%

(5)                                 The exercise price is equal to 125% of the fair market value per share (as defined in the applicable stock and annual incentive plan) of IAC common stock on the grant date.

(6)                                 These stock options vest in four equal installments on the first four anniversaries of the grant date, subject to continued employment, and become exercisable if the closing price per share of the Company’s common stock during any 20 consecutive trading day period equals or exceeds $115.89 (a 50% increase to the closing price of the Company’s common stock on the grant date) at any time during the period during which the stock options are outstanding.

(7)                                 Reflects the grant date fair value of the performance stock option award granted to Mr. Levin using a lattice model that incorporates a Monte Carlo simulation of IAC’s stock price. The assumptions used to calculate the amount in the table above for this award are as follows: weighted average expected volatility (27)%, risk-free interest rate (2.3%), and dividend yield (1.8%). The expected term of this award (4 years) is derived from the output of the valuation model.

(8)                                 These RSUs vested/vest in three equal installments on the first three anniversaries of the grant date, subject to continued employment.

(9)                                 Reflects the dollar value of RSU awards, calculated by multiplying the closing market price of IAC common stock on the grant date by the number of RSUs awarded.

Outstanding Equity Awards at 2015 Fiscal Year-End

The table below provides information regarding equity awards held by our named executives on December 31, 2015. The market value of all RSU awards is based on the closing price of IAC common stock on December 31, 2015 ($60.05).

 

 

Option Awards

 

Stock Awards

 

Name

 

Number of
securities
underlying
unexercised
options
(#)

 

Number of
securities
underlying
unexercised
options
(#)

 

Option
exercise
price
($)

 

Option
expiration
date

 

Number of
shares or
units of stock
that have not
vested
(#)(1)

 

Market value
of shares or
units of stock
that have not
vested
($)(1)

 

 

 

(Exercisable)

 

(Unexercisable)

 

 

 

 

 

 

 

 

 

Barry Diller

 

300,000

 

 

$

31.89

 

4/20/21

 

 

 

 

 

 

500,000

(2)

$

67.45

 

3/29/25

 

 

 

 

 

 

500,000

(2)

$

84.31

 

3/29/25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joseph Levin

 

250,000

 

 

$

19.03

 

12/17/19

 

 

 

 

 

66,666

 

33,334

(3)

$

60.00

 

2/2/22

 

 

 

 

 

74,999

 

37,501

(3)

$

45.78

 

2/2/22

 

 

 

 

 

25,000

 

75,000

(4)

$

66.30

 

8/1/24

 

 

 

 

 

 

400,000

(5)

$

77.26

 

6/24/25

 

 

 

 

 

 

 

 

 

285,864

 

$

17,166,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Victor A. Kaufman

 

190,971

 

 

$

25.31

 

4/9/18

 

 

 

 

 

200,000

 

 

$

30.90

 

3/30/21

 

 

 

 

 

 

 

 

 

11,786

 

$

707,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey W. Kip

 

100,000

 

50,000

(6)

$

49.10

 

3/14/22

 

 

 

 

 

33,333

 

16,667

(6)

$

60.00

 

3/14/22

 

 

 

 

 

33,003

 

33,004

(7)

$

47.06

 

5/3/23

 

 

 

 

 

31,250

 

93,750

(8)

$

71.55

 

3/28/24

 

 

 

 

 

 

100,000

(2)

$

61.68

 

2/11/25

 

 

 

 

 

 

 

 

 

15,937

 

$

957,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregg Winiarski

 

100,000

 

 

$

21.60

 

2/16/20

 

 

 

 

 

200,000

 

 

$

30.90

 

3/30/21

 

 

 

 

 

131,250

 

43,750

(9)

$

45.78

 

2/2/22

 

 

 

 

 

22,002

 

22,003

(7)

$

47.06

 

5/3/23

 

 

 

 

 

31,250

 

93,750

(8)

$

71.55

 

3/28/24

 

 

 

 

 

 

100,000

(2)

$

61.68

 

2/11/25

 

 

 

 

 

 

 

 

 

10,625

 

$

638,031

 


(1)                                 The table below provides the following information regarding RSUs held by our named executives on December 31, 2015: (i) the grant date of each award, (ii) the number of RSUs outstanding on December 31, 2015, (iii) the market value of RSUs outstanding on December 31, 2015, (iv) the vesting schedule for each award and (v) the total number of RSUs that vested/are scheduled to vest in each of the fiscal years ending December 31, 2016, 2017, 2018 and 2019.

 

 

Number of
Unvested
RSUs as
of 12/31/15

 

Market
Value of
Unvested
RSUs as
of 12/31/15

 

Vesting Schedule (#)

 

Name and Grant Date

 

(#)

 

($)

 

2016

 

2017

 

2018

 

2019

 

Barry Diller

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joseph Levin

 

 

 

 

 

 

 

 

 

 

 

 

 

4/2/13

 

110,864

 

$

6,657,383

 

55,432

 

55,432

 

 

 

7/29/14

 

175,000

 

$

10,508,750

 

 

87,500

 

 

87,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Victor A. Kaufman

 

 

 

 

 

 

 

 

 

 

 

 

 

4/2/13

 

2,587

 

$

155,349

 

2,587

 

 

 

 

2/11/14

 

3,525

 

$

211,676

 

1,762

 

1,763

 

 

 

2/11/15

 

5,674

 

$

340,724

 

1,891

 

1,891

 

1,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey W. Kip

 

 

 

 

 

 

 

 

 

 

 

 

 

5/3/13

 

15,937

 

$

957,017

 

7,968

 

7,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregg Winiarski

 

 

 

 

 

 

 

 

 

 

 

 

 

5/3/13

 

10,625

 

$

638,031

 

5,312

 

5,313

 

 

 


(2)                                 These stock options vested/vest in four equal installments on the first four anniversaries of the applicable grant date, subject to continued employment.

(3)                                 The last installment of these stock options (with each installment representing one-third of the award) vested on February 2, 2016.

(4)                                 The three remaining installments of these stock options (with each installment representing 25% of the award) vest on July 29, 2016, 2017 and 2018, subject to continued employment.

(5)                                 Consists of: (i) 200,000 stock options that vest in four equal installments on the first four anniversaries of the grant date, subject to continued employment, and (ii) 200,000 performance stock options that vest on the first four anniversaries of the grant date, subject to continued employment, and become exercisable if the closing price per share of the Company’s common stock during any 20 consecutive trading day period equals or exceeds $115.89 (a 50% increase to the closing price of the Company’s common stock on the grant date) at any time during the period during which the stock options are outstanding.

(6)                                 The last installment of these stock options (with each installment representing one-third of the award) vested on March 14, 2016.

(7)                                 The two remaining installments of these stock options (with each installment representing 25% of the initial award) vested/vest in equal installments on May 3, 2016 and 2017, subject to continued employment.

(8)                                 The three remaining installments of these stock options (with each installment representing 25% of the initial award) vested/vest in equal installments on February 11, 2016, 2017 and 2018, subject to continued employment.

(9)                                 The last installment of these stock options (with each installment representing 25% of the award) vested on February 2, 2016.

2015 Option Exercises and Stock Vested

The table below provides information regarding the number of shares acquired by our named executives upon the exercise of stock options and the vesting of RSU awards in 2015 and the related value realized, excluding the effect of any applicable taxes. The dollar value realized upon the exercise of stock options represents the difference between: (i)(A) in the case of simultaneous exercise and sale transactions, the sale price of the shares acquired upon exercise, or (B) in the case of Mr. Diller’s exercise only, the closing price of IAC common stock on the exercise date given the fact that no simultaneous sale occurred, and (ii) the exercise price of the stock options, multiplied by the number of stock options exercised.  The dollar value realized upon the vesting of RSUs represents the closing price of IAC common stock on the vesting date, multiplied by the number of RSUs so vesting.

Name

 

Number of
Shares
Acquired
Upon Exercise
(#)

 

Value
Realized
Upon Exercise
($)

 

Number of
Shares
Acquired
Upon Vesting
(#)

 

Value
Realized
Upon Vesting
($)

 

Barry Diller(1)

 

705,734

(2)

$

23,080,664

(2)

 

 

Joseph Levin

 

 

 

 

 

Victor A. Kaufman

 

287,500

 

$

13,987,593

 

6,726

 

$

441,492

 

Jeffrey W. Kip

 

 

 

 

 

Gregg Winiarski

 

 

 

 

 


(1)                                 Mr. Diller also exercised HSN, Inc. and Tree.com, Inc. stock options in 2015, in connection with which he received gross proceeds of $11,996,840 and $5,132,875, respectively. In both cases, these amounts represent the difference between the exercise price of the applicable stock options and the fair market value per share (as defined in the applicable stock and annual incentive plan) of the applicable common stock underlying such stock options at the time of exercise.

Mr. Diller received these stock options as a result of spin-off transactions completed by the Company in August 2008. The value realized upon the exercise of these non-IAC stock options by Mr. Diller is treated for tax purposes as compensation payable to him in his capacity as Chairman and Senior Executive of the Company.

(2)                                 In connection with the exercise of these stock options, the Company withheld 395,654 shares of IAC common stock to cover the payment of the exercise price and 173,369 shares of IAC common stock to cover the payment of taxes due in connection with the exercise, which resulted in the issuance of 136,711 shares of IAC common stock to Mr. Diller.

Estimated Potential Payments Upon Termination or Change in Control of IAC

Certain of our employment agreements, equity award agreements and/or omnibus stock and annual incentive plans entitle our named executives to continued base salary payments, the acceleration of the vesting of equity awards and/or extended post-termination exercise periods for stock options upon certain terminations of employment (including certain terminations during specified periods following a change in control of IAC). These arrangements are described below as they would have applied to each named executive on December 31, 2015.

Certain amounts that would have become payable to our named executives upon the events described above (as and if applicable), assuming that the relevant event occurred on December 31, 2015, are described and quantified in the table below. These amounts, which exclude the effect of any applicable taxes, are based on the named executive’s base salary and the number of stock options and/or RSUs outstanding on December 31, 2015 and the closing price of IAC common stock ($60.05) on December 31, 2015. In addition to these amounts, certain other amounts and benefits generally payable and made available to other Company employees upon a termination of employment, including payments for accrued vacation time and outplacement services, will generally be payable to named executives.

Messrs. Diller and Levin

No payments would have been made to Messrs. Diller and Levin pursuant to any agreement between the Company and these named executives upon a termination without cause or due to death or disability or a resignation for good reason on December 31, 2015.  In addition, no payments would have been made Messrs. Diller and Levin pursuant to any agreement between the Company and these named executives upon a change in control of IAC on December 31, 2015. Lastly, upon a termination without cause or resignation for good reason following a change in control of IAC on December 31, 2015, in accordance with the applicable omnibus stock and incentive plan and the related award agreements, the vesting of all then

outstanding and unvested stock options and/or RSUs, as applicable, held by Messrs. Diller and Levin would have been accelerated.

In addition, in the case of Mr. Diller only, under the Equity and Bonus Compensation Agreement, dated August 24, 1995, between IAC and Mr. Diller, we agreed that to the extent any payment or distribution by IAC to or for the benefit of Mr. Diller (whether under the terms of the related agreement or otherwise) would be subject to the excise tax imposed by §4999 of the Internal Revenue Code, or any interest or penalties are incurred by Mr. Diller with respect to such excise tax, then Mr. Diller would be entitled to a gross-up payment covering the excise taxes and related interest and penalties. Given that Mr. Diller would not have received any payment or other benefits upon an assumed change in control of IAC at the end of 2015, the Company does not believe that any excise tax would be imposed or that any gross-up would be required.

Mr. Kaufman

Upon a termination without cause or resignation for good reason on December 31, 2015, pursuant to the terms of his amended employment agreement, Mr. Kaufman would have been entitled to:

·                  the partial vesting of outstanding and unvested RSUs in amounts equal to the number that would have otherwise vested in accordance with the terms of such awards during the 12-month period following such termination of employment; and

·                  continue to have the ability to exercise his vested stock options through June 30, 2017.

No payments would have been made to Mr. Kaufman pursuant to any agreement between the Company and Mr. Kaufman upon a change in control of IAC on December 31, 2015. Upon a termination without cause or resignation for good reason following a change in control of IAC on December 31, 2015, in accordance with our omnibus stock and annual incentive plans and the related award agreements, the vesting of all then outstanding and unvested RSUs held by Mr. Kaufman would have been accelerated. For Mr. Kaufman, “good reason” means a material breach of his amended employment agreement by the Company that it fails to remedy.

Mr. Kip

Upon a termination without cause or voluntary resignation on December 31, 2015, pursuant to the terms of an oral agreement between Mr. Kip and the Company that was reached following his tenure as the Company’s Chief Financial Officer, Mr. Kip would have been entitled to:

·                  receive 12 months of his base salary, subject to the execution and non-revocation of a release and compliance with post-termination confidentiality, non-solicitation of employees (18 months), non- solicitation of business partners (12 months) and assignment of certain employee developments covenants, and subject to offset for any amounts earned from other employment during the severance period;

·                  the partial vesting of outstanding and unvested stock options and RSUs in amounts equal to the number that would have otherwise vested in accordance with the terms of such awards during the 12-month period following such termination of employment; and

·                  continue to have the ability to exercise his vested stock options through June 30, 2017.

No payments would have been made to Mr. Kip pursuant to any agreement between the Company and Mr. Kip upon a change in control of IAC on December 31, 2015. Lastly, upon a termination without cause or resignation for good reason following a change in control of IAC on December 31, 2015, in accordance with the applicable omnibus stock and annual incentive plans and the related award agreements, the vesting of all then outstanding and unvested stock options and RSUs held by Mr. Kip would have been accelerated.

Mr. Winiarski

Upon a termination without cause or resignation for good reason on December 31, 2015, pursuant to the terms of his employment agreement, Mr. Winiarski would have been entitled to:

·                  receive 12 months of his base salary, subject to the execution and non-revocation of a release and compliance with post-termination confidentiality, non-solicitation of employees (18 months), non- solicitation of business partners (12 months) and assignment of certain employee developments covenants, and subject to offset for any amounts earned from other employment during the severance period;

·                  the partial vesting of outstanding and unvested stock options and RSUs in amounts equal to the number that would have otherwise vested in accordance with the terms of such awards during the 12-month period following such termination of employment; and

·                  continue to have the ability to exercise his vested stock options through June 30, 2017.

No payments would have been made to Mr. Winiarski pursuant to any agreement between the Company and Mr. Winiarski upon a change in control of IAC on December 31, 2015. Upon a termination without cause or resignation for good reason following a change in control of IAC on December 31, 2015, in accordance with our omnibus stock and annual incentive plans and the related award agreements, the vesting of all then outstanding and unvested stock options and RSUs held by Mr. Winiarski would have been accelerated.

For Mr. Winiarski, “good reason” includes: (i) a material adverse change in his title, duties or level of responsibilities, (ii) a material reduction in his base salary, (iii) a material relocation of his principal place of employment outside of the New York City metropolitan area, and (iv) a material adverse change in reporting structure such that he is no longer reporting to a Company officer with a title of Executive Vice President or above that reports to the Company’s Chairman or Vice Chairman, in each case, without the written consent of Mr. Winiarski or that is not cured promptly after notice.

Name and Benefit

 

Termination of
Employment Without
Cause or Resignation
for Good Reason

 

Termination of Employment
Without Cause or
Resignation for Good
Reason During the Two
Year Period Following a
Change in Control of IAC

 

Barry Diller

 

 

 

 

 

Continued Salary

 

 

 

Market Value of stock options that would vest

 

 

 

Market Value of RSUs that would vest

 

 

 

Total Estimated Incremental Value

 

 

 

 

 

 

 

 

 

Joseph Levin

 

 

 

 

 

Continued Salary

 

 

 

Market Value of stock options that would vest(1)

 

 

$

536,806

(3)

Market Value of RSUs that would vest(2)

 

 

$

17,166,133

(4)

Total Estimated Incremental Value

 

 

$

17,702,939

 

 

 

 

 

 

 

 

Victor A. Kaufman

 

 

 

 

 

Continued Salary

 

 

 

Market Value of stock options that would vest

 

 

 

Market Value of RSUs that would vest(2)

 

$

374,712

(5)

$

707,749

(4)

Total Estimated Incremental Value

 

$

374,712

 

$

707,749

 

 

 

 

 

 

 

 

 

Jeffrey W. Kip

 

 

 

 

 

Continued Salary

 

$

575,000

(6)

$

575,000

(6)

Market Value of stock options that would vest(1)

 

762,694

(5)

$

977,055

(3)

Market Value of RSUs that would vest(2)

 

47,848

(7)

$

957,017

(4)

Total Estimated Incremental Value

 

1,385,542

 

$

2,509,072

 

 

 

 

 

 

 

 

Gregg Winiarski

 

 

 

 

 

Continued Salary

 

$

500,000

 

$

500,000

 

Market Value of stock options that would vest(1)

 

$

767,216

(7)

$

910,132

(3)

Market Value of RSUs that would vest(2)

 

$

318,986

(5)

$

638,031

(4)

Total Estimated Incremental Value

 

$

1,586,202

 

$

2,048,163

 


(1)                                 Represents the difference between the closing price of IAC common stock ($60.05) on December 31, 2015 and the exercise prices of all in-the-money stock options accelerated upon the occurrence of the relevant event specified above, multiplied by the number of stock options accelerated.

(2)                                 Represents the closing price of IAC common stock ($60.05) on December 31, 2015, multiplied by the number of RSUs accelerated upon the occurrence of the relevant event specified above.

(3)                                 Represents the value of stock options that would have vested upon a termination of employment without cause or resignation for good reason following a change in control of IAC on December 31, 2015 in accordance with the applicable omnibus stock and annual incentive plan and the related award agreements.

(4)                                 Represents the value of RSUs that would have vested upon a termination of employment without cause or resignation for good reason following a change in control of IAC on December 31, 2015 in accordance with the applicable omnibus stock and annual incentive plan and the related award agreements.

(5)                                 Represents the value of RSUs that would have otherwise vested during the 12-month period following: (i) a termination of employment without cause or resignation for good reason in the case of Messrs. Kaufman and Winiarski and (ii) a termination of employment without cause or voluntary resignation in the case of Mr. Kip, in each case, in accordance with the terms of these awards.

(6)                                 Represents continued salary payments that Mr. Kip would have been entitled to receive upon a termination of employment without cause or voluntary resignation on December 31, 2015.

(7)                                 Represents the value of stock options that would have otherwise vested during the 12-month period following (i) a termination of employment without cause or voluntary resignation in the case of Mr. Kip and (ii) a termination without cause or resignation for good reason in the case of Mr. Winiarski, in each case, in accordance with the terms of these awards.

DIRECTOR COMPENSATION

Non-Employee Director Compensation Arrangements.  The Nominating Committee has primary responsibility for establishing non-employee director compensation arrangements, which have been designed to provide competitive compensation necessary to attract and retain high quality non- employee directors and to encourage ownership of Company stock to further align the interests of our directors with those of our stockholders. Arrangements in effect during 2015 provided that: (i) each member of the Board receive an annual retainer in the amount of $50,000, (ii) each member of the Audit and Compensation and Human Resources Committees (including their respective Chairpersons) receive an additional annual retainer in the amount of $10,000 and $5,000, respectively, and (iii) the Chairpersons of each of the Audit and Compensation and Human Resources Committees receive an additional annual chairperson retainer in the amount of $20,000, with all amounts being paid quarterly, in arrears.

In addition, these arrangements also provide that each non-employee director receive a grant of RSUs with a dollar value of $250,000 upon his or her initial election to the Board and annually thereafter upon re-election on the date of IAC’s annual meeting of stockholders, the terms of which provide for: (i) vesting in three equal annual installments commencing on the first anniversary of the grant date, (ii) cancellation and forfeiture of unvested RSUs in their entirety upon termination of service for IAC and its affiliates and (iii) full acceleration of vesting upon a change in control of IAC. The Company also reimburses non-employee directors for all reasonable expenses incurred in connection with attendance at IAC Board and Board committee meetings.

Deferred Compensation Plan for Non-Employee Directors.  Under IAC’s Deferred Compensation Plan for Non-Employee Directors, non-employee directors may defer all or a portion of their Board and Board committee fees. Eligible directors who defer all or any portion of these fees can elect to have such deferred fees applied to the purchase of share units, representing the number of shares of IAC common stock that could have been purchased on the relevant date, or credited to a cash fund. If any dividends are paid on IAC common stock, dividend equivalents will be credited on the share units. The cash fund will be credited with deemed interest at an annual rate equal to the weighted average prime lending rate of JPMorgan Chase Bank. After a director ceases to be a member of the Board, he or she will receive: (i) with respect to share units, such number of shares of IAC common stock as the share units represent, and (ii) with respect to the cash fund, a cash payment in an amount equal to deferred amounts, plus accrued interest. These payments are generally made in a one lump sum installment after the relevant director leaves the Board and otherwise in accordance with the plan.

2015 Non-Employee Director Compensation.  The table below provides the amount of: (i) fees earned by non-employee directors for services performed during 2015 and (ii) the grant date fair value of RSU awards granted in 2015.

 

 

Fees Earned(1)

 

 

 

 

 

Name(4)

 

Fees Paid
in Cash
($)

 

Fees
Deferred
($)(2)

 

Stock
Awards($)(3)

 

Total($)(4)

 

Edgar Bronfman, Jr.

 

 

$

50,000

 

$

249,936

 

$

299,936

 

Chelsea Clinton

 

 

$

50,000

 

$

249,936

 

$

299,936

 

Michael D. Eisner

 

$

50,000

 

 

$

249,936

 

$

299,936

 

Bonnie S. Hammer

 

$

55,000

 

 

$

249,936

 

$

304,936

 

Bryan Lourd

 

 

$

60,000

 

$

249,936

 

$

309,936

 

David Rosenblatt

 

$

75,000

 

 

$

249,936

 

$

324,936

 

Alan G. Spoon

 

$

80,000

 

 

$

249,936

 

$

329,936

 

Alexander von Furstenberg

 

$

50,000

 

 

$

249,936

 

$

299,936

 

Richard F. Zannino

 

$

60,000

 

 

$

249,936

 

$

309,936

 


(1)                                 Fees earned by, and the grant date fair value of RSU awards granted to, a former director (Sonali De Rycker) in 2015 were $50,000 in fees earned and deferred and an IAC RSU award with a grant date fair value of $249,936.

(2)                                 Represents the dollar value of fees deferred in the form of share units by the relevant director under IAC’s Deferred Compensation Plan for Non-Employee Directors. Pursuant to the terms of the plan, share units are credited with the number of share units that could have been purchased with the dollar amount of ordinary cash dividends payable on the number of share units outstanding on the relevant dividend record date, with each share unit being treated as if it was one share of IAC common stock. Share units issued as credit for ordinary cash dividends paid are settled at the same time as the underlying share units (after the relevant director leaves the Board and otherwise in accordance with the plan).

Pursuant to the plan, share units held by each of Messrs. Bronfman, Lourd, Rosenblatt, Spoon and von Furstenberg and Mmes. Clinton and De Rycker during 2015 were credited with share units for ordinary cash dividends paid in 2015 with a value of approximately $30,482, $28,571, $7,095, $37,076, $4,756, $4,215 and $2,457, respectively.

(3)                                 Amounts presented represent the grant date fair value of these RSU awards, which was calculated using the closing price of IAC common stock on the grant date.

(4)                                 The differences in the amounts shown above among directors reflect, as applicable, committee service (or lack thereof), which varies among directors.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents, as of April 25, 2016, information relating to the beneficial ownership of IAC common stock and Class B common stock, by: (1) each person known by IAC to own beneficially more than 5% of the outstanding shares of IACwith ten votes per share and which are convertible into common stock and Class B common stock, (2) each current director, (3) each named executive and (4) all current directors and named executives of IAC ason a group.share for share basis. As of April 25, 2016, there were 73,971,410January 27, 2017, Mr. Diller, his spouse, Diane von Furstenberg, and 5,789,499 shares of IAC common stock and Class B common stock, respectively, outstanding.

Unless otherwise indicated, the beneficial owners listed below may be contacted at IAC’s corporate headquarters located at 555 West 18th Street, New York, New York 10011. For each listed person, the number of shares of IAC common stock and percent of such class listed assumes the conversion or exercise of any IAC equity securities owned by such person that are or will become convertible or exercisable, and the vesting of any stock options and/or RSUs that will vest, within 60 days of April 25, 2016, but does not assume the conversion, exercise or vesting of any such equity securities owned by any other person. Shares of IAC Class B common stock may at the option of the holder be converted on a one-for-one basis into shares of IAC common stock. The percentage of votes for all classes of capital stock is based on one vote for each share of IAC common stock and ten votes for each share of IAC Class B common stock.

 

 

IAC Common Stock

 

IAC Class B Common
Stock

 

Percent
of
Votes

 

Name and Address of Beneficial Owner

 

Number of
Shares Owned

 

% of
Class
Owned

 

Number of
Shares
Owned

 

% of
Class
Owned

 

(All
Classes)
%

 

The Vanguard Group

 

5,210,438

(1)

7.0

%

 

 

4.0

%

100 Vanguard Blvd.

 

 

 

 

 

 

 

 

 

 

 

Malvern, PA 19355

 

 

 

 

 

 

 

 

 

 

 

Barry Diller

 

5,937,020

(2)(3)

7.4

%

5,248,598

(3)

90.7

%

*

 

Edgar Bronfman, Jr.

 

69,410

(4)

*

 

 

 

*

 

Chelsea Clinton

 

18,769

(5)

*

 

 

 

*

 

Michael D. Eisner

 

28,039

(6)

*

 

 

 

*

 

Bonnie S. Hammer

 

2,260

(7)

*

 

 

 

*

 

Victor A. Kaufman

 

483,568

(8)

*

 

 

 

*

 

Jeffrey W. Kip

 

374,973

(9)

*

 

 

 

*

 

Joseph Levin

 

561,989

(10)

*

 

 

 

*

 

Bryan Lourd

 

13,104

(11)

*

 

 

 

*

 

David Rosenblatt

 

45,722

(12)

*

 

 

 

*

 

Glenn H. Schiffman

 

 

 

 

 

 

Alan G. Spoon

 

88,556

(13)

*

 

 

 

*

 

Mark Stein

 

298,073

(14)

*

 

 

 

*

 

Alexander von Furstenberg

 

594,123

(3)(15)

*

 

540,901

(3)

9.3

%

4.1

%

Diane von Furstenberg

 

5,385,309

(3)(16)

6.8

%

5,248,598

(3)

90.7

%

39.9

%

Gregg Winiarski

 

622,187

(17)

*

 

 

 

*

 

Richard F. Zannino

 

46,039

(18)

*

 

 

 

*

 

All current named executives and directors as a group (15 persons)

 

9,183,832

 

11.1

%

5,789,499

(3)

100

%

45.1

%


*                                         The percentage of shareshis stepson, Alexander von Furstenberg, collectively beneficially owned does not exceed 1% of the class.

(1)                                 Based upon information regarding IAC holdings reported by way of Amendment No. 3 to a Schedule 13G filed by The Vanguard Group (“Vanguard”) with the SEC on February 11, 2016. Vanguard beneficially owns the IAC holdings disclosed in the table above in its capacity as an investment adviser and investment manager. Vanguard has sole voting power, shared voting power, sole dispositive power and shared dispositive power over 55,931, 4,300, 5,154,907 and 55,531 shares of IAC common stock, respectively, listed in the table above.

(2)                                 Consists of: (i) (A) 5,248,5985,789,499 shares of IAC Class B common stock (which are convertible on a one-for-one basis into shares of IAC common stock) and (B) 136,711 shares of IAC common stock, all of which arewere held by two grantor retained annuityin trusts and over whichfor the benefit of Mr. Diller has sole investment power and Mr. Diller’s spouse, Diane von Furstenberg, has sole voting power, (ii)certain members of his family, and 1,711 shares of IAC common stock held by a private foundation as to which Mr. Diller disclaims beneficial ownership and (iii) vested options to purchase 550,000 sharesfoundation. As of IAC common stock.

(3)                                 The total number of shares of Class B common stock outstanding on April 26, 2015 includes : (i) 5,248,598 shares held by two grantor retained annuity trusts over which Mr. Diller has sole investment power and over which Ms. Von Furstenberg has sole voting power and (ii) 540,901 shares over which Mr. Von Furstenberg has sole voting and investment power.

(4)                                 Consists of: (i) 59,621 shares held directly by Mr. Bronfman, (ii) 5,375 shares of IAC common stock held forthat date, the benefit of Mr. Bronfman in an individual retirement account, (iii) 2,125 shares of IAC common stock held by Mr. Bronfman in his capacity as custodian for his minor children and (iv) 2,289 shares of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service. Mr. Bronfman disclaims beneficial ownership of the shares of IAC common stock described in (iii) above.

(5)                                 Consists of: (i) 16,480 shares of IAC common stock held directly by Ms. Clinton and (ii) 2,289 shares of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service.

(6)                                 Consists of: (i) 25,750 shares of IAC common stock held directly by Mr. Eisner and (ii) 2,289 shares of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service.

(7)                                 Consists of: (i) 1,182 shares of IAC common stock held directly by Ms. Hammer and (ii) 1,078 shares of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service.

(8)                                 Consists of: (i) 92,597 shares of IAC common stock held directly by Mr. Kaufman and (ii) vested options to purchase 390,971 shares of IAC common stock.

(9)                                 Consists of: (i) 30,000 shares of IAC common stock held directly by Mr. Kip, (ii) vested options to purchase 320,503 shares of IAC common stock and (iii) (A) options to purchase 16,502 shares of IAC common stock vesting, and (B) 7,968 shares of IAC common stock to be received upon the vesting of RSUs, in each case, in the next 60 days, subject to continued service.

(10)                          Consists of: (i) 24,489 shares of IAC common stock held directly by Mr. Levin, (ii) vested options to purchase 487,500 shares of IAC common stock and (iii) options to purchase 50,000 shares of IAC common stock vesting in the next 60 days, subject to continued service.

(11)                          Consists of: (i) 10,815 shares of IAC common stock held directly by Mr. Lourd and (ii) 2,289 shares of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service.

(12)                          Consists of: (i) 43,433 shares of IAC common stock held directly by Mr. Rosenblatt and (ii) 2,289 shares of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service.

(13)                          Consists of: (i) 86,267 shares of IAC common stock held directly by Mr. Spoon and (ii) 2,289 shares of IAC common stock to be received upon the vesting of IAC RSUs in the next 60 days, subject to continued service.

(14)                          Consists of: (i) 21,250 shares of IAC common stock held directly by Mr. Stein and (ii) vested options to purchase 276,823 shares of IAC common stock.

(15)                          Consists of: (i) 540,901 shares of IAC Class B common stock (which are convertible on a one-for-one basis into sharesbeneficially owned by Mr. Diller and certain members of IAChis family collectively represented 100% of IAC’s outstanding Class B common stock) held a family trust, over which Mr. von Furstenberg has sole votingstock and, investment power, (ii) 50,933together with the shares of IAC common stock held directlyalso beneficially owned by Mr. von Furstenberg and (iii) 2,289 sharesthese individuals, represented approximately 44.7% of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service.

(16)                          Consists of: (i) 5,248,598 shares of IAC Class B common stock (which are convertible on a one-for-one basis into shares of IAC common stock) and (ii) 136,711 shares of IAC common stock, all of which are held by two grantor retained annuity trusts (the same trusts referred to in footnote (2) above) and over which Ms. Von Furstenberg has soletotal outstanding voting power andof IAC. Mr. Diller has sole investment power.

(17)                          Consists of: (i) 21,372 shares of IAC common stock held directly by Mr. Winiarski, (ii)also holds 550,000 vested options and 750,000 unvested options to purchase 584,502 shares of IAC common stock and (iii) (A) options to purchase 11,001 shares of IAC common stock vesting, and (B) 5,312 shares of IAC common stock to be received upon the vesting of RSUs, in each case, in the next 60 days, subject to continued service.

(18)                          Consists of: (i) 43,750 shares of IAC common stock held directly by Mr. Zannino and (ii) 2,289 shares of IAC common stock to be received upon the vesting of RSUs in the next 60 days, subject to continued service.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table summarizes information, as of December 31, 2015, regarding IAC equity compensation plansstock.


In addition, pursuant to which grants of IAC stock options, IAC RSUs or other rights to acquire shares of IAC common stock may be made from time to time.

Plan Category

 

Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and
Rights(1)
(A)

 

Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
(B)

 

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding
Securities Reflected
in Column (A))
(C)

 

Equity compensation plans approved by security holders(2)

 

8,594,341

(3)

$

52.13

 

4,684,340

(4)

Equity compensation plans not approved by security holders

 

 

 

 

Total

 

8,594,341

(3)

$

52.13

 

4,684,340

(4)


(1)                                 Information excludes 6,401,414 shares that have been reserved and may be issuable upon the settlement of subsidiary-level phantom equity awards (without giving effect to the withholding of shares to cover taxes due) that relate to subsidiaries of IAC and Match Group, Inc. (“Match Group”), based on the estimated values of such awards as of December 31, 2015. For a description of these awards, see the discussion under the caption “Equity Instruments Denominated in the Shares of Certain Subsidiaries” in Note 12 to the consolidated financial statements in our Form 10-K for the fiscal year ended December 31, 2015, which is incorporated herein by reference.

Following the completion of Match Group’s initial public offering in November 2015, subsidiary-level phantom equity awards that relate to Match Group subsidiaries are settleable, at IAC’s election, in shares of IAC common stock or Match Group common stock. To the extent that shares of IAC common stock are issued in settlement of these awards, Match Group will reimburse IAC for the cost of those shares by issuing IAC additional shares of Match Group common stock. As of December 31, 2015, 4,101,657 shares of IAC common stock (included within the 6,401,414 shares of IAC common stock disclosed above) would have been issuable upon the settlement of subsidiary-level phantom equity awards that relate to Match Group subsidiaries.

The number of shares ultimately needed to settle subsidiary-level phantom equity awards can vary from the estimated numbers disclosed above as a result of both movements in our stock price and determinations of the fair value of the relevant subsidiaries that differ from our estimated determinations of the fair value of such subsidiaries as of December 31, 2015.

(2)                                 Includes the 2013 and 2008 Stock and Annual Incentive Plans (both of which have been approved by security holders). For a description of our stock and annual incentive plans, see the first two paragraphs of Note 12 to the consolidated financial statements in our Form 10-K for the fiscal year ended December 31, 2015, which are incorporated herein by reference.

(3)                                 Includes an aggregate of: (i) up to 1,311,399 shares issuable upon the vesting of IAC RSUs (including performance-based RSU awards, with the total number of shares included above assuming the maximum potential payout); and (ii) 7,282,942 shares issuable upon the exercise of outstanding IAC stock options, in each case, as of December 31, 2015.

(4)                                 Reflects 11,085,754 shares that remain available for future issuance under the plans described in footnote 2 above less an aggregate of 6,401,414 shares that have been reserved and may be issuable upon the settlement of the subsidiary-level phantom equity awards discussed in footnote1 above.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Review of Related Person Transactions

The Audit Committee has a formal, written policy that requires an appropriate review of all related person transactions by the Audit Committee, as required by Marketplace Rules governing conflict of interest transactions. For purposes of this policy, as amended, consistent with the Marketplace Rules, the terms “related person” and “transaction” are determined by reference to Item 404(a) of Regulation S-K under the Securities Act of 1933, as amended (“Item 404”). During 2015, in accordance with this policy, Company management was required to determine whether any proposed transaction, arrangement or relationship with a related person fell within the definition of “transaction” set forth in Item 404, and if so, review such transaction with the Audit Committee. In connection with such determinations, Company management and the Audit Committee consider: (i) the parties to the transaction and the nature of their affiliation with IAC and the related person, (ii) the dollar amount involved in the transaction, (iii) the material terms of the transaction, including whether the terms of the transaction are ordinary course and/or otherwise negotiated at arms’ length, (iv) whether the transaction is material, on a quantitative and/or qualitative basis, to IAC and/or the related person and (v) any other facts and circumstances that Company management or the Audit Committee deems appropriate.

Relationships Involving Significant Stockholders, Named Executives and Directors

Relationships Involving Mr. Diller.  Pursuant to an amended and restated governance agreement between IAC and Mr. Diller, for so long as Mr. Diller serves as IAC’s Chairman and Senior Executive and he beneficially owns (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) at least 5,000,000 shares of IAC Class B common stock and/or common stock in which he has a pecuniary interest (including IAC securities beneficially owned by him directly and indirectly through trusts for the benefit of him and certain members of his family), he generally has the right to consent to limited matters in the event that IAC’s ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds four to one over a continuous twelve-month period.

As a result of IAC securities beneficially owned by Mr. Diller and certain members of his family, Mr. Diller and these family members are, collectively, currently in a position to influence, subject to our organizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcome of corporate actions requiring shareholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions.

DESCRIPTION OF IAC BUSINESSES
Match Group
Overview
Our Match Group segment includes the dating and non-dating businesses of Match Group, Inc. (“Match Group”), which completed its initial public offering on November 24, 2015. As of December 31, 2016, IAC’s ownership interest and voting interest in Match Group were 82.5% and 97.9%, respectively.
Services
Dating. Through Match Group, we operate a dating business that consists of a portfolio with over 45 brands, available in 42 languages, and offered in over 190 countries, including the following key brands: Match, Tinder, PlentyOfFish, Meetic, OkCupid, Pairs, Twoo, OurTime, BlackPeopleMeet and LoveScout24. We operate a North America dating business, which includes Match, Tinder, PlentyOfFish, OkCupid, our various affinity brands and other dating businesses operating within the United States and Canada, and an International dating business, which includes Meetic, Pairs, Twoo, the international operations of Tinder and PlentyOfFish and all other dating businesses operating outside of the United States and Canada.
Through the brands within our dating business, we are a leading provider of membership-based and ad-supported dating products servicing North America, Western Europe and many other regions around the world. We provide these services through websites and applications that we own and operate.
All of our dating products enable users to establish a profile and review other people’s profiles without charge. Each product also offers additional features, some of which are free, and some of which require payment depending on the particular product. In 2001,general, access to premium features requires a paid membership, which is typically offered in packages (primarily ranging from one month to six months), depending on the product and circumstance. Prices differ meaningfully within a given brand by the duration of membership purchased, by the bundle of paid features that a user chooses to access, and by whether or not a customer is taking advantage of any special offers. In addition to paid memberships, many of our dating products offer users the ability to promote themselves for a given period of time, or to review certain profiles without any signaling to other members, and these features are offered on a pay‑per‑use basis. The precise mix of paid and premium features is established over time on a brand‑by‑brand basis and is constantly subject to iteration and evolution.
Non-Dating. In addition to our dating business, we also operate a non‑dating business through Match Group’s ownership of The Princeton Review, which provides a variety of educational test preparation, academic tutoring and college counseling services. The Princeton Review includes Tutor.com (acquired in 2012) and The Princeton Review (acquired in 2014). In January 2017, Match Group entered into a definitive agreement to sell The Princeton Review to ST Unitas, a global education technology company. The transaction is expected to close in the first half of 2017.
Revenue
The substantial majority of the Match Group segment’s revenue is attributable to the dating business. Dating business revenue is substantially derived directly from users in the form of recurring membership fees for subscription-based online personals and related services. Revenue is also earned from online advertising, the purchase of à la carte features and offline events. Non-dating revenue consists primarily of fees received directly from students for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services.
Marketing
We attract the majority of users of our dating products through word‑of‑mouth and other free channels. In addition, many of our brands rely on paid customer acquisition for a significant percentage of their users. Our online marketing activities generally consist of purchasing banner and other display advertising, search engine marketing, e-mail campaigns and business development or partnership deals. Our offline marketing activities generally consist of television advertising and related public relations efforts, as well as events.
Competition
The dating industry is competitive and has no single, dominant brand globally. We compete with a number of other companies that provide similar dating and matchmaking products. In addition to other online dating brands, we compete indirectly with offline dating services, such as in‑person matchmakers, and social media platforms. Arguably, our biggest competition in the case of our dating business comes from the traditional ways that people meet each other, and the choices some people make to not utilize dating products or services.

We believe that our ability to compete successfully in the case of our dating business will depend primarily upon the following factors:
our ability to increase consumer acceptance of dating products;
the continued strength of Match Group’s brands;
the breadth and depth of Match Group’s active communities of users relative to those of its competitors;
our ability to evolve our dating products in response to competitors’ offerings, user requirements, social trends and the technological landscape;
our ability to efficiently acquire new users for our dating products;
our ability to continue to optimize our monetization strategies; and
the design and functionality of our dating products.
HomeAdvisor
Overview
HomeAdvisor is a leading global home services digital marketplace that helps connect consumers with home professionals in North America, as well as in France, the Netherlands and Italy under various brands. In November 2016, HomeAdvisor acquired a controlling interest in MyHammer Holding AG, the leading home services marketplace in Germany.
As of December 31, 2016, HomeAdvisor’s domestic network of home services professionals consisted of approximately 143,000 paying professionals in the United States providing services in more than 500 categories ranging from simple home repairs to larger home remodeling projects. HomeAdvisor generated approximately 13.2 million domestic service requests from homeowners during the year ended December 31, 2016. HomeAdvisor also operates Felix, a pay-per-call advertising service, CraftJack, a lead generation service, and mHelpDesk, a provider of cloud based field service software for small to mid-size businesses.
Consumer Services
Matching Services. When a consumer submits a request through the HomeAdvisor marketplace, we generally match that consumer with up to four home services professionals from our network based on the type of services desired and the consumer’s location. Consumers can then review profiles of home services professionals with whom they have been matched and select the professional whom they believe best meets their specific needs. In addition to (or in lieu of) submitting a request through our marketplace, consumers can also search, select and contact home service professionals directly through our online directory. In all cases, the consumer is under no obligation to work with home service professionals referred by or found through HomeAdvisor.
On-Demand Services. HomeAdvisor also provides two on-demand services that complement its matching services: Instant Booking and Instant Connect (patent-pending). Through Instant Booking, consumers can schedule appointments for select home tasks on-demand with a pre-screened home services professional instantly across our platforms (website or mobile application), and through Instant Connect, consumers can connect with a home services professional instantly via phone.
Other Services. In addition to matching and on-demand services, consumers can access our free, online True Cost Guide, which provides project cost information for more than 400 project types on a local basis, as well as an online library of home services‑related resources, which primarily includes articles about home improvement, repair and maintenance, tools to assist consumers with the research, planning and management of their projects and general advice for working with home services professionals.
Consumers can also access HomeAdvisor services and tools on iOS and Android devices (including the Apple Watch®) and through HomeAdvisor's mobile application, as well as access its Instant Connect service through Amazon's Echo product.
Subscription Services for Home Services Professionals
Home services professionals who are new to HomeAdvisor must sign up for an annual membership package. Our basic annual membership package includes membership in our network of home services professionals, as well as a listing in our online directory and matches through the marketplace. As of December 31, 2016, approximately 93% of the approximately 143,000 domestic paying home services professionals within our network had purchased a membership package. We also offer subscription products that include custom website and mobile development and hosting services, as well as integration with mHelpDesk.

Revenue
The HomeAdvisor segment’s revenue is primarily derived from fees paid by home services professionals for consumer matches (regardless of whether the professional ultimately provides the requested service), subscription fees and fees for website hosting services. Fees for matches vary based upon the service requested, type of match and where the service is provided.
Marketing
We market our services to consumers primarily through television advertising, as well as through search engine marketing and affiliate agreements with third parties. Pursuant to these agreements, third parties agree to advertise and promote our services and those of our home services professionals on their websites and we agree to pay them a fixed fee when visitors from their websites submit a valid service request through our website (on a cost-per-acquisition basis) or click through to our website (on a cost-per-click basis). We also market our services to consumers through e-mails, digital display advertisements, partnerships with other contextually related websites and, to a lesser extent, through direct mail and radio advertising. We market our subscription packages to home services professionals primarily through our sales force, as well as through search engine marketing, digital media advertising and direct relationships with trade associations.
Competition
We compete with home services-related lead generation services, as well as Internet search engines and directories and with other forms of local advertising, including radio, direct marketing campaigns, yellow pages, newspapers and other offline directories. We also compete with local and national retailers of home improvement products that offer or promote installation services. We believe that our ability to compete successfully will depend primarily upon the following factors:
the size, quality (as determined, in part, by reference to our pre-screening efforts and customer ratings and reviews), diversity and stability of our network of home services professionals and the quality of the services they provide;
our continued ability to deliver service requests that convert into revenue for our network of home services professionals in a cost-effective manner;
whether our subscription products resonate with (and provide value to) our home services professionals;
the functionality of our websites and mobile applications and the attractiveness of their features and our services generally to consumers and home services professionals, as well as our ability to introduce new products and services that resonate with consumers and home services professionals; and
our ability to build and maintain awareness of (and loyalty to) the HomeAdvisor brand.
Video
Overview
Our Video segment consists primarily of Vimeo, Electus, CollegeHumor, Notional, IAC Films and Daily Burn.
Vimeo
Services. Vimeo operates a global video sharing platform for creators and their audiences. Through Vimeo, we offer video creators simple, professional grade tools to share, manage, distribute and monetize content online, and provide viewers with a clutter-free environment to watch content across a variety of Internet-enabled devices, including mobile devices and connected television platforms. We offer these basic services free of charge.
We also offer premium services through subscription products, which provide paying subscribers with various levels of premium features, including: additional video storage space, advanced video privacy controls, extensive video player customization options, team collaboration, review and workflow tools, e-mail lead generation, premium support and the ability to sell videos and OTT video channels (through VHX, a platform for premium OTT subscription video channels that we acquired in 2016), directly to consumers. As of December 31, 2016, Vimeo had approximately 768,000 paid subscribers and reached over 240 million unique users worldwide.
We also provide on-demand services through which video creators can sell videos they create to consumers. As of December 31, 2016, our on-demand services featured over 60,000 titles in a variety of genres from more than 15,000 creators and sold titles to more than 2.8 million consumers. Titles are added to our Video On Demand marketplace by video creators through direct uploads to www.vimeo.com and through negotiated agreements with content owners, producers and distributors to acquire titles.

We also provide tools through which video owners and distributors can offer branded, over-the-top (OTT) video channels directly to consumers. Video owners and distributors can offer their content on a subscription or à la carte basis through applications for all major mobile and set top box platforms.
Marketing. We market Vimeo’s services primarily through online marketing efforts, including search engine marketing, social media, e-mail campaigns, display advertising and affiliate marketing, as well as through offline advertising and upgrade channels on the Vimeo platform (website and mobile application).
Revenue. Vimeo revenue is derived primarily from subscription fees and, to a lesser extent, from video sales and OTT service fees.
Competition. Vimeo competes with a variety of online video providers, including those that serve video creators and consumers through advertising-supported, subscription or transactional fee models. We believe that Vimeo differentiates itself from its competitors by offering a customizable, high definition video player, proprietary uploading and encoding infrastructure and a clutter-free viewing experience (advertisements are not placed in video streams on www.vimeo.com). We believe that our ability to compete successfully will depend primarily on:
the quality of our technology platform and the viewing and production experiences we provide consumers and video creators and distributors across Internet-connected devices (desktop, mobile and television);
whether our subscription and OTT offerings resonate with video creators and distributors;
our ability to attract high-quality content, both for free and fee-based viewing;
the accessibility of our videos on search engines and social media platforms;
the recognition and strength of the Vimeo brand relative to those of our competitors; and
our ability to drive new subscribers and viewers to our platform through various forms of direct advertising.
Electus
Services. Through Electus, we provide production and producer services for both unscripted and scripted television, feature film and digital content, primarily for initial sale and distribution in the United States. Our content is distributed on a wide range of platforms, including broadcast television, premium and basic cable television, subscription-based and ad-supported video-on-demand services and through theatrical releases and other outlets. We sell and distribute Electus programming and other content, together with programming and other content developed by third parties, outside of the United States through Electus International. We also work with various brands to integrate their products into, as well as sponsor, Electus content through our Content Marketing team.
In addition, we operate Electus Digital, which consists of the following websites and properties: CollegeHumor.com, Dorkly.com and WatchLOUD.com; YouTube channels WatchLOUD, Nuevon and Hungry; and Big Breakfast (a production company). The various brands and businesses within Electus Digital specialize in creating content for digital, television and feature film platforms across a variety of genres, as well as provide branded and third party creative production services. Through Electus, we also operate Notional.
Revenue. Electus revenue is derived primarily from media production and distribution and display advertising.
Marketing. We do not engage in any formal marketing efforts in the case of our production and executive producer services, instead relying on referrals and the quality of our services and projects. For content distribution, we rely on our sales force, referrals and the quality of our services and projects, and for international distribution only, attendance at industry trade shows. In addition, the platforms to which we license our content for distribution market our content through their own independent marketing efforts. Electus Digital attracts users and audience primarily through social media, search engine marketing and affiliate agreements.
Competition. We compete with entertainment studios, production companies, distribution companies, creative agencies and content websites. We believe that our ability to compete successfully will depend primarily upon the following factors:
the quality and diversity of our content and the third parties to whom we license our content, as well as the quality of the services provided by licensees of our content;
our continued ability to create new content that resonates with licensees and viewers; and
our ability to sell integration and sponsorship opportunities for our content.
Daily Burn
Services. Daily Burn is a health and fitness property that provides streaming fitness and workout videos across a variety of platforms, including iOS, Android, Roku and other Internet-enabled television platforms.

Revenue. Daily Burn’s revenue consists primarily of subscription fees.
Marketing. We market our streaming fitness and workout videos primarily through television advertising, advertising on ad-supported video-on-demand services and content platforms and search engine marketing.
Competition. The fitness and workout market is highly competitive and barriers to entry, particularly in the case of online platforms, are minimal. We compete primarily with other streaming fitness and workout platforms and, to a lesser extent, fitness and workout DVDs.

Applications    
Overview
Our Applications segment consists of:
Consumer, which includes our direct-to-consumer downloadable desktop applications, Apalon, which houses our mobile applications, and SlimWare; and
Partnerships, which includes our business-to-business partnership operations.
Consumer
Through our Consumer business, we develop, market and distribute a variety of applications, including desktop applications that are tailored to a number of specific online uses and through which users can access search services. The majority of our applications are browser extensions, which consist of a browser tab page and related technology that together enable users to run search queries directly from their web browsers. Many of our browser extensions are coupled with other applications that we have developed that provide users with access to various forms of content and software capabilities. These applications include: FromDoctoPDF, through which users can convert documents from one format into various others and share them across multiple platforms; MapsGalaxy, through which users can access accurate street maps, local traffic conditions and aerial and satellite street views; and WeatherBlink, through which users can access local weather conditions and satellite radar maps directly from their web browsers. Other applications target users with a special or passionate interest in select vertical categories (such as recipes, entertainment and religion, among others) or provide users with particular reference information or access to specific capabilities (such as internet speed and package tracking, among others). We distribute our utility applications directly to consumers free of charge.
Apalon is an award-winning mobile development company with one of the largest and most popular portfolios of mobile applications worldwide. SlimWare is a provider of community-powered software and services that clean, repair, update and optimize personal computers.
Partnerships
Through our Partnerships business, we work closely with partners in the software, media and other industries to design and develop customized browser‑based search applications to be bundled and distributed with these partners’ products and services.
Revenue
Substantially all of the Applications segment's revenue consists of advertising revenue generated principally through the display of paid listings in response to search queries. Paid listings are advertisements displayed on search results pages that generally contain a link to advertiser websites. Paid listings are generally displayed based on keywords selected by advertisers. The substantial majority of the paid listings displayed by our Applications businesses are supplied to us by Google Inc. ("Google") in the manner provided by and pursuant to a services agreement with Google, which expires on March 31, 2020. The Company may choose to terminate this agreement effective March 31, 2019.
Pursuant to this agreement, those of our Applications businesses that provide search services transmit search queries to Google, which in turn transmits a set of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occurs independently of, but concurrently with, the generation of algorithmic search results for the same search queries. Google paid listings are displayed separately from algorithmic search results and are identified as sponsored listings on search results pages. Paid listings are priced on a price per click basis and when a user submits a search query through one of our Applications businesses and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with us. We recognize paid listing revenue from Google when it delivers the user's click. In cases where the user’s click is generated due to the efforts of a third party distributor, we recognize the amount due from Google as revenue and record a revenue share or other payment obligation to the third party distributor as traffic acquisition costs. See “Item 1A-Risk Factors-We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition and results of operations.”
To a significantly lesser extent, the Applications segment's revenue also consists of fees related to subscription downloadable applications, fees related to paid mobile downloadable applications and display advertisements.
Competition
We compete with a wide variety of parties in connection with our efforts to develop, market and distribute applications and related technology directly and through third parties. Competitors of our Applications businesses include Google, Yahoo!,

Bing and other third party browser extension, convenience search and applications providers and other search technology and convenience service providers.
Moreover, some of the current and potential competitors of our Applications businesses have longer operating histories, greater brand recognition, larger customer bases and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparatively greater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products and services relative to those offered by us.
We believe that the ability of our Applications businesses to compete successfully will depend primarily upon our continued ability to:
create browser extensions and other applications that resonate with consumers (which requires that we continue to bundle attractive features, content and services, some of which may be owned by third parties, with quality search services);
maintain industry-leading monetization solutions for our applications;
differentiate our browser extensions and other applications from those of our competitors (primarily through providing customized browser tab pages and access to multiple search and other services through our browser extensions);
secure cost-effective distribution arrangements with third parties; and
market and distribute our browser extensions and other applications directly to consumers in a cost-effective manner.
Publishing
Overview
Our Publishing segment consists of:
our Premium Brands business, which includes About.com, Dictionary.com, Investopedia and The Daily Beast; and
our Ask & Other business, which primarily includes Ask.com and CityGrid.
Our Publishing businesses publish digital content and/or provide search services to users. Those of our Publishing businesses that publish digital content (our Premium Brands) generate such content through various sources, including, for example, through a network of “experts” in the case of About.com and internal editorial staff in the case of The Daily Beast, and/or acquire such content (or the rights to publish such content) from third parties. Those of our Publishing businesses that provide search services generally generate and display of a set of algorithmic search results, or hyperlinks to websites deemed relevant to search queries entered by users. In addition to these algorithmic search results, paid listings are also generally displayed in response to search queries. The paid listings displayed by our Publishing businesses are supplied to us by Google in the manner provided by and pursuant to our services agreement with Google, which is described above.
Premium Brands
Our Premium Brands business primarily consists of the following destination websites:
About.com, which provides detailed information and content written by independent, freelance subject matter experts;
Dictionary.com, which primarily provides online and mobile dictionary, thesaurus and reference services;
Investopedia, a resource for investment and personal finance education and information; and
The Daily Beast, a website dedicated to news, commentary, culture and entertainment that curates and publishes existing and original online content from its own roster of contributors in the United States.
During 2016, About.com evolved from a general content website to a collection of vertical brands by transitioning content from the various network channels on its general content website to stand-alone vertical domains, each with its own unique branding and user experience. To date, content from four network channels (specifically, Health, Money, Tech, and Home) has been transitioned to four verticals (Verywell.com, TheBalance.com, Lifewire.com and TheSpruce.com, respectively). We currently intend to launch additional verticals in 2017.

Ask & Other
Our Ask & Other business consists primarily of:
Ask.com, which provides general search services, as well as question and answer services that provide direct answers to natural-language questions; and
CityGrid, an advertising network that integrates local content and advertising for distribution to affiliated and third party publishers across web and mobile platforms.
Revenue
The Publishing segment's revenue consists principally of advertising revenue, which is generated primarily through the display of paid listings in response to search queries, display advertisements (sold directly and through programmatic ad sales) and fees related to paid mobile downloadable applications. The substantial majority of the paid listings that our Publishing businesses display are supplied to us by Google in the manner provided by and pursuant to our services agreement with Google, which is described above.
Competition
We compete with a wide variety of parties in connection with our efforts to attract and retain users and advertisers to our Publishing businesses.
In terms of publishing digital content, our competitors include destination websites that primarily acquire traffic through paid and algorithmic search results in relevant vertical categories and social channels. In terms of providing search services, generally our competitors include Google, Yahoo!, Bing and other destination search websites and search‑centric portals (some of which provide a broad range of content and services and/or link to various desktop applications).
Moreover, some of the current and potential competitors of our Publishing businesses have longer operating histories, greater brand recognition, larger customer bases and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparatively greater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products and services relative to those offered by us.
We believe that the ability of our Publishing businesses to compete successfully will depend primarily upon:
the quality of the content and features on our various Publishing platforms (websites and mobile applications), and the attractiveness of the services provided by these platforms generally, relative to those of our competitors;
our ability to successfully generate and acquire content (or the rights thereto) in a cost-effective manner;
the relevance and authority of the content, search results and answers featured on our various Publishing platforms; and
our ability to successfully market the content and search services offered by our Publishing businesses in a cost-effective manner.
Other
Our Other segment consisted of ShoeBuy, an Internet retailer of footwear and related apparel and accessories, and PriceRunner, a shopping comparison website. PriceRunner was sold in March 2016 and ShoeBuy was sold in December 2016.
Employees
As of December 31, 2016, IAC and its subsidiaries employed approximately 5,800 full-time employees and approximately 3,300 part-time employees. Substantially all of our part-time employees are employed by Match Group's non-dating businesses and perform academic tutoring, test preparation and college counseling services. IAC believes that it generally has good employee relationships.
Additional Information
Company Website and Public Filings.    The Company maintains a website at www.iac.com. Neither the information on the Company’s website, nor the information on the website of any IAC business, is incorporated by reference into this annual report, or into any other filings with, or into any other information furnished or submitted to, the SEC.

The Company makes available, free of charge through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (including related amendments) as soon as reasonably practicable after they have been electronically filed with (or furnished to) the SEC.
Code of Ethics.    The Company’s code of ethics applies to all employees (including IAC’s principal executive officers, principal financial officer and principal accounting officer) and directors and is posted on the Investor Relations section of the Company's website at www.iac.com/Investors under the "Code of Ethics" tab. This code of ethics complies with Item 406 of SEC Regulation S-K and the rules of The Nasdaq Stock Market LLC. Any changes to the code of ethics that affect the provisions required by Item 406 of Regulation S-K, and any waivers of such provisions of the code of ethics for IAC’s executive officers, senior financial officers or directors, will also be disclosed on IAC’s website.
Item 1A.    Risk Factors
Cautionary Statement Regarding Forward-Looking Information
This annual report on Form 10-K 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,” “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 expectations and assumptions about future events as of the date of this annual report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Actual results could differ materially from those contained in these forward‑looking statements for a variety of reasons, including, among others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect IAC’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward‑looking statements discussed in this annual 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 annual report. IAC does not undertake to update these forward‑looking statements.
Risk Factors
Mr. Diller and certain members of his family collectively have sole voting and/or investment power over a significant percentage of the voting power of our stock. As a result, Mr. Diller and these family members are able to exercise significant influence over the composition of our Board of Directors, matters subject to stockholder approval and our operations.
As of January 27, 2017, Mr. Diller, his spouse, Diane von Furstenberg, and his stepson, Alexander von Furstenberg, collectively beneficially owned 5,789,499 shares of IAC Class B common stock and 136,711 shares of IAC common stock, all of which were held in trusts for the benefit of Mr. Diller and certain members of his family, and 1,711 shares of IAC common stock held by a private foundation. As of that date, the shares of IAC Class B common stock beneficially owned by Mr. Diller and certain members of his family collectively represented 100% of IAC’s outstanding Class B common stock and, together with the shares of IAC common stock also beneficially owned by these individuals, represented approximately 44.7% of the total outstanding voting power of IAC. Mr. Diller also holds 550,000 vested options and 750,000 unvested options to purchase IAC common stock.
In addition, pursuant to an amended and restated governance agreement between IAC and Mr. Diller, entered into an agreement with respect to the construction of a screening room on Mr. Diller’s property to assistfor so long as Mr. Diller in connection with Company-related activities. Construction costs of approximately $1.8 million were paid by the Company and the agreement provides that under certain circumstances, including upon the termination of Mr. Diller’s employment by IAC or its affiliates, Mr. Diller shall have the option to pay to IAC an amount equal to the depreciated book value of the construction costs to acquire the facilities.

As discussed in the Compensation Discussion and Analysis on page 13, pursuant to the Company’s Airplane Travel Policy, Mr. Diller is required to travel by Company-owned or chartered aircraft for both business and personal use. Mr. Diller reimbursed IAC approximately $350,000 for personal use of Company-owned aircraft in 2015.

Relationships Involving Other Directors.  During 2015, an IAC business was billed for data licensing services provided by infoGroup, Inc. (“infoGroup”) in the aggregate amount of approximately $500,000. infoGroup is a portfolio company of CCMP Capital Advisors, LLC, of which Mr. Zannino is a Managing Director and member of the firm’s Investment Committee. The agreement pursuant to which the IAC business made these payments was entered into by the parties before Mr. Zannino began serving on the Board and before CCMP acquired infoGroup.

Relationships Involving IAC and Expedia

Overview.  Since the completion of the spin-off of Expedia in August 2005 (the “Expedia Spin-Off”), IAC and Expedia have been related parties since they are under common control. In connection with and following the Expedia Spin-Off, IAC and Expedia entered into certain arrangements, including arrangements regarding the sharing of certain costs, the use and ownership of certain aircraft and various commercial agreements, certain of which are generally described below.

Cost Sharing Arrangements.  Mr. Diller currently serves as IAC’s Chairman and Senior Executive and he beneficially owns (within the meaning of bothRule 13d-3 of the Securities Exchange Act of 1934) at least 5,000,000 shares of IAC Class B common stock and/or common stock in which he has a pecuniary interest (including IAC securities beneficially owned by him directly and Expedia. In connection with the Expedia Spin-Off, IAC and Expedia had agreed, in light of Mr. Diller’s senior role at both companies and his anticipated use of certain resources toindirectly through trusts for the benefit of both companies,him and certain members of his family), he generally has the right to consent to limited matters in the event that IAC’s ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds four to one over a continuous twelve-month period.

As a result of IAC securities beneficially owned by Mr. Diller and certain members of his family, Mr. Diller and these family members are, collectively, currently in a position to influence, subject to our organizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcome of corporate actions requiring shareholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions. In addition, this concentration of investment and voting power could discourage others from initiating a potential merger, takeover or other change of control transaction that may otherwise be beneficial to IAC, which could adversely affect the market price of IAC securities.

We depend on our key personnel.
Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled individuals, with the continued contributions of our senior management being especially critical to our success. Competition for well-qualified employees across IAC and its various businesses is intense and our continued ability to compete effectively depends, in part, upon our ability to attract new employees. While we have established programs to attract new employees and provide incentives to retain existing employees, particularly our senior management, we cannot assure you that we will be able to attract new employees or retain the services of our senior management or any other key employees in the future. Effective succession planning is also important to our future success. If we fail to ensure the effective transfer of senior management knowledge and smooth transitions involving senior management across our various businesses, our ability to execute short and long term strategic, financial and operating goals, as well as our business, financial condition and results of operations generally, could be adversely affected.
We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition and results of operations.
A substantial portion of our consolidated revenue is attributable to a services agreement with Google. Pursuant to this agreement, we display and syndicate paid listings provided by Google in response to search queries generated by users of our Publishing and Applications properties. In exchange for making our search traffic available to Google, we receive a share certain expenses associated with such usage,of the revenue generated by the paid listings supplied to us, as well as certain other search‑related services. Our current agreement with Google expires on March 31, 2020. The Company may choose to terminate this agreement effective March 31, 2019.
The amount of revenue we receive from Google depends upon a number of factors outside of our control, including the amount Google charges for advertisements, the efficiency of Google’s system in attracting advertisers and serving up paid listings in response to search queries and parameters established by Google regarding the number and placement of paid listings displayed in response to search queries. In addition, Google makes judgments about the relative attractiveness (to advertisers) of clicks on paid listings from searches performed on our Publishing and Applications properties and these judgments factor into the amount of revenue we receive. Google also makes judgments about the relative attractiveness (to users) of paid listings from searches and these judgments factor into the amount of advertisements we can purchase. Changes to the amount Google charges to advertisers, Google’s paid listings network efficiency, its judgment about the relative attractiveness to advertisers of clicks on paid listings from our Publishing and Applications properties or the parameters applicable to the display of paid listings could result in a decrease in the amount of revenue we receive and could have an adverse effect on our business, financial condition and results of operations. Such changes could come about for a number of reasons, including general market conditions, competition or policy and operating decisions made by Google.
Our services agreement with Google also requires that we comply with certain guidelines promulgated by Google for the use of its brands and services, including with respect to which products and applications may access Google's services, and the manner in which Google’s paid listings are displayed within search results across various platforms and products. Our services agreement also requires that we establish guidelines to govern certain activities of third parties to whom we syndicate paid listings, including the manner in which these parties drive search traffic to their websites and display paid listings. Google may generally unilaterally update its own policies and guidelines without advance notice, which could in turn require modifications to, or prohibit and/or render obsolete certain of, our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results of operations. Noncompliance with Google’s guidelines by us or the third parties to whom we are permitted to syndicate paid listings or through which we secure distribution arrangements for our applications could, if not cured, result in Google’s suspension of some or all of its services to our websites or the websites of our third party partners or the termination of the services agreement by Google.
The termination of the services agreement by Google, the curtailment of IAC’s rights under the agreement (whether pursuant to the terms thereof or otherwise) or the failure of Google to perform its obligations under the agreement would have an adverse effect on our business, financial condition and results of operations. If any of these events were to occur, we may not be able to find another suitable alternate paid listings provider (or if an alternate provider were found, the economic and other terms of the agreement and the quality of paid listings may be inferior relative to our arrangements with, and the paid listings supplied by, Google) or otherwise replace the lost revenues.

General economic events or trends, particularly those that reduce advertising spending and/or adversely impact consumer confidence, could harm our business, financial condition and results of operations.
A substantial portion of our consolidated revenue (primarily revenue from our Applications and Publishing segments) is attributable to online advertising. Accordingly, we are particularly sensitive to events and trends that could result in decreased advertising expenditures. Advertising expenditures have historically been cyclical in nature, reflecting overall economic conditions and budgeting and buying patterns, as well as levels of consumer confidence and discretionary spending.
Similarly, some of our businesses (primarily HomeAdvisor) are particularly sensitive to events and trends that adversely impact consumer confidence and spending behavior. For example, in the event of a general economic downturn or sudden disruption in business conditions, consumer confidence, spending levels and credit availability could be adversely affected. The occurrence of any of these events or trends could result in consumers delaying or foregoing home services projects, which could result in a decrease in fees paid by home service professionals for consumer matches, which could adversely affect our business, financial condition and results of operations. We could also experience turnover in our network of home services professionals given that a significant number of our home services professionals are sole proprietorships and small businesses, and as such, are particularly sensitive to events and trends that adversely impact consumer confidence and spending behavior. While these home services professionals are required to agree that they will operate in accordance with our terms and conditions, we do not enter into long‑term agreements with them. Any turnover, if significant or recurring over a prolonged period, could result in a decrease in traffic to our properties and increased costs, incurredall of which could adversely affect our business, financial condition and results of operations.
In the recent past, adverse economic conditions have caused, and if such conditions were to recur in the future they could cause, decreases and/or delays in advertising expenditures and discretionary spending by IACconsumers, which would reduce our revenues and adversely affect our business, financial condition and results of operations.
Our success depends, in part, upon the continued growth and acceptance of online advertising, particularly paid listings, as an effective alternative to traditional, offline advertising and the continued commercial use of the Internet.
We continue to compete with traditional advertising media, including television, radio and print, in addition to a multitude of websites with high levels of traffic and online advertising networks, for a share of available advertising expenditures and expect to face continued competition as more emerging media and traditional offline media companies continue to enter the online advertising market. We believe that the continued growth and acceptance of online advertising generally will depend, to a large extent, on its perceived effectiveness and the acceptance of related advertising models (particularly in the case of mobile advertising), the continued growth in commercial use of the Internet (particularly abroad), the extent to which web browsers, software programs and/or other applications that limit or prevent advertising from being displayed become commonplace and the extent to which the industry is able to effectively manage click fraud. Any lack of growth in the market for online advertising, particularly for paid listings, or any decrease in the effectiveness and value of online advertising (whether due to changes in laws, changes in industry practices, the emergence of technologies that can block the display of advertisements across platforms or other developments) would have an adverse effect on our business, financial condition and results of operations.
The distribution and use of our products and services depends, in part, on third parties.
We distribute our products and services through a variety of third party publishers and distribution channels. For example, as our users and customers increasingly access our products and services through mobile applications, we (primarily in the case of Match Group’s dating business and Apalon, one of the businesses within our Applications segment) increasingly depend upon the Apple App Store and the Google Play Store to distribute our mobile applications. Both Apple and Google have broad discretion to change their respective terms and conditions applicable to the distribution of our mobile applications, and to interpret their respective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability to distribute our mobile applications through their stores. We cannot assure you that Apple or Google will not limit or eliminate or otherwise interfere with the distribution of our mobile applications. If either or both of them did so, our business, financial condition and results of operations could be adversely affected.
The use of certain of our products and services also depends, in part, on third parties. For example, users of Match Group's Tinder dating product currently register for (and log in to) Tinder exclusively through their Facebook profiles. While Match Group is currently in the process of developing an alternate authentication method that would allow users to register for (and log into) Tinder using their mobile phone number, no assurances can be provided that users will use this method versus registering for (and logging into) Tinder through their Facebook profiles. Facebook has broad discretion to change its terms and conditions applicable to the use of its platform and to interpret its terms and conditions in ways that could limit, eliminate or

otherwise interfere with our ability to use Facebook as an authentication method and if Facebook did so and no alternate authentication method is available (or the alternate method Match Group ultimately develops is not adopted by users), Match Group’s (and in turn, our) business, financial condition and results of operations could be adversely affected.
Lastly, certain of the businesses within our Applications and Publishing segments have entered into (and expect to continue to enter into) agreements to distribute search boxes, browser extensions and other applications to users through third parties. Most of these agreements are either non‑exclusive and short‑term in nature or, in the case of long‑term or exclusive agreements, are terminable by either party in certain specified circumstances. In addition, a few of these agreements collectively represent a significant percentage of the revenue generated by our Partnerships business. The inability of these businesses to enter into new (or renew existing) agreements to distribute search boxes, browser extensions and other applications through third parties for any reason would result in decreases in traffic to our various properties, queries and advertising revenue, which could have an adverse effect on our business, financial condition and results of operations.
Our success depends, in part, on our continued ability to introduce new and enhanced content, products and services in response to evolving trends and technologies and that otherwise resonate with our users and customers.
We may not be able to convert traffic into repeat users and customers unless we continue to introduce new and enhanced content, products and services in response to evolving trends and technologies and provide quality products and services that otherwise resonate with our users and customers.
The development of new content, products and services, as well as the identification of new business opportunities in this dynamic environment, require significant time and resources. We may not be able to adapt quickly enough to these changes, appropriately time the introduction of new content, products and services or identify new business opportunities in a timely manner. Also, these changes could require us to modify related infrastructures and our failure to do so could render our existing websites, applications, services and proprietary technologies obsolete. Our failure to respond to any of these changes appropriately and efficiently could adversely affect our business, financial condition and results of operations.
In addition, third parties could continue to develop technologies and policies that may interfere with the ability of users to access or utilize our products and services generally, otherwise make users less likely to use our products and services or interfere with the advertising efforts of our various businesses. For example, third parties have developed technologies that can block the display of online advertisements across platforms (particularly and increasingly in the case with mobile platforms) and that provide users with the ability to opt out of advertising products. In addition, third parties continue to introduce technologies (including new and enhanced web browsers and operating systems) that may limit or prevent certain types of applications from being installed and/or have features and policies that significantly lessen the likelihood that users will install our applications or that previously installed applications will remain in active use. Our failure to successfully modify our websites and products in a cost-effective manner in response to the introduction and adoption of new technologies, or our failure to find alternative sources of revenue to support websites and products that currently generate revenue through advertising, could adversely affect our business, financial condition and results of operations.
Lastly, while the continued introduction of new content, products and services is critical to our success, by definition, new content, products and services have limited operating histories, which could make it difficult for us to evaluate our current business and future prospects. For example, through Match Group, we seek to tailor each of our dating products to meet the preferences of specific communities of users. Building a given dating product is generally an iterative process that occurs over a meaningful period of time and involves considerable resources and expenditures. Although certain of our newer dating products have experienced significant growth over relatively short periods of time, the historical growth rates of these dating products are not necessarily an indicator of future growth rates for our newer dating products generally. We have encountered, and may continue to encounter, risks and difficulties as we build new content, brands and products. The failure to successfully address these risks and difficulties could adversely affect our business, financial condition and results of operations.
Marketing efforts designed to drive traffic to our various websites may not be successful or cost-effective.
Traffic building and conversion initiatives involve considerable expenditures for online and offline advertising and marketing. We have made, and expect to continue to make, significant expenditures for search engine marketing (primarily in the form of the purchase of keywords, which we purchase primarily through Google and, to a lesser extent, Microsoft and Yahoo!), online display advertising and traditional offline advertising (including television) in connection with these initiatives, which may not be successful or cost-effective. Historically, we have had to increase advertising and marketing expenditures over time in order to attract and retain users and customers and sustain our growth.


In the case of paid advertising generally, our ability to market our brands on any given property or channel is subject to the policies of the relevant third party seller, publisher of advertising (including through search engines and social networks and platforms) or marketing affiliate. As a result, any such third party could limit our ability to purchase certain types of advertising or advertise some of our products and services, which could affect our ability to compete effectively and, in turn, adversely affect our business, financial condition and results of operations. We cannot assure you that we will not be limited or prohibited from using certain current or prospective marketing channels in the case of any of our businesses in the future. If this were to happen in the case of a significant marketing channel and/or for a significant period of time, our business, financial condition and results of operations could be adversely affected. In addition, if we fail to comply with the policies of third party sellers, publishers of advertising or marketing affiliates, our advertisements could be removed without notice and/or our accounts could be suspended or terminated, any of which could have an adverse effect on our business, financial condition and results of operations.
In the case of our search engine marketing and optimization efforts, our failure to respond successfully to rapid and frequent changes in the pricing and operating dynamics of search engines, as well as changing policies and guidelines applicable to keyword advertising (which may be unilaterally updated by Google, Microsoft and Yahoo! without advance notice), could adversely affect both the placement of paid listings that appear in response to keywords we purchase, the pricing of online advertising we purchase generally and how our websites rank within search results, any or all of which would increase our costs and adversely impact the effectiveness of our advertising efforts overall.
Certain of our businesses engage in efforts similar to search engine optimization involving Facebook and other social media platforms (for example, developing content designed to appear higher in a given Facebook News Feed and generate "likes") that involve challenges and risks similar to those faced in connection with our broader search engine marketing and optimization efforts. Also, search engines continue to expand their offerings into other, non-search related categories, and in certain instances display their own integrated or related product and service offerings in a more prominent manner than those of third parties within their search results. Continued expansion and competition from search engines could result in a substantial decrease in traffic to our various properties, as well as increased costs if we were to replace free traffic with paid traffic, which would adversely affect our business, financial condition and results of operations.
Separately, evolving consumer behavior can affect the availability of cost-effective marketing opportunities. For example, as traditional television viewership declines and consumers spend more time on mobile devices rather than desktop computers, the reach of many of traditional online and offline advertising channels is contracting. To continue to reach potential users and customers, we must continue to identify and devote more of our overall marketing expenditures to newer advertising channels, such as mobile and online video platforms, as well as targeted campaigns in which we communicate directly with potential, former and current users via new virtual means. Generally, the opportunities in (and sophistication of) newer advertising channels are undeveloped and unproven relative to opportunities in traditional online and offline channels and if we are unable to continue to appropriately manage and fine‑tune our marketing efforts in response to these and other trends in the advertising industry, our business, financial condition and results of operations could be adversely affected.
Lastly, we also enter into various arrangements with third parties in an effort to drive traffic to our various websites and mobile applications, which arrangements are generally more cost-effective than traditional marketing efforts. If we are unable to renew existing (and enter into new) arrangements of this nature, sales and marketing costs as a percentage of revenue would increase over the long-term.
Any failure to attract and acquire new (and retain existing) traffic, users and customers in a cost-effective manner could adversely affect our business, financial condition and results of operations.
Communicating with our users via e-mail is critical to our success, and any erosion in our ability to communicate in this fashion that is not sufficiently replaced by other means could adversely affect our business, financial condition and results of operations.
Primarily in the case of Match Group’s dating business, one of our primary means of communicating with users and customers and keeping them engaged with our products and services is via e-mail. As consumer habits evolve in the era of smart phones and messaging/social networking apps, usage of e-mail, particularly among younger users and customers, has declined. In addition, deliverability and other restrictions imposed by third party e-mail providers and/or applicable law could limit or prevent our ability to send e-mails to our users and customers. A continued and significant erosion in our ability to communicate successfully with our users and customers via e-mail could have an adverse impact on user and customer experience, levels of user engagement and, in the case of Match Group’s dating businesses, the rate at which non‑paying users become paid members. While we continually work to find new means of communicating and connecting with our users and customers (for example, through push notifications), we cannot assure you that such alternative means of communication will

be as effective as e-mail has been historically. Any failure to develop or take advantage of new means of communication could have an adverse effect on our business, financial condition and results of operations.
Our success depends, in part, on our ability to build, maintain and/or enhance our various brands.
Through our various businesses, we own and operate a number of widely known consumer brands with strong brand appeal within their respective industries, as well as a number of emerging brands that we are in the process of building. We believe that our success depends, in part, upon our continued ability to maintain and enhance our established brands, as well as build awareness of (and loyalty to) our emerging brands. Our brands and brand-building efforts could be negatively impacted by a number of factors, including product and service quality concerns, consumer complaints, actions brought by consumers, governmental or regulatory authorities and related media coverage and data protection and security breaches. Moreover, the failure to market our products and services successfully (or in a cost-effective manner), the inability to develop and introduce products and services that resonate with consumers and/or the inability to adapt quickly enough (and/or in a cost effective manner) to evolving changes in the Internet and related technologies, applications and devices, could adversely impact our various brands and brand-building efforts, and in turn, our business, financial condition and results of operations.
Foreign currency exchange rate fluctuations could adversely affect our results of operations.
We operate in various international markets, primarily in various jurisdictions within the European Union, and as result are exposed to foreign exchange risk for both the Euro and British Pound ("GBP"). During the fiscal years ended December 31, 2016 and 2015, approximately 26% of our total revenues were international revenues. We translate international revenues into U.S. dollar-denominated operating results and during periods of a strengthening U.S. dollar, our international revenues will be reduced when translated into U.S. dollars. In addition, as foreign currency exchange rates fluctuate, the translation of our international revenues into U.S. dollar-denominated operating results affects the period-over-period comparability of such results.
Our 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. Since the average Euro versus the U.S. dollar exchange rate in 2016 was essentially flat compared to 2015, the translation of our international results into U.S. dollars did not significantly reduce our revenue nor did it have a significant effect on the period-over-period comparability of our U.S dollar-denominated operating results for the fiscal year ended December 31, 2016 versus December 31, 2015. To the extent that the U.S. dollar continues to strengthen relative to the Euro, the translation of our international revenues into U.S. dollars will reduce our U.S. dollar-denominated operating results and will affect their period-over-period comparability.
Fluctuating foreign exchange rates can also result in foreign currency exchange gains and losses. While foreign currency exchange gains and losses historically have not been material to the Company, the significant decline in the GBP due to the Brexit vote on June 23, 2016 generated significant foreign currency exchange gains during the fiscal year ended December 31, 2016. See "Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk."
Historically, we have not hedged any foreign currency exposures. The continued growth and expansion of our international operations into new countries increases our exposure to foreign exchange rate fluctuations. Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could adversely affect our future results of operations.
As the distribution of our dating products through app stores increases, in order to maintain our profit margins, we may need to offset increasing app store fees by decreasing traditional marketing expenditures, increasing user volume or monetization per user or by engaging in other efforts to increase revenue or decrease costs generally, or our business, financial condition and results of operations could be adversely affected.
As users of our dating products continue to shift to mobile solutions, we increasingly rely upon the Apple App Store and the Google Play Store to distribute our mobile applications. For example, while our mobile dating applications are generally free to download from these stores, we offer our users the opportunity to purchase paid memberships and certain à la carte features through these applications. We determine the prices at which these memberships and features are sold and, in exchange for facilitating the purchase of these memberships and features through these applications to users who download our applications from these stores, we pay Apple and Google, as applicable, a share (generally 30%) of the revenue we receive from these transactions. As the distribution of our dating products through app stores increases, we may need to offset these increased app store fees by decreasing traditional marketing expenditures as a percentage of revenue, increasing user volume or monetization per user, or by engaging in other efforts to increase revenue or decrease costs generally, or our business, financial condition and results of operations could be adversely affected.

Our success depends, in part, on our ability to develop and monetize mobile versions of our products and services.
Our success depends, in part, on our ability to develop and monetize mobile versions of our products and services. While many of our users continue to access our products and services through personal computers, users of (and usage volumes on) mobile devices, including smartphones and tablets, continue to increase relative to those of personal computers. While we have developed mobile versions of certain of our products and services (and have developed certain products and services exclusively for mobile devices) and intend to continue to do so in the future, we may not be able to monetize these applications as effectively as we monetize our non-mobile products and services.
In addition, the success of our mobile applications is dependent on their interoperability with various mobile operating systems, technologies, networks and standards that we do not control and any changes in any of these things that compromise the quality or functionality of our products and services could adversely impact usage of our products and services on mobile devices and, in turn, our ability to attract advertisers. Our failure or inability to successfully respond to the general shift of users and customers to mobile devices could adversely affect our business, financial condition and results of operations.
Each of our dating products monetizes users at different rates. If a meaningful migration of our user base from our higher monetizing dating products to our lower monetizing dating products were to occur, it could adversely affect our business, financial condition and results of operations.
Through Match Group, we own, operate and manage a large and diverse portfolio of dating products. Each dating product has its own mix of free and paid features designed to optimize the user experience for, and revenue generation from, that product’s community of users. In general, the mix of features for the various dating products within our more established brands leads to higher monetization rates per user than the mix of features for the various dating products within our newer brands. If a significant portion of our user base were to migrate to our less profitable brands, our business, financial condition and results of operations could be adversely affected.
Our success depends, in part, on the integrity and quality of our systems and infrastructures and those of third parties. System interruptions and the lack of integration and redundancy in our and third party information systems may affect our business.
To succeed, our systems and infrastructures must perform well on a consistent basis. From time to time, we may experience occasional system interruptions that make some or all of our systems or data unavailable or that prevent us from providing products and services; any such interruption could arise for any number of reasons. Furthermore, fire, power loss, telecommunications failure, natural disasters, acts of war or terrorism, acts of God and other similar events or disruptions may damage or interrupt computer, data, broadband or other communications systems at any time. Any event of this nature could cause system interruptions, delays and loss of critical data, and could prevent us from providing services to users and customers. While we have backup systems in place for certain aspects of our operations, our systems are not fully redundant and disaster recovery planning is not sufficient for all eventualities. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption. Any such interruptions or outages, regardless of the cause, could negatively impact the experiences of our users and customers with our products and services, tarnish our brands’ reputation and decrease demand for our products and services, any or all of which could adversely affect our business, financial condition and results of operations.
We also continually work to expand and enhance the efficiency and scalability of our technology and network systems to improve the experiences of our users and customers, accommodate substantial increases in the volume of traffic to our properties, ensure acceptable page load times and keep up with changes in technology and user and customer preferences. Any failure to do so in a timely and cost-effective manner could adversely affect the experiences of our users and customers with our products and services and thereby negatively impact demand for our products and services, and could increase our costs, any of which could adversely affect our business, financial condition and results of operations.
We also rely on third party computer systems, data center service providers, cloud-based web hosting services, broadband and other communications systems and service providers in connection with the provision of our products and services generally, as well as to facilitate and process certain benefitstransactions with our users and customers. We have no control over any of these third parties or their operations.
Any interruptions, outages or delays in our systems or those of our third party providers, changes in service levels provided by these systems or deterioration in the performance of these systems, could impair our ability to Mr. Dillerprovide our products and services and/or process certain transactions with users and customers. If any of these events were to occur, it could damage

our reputation and result in the loss of current and potential users and customers, which could have an adverse effect on our business, financial condition and results of operations and otherwise be costly to remedy.
We may not be able to protect our systems, infrastructures and technologies from cyberattacks. In addition, we may be adversely impacted by cyberattacks experienced by third parties. Any disruption of our systems, infrastructures and technologies, or compromise of our user data or other information, due to cyberattacks could have an adverse effect on our business, financial condition and results of operations.
We are regularly under attack by perpetrators of malicious technology-related events, such as cyberattacks, computer hacking, computer viruses, worms, bot attacks or other destructive or disruptive software, distributed denial of service attacks, attempts to misappropriate customer information (including credit card information) or other malicious activities. Events of this nature could compromise the integrity of our systems, infrastructures and technologies, as well as the products and services offered by our various businesses, which could in turn adversely affect our users and customers. The incidence of events of this nature (or any combination thereof) is on the rise worldwide.
While we continuously develop and maintain systems to detect and prevent events of this nature from impacting our various businesses (and their respective systems, infrastructures, technologies, products, services, users and customers), and have invested (and continue to invest) heavily in these efforts and related training, these efforts are costly and require ongoing monitoring and updating as technologies change and efforts to overcome preventative security measures become more sophisticated. Despite our efforts, we cannot assure you that we will not experience significant events of this nature in the future and if such an event does occur, that it will not have an adverse effect on our business, financial condition and results of operations.
Any cyberattack or security breach we experience could damage our systems, infrastructures and technologies and/or those of our users and customers, prevent us from providing our products and services, compromise the integrity of our products and services, damage our reputation, erode our brands and/or be costly to remedy, as well as subject us to investigations by regulatory authorities and/or litigation that could result in liability to third parties. Even if we do not experience such events, the impact of any such events experienced by third parties with whom we do business (or upon whom we otherwise rely in connection with our day to day operations) could have a similar effect. Moreover, even cyberattacks and security breaches that do not impact us directly may result in a loss of consumer confidence generally, which could make consumers and users less likely to use our products and services.
In addition, we may not have adequate insurance coverage to compensate for losses resulting from any of these events.
If the security of personal and confidential user information, including credit card information, that we maintain and store is breached or otherwise accessed by unauthorized persons, it may be costly to mitigate the impact of such an event, our reputation could be harmed and our business, financial condition and results of operations could be adversely affected.
We receive, process, store and transmit a significant amount of personal user and other confidential information, including credit card information, and enable our users to share their personal information with each other. In some cases, we retain third party vendors to store this information. We continuously develop and maintain systems to protect the security, integrity and confidentiality of this information, but cannot guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. If any such event were to occur, we may not be able to remedy the event, and we may have to expend significant capital and resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring. If a breach of our security (or the security of our vendors and partners) occurs, the perception of the effectiveness of our security measures and our reputation may be harmed, we could lose current and potential users and the recognition of our various brands and their competitive positions could be diminished, any or all of which could adversely affect our business, financial condition and results of operations.
We are subject to a number of risks related to credit card payments, including data security breaches and fraud that we or third parties experience or additional regulation, any of which could adversely affect our business, financial condition and results of operations.
Our various businesses accept payment from our users and customers primarily through credit card transactions and certain online payment service providers. The ability of these businesses to access credit card information on a real time‑basis without having to proactively reach out to the consumer each time they process a payment for products and services (including auto‑renewal payments or payments for the purchase of a premium feature on or with any of our products or services) is critical to our success.

When we experience (or a third party experiences) a data security breach involving credit card information, affected cardholders will often cancel their credit cards. In the case of a breach experienced by a third party, the more sizable the third party’s customer base and the greater the number of credit card accounts impacted, the more likely it is that our users and customers would be impacted by such a breach. To the extent our users and customers are ever affected by such a breach experienced by us or a third party, affected individuals would need to be contacted to obtain new credit card information and process any pending transactions. It is likely that we would not be able to reach all affected individuals, and even if we could, new credit card information for some individuals may not be obtained and some pending transactions may not be processed, which could adversely affect our business, financial condition and results of operations.
Even if our users and customers are not directly impacted by a given data security breach, they may lose confidence in the ability of service providers to protect their personal information generally, which could cause them to stop using their credit cards online and choose alternative payment methods that are not as convenient for us or restrict our ability to process payments without significant user and customer effort.
Additionally, if we fail to adequately prevent fraudulent credit card transactions, we may face litigation, fines, governmental enforcement action, civil liability, diminished public perception of our security measures, significantly higher credit card‑related costs and substantial remediation costs, any of which could adversely affect our business, financial condition and results of operations.
Finally, the passage or adoption of any legislation or regulation affecting the ability of service providers to periodically charge users and customers for recurring membership payments may adversely affect our business, financial condition and results of operations.
The processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights and compliance with laws designed to prevent unauthorized access of personal data could be costly.
We receive, transmit and store a large volume of personal information and other user data (including personal credit card data, as well as private content (such as videos and correspondence)) in connection with the processing of search queries, the provision of online products and services, transactions with users and customers and advertising on our websites. The sharing, storage, use, disclosure and protection of this information are determined by the respective privacy and data security policies of our various businesses. These policies are, in turn, subject to federal, state and foreign laws and regulations, as well as evolving industry standards and practices, regarding privacy generally and the sharing, storage, use disclosure and protection of personal information and user data. These laws, regulations, standards and practices are changing, inconsistent and conflicting and subject to differing interpretations, and new laws, regulations, standards and practices of this nature are adopted from time to time.
For example, in 2016, the European Commission: (i) and the United States reached an agreement on a new framework for transfers of personal data, the EU-U.S. Privacy Shield, which provides a safe harbor for U.S. companies that transfer data from the EU to the U.S. and (ii) adopted the General Data Protection Regulation (the “Shared Costs”"GDPR"), a comprehensive European Union privacy and data protection reform that will become effective in May 2018 and will supersede the European Union Data Protection Directive (the "EU Directive") currently in place. The GDPR imposes stricter standards regarding the sharing, storage, use, disclosure and protection of end user data and increased penalties for non-compliance relative to the EU Directive. In addition, the potential exit from the European Union by the United Kingdom could result in the application of new and conflicting data privacy and protection laws and standards to our operations in the United Kingdom and our handling our personal data of users located in the United Kingdom. In addition, there are a number of draft privacy laws and regulations under consideration in the U.S. (including in various states) and in various foreign jurisdictions in which we do business.
While we believe that we comply with applicable privacy policies, laws and regulations, as well as evolving industry standards and practices relating to privacy and data security in all material respects, there is no assurance that we will not be subject to claims that we have violated applicable laws and regulations, standard and practices, that we will be able to successfully defend against such claims or that we will not be subject to significant fines and penalties in the event of non-compliance. Moreover, any failure or perceived failure by us (or the third parties with whom we have contracted to handle such information) to comply with applicable privacy laws, privacy policies or privacy‑related contractual obligations or any compromise of security that results in unauthorized access to personal information could result in governmental enforcement actions, significant fines, litigation, claims of breach of contract and indemnity by third parties and adverse publicity. In the case of such an event, our reputation may be harmed, we could lose current and potential users and the competitive positions of our various brands could be diminished, any or all of which could adversely affect our business, financial condition and results of operations.

Lastly, compliance with the numerous privacy and data protection laws in the various countries in which our businesses operate (particularly the GDPR) could be costly, particularly as these laws become more comprehensive in scope, more commonplace and continue to evolve. If these costs are significant, our business, financial condition and results of operations could be adversely affected.
Our indebtedness may affect our ability to operate our business, which could have a material adverse effect on our financial condition and results of operations. We and our subsidiaries may incur additional indebtedness, including secured indebtedness.
As of December 31, 2016, we had total debt outstanding of approximately $1.6 billion, including $1.2 billion of total debt outstanding at Match Group. As of this date, we had borrowing availability of $300 million, and Match Group had borrowing availability of $500 million, under our respective revolving credit facilities. Neither Match Group nor any of its subsidiaries guarantee any indebtedness of IAC or are subject to any of the covenants related to such indebtedness. Similarly, neither IAC nor any of its subsidiaries (other than Match Group and its subsidiaries) guarantee any indebtedness of Match Group or are subject to any of the covenants related to such indebtedness.
Our indebtedness and Match Group's indebtedness could have important consequences, such as:
limiting our respective abilities to obtain additional financing to fund working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes;
limiting our respective abilities to use operating cash flow in other areas of our respective businesses because we must dedicate a substantial portion of these funds to service debt;
limiting our respective abilities to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;
restricting us from making strategic acquisitions, developing properties or exploiting business opportunities;
restricting the way in which we conduct business because of financial and operating covenants in the agreements governing our respective existing and future indebtedness;
exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our respective subsidiaries’ debt instruments that could have a material adverse effect on our business, financial condition and operating results;
increasing our vulnerability to a downturn in general economic conditions or in pricing of our products and services; and
limiting our respective abilities to react to changing market conditions in the various industries in which we do business.
In addition to our respective debt service obligations, our and Match Group’s operations require substantial investments on a continuing basis. Our ability or the ability of Match Group to make scheduled debt payments, to refinance obligations with respect to our indebtedness and to fund capital and non‑capital expenditures necessary to maintain the condition of our respective operating assets and properties, as well as to provide capacity for the growth of our respective businesses, depends on our respective financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors.
Subject to certain restrictions in the agreements governing our and Match Group’s indebtedness, we and our subsidiaries may incur significant additional indebtedness, including additional secured indebtedness. Although the terms of agreements governing our and Match Group’s indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. If new debt is added to our or our subsidiaries’ current debt levels, the risks described above could increase. Also, in the event a default has occurred or our leverage ratio exceeds thresholds specified in the agreements governing our indebtedness, our ability to pay dividends or to make distributions and repurchase or redeem our stock would be limited and the agreements governing Match Group's indebtedness contain similar restrictions. See "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Position, Liquidity and Capital Resources-Financial Position."

We may not be able to generate sufficient cash to service all of our current and planned indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.
Our ability and the ability of Match Group to satisfy our respective debt obligations will depend upon, among other things:
our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control; and
our future ability and the future ability of Match Group to borrow under our respective revolving credit agreements, the availability of which will depend on, among other things, compliance with the covenants in the then‑existing agreements governing such indebtedness.
There can be no assurance that we or Match Group will generate sufficient cash flow from operations, or that we or Match Group will be able to draw under our respective revolving credit agreements or otherwise, in an amount sufficient to fund our respective liquidity needs. See also "-We may not freely access the cash of Match Group and its subsidiaries" below.
If cash flows and capital resources are insufficient to service indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations, sell equity, and/or negotiate with our lenders to restructure the applicable debt, in order to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. The agreements governing our and Match Group’s indebtedness may restrict, or market or business conditions may limit, our ability to avail ourselves of some or all of these options. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due.
We may not freely access the cash of Match Group and its subsidiaries.
The Company's potential sources of cash include our available cash balances, net cash from the operating activities of our subsidiaries, availability under IAC's revolving credit facility and proceeds from asset sales, including marketable securities. The ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which they may be or may become subject.  Agreements governing Match Group's indebtedness limit the payment of dividends or the making of distributions, loans or advances to stockholders, including IAC. In addition, because Match Group is a separate and distinct legal entity with public shareholders, it has no obligation to provide us with funds for payment obligations, whether by dividends, distributions, loans or other payments.
You may experience dilution with respect to your investment in IAC, and IAC may experience dilution with respect to its investment in Match Group, as a result of the settlement of equity awards.
Our dilutive securities consist of vested and unvested options to purchase shares of our common stock, restricted stock unit awards and vested and unvested stock options and stock settled stock appreciation rights denominated in the equity of certain of our consolidated subsidiaries, including Tinder and other Match Group subsidiaries (“Subsidiary Awards”). Cost sharing arrangementsFor more information regarding Subsidiary Awards, see "Note 13-Stock-Based Compensation" to the consolidated financial statements included in "Item 8-Consolidated Financial Statements and Supplementary Data."
These dilutive securities are reflected in our share calculations underlying our dilutive earnings per share calculation contained in our financial statements for fiscal years ended December 31, 2016, 2015 and 2014. See "Note 12-Earnings Per Share” to the consolidated financial statements included in "Item 8-Consolidated Financial Statements and Supplementary Data." Intra-quarter movements in our stock price, as well as variances between the estimated fair value of our subsidiaries used to calculate such fully-diluted share calculations (which estimated fair value may change from time-to-time and quarter-to-quarter) and the fair value determined in connection with the liquidity events related to Subsidiary Awards, could lead to more or less dilution than reflected in these calculations.


The issuance of shares of IAC common stock in settlement of Subsidiary Awards could dilute your ownership interest in IAC.  Subsidiary Awards related to Match Group subsidiaries may be settled in shares of IAC common stock or Match Group common stock, at our option. In the event we elect to settle these Match Group Subsidiary Awards in shares of Match Group common stock (rather than in shares of IAC common stock), our ownership stake in Match Group would be diluted.  This dilution could impact our ability, among other things, to maintain Match Group as part of our consolidated tax group for U.S. federal income tax purposes, to effect a tax-free distribution of our Match Group stake to our stockholders or to maintain control of Match Group. As we generally have the right to maintain our level of ownership in Match Group to the extent Match Group issues additional shares of its capital stock in the future pursuant to an investor rights agreement, we do not intend to allow any of the foregoing to occur.

In addition to the dilution resulting from the issuance of shares of IAC common stock (or Match Group common stock) in settlement of Subsidiary Equity Awards, the holders of the Subsidiary Equity Awards may choose to sell the shares of IAC common stock (or Match Group common stock) they receive in settlement of their Subsidiary Awards into the open market immediately.  If sales are significant and concentrated, they could have a temporary impact on the trading value of our stock (or on Match Group common stock).

Variable rate indebtedness will subject us to interest rate risk, which could cause our debt service obligations to increase significantly.
Match Group currently has $350 million of indebtedness outstanding under its term loan. Borrowings under the term loan are, and any borrowings under Match Group's revolving credit facility will be, at variable rates of interest. Indebtedness that bears interest at variable rates exposes us to interest rate risk. Match Group's term loan bears interest at LIBOR plus 3.25%. As of December 31, 2016, the rate in effect during 2015 providedwas 4.20%. If LIBOR were to increase by 100 basis points, then the annual interest and expense payments on the outstanding balance as of December 31, 2016 on the term loan would have increased by $3.5 million. If LIBOR were to decrease by 100 basis points, then the effective interest rate would decrease by 20 basis points to the LIBOR floor of 0.75% and the annual interest expense and payments in the current year would decrease by $0.7 million. See also "Item 7A-Quantitative and Qualitative Disclosures About Market Risk."
We may not be able to identify suitable acquisition candidates and even if we do so, we may experience operational and financial risks in connection with acquisitions. In addition, some of the businesses we acquire may incur significant losses from operations or experience impairment of carrying value.
We have made numerous acquisitions in the past and we continue to seek to identify potential acquisition candidates that eachwill allow us to apply our expertise to expand their capabilities, as well as maximize our existing assets. As a result, our future growth may depend, in part, on acquisitions. We may not be able to identify suitable acquisition candidates or complete acquisitions on satisfactory pricing or other terms and we expect to continue to experience competition in connection with our acquisition-related efforts.
Even if we identify what we believe to be suitable acquisition candidates and negotiate satisfactory terms, we may experience operational and financial risks in connection with acquisitions, and to the extent that we continue to grow through acquisitions, we will need to:
properly value prospective acquisitions, especially those with limited operating histories;
successfully integrate the operations, as well as the accounting, financial controls, management information, technology, human resources and other administrative systems, of acquired businesses with our existing operations and systems;
successfully identify and realize potential synergies among acquired and existing businesses;
retain or hire senior management and other key personnel at acquired businesses; and
successfully manage acquisition‑related strain on the management, operations and financial resources of IAC and Expedia cover 50%its businesses and/or acquired businesses.
We may not be successful in addressing these challenges or any other problems encountered in connection with historical and future acquisitions. In addition, the anticipated benefits of one or more acquisitions may not be realized and future acquisitions could result in increased operating losses, potentially dilutive issuances of equity securities and the assumption of contingent liabilities. Also, the value of goodwill and other intangible assets acquired could be impacted by one or more continuing unfavorable events and/or trends, which could result in significant impairment charges. The occurrence of any these events could have an adverse effect on our business, financial condition and results of operations.

We operate in various international markets, some in which we have limited experience. As a result, we face additional risks in connection with our international operations. Also, we may not be able to successfully expand into new, or further into our existing, international markets.
We currently operate in various jurisdictions abroad and may continue to expand our international presence. In order for our products and services in these jurisdictions to achieve widespread acceptance, commercial use and acceptance of the SharedInternet (particularly via mobile devices) must continue to grow, which growth may occur at slower rates than those experienced in the United States. Moreover, we must continue to successfully tailor our products and services to the unique customs and cultures of foreign jurisdictions, which can be difficult and costly and the failure to do so could slow our international growth and adversely impact our business, financial condition and results of operations.
Operating abroad, particularly in jurisdictions where we have limited experience, exposes us to additional risks. These additional risks include, among others:
operational and compliance challenges caused by distance, language and cultural differences;
difficulties in staffing and managing international operations;
differing levels of social and technological acceptance of our products and services or lack of acceptance of them generally;
foreign currency fluctuations;
restrictions on the transfer of funds among countries and back to the United States and costs associated with repatriating funds to the United States;
differing and potentially adverse tax laws;
multiple, conflicting and changing laws, rules and regulations, and difficulties understanding and ensuring compliance with those laws by both our employees and our business partners, over whom we exert no control;
competitive environments that favor local businesses;
limitations on the level of intellectual property protection; and
trade sanctions, political unrest, terrorism, war and epidemics or the threat of any of these events.
The occurrence of any or all of these events could adversely affect our international operations, which could in turn adversely affect our business, financial condition and results of operations. Our success in international markets will also depend, in part, on our ability to identify potential acquisition candidates, joint venture or other partners, and to enter into arrangements with these parties on favorable terms and successfully integrate their businesses and operations with our own.
A variety of new laws, or new interpretations of existing laws, could subject us to claims or otherwise harm our business.
We are subject to a variety of laws in the U.S. and abroad that are costly to comply with, can result in negative publicity and diversion of management time and effort, and can subject us to claims or other remedies. Some of these laws, such as income, sales, use, value‑added and other tax laws and consumer protection laws, are applicable to businesses generally and others are unique to the various types of businesses in which we are engaged. Many of these laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies. Laws that do reference the Internet are being interpreted by the courts, but their applicability and scope remain uncertain. In addition, evolving Internet business practices may attract increased legal and regulatory attention. For example, the U.S. Federal Trade Commission has indicated that it will continue to monitor the use of online "native" advertising (a form of advertising in which sponsored content is presented in a manner that some may view as similar to traditional editorial content) to ensure that it is presented in a manner that is not confusing or deceptive to consumers.
Any failure on our part to comply with applicable laws may subject us to additional liabilities, which could adversely affect our business, financial condition and results of operations. In addition, if the laws to which we are currently subject are amended or interpreted adversely to our interests, or if new adverse laws are adopted, our products and services might need to be modified to comply with such laws, which would increase our costs and could result in decreased demand for our products and services to the extent that we pass on such costs to our customers. Specifically, in the case of tax laws, positions that we have taken or will take are subject to interpretation by the relevant taxing authorities. While we believe that the positions we have taken to date comply with applicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position, and if so, that such positions will not adversely affect us. Any events of this nature could adversely affect our business, financial condition and results of operations.
Moreover, laws that regulate the practices of third parties may also adversely impact our business, financial condition and results of operations. For example, the Open Internet Order adopted by the U.S. Federal Communications Commission (the "FCC") in May 2016 codified "network neutrality," the principle that Internet service providers should treat all data traveling

through their networks the same, not discriminating or charging differentially by content, website, platform or application. The Open Internet Order's rules could be vacated by the courts in connection with a legal challenge to the FCC's authority to adopt the order, repealed by the FCC or overruled by the U.S. Congress. If this were to occur, broadband Internet access providers could discriminate against Internet traffic of our businesses in favor of others or charge our businesses to provide their services to users and consumers via their networks, which could increase our costs and would adversely affect our business, financial condition and results of operations.
We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties.
We rely heavily upon our trademarks and related domain names and logos to market our brands and to build and maintain brand loyalty and recognition, as well as upon trade secrets. We also rely, to a lesser extent, upon patented and patent‑pending proprietary technologies with expiration dates ranging from 2017 to 2038.
We rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect our various intellectual property rights. For example, we have generally registered and continue to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed and used, and reserve, register and renew domain names as we deem appropriate. Effective trademark protection may not be available or may not be sought in every country in which products and services are made available and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available.
We also generally seek to apply for patents or for other similar statutory protections as and if we deem appropriate, based on then current facts and circumstances, and will continue to do so in the future. No assurances can be given that any patent application we have filed (or will file) will result in a patent being issued, or that any existing or future patents will afford adequate protection against competitors and similar technologies. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon patents we own.
Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise or third parties could copy or otherwise obtain and use our intellectual property without authorization. The occurrence of any of these events could result in the erosion of our brands and limitations on our ability to control marketing on or through the Internet using our various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any of which could adversely affect our business, financial condition and results of operations.
From time to time, we have been subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties. In addition, litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or to determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations. Patent litigation tends to be particularly protracted and expensive.
Our estimated income taxes could be materially different from income taxes that we ultimately pay.
We are subject to income taxes in both the United States and numerous jurisdictions abroad. Significant judgment and estimation is required in determining our provision for income taxes and related matters. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determinations are uncertain or otherwise subject to interpretation. Our determination of our income tax liability is always subject to review by applicable tax authorities and we are currently subject to audits in a number of jurisdictions. Although we believe our income tax estimates and related determinations are reasonable and appropriate, relevant taxing authorities may disagree. The ultimate outcome of any such audits and reviews could be materially different from estimates and determinations reflected in our historical income tax provisions and accruals. Any adverse outcome of any such audit or review could have an adverse effect on our financial condition and results of operations.
Item 1B.    Unresolved Staff Comments
Not applicable.

Item 2.    Properties
IAC believes that the facilities for its management and operations are generally adequate for its current and near-term future needs. IAC's facilities, most of which are leased by IAC's businesses in various cities and locations in the United States and various jurisdictions abroad, generally consist of executive and administrative offices, operations centers, data centers and sales offices.
All of IAC's leases are at prevailing market rates. IAC believes that the duration of each lease is adequate. IAC believes that its principal properties, whether owned or leased, are currently adequate for the purposes for which they are used and are suitably maintained for these purposes. IAC does not anticipate any future problems renewing or obtaining suitable leases for any of its principal businesses. IAC's approximately 202,500 square foot corporate headquarters in New York, New York houses offices for IAC corporate and various IAC businesses within the following segments: Match Group, Video, Applications and Publishing.
Item 3.    Legal Proceedings
In the ordinary course of business, the Company and its subsidiaries are parties to litigation involving property, personal injury, contract, intellectual property and other claims. The amounts that may be recovered in such matters may be subject to insurance coverage.
Rules of the Securities and Exchange Commission require the description of material pending legal proceedings (other than ordinary, routine litigation incidental to the registrant's business) to which the registrant or any of its subsidiaries is a party or to which any of their property is subject and advise that proceedings ordinarily need not be described if they primarily involve claims for damages for amounts (exclusive of interest and costs) not exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of Company management, none of the pending litigation matters that the Company and its subsidiaries are defending, including those described below, involves or is likely to involve amounts of that magnitude. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these matters may be material to our financial position or operations based upon the standard set forth in the rules of the Securities and Exchange Commission.
Delaware Law Class Action Litigation against IAC
On November 21, 2016, following the Company’s announcement in its Definitive Proxy Statement of a proposal to adjust the Company’s capital structure by adopting an amendment and restatement of the Company’s certificate of incorporation (the “New Certificate”) to establish a new class of non-voting capital stock, which would be known as Class C common stock, and potentially declaring and paying a dividend of one share of the Class C common stock for each outstanding share of IAC common stock and Class B common stock (the “Dividend” and, together with the adoption of the New Certificate, the “Class C Issuance”), a putative class action lawsuit was filed in the Delaware Court of Chancery against the Company and its Board of Directors purportedly on behalf of the Company’s stockholders.  See Miller et al. v. IAC/InterActiveCorp et al., C.A. No. 12929-VCL (Del. Ch. Ct.).  The lawsuit generally alleged, among other things, that IAC’s directors breached their fiduciary duties in connection with the proposed Class C Issuance inasmuch as it was allegedly designed to unduly benefit the Company’s Chairman and Senior Executive, Barry Diller, in respect of his alleged voting control of the Company and would harm IAC’s public stockholders.  Among other remedies, the lawsuit sought to enjoin the filing of the New Certificate with the Delaware Secretary of State, as well as unspecified money damages.

On November 22, 2016 and December 12, 2016, two additional putative class action lawsuits were filed in the Delaware Court of Chancery against the Company and its Board of Directors purportedly on behalf of the Company’s stockholders and asserting substantially similar allegations, claims and remedies as in the Miller lawsuit.  See Halberstam v. Bronfman et al., C.A. No. 12935-VCL (Del. Ch. Ct.), and California Public Employees’ Retirement System v. IAC/InterActiveCorp et al., No. 12975-VCL (Del. Ch. Ct.).  All three lawsuits have been consolidated as In re IAC/InterActiveCorp Class C Reclassification Litigation, No. 12975-VCL, and the Court has designated the CalPERS complaint as the operative complaint in the case and established a case schedule.  On January 23, 2017 and February 3, 2017, the defendants filed answers denying the material allegations of the complaint.  The case is currently in discovery.

While the Class C Issuance was approved at the Company's 2016 Annual Meeting of Stockholders, the Company has agreed not to effect the Class C Issuance during the pendency of the lawsuit described immediately above, and the Delaware Court of Chancery has been so informed.


We believe that this lawsuit, and the material allegations and claims therein, are without merit and intend to continue to defend against them vigorously.
Securities Class Action Litigation against Match Group
As previously disclosed in our 2016 quarterly reports on Form 10-Q, on February 26, 2016, a putative nationwide class action was filed in federal court in Texas against Match Group, five of its officers and directors, and twelve underwriters of Match Group's initial public offering in November 2015.  See David M. Stein v. Match Group, Inc. et al., No. 3:16-cv-549 (U.S. District Court, Northern District of Texas).  The complaint alleged that Match Group's registration statement and prospectus issued in connection with its initial public offering were materially false and misleading given their failure to state that: (i) Match Group's Non-dating business would miss its revenue projection for the quarter ended December 31, 2015, and (ii) ARPPU (as defined in "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations-General-Key Terms") would decline substantially in the quarter ended December 31, 2015.  The complaint asserted that these alleged failures to timely disclose material information caused Match Group's stock price to drop after the announcement of its earnings for the quarter ended December 31, 2015.  The complaint pleaded claims under the Securities Act of 1933 for untrue statements of material fact in, or omissions of material facts from, the registration statement, the prospectus, and related communications in violation of Sections 11 and 12 and, as to the officer/director defendants only, control-person liability under Section 15 for Match Group’s alleged violations.  The complaint sought among other relief class certification and damages in an unspecified amount.

On March 9, 2016, a virtually identical class action complaint was filed in the same court against the same defendants by a different named plaintiff.  See Stephany Kam-Wan Chan v. Match Group, Inc. et al., No. 3:16-cv-668 (U.S. District Court, Northern District of Texas).  On April 25, 2016, Judge Boyle in the Chan case issued an order granting the parties’ joint motion to transfer that case to Judge Lindsay, who is presiding over the earlier-filed Stein case.  On April 27, 2016, various current or former Match Group shareholders and their respective law firms filed motions seeking appointment as lead plaintiff(s) and lead or liaison counsel for the putative class.  On April 28, 2016, the Court issued orders: (i) consolidating the Chan case into the Stein case, (ii) approving the parties’ stipulation to extend the defendants’ time to respond to the complaint until after the Court has appointed a lead plaintiff and lead counsel for the putative class and has set a schedule for the plaintiff’s filing of a consolidated complaint and the defendants’ response to that pleading, and (iii) referring the various motions for appointment of lead plaintiff(s) and lead or liaison counsel for the putative class to a United States Magistrate Judge for determination.  In accordance with this order, the consolidated case is now captioned Mary McCloskey et ano. v. Match Group, Inc. et al., No. 3:16-CV-549-L.  On June 9, 2016, the Magistrate Judge issued an order appointing two lead plaintiffs, two law firms as co-lead plaintiffs’ counsel, and a third law firm as plaintiffs’ liaison counsel.

On July 27, 2016, the parties submitted to the Court a joint status report proposing a schedule for the plaintiffs’ filing of a consolidated amended complaint and the parties’ briefing of the defendants’ contemplated motion to dismiss the consolidated complaint. On August 17, 2016, the Court issued an order approving the parties’ proposed schedule.  On September 9, 2016, in accordance with the schedule, the plaintiffs filed an amended consolidated complaint.  The new pleading focuses solely on allegedly misleading statements or omissions concerning the Match Group’s Non-dating business. The defendants filed motions to dismiss the amended consolidated complaint on November 8, 2016. The plaintiffs filed oppositions to the motions on December 23, 2016, and the defendants filed replies to the oppositions on February 6, 2017.  We and Match Group believe that the allegations in these lawsuits, and the material allegations and claims therein, are without merit and intend to continue to defend against them vigorously.
Item 4.    Mine Safety Disclosures
Not applicable.


PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Registrant's Common Equity and Related Stockholder Matters
IAC common stock is quoted on the Nasdaq Global Select Market ("NASDAQ") under the ticker symbol "IAC." There is no established public trading market for IAC Class B common stock. The table below sets forth, for the calendar periods indicated, the high and low sales prices per share for IAC common stock as reported on NASDAQ. As February 27, 2017, the closing price of IAC common stock on NASDAQ was $74.44.
 High Low
Year Ended December 31, 2016   
Fourth Quarter$68.75
 $60.39
Third Quarter64.00
 55.41
Second Quarter57.14
 45.37
First Quarter60.56
 38.82
Year Ended December 31, 2015   
Fourth Quarter$73.15
 $58.30
Third Quarter84.66
 63.29
Second Quarter82.40
 66.63
First Quarter70.10
 59.11
As of January 27, 2017, there were approximately 1,400 holders of record of the Company's common stock and five holders of record (all trusts for the benefit of Mr. Diller and certain members of his family) of the Company's Class B common stock. Because the substantial majority of the outstanding shares of IAC common stock are held by brokers and other institutions on behalf of shareholders, IAC is not able to estimate the total number of beneficial shareholders represented by these record holders.
In 2015, IAC's Board of Directors declared four quarterly cash dividends, all of which were $0.34 per share of common and Class B common stock outstanding. In February 2016, IAC announced that following the completion of the Match Group initial public offering and related debt transactions, IAC's Board of Directors had suspended the Company's quarterly cash dividend program. Accordingly, we do not currently expect that comparable cash dividends will continue to be paid in the near future. Any future cash or other dividend declarations are subject to the determination of IAC's Board of Directors.
During the quarter ended December 31, 2016, the Company did not issue or sell any shares of its common stock or other equity securities pursuant to unregistered transactions.
Issuer Purchases of Equity Securities
The following table sets forth purchases by the Company of its common stock during the quarter ended December 31, 2016:
Period
(a)
Total
Number of Shares
Purchased
 
(b)
Average
Price Paid
Per Share
 
(c)
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs(1)
 
(d)
Maximum
Number of
Shares that
May Yet Be
Purchased
Under Publicly
Announced
Plans or
Programs
October 2016
  $
  
  10,322,016
November 2016205,158
  $67.26
  205,158
  10,116,858
December 2016817,342
  $66.31
  817,342
  9,299,516
  Total1,022,500
  $66.50
  1,022,500
  9,299,516 (2)

(1)Reflects repurchases made pursuant to the share repurchase authorizations previously announced in April 2013 and May 2016.
(2)Represents the total number of shares of common stock that remained available for repurchase as of December 31, 2016 pursuant to the May 2016 share repurchase authorization. As of January 30, 2017, the Company had approximately 8.6 million shares remaining in the May 2016 share repurchase authorization. IAC may purchase shares pursuant to this authorization over an indefinite period of time in 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.


Item 6.    Selected Financial Data
The following selected financial data for the five years ended December 31, 2016 should be read in conjunction with the consolidated financial statements and accompanying notes included herein.
 Year Ended December 31,
 2016 2015 2014 2013 2012
 (In thousands, except per share data)
Statement of Operations Data:(a)
         
Revenue$3,139,882
 $3,230,933
 $3,109,547
 $3,022,987
 $2,800,933
(Loss) earnings from continuing operations(16,340) 113,357
 234,557
 281,799
 169,847
Net (earnings) loss attributable to noncontrolling interests(25,129) 6,098
 5,643
 2,059
 (1,530)
Net (loss) earnings attributable to IAC shareholders(41,280) 119,472
 414,873
 285,784
 159,266
(Loss) earnings per share from continuing operations attributable to IAC shareholders:    
Basic$(0.52) $1.44
 $2.88
 $3.40
 $1.95
Diluted$(0.52) $1.33
 $2.71
 $3.27
 $1.81
          
Dividends declared per share$
 $1.36
 $1.16
 $0.96
 $0.72
          
 December 31,
 2016 
2015(b)
 
2014(b)
 
2013(b)
 
2012(b)
 (In thousands)
Balance Sheet Data:         
Total assets$4,645,873
 $5,188,691
 $4,241,421
 $4,183,810
 $3,774,574
Long-term debt, including current portion1,602,484
 1,766,954
 1,064,536
 1,062,446
 583,775

(a)We recognized items that affected the comparability of results for the years 2016, 2015 and 2014, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations."
(b)
Total assets and long-term debt have been adjusted due to the adoption of Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, and ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. Together, this guidance requires that deferred debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with debt discounts and premiums, while debt issuance costs related to line-of-credit arrangements may still continue to be classified as assets, see "Note 2—Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."


Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
Key Terms:
When the following terms appear in this report, they have the meanings indicated below:
Reportable Segments:
Match Group - includes the businesses of Match Group, Inc., which completed its initial public offering ("IPO") on November 24, 2015; and consists of Dating, which includes all Datingbusinesses globally, and Non-dating, which consists of The Princeton Review.
HomeAdvisor - is a leading global home services digital marketplace that helps connect consumers with home professionals.
Video - consists primarily of Vimeo, Electus, CollegeHumor, Notional, IAC Films and Daily Burn.
Applications - consists of Consumer, which includes our direct-to-consumer downloadable desktop applications, including Apalon, which houses our mobile operations, and SlimWare, which houses our downloadable desktop software and services operations; and Partnerships, which includes our business-to-business partnership operations.
Publishing - consists of Premium Brands, which includes About.com, Dictionary.com, Investopedia and The Daily Beast; and Ask & Other, which primarily includes Ask.com, CityGrid and, for periods prior to its sale on June 30, 2016, ASKfm.
Other - consists of ShoeBuy and PriceRunner, for periods prior to their sales on December 30, 2016 and March 18, 2016, respectively.
Operating metrics:
Dating North America - consists of the financial results of the Dating businesses for customers located in the United States and Canada.
Dating International - consists of the financial results of the Dating businesses for customers located outside of the United States and Canada.
Direct Revenue - is revenue that is directly received by Match Group from an end user of its products.
Average PMC - is calculated by summing the number of paid members, or paid member count ("PMC"), at the end of each day in the relevant measurement period and dividing it by the number of calendar days in that period. PMC as of any given time represents the number of users with a paid membership at that time.
Average Revenue per Paying User ("ARPPU") - is Direct Revenue from members in the relevant measurement period (whether in the form of subscription payments or àla carte payments) divided by the Average PMC in such period divided by the number of calendar days in such period. This definition has been updated in the fourth quarter of 2016 to exclude non-subscriber Direct Revenue andpreviously reported ARPPU has been adjusted to conform to this definition.
Service Requests - are fully completed and submitted customer service requests on HomeAdvisor.
Paying Service Professionals ("Paying SPs") - are the number of service professionals that had an active membership and/or paid for leads in the last month of the period.
Operating costs and expenses:
Cost of revenue - consists primarily of traffic acquisition costs and includes (i) payments made to partners who distribute our Partnerships customized browser-based applications and who integrate our paid listings into their websites and (ii) fees related to the distribution and the facilitation of in-app purchase of product features. 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 Video segment, expenses associated with the operation of the Company's data centers, consisting compensation (including stock-based compensation) and other employee-related costs, hosting fees, credit card processing fees, content acquisition costs and rent.
Selling and marketing expense - consists primarily of advertising expenditures and compensation (including stock-based compensation) and other employee-related costs for personnel engaged in selling and marketing, sales support and customer service functions. Advertising expenditures include online marketing, including fees paid to search engines and third parties that distribute our Consumer downloadable desktop applications, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the Match Group brands.
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, acquisition-related contingent consideration fair value adjustments (described below), fees for professional services and facilities costs.
Product development expense -consists primarily of compensation (including stock-based compensation) and other employee-related costs, to the extent that they are not capitalized, for personnel engaged in the design, development, testing and enhancement of product offerings and related technology.
Acquisition-related contingent consideration fair value adjustments - relate to the portion of the purchase price (of certain acquisitions) that is contingent upon the future operating performance of the acquired company.  The amounts ultimately paid are generally dependent upon earnings performance and/or operating metrics as stipulated in the relevant purchase agreements.  The fair value of the liability is estimated at the date of acquisition and adjusted each reporting period until the liability is settled.  If the payment date of the liability is longer than one year, the amount is initially recorded net of a discount, which is amortized as an expense each period.  In a period where the acquired company is expected to perform better than the previous estimate, the liability will be increased resulting in additional expense; and in a period when the acquired company is expected to perform worse than the previous estimate, the liability will be decreased resulting in income.  The year-over-year impact can be significant, for example, if there is income in one period and expense in the other period.
Long-term debt:
2012 Senior Notes - IAC's 4.75% Senior Notes due December 15, 2022, with interest payable each June 15 and December 15, which commenced on June 15, 2013, a portion of which were exchanged for the 2015 Match Group Senior Notes (described below) on November 16, 2015.
2013 Senior Notes - IAC's 4.875% Senior Notes due November 30, 2018, with interest payable each May 30 and November 30, which commenced on May 30, 2014.
Match Exchange Offer - Match Group exchanged $445 million of 2015 Match Group Senior Notes for a substantially like amount of 2012 Senior Notes on November 16, 2015.
2015 Match Group Senior Notes - Match Group's 6.75% Senior Notes due December 15, 2022, with interest payable each June 15 and December 15, which commenced on June 15, 2016, and which were issued in exchange for 2012 Senior Notes on November 16, 2015.
Match Group Term Loan - an $800 million, seven-year term loan entered into by Match Group on November 16, 2015. On March 31, 2016, a $10 million principal payment was made. On June 1, 2016, Match Group issued $400 million of 6.375% Senior Notes (described below). The proceeds from the offering were used to prepay a portion of the $790 million of indebtedness outstanding under the Match Group Term Loan. On December 8, 2016, a $40 million principal payment was made. In addition, the outstanding balance was repriced at LIBOR plus 3.25%, with a LIBOR floor of 0.75%. The outstanding balance of the Match Group Term Loan as of December 31, 2016 is $350 million.
2016 Match Group Senior Notes - Match Group's 6.375% Senior Notes due June 1, 2024, with interest payable each June 1 and December 1, which commenced on December 1, 2016, and which were issued on June 1, 2016.
Liberty Bonds - 5% New York City Industrial Development Agency Liberty Bonds due September 1, 2035. The Liberty Bonds were redeemed on September 1, 2015.

Non-GAAP financial measure:
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") - is a Non-GAAP financial measure. See "IAC's Principles of Financial Reporting" for the definition of Adjusted EBITDA.
MANAGEMENT OVERVIEW
IAC is a leading media and Internet company comprised of widely known consumer brands, such as HomeAdvisor, Vimeo, Dictionary.com, The Daily Beast, Investopedia, and Match Group's online dating portfolio, which includes Match, Tinder, PlentyOfFish and OkCupid.
Sources of Revenue
Match Group's Dating revenue is primarily derived directly from users in the form of recurring membership fees, which typically provide unlimited access to a bundle of features for a specific period of time, and the balances from à la carte features, where users pay a fee for a specific action or event; with additional revenue generated from online advertisers who pay to reach our large audiences. Non-dating revenue is primarily earned from fees received directly from students for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services.
HomeAdvisor's revenue is derived primarily from fees paid by members of its network of home services professionals for consumer leads and memberships.
A significant portion of the revenue from our Applications and Publishing segments is derived from online advertising, most of which is attributable to our services agreement with Google Inc. ("Google"). The Company's service agreement became effective on April 1, 2016, following the expiration of the previous services agreement. The services agreement expires on March 31, 2020; however, the Company may choose to terminate the agreement effective March 31, 2019. The services agreement requires that we comply with certain guidelines promulgated by Google. Google may generally unilaterally update its policies and guidelines without advance notice; which could in turn require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results of operations. For the years ended December 31, 2016, 2015 and 2014, revenue earned from Google was $824.4 million, $1.3 billion and $1.4 billion, respectively. For the years ended December 31, 2016, 2015 and 2014, Google revenue represents 87% and 73%; 94% and 83%; and 97% and 83%, of Applications and Publishing revenue, respectively.
The revenue earned by our Video segment is derived from media production and distribution, subscriptions and advertising.
ShoeBuy's revenue was derived principally from merchandise sales. PriceRunner's revenue was derived principally from advertising.
Strategic Partnerships, Advertiser Relationships and Online Advertising
A meaningful portion of the Company's revenue is attributable to the services agreement with Google described above. For the years ended December 31, 2016, 2015 and 2014, revenue earned from Google represents 26%, 40% and 45%, respectively, of our consolidated revenue.
We pay traffic acquisition costs, which consist of payments made to partners who distribute our Partnerships customized browser-based applications, integrate our paid listings into their websites and fees related to the distribution and facilitation of in-app purchases of product features. We also pay to market and distribute our services on third-party distribution channels, such as search engines and social media websites. In addition, some of our businesses manage affiliate programs, pursuant to which we pay commissions and fees to third parties based on revenue earned. These distribution channels might also offer their own products and services, as well as those of other third parties, which compete with those we offer.
We market and offer our products and services directly to consumers through branded websites and subscriptions, allowing consumers to transact directly with us in a convenient manner. We have made, and expect to continue to make, substantial investments in online and offline advertising to build our brands and drive traffic to our websites and consumers and advertisers to our businesses.
The cost of acquiring new consumers through online and offline third-party distribution channels has increased, particularly in the case of online channels, as Internet commerce continues to grow and competition in the markets in which IAC's businesses operate increases.
2016 Developments
During 2016, the Company:

repurchased 6.3 million shares of common stock at an average price of $49.98 per share, or $315.3 million in aggregate; and
redeemed and repurchased $109.8 million of its 2013 Senior Notes and repurchased $16.6 million of its 2012 Senior Notes.
On December 30, 2016, ShoeBuy, which was part of the Other segment, was sold for approximately $70.0 million resulting in a pre-tax gain of $37.5 million.
On December 8, 2016, Match Group made a $40 million principal payment on the Match Group Term Loan. In addition, the remaining outstanding balance of $350 million was repriced at LIBOR plus 3.25%, with a LIBOR floor of 0.75%. The previous interest charged on the Match Group Term Loan was LIBOR plus 4.50%, with a LIBOR floor of 1.00%.
On November 3, 2016, HomeAdvisor acquired a controlling interest in MyHammer Holding AG ("MyHammer"), the leading home services marketplace in Germany.
On June 30, 2016, ASKfm, which was part of the Publishing segment, was sold resulting in a pre-tax loss of $3.8 million.
On June 1, 2016, Match Group issued $400 million aggregate principal amount of 6.375% Senior Notes due June 1, 2024. The proceeds were used to prepay a portion of the Match Group Term Loan.
On May 2, 2016, Vimeo, which is part of the Video segment, acquired VHX, a platform for premium over-the-top subscription video channels.
On March 18, 2016, PriceRunner, which was part of the Other segment, was sold for $96.6 million resulting in a pre-tax gain of $12.0 million.
2016 Consolidated Results
In 2016, the Company's revenue decreased 3% and operating income declined $212.2 million to a loss of $32.6 million; however, the Company delivered 3% Adjusted EBITDA growth. Revenue declined due primarily to significant decreases from Publishing and Applications, partially offset by strong growth at Match Group and HomeAdvisor. The operating income decline, despite higher Adjusted EBITDA, was due primarily to increases of $261.3 million in goodwill impairment charges, $9.5 million in depreciation and a change of $18.0 million in acquisition-related contingent consideration fair value adjustments, partially offset by a decrease of $60.5 million in amortization of intangibles. The increase in goodwill impairment charges is due to the write-off of goodwill of $275.4 million at Publishing in the current year period compared to the write-off of goodwill of $14.1 million at ShoeBuy in the prior year period. The change in acquisition-related contingent consideration fair value adjustments reflects expense in the current year period of $2.6 million versus income of $15.5 million in the prior year period. The decrease in amortization of intangibles was due primarily to a reduction in impairment charges during the year. The Company recorded in 2016 an impairment charge of $11.6 million compared to an impairment charge in 2015 of $88.0 million all related to certain Publishing indefinite-lived trade names. The Adjusted EBITDA increase was primarily driven by strong growth from Match Group and HomeAdvisor and reduced losses from Video, partially offset by declines of $95.4 million and $52.0 million from Publishing and Applications, respectively.
Other events affecting year-over-year comparability include:
(i)sales of businesses in 2016:
PriceRunner on March 18, 2016 (reflected in the Other segment);
ASKfm on June 30, 2016 (reflected in the Publishing segment); and
ShoeBuy on December 30, 2016 (reflected in the Other segment).

(ii)acquisitions in 2015:
Eureka on April 24, 2015 (reflected in the Match Group segment); and
PlentyOfFish on October 28, 2015 (reflected in the Match Group segment).

(iii)acquisitions in 2014:

the ValueClick O&O website businesses on January 10, 2014 (reflected in the Publishing segment, except for PriceRunner which was reflected in the Other segment);
SlimWare on April 1, 2014 (reflected in the Applications segment);
The Princeton Review on August 1, 2014 (reflected in the Match Group segment);
LoveScout24 (formerly known as FriendScout24) on August 31, 2014 (reflected in the Match Group segment); and
Apalon on November 3, 2014 (reflected in the Applications segment).

(iv)costs of $4.9 million, $16.8 million and $4.9 million in 2016, 2015 and 2014, respectively, related to the consolidation and streamlining of technology systems and European operations at the Dating businesses (reflected in the Match Group segment). This project is complete as of December 31, 2016.
(v)restructuring charges in 2016 of $15.6 million and $2.6 million at the Publishing and Applications segments, respectively, related to an effort to manage overall costs resulting from significant declines in revenue from the new Google contract, which was effective April 1, 2016, as well as declines from certain other legacy businesses.
Results of Operations for the Years Ended December 31, 2016, 2015 and 2014
Revenue
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Match Group$1,222,526
 $202,095
 20 % $1,020,431
 $132,163
 15 % $888,268
HomeAdvisor498,890
 137,689
 38 % 361,201
 77,660
 27 % 283,541
Video228,649
 15,332
 7 % 213,317
 30,863
 17 % 182,454
Applications604,140
 (156,608) (21)% 760,748
 (15,959) (2)% 776,707
Publishing407,313
 (284,373) (41)% 691,686
 (99,863) (13)% 791,549
Other178,949
 (5,146) (3)% 184,095
 (3,739) (2)% 187,834
Inter-segment elimination(585) (40) (7)% (545) 261
 33 % (806)
Total$3,139,882
 $(91,051) (3)% $3,230,933
 $121,386
 4 %
$3,109,547
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Match Group revenue increased 20% driven by a 23% increase in Dating revenue attributable to higher Average PMC at both North America and International, up 22% and 46%, respectively, due primarily to growth in paying members at Tinder and the contribution from the 2015 acquisition of PlentyOfFish. This revenue growth was partially offset by a 6% decline in ARPPU. North America and International ARPPU decreased 5% and 7%, respectively, due primarily to the continued mix shift towards lower ARPPU brands, including Tinder and PlentyOfFish, which have lower price points compared to Match Group's more established brands. North America ARPPU decline was partially offset by an increase in mix-adjusted rates. Non-dating revenue decreased 6% reflecting fewer in-person SAT test preparation courses and in-person tutoring sessions, partially offset by an increase in online and self-paced services.
HomeAdvisor revenue increased 38% due primarily to 44% growth at the domestic business and 18% growth at the international business. Domestic revenue growth was driven by a 41% increase in Paying SPs and a 34% increase in Service Requests. International revenue growth was driven by organic growth across all regions as well as the acquisition of a controlling interest in MyHammer on November 3, 2016.
Video revenue increased 7% due primarily to growth at Electus, Vimeo and Daily Burn, partially offset by lower revenue from IAC Films as the prior year benefited from the release of the movie While We're Young.
Applications revenue decreased 21% due to a 39% decline in Partnerships and a 12% decline in Consumer. Partnerships revenue decreased due primarily to the loss of certain partners. The Consumer decline was driven by lower search revenue from our downloadable desktop applications due primarily to lower monetization, partially offset by strong growth at Apalon and SlimWare, which together comprised 12% of total Applications revenue in 2016.

Publishing revenue decreased 41% due to 54% lower Ask & Other revenue and 25% lower Premium Brands revenue. Ask & Other revenue decreased due to a decline in revenue at Ask.com primarily as a result of the new Google contract, which became effective April 1, 2016, as well as declines from certain other legacy businesses. Premium Brands revenue decreased due primarily to declines in paid search traffic at About.com, mainly attributable to the new Google contract, partially offset by strong growth at Investopedia and The Daily Beast.
Other revenue decreased 3% due to the sale of PriceRunner on March 18, 2016, partially offset by growth at ShoeBuy.
For the year ended December 31, 2015 compared to the year ended December 31, 2014
Match Group revenue increased 15%, or 20% excluding the effects of foreign exchange, driven by a 9% increase in Dating revenue attributable to 8% growth in Direct revenue. Direct revenue growth was primarily driven by higher Average PMC at both North America and International, up 13% and 31%, respectively, due mainly to Tinder, partially offset by 9% lower ARPPU due to brand mix shifts and foreign exchange effects. Excluding foreign exchange effects, total Dating revenue and International Direct revenue would have increased 15% and 21%, respectively. Non-dating revenue increased 114% principally due to the full year contribution from The Princeton Review, which was acquired on August 1, 2014.
See "IAC's Principles of Financial Reporting" for a discussion and reconciliation of effects of foreign exchange on Match Group revenue.
HomeAdvisor revenue increased 27% due primarily to 43% growth at the domestic business, partially offset by international declines due primarily to the restructuring of certain European operations in the fourth quarter of 2014. Domestic revenue growth was driven by 49% higher Service Requests and a 46% increase in Paying SPs.
Video revenue grew 17% due primarily to strong growth at Vimeo, Daily Burn and Electus.
Applications revenue decreased 2% due to a 27% decline in Partnerships, partially offset by 16% growth in Consumer. Consumer growth was driven by higher revenue from our downloadable desktop applications, including SlimWare, and a full year contribution from Apalon, our mobile applications business, which was acquired on November 3, 2014.
Publishing revenue decreased 13% due to 31% lower Ask & Other revenue, partially offset by 29% higher Premium Brands revenue. Ask & Other revenue decreased primarily to a decline in revenue at Ask.com and certain legacy businesses. Premium Brands revenue increased due primarily to strong growth at About.com and Investopedia.
Other revenue decreased 2% due to lower revenue at PriceRunner.
Cost of revenue
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Cost of revenue$755,730 $(22,431) (3)% $778,161 $(82,043) (10)% $860,204
As a percentage of revenue24%     24%     28%
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Cost of revenue in 2016 decreased from 2015 due to decreases of $54.7 million from Applications and $47.0 million from Publishing, partially offset by increases of $56.0 million from Match Group, $12.4 million from Other and $7.7 million from Video.
The Applications decrease was due primarily to a reduction of $52.0 million in traffic acquisition costs driven by a decline in revenue at Partnerships.
The Publishing decrease was due primarily to reductions of $40.0 million in traffic acquisition costs and $4.6 million in content costs driven by a decline in revenue at Ask.com and certain legacy businesses, partially offset by $9.2 million in restructuring charges in the current year period related to vacating a data center facility and severance costs in connection with a reduction in workforce.

The Match Group increase was due primarily to a significant increase in in-app purchase fees across multiple brands, including Tinder, and the 2015 acquisitions of PlentyOfFish and Eureka, partially offset by a mix shift to higher margin online products from in-person courses at Non-dating.
The Other increase was due primarily to an increase in cost of products sold at ShoeBuy due to increased sales, partially offset by the sale of PriceRunner.
The Video increase was due primarily to a net increase in production costs at our media and video businesses and an increase in hosting fees related to Vimeo's subscription growth, increased video plays and expanded On Demand catalog. These increases were partially offset by a reduction in investment in content costs at Vimeo in 2016.
For the year ended December 31, 2015 compared to the year ended December 31, 2014
Cost of revenue in 2015 decreased from 2014 due to decreases of $87.8 million from Publishing and $65.3 million from Applications, partially offset by increases of $58.0 million from Match Group and $10.4 million from Video.
The Publishing decrease was due primarily to a reduction of $87.1 million in traffic acquisition costs at Ask & Other driven primarily by a decline in revenue at Ask.com.
The Applications decrease was due primarily to a reduction of $72.2 million in traffic acquisition costs driven by a decline in revenue at Partnerships.
The Match Group increase was due primarily to a significant increase in in-app purchase fees given that its native mobile apps were largely introduced in the second quarter of 2014, the full year contribution from the acquisition of The Princeton Review and higher hosting fees driven by growth in users and product features.
The Video increase was due primarily to increases in hosting fees and content costs related to Vimeo's expanded On Demand catalog.
Selling and marketing expense
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Selling and marketing expense$1,245,263 $(100,313) (7)% $1,345,576 $198,167 17% $1,147,409
As a percentage of revenue40%     42%     37%
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Selling and marketing expense in 2016 decreased from 2015 due to decreases of $130.2 million from Publishing, $40.1 million from Applications and $11.3 million from Video, partially offset by an increase of $81.5 million from HomeAdvisor.
The Publishing decrease was due primarily to a reduction of $132.6 million in online marketing, resulting from a decline in revenue, partially offset by $3.1 million in restructuring charges in the current year period related to severance costs in connection with a reduction in workforce.
The Applications decrease was due primarily to a decline of $37.5 million in online marketing, principally related to lower anticipated search revenue from our downloadable desktop applications at Consumer.
The Video decrease was due primarily to a reduction of $8.9 million in online marketing driven primarily by Vimeo.
The HomeAdvisor increase was due primarily to higher online and offline marketing of $51.2 million and an increase of $27.2 million in compensation due primarily to an increase in the sales force at the domestic business.
For the year ended December 31, 2015 compared to the year ended December 31, 2014

Selling and marketing expense in 2015 increased from 2014 due to increases of $62.7 million from HomeAdvisor, $56.6 million from Publishing, $41.0 million from Applications, $24.5 million from Match Group and $17.0 million from Video.
The HomeAdvisor increase was due primarily to increases of $41.5 million in offline and online marketing and $19.1 million in compensation due, in part, to an increase in the sales force at the domestic business.
The Publishing increase was due primarily to an increase of $54.8 million in online marketing across Premium Brands, including About.com, partially offset by declines at Ask.com.
The Applications increase was due primarily to an increase of $38.1 million in online marketing, which was primarily related to a significant increase in new downloadable desktop applications at Consumer.
The Match Group increase was due primarily to the full year contribution from the 2014 acquisitions of LoveScout24 and The Princeton Review, an increase in stock-based compensation and from the 2015 acquisition of Eureka.
The Video increase was due primarily to an increase of $13.3 million in online marketing driven primarily by Vimeo.
General and administrative expense
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
General and administrative expense$547,160 $21,531 4% $525,629 $82,019 18% $443,610
As a percentage of revenue17%     16%     14%
For the year ended December 31, 2016 compared to the year ended December 31, 2015
General and administrative expense in 2016 increased from 2015 due to increases of $21.8 million from HomeAdvisor, $10.5 million from Applications, $4.7 million from Video and $3.3 million from Match Group, partially offset by decreases of $14.1 million from Publishing and $3.3 million from Corporate.
The HomeAdvisor increase was due primarily to higher compensation due, in part, to increased headcount at the domestic business, an increase in bad debt expense due to higher domestic revenue and $2.1 million in transaction-related costs in the current year period.
The Applications increase was due primarily to a change of $13.8 million in acquisition-related contingent consideration fair value adjustments, which was due to expense of $12.0 million in the current year period versus income of $1.8 million in the prior year period, partially offset by a decrease in compensation due, in part, to a decrease in headcount related to a reduction in workforce that took place in the first half of 2016.
The Video increase was due primarily to the inclusion in the prior year of income of $2.6 million in acquisition-related contingent consideration fair value adjustments and higher compensation due, in part, to an increase in headcount at Vimeo.
The Match Group increase was due primarily to an increase of $5.3 million in compensation, an increase of $4.0 million in office rent due to growth in the business and a decrease in income of $1.9 million in acquisition-related contingent consideration fair value adjustments, partially offset by decreases in consulting expenses and non-income tax related items at Non-dating. The increase in compensation is due to an increase in headcount from both recent acquisitions and existing business growth, partially offset by a decrease in stock-based compensation expense due primarily to the inclusion in 2015 of a modification charge related to certain equity awards, partially offset by the issuance of new equity awards since the prior year.
The Publishing decrease was due primarily to the sale of ASKfm and a decrease in bad debt expense, partially offset by $2.3 million in restructuring charges in the current year period primarily related to severance costs in connection with a reduction in workforce.

The Corporate decrease was due primarily to a decrease in stock-based compensation expense resulting from the inclusion in 2015 of a modification charge and a greater number of awards being forfeited in the current year compared to the prior year, partially offset by the issuance of new equity awards in 2016.
For the year ended December 31, 2015 compared to the year ended December 31, 2014
General and administrative expense in 2015 increased from 2014 due to increases of $58.0 million from Match Group, $11.7 million from Corporate and $9.0 million from HomeAdvisor.
The Match Group increase was due primarily to the full year contribution from the acquisition of The Princeton Review, an increase of $19.2 million in stock-based compensation expense due to the modification of certain awards in 2015 and the issuance of equity awards since 2014, and an increase of $3.3 million in costs, including severance, in 2015 related to the consolidation and streamlining of technology systems and European operations at our Dating businesses, partially offset by a $3.9 million benefit in 2014 related to the expiration of the statute of limitations for a non-income tax matter.
The Corporate increase was due primarily to an increase in stock-based compensation expense as a result of a higher number of forfeited awards in 2014 and the modification of certain awards in 2015.
The HomeAdvisor increase was due primarily to an increase in compensation as a result of increased headcount in the domestic business and an increase in bad debt expense due to higher domestic revenue.
Product development expense
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Product development expense$197,885 $12,119 7% $185,766 $25,251 16% $160,515
As a percentage of revenue6%     6%     5%
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Product development expense in 2016 increased from 2015 due to increases of $15.7 million from Match Group and $2.3 million from Publishing, partially offset by a decrease of $6.6 million from Applications.
The Match Group increase was primarily related to an increase of $7.6 million in stock-based compensation expense, increased headcount at Tinder, and the 2015 acquisitions of PlentyOfFish and Eureka. The increase in stock-based compensation expense was due primarily to the issuance of new equity awards and a net increase in expense associated with the modification of certain equity awards since the prior year period.
The Publishing increase was due primarily to $1.2 million in restructuring charges related to severance costs in connection with a reduction in workforce.
The Applications decrease was due primarily to a decrease of $4.4 million in compensation due, in part, to a decrease in headcount related to a reduction in workforce that took place in the first half of 2016.
For the year ended December 31, 2015 compared to the year ended December 31, 2014
Product development expense in 2015 increased from 2014 due to increases of $17.6 million from Match Group and $5.5 million from HomeAdvisor.
The Match Group increase was due primarily to increased compensation at existing businesses and from acquisitions at Dating, as well as $4.0 million in severance expense in 2015, primarily incurred in the first half of 2015, related to the consolidation and streamlining of technology systems and European operations at our Dating business.
The HomeAdvisor increase was primarily related to an increase in compensation in the domestic business due, in part, to increased headcount.

Depreciation
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Depreciation$71,676 $9,471 15% $62,205 $1,049 2% $61,156
As a percentage of revenue2%     2%     2%
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Depreciation in 2016 increased from 2015 due primarily to acquisitions and capital expenditures, partially offset by certain fixed assets becoming fully depreciated.
For the year ended December 31, 2015 compared to the year ended December 31, 2014
Depreciation in 2015 increased from 2014 due primarily to the acquisition of The Princeton Review and capital expenditures, partially offset by certain fixed assets becoming fully depreciated.
Operating income (loss)
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Match Group$305,908
 $112,352
 58 % $193,556
 $(35,011) (15)% $228,567
HomeAdvisor35,343
 28,891
 448 % 6,452
 5,391
 509 % 1,061
Video(27,656) 11,100
 29 % (38,756) 4,590
 11 % (43,346)
Applications109,663
 (65,482) (37)% 175,145
 (3,815) (2)% 178,960
Publishing(334,417) (307,725) (1,153)% (26,692) (137,215) NM
 110,523
Other(2,037) 7,149
 78 % (9,186) (17,294) NM
 8,108
Corporate(119,429) 1,502
 1 % (120,931) (15,785) (15)% (105,146)
Total$(32,625) $(212,213) NM
 $179,588
 $(199,139) (53)% $378,727
              
As a percentage of revenue(1)%     6%     12%
________________________
NM = not meaningful
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Operating income in 2016 decreased to a loss from 2015 despite an increase of $15.4 million in Adjusted EBITDA described below, due primarily to increases of $261.3 million in goodwill impairment charges, $9.5 million in depreciation and a change of $18.0 million in acquisition-related contingent consideration fair value adjustments, partially offset by a decrease of $60.5 million in amortization of intangibles. The increase in goodwill impairment charges is due to the write-off of goodwill of $275.4 million at Publishing in the current year period compared to the write-off of goodwill of $14.1 million at ShoeBuy in the prior year period. The goodwill impairment charge at Publishing was driven by the impact from the new Google contract, traffic trends and monetization challenges and the corresponding impact on the current estimate of fair value. The goodwill impairment charge was recorded in the second quarter of 2016. The change in acquisition-related contingent consideration fair value adjustments was primarily the result of expense in the current year period of $2.6 million versus income of $15.5 million in the prior year period. The decrease in amortization of intangibles was due primarily to a reduction in impairment charges during the year, partially offset by $23.3 million in amortization related to a change in classification of a Publishing trade name from an indefinite-lived intangible asset to a definite-lived intangible asset, effective April 1, 2016. The Company recorded an impairment charge in 2016 of $11.6 million compared to an impairment charge in 2015 of $88.0 million all related to certain Publishing indefinite-lived trade names.

For a detailed description of the Publishing goodwill and indefinite-lived intangible asset impairments, see "Note 2—Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
At December 31, 2016, there was $177.9 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 2.6 years.
For the year ended December 31, 2015 compared to the year ended December 31, 2014
Operating income in 2015 decreased from 2014 due to the decrease of $58.3 million in Adjusted EBITDA described below and increases of $82.0 million in amortization of intangibles, $45.8 million in stock-based compensation expense and a $14.1 million goodwill impairment charge at ShoeBuy, partially offset by an increase in income of $2.1 million in changes from acquisition-related contingent consideration fair value adjustments compared to 2014. The increase in amortization of intangibles was due primarily to an $88.0 million impairment charge related to certain trade names of certain Ask & Other direct marketing brands, including Ask.com. The impairment charge reflected the impact of Google ecosystem changes that have impacted our ability to market, the effect of the reduced revenue share on mobile under the terms of the services agreement with Google, and the shift in focus to higher margin businesses in Publishing's Premium Brands. The combined impact of these factors has reduced the forecasted revenue and profits for these brands and the impairment charge reflected the resultant reduction in fair value. The increase in stock-based compensation expense was due primarily to the modification of certain equity awards in 2015, a higher number of forfeited awards in 2014 and issuance of equity awards since 2014. The goodwill impairment charge at ShoeBuy was due to increased investment and the seasonal effect of high inventory levels as of October 1, 2015, the date of our 2015 annual assessment.
Adjusted EBITDA
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Match Group$403,955
 $125,288
 45 % $278,667
 $5,219
 2 % $273,448
HomeAdvisor48,546
 30,017
 162 % 18,529
 828
 5 % 17,701
Video(21,247) 17,137
 45 % (38,384) 1,532
 4 % (39,916)
Applications132,276
 (51,982) (28)% 184,258
 (1,934) (1)% 186,192
Publishing(7,571) (95,359) NM
 87,788
 (63,172) (42)% 150,960
Other1,227
 (9,394) (88)% 10,621
 (2,513) (19)% 13,134
Corporate(55,967) (278)  % (55,689) 1,754
 3 % (57,443)
Total$501,219
 $15,429
 3 % $485,790
 $(58,286) (11)% $544,076
              
As a percentage of revenue16%     15%     17%
For a reconciliation of operating income (loss) for the Company's reportable segments and net (loss) earnings attributable to IAC's shareholders to Adjusted EBITDA, see "Note 14—Segment Information" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Match Group Adjusted EBITDA increased 45% due primarily to higher revenue, a decrease in selling and marketing expense as a percentage of revenue as the product mix continues to shift towards brands with lower marketing spend, and profits from Non-dating in the current year period, partially offset by an increase in cost of revenue driven by a significant increase in in-app purchase fees. Additionally, there are $11.8 million of lower costs in the current year period related to the consolidation and streamlining of technology systems and European operations at our Dating businesses ($4.9 million in 2016 compared to $16.8 million in 2015).
HomeAdvisor Adjusted EBITDA increased 162% due primarily to higher revenue, partially offset by an increased investment in online and offline marketing and $2.1 million in transaction-related costs. Adjusted EBITDA was further impacted by higher compensation due primarily to increased headcount and an increase in bad debt expense due to higher domestic revenue.

Video Adjusted EBITDA loss improved 45% due primarily to reduced losses at Vimeo and Daily Burn and increased profits at Electus.
Applications Adjusted EBITDA decreased 28% due primarily to lower revenue, partially offset by decreases in cost of revenue and selling and marketing expense. Adjusted EBITDA was further impacted by $2.6 million in restructuring charges.
Publishing Adjusted EBITDA declined to a loss in the current year period due primarily to lower revenue and $15.6 million in restructuring charges related to vacating a data center and severance costs during 2016 in an effort to manage costs ($9.2 million in cost of revenue, $3.1 million in selling and marketing expense, $2.3 million in general and administrative expense and $1.2 million in product development expense). Adjusted EBITDA was further impacted by decreases in selling and marketing expense, cost of revenue and general and administrative expense exclusive of the restructuring charges.
Other Adjusted EBITDA decreased 88% due to the sale of PriceRunner in the first quarter of 2016, partially offset by improved Adjusted EBITDA at ShoeBuy resulting from increased revenue.
Corporate Adjusted EBITDA loss was flat compared to 2015.
For the year ended December 31, 2015 compared to the year ended December 31, 2014
Match Group Adjusted EBITDA increased 2% due primarily to an increase in revenue and reduced losses from The Princeton Review, partially offset by $16.8 million of costs in 2015 related to the consolidation and streamlining of technology systems and European operations at our Dating businesses, an increase in cost of revenue and $3.9 million benefit in 2014 related to the expiration of the statute of limitations for a non-income tax matter.
HomeAdvisor Adjusted EBITDA increased 5% due primarily to higher revenue, partially offset by an increased investment in offline and online marketing, higher compensation due, in part, to increased headcount, and increased bad debt expense due to higher domestic revenue.
Video Adjusted EBITDA loss decreased 4% due primarily to increased profits at Electus and reduced losses at Daily Burn and IAC Films, partially offset by increased investment in Vimeo.
Applications Adjusted EBITDA decreased 1% due 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 a significant increase in online marketing related to new downloadable desktop applications at Consumer. The decrease in cost of revenue was due primarily to a decrease in traffic acquisition costs driven by a decline in revenue from Partnerships.
Publishing Adjusted EBITDA decreased 42% 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 related to an increase in online marketing across Premium Brands, including About.com, partially offset by a decline at Ask.com. The decrease in cost of revenue was due primarily to a decrease in traffic acquisition costs driven primarily by a decline in revenue at Ask.com.
Other Adjusted EBITDA decreased 19% due to lower revenue.
Corporate Adjusted EBITDA loss decreased 3% due to lower compensation.
Interest expense
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Interest expense$109,110 $35,474 48% $73,636 $17,322 31% $56,314
Interest expense in 2016 increased from 2015 due to the $800 million of borrowings under the Match Group Term Loan in November 2015, of which $400 million was refinanced on June 1, 2016 with the 2016 Match Group Senior Notes, and the 2% higher interest rate associated with the 2015 Match Group Senior Notes which were issued in exchange for a substantially like amount of 2012 Senior Notes, partially offset by the repurchases and redemptions of the 2013 and 2012 Senior Notes during the year.

Interest expense in 2015 increased from 2014 due primarily to both the costs and the higher interest rate associated with the exchange of $445 million of Match Group Senior Notes for a substantially like amount of 2012 Senior Notes, as well as the $800 million Match Group Term Loan. In connection with the note exchange, $7.3 million in costs were expensed during 2015. The note exchange and term loan borrowings closed on November 16, 2015. Interest expense in 2015 was also impacted by the accelerated amortization of deferred financing costs associated with the redemption of the Liberty Bonds on September 1, 2015.
Other income (expense), net
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Other income (expense), net$60,461 $23,540 64% $36,921 $89,405 NM $(52,484)
Other income, net in 2016 includes gains of $37.5 million and $12.0 million related to the sale of ShoeBuy and PriceRunner, respectively, $34.4 million in net foreign currency exchange gains due to strengthening of the dollar relative to the British Pound and Euro, interest income of $5.1 million and a $3.6 million gain related to the sale of marketable equity securities, partially offset by a non-cash charge of $12.1 million related to the write-off of a proportionate share of original issue discount and deferred financing costs associated with prepayments of $440 million of the Match Group Term Loan, $10.0 million in other-than-temporary impairment charges related to certain cost method investments as a result of our assessment of the near-term prospects and financial condition of the investees, a loss of $3.8 million related to the sale of ASKfm and a $3.6 million loss on the 2013 and 2012 Senior Note redemptions and repurchases.
Other income, net in 2015 included a gain of $34.3 million from a real estate transaction, $5.4 million in net foreign currency exchange gains and $4.3 million in interest income, partially offset by $6.7 million in other-than-temporary impairment charges related to certain cost method investments.
Other expense, net in 2014 included $66.6 million in other-than-temporary impairment charges related to certain cost method investments and a $4.2 million other-than-temporary impairment charge on one of our equity method investments following the sale of a majority of the investee's assets, partially offset by a $19.4 million gain related to the sale of Urbanspoon, $4.4 million in interest income and $3.6 million in gains related to the sale of several long-term investments.
Income tax benefit (provision)
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Income tax benefit (provision)$64,934 NM NM $(29,516) NM NM $(35,372)
Effective income tax rate80%     21%     13%
In 2016, the Company recorded an income tax benefit for continuing operations of $64.9 million, which represents an effective income tax rate of 80%. The effective income tax rate was higher than the statutory rate of 35% due primarily to foreign income taxed at lower rates and the non-taxable gain on the sale of ShoeBuy, partially offset by the non-deductible portion of the goodwill impairment charge at the Publishing segment.
In 2015, the Company recorded an income tax provision for continuing operations of $29.5 million, which represents an effective income tax rate of 21%. The effective income tax rate was lower than the statutory rate of 35% due primarily to the realization of certain deferred tax assets, foreign income taxed at lower rates, the non-taxable gain on contingent consideration fair value adjustments, and a reduction in tax reserves and related interest due to the expiration of statutes of limitations, partially offset by a non-deductible goodwill impairment charge and unbenefited losses of unconsolidated subsidiaries.
In 2014, the Company recorded an income tax provision for continuing operations of $35.4 million, which represents an effective income tax rate of 13%. The effective income tax rate was lower than the statutory rate of 35% due principally to a reduction in tax reserves and related interest of $88.2 million due to the expiration of statutes of limitations for federal income taxes for 2001 through 2009 and foreign income taxed at lower rates, partially offset by the largely unbenefited loss associated with the write-downs of certain of the Company's investments and non-deductible goodwill associated with the sale of Urbanspoon.

For further details of income tax matters, see "Note 3—Income Taxes" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
Earnings from discontinued operations, net of tax
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Earnings from discontinued operations, net of tax$189 NM NM $17 NM NM $174,673
Earnings from discontinued operations, net of tax in 2014 was due to the release of tax reserves related to the expiration of the statutes of limitations for federal income taxes for the years 2001 through 2009.
Net (earnings) loss attributable to noncontrolling interests
Noncontrolling interests represent the noncontrolling holders’ percentage share of earnings or losses from the subsidiaries in which the Company holds a majority, but less than 100 percent, ownership interest and the results of which are included in our consolidated financial statements.
 Years Ended December 31,
 2016 $ Change % Change 2015 $ Change % Change 2014
 (Dollars in thousands)
Net (earnings) loss attributable to noncontrolling interests$(25,129) $(31,227) NM $6,098 $455 8% $5,643
Net earnings attributable to noncontrolling interests in 2016 primarily represents the proportionate share of the noncontrolling holders' ownership in Match Group.
Net loss attributable to noncontrolling interests in 2015 primarily represents the proportionate share of the noncontrolling holders' ownership in certain subsidiaries within the Video, HomeAdvisor and Publishing segments and Match Group.
Net loss attributable to noncontrolling interests in 2014 primarily represents the proportionate share of the noncontrolling holders' ownership in certain subsidiaries within the Video segment.


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 Earnings Before Interest, Taxes, Depreciation and Amortization ("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, if applicable, 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, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. 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.
For a reconciliation of operating income (loss) by reportable segment and net (loss) earnings attributable to IAC shareholders to Adjusted EBITDA for the years ended December 31, 2016, 2015 and 2014, see "Note 14—Segment Information" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
Non-Cash Expenses That Are Excluded From IAC's Non-GAAP Measure
Stock-based compensationexpense consists principally of expense associated with the grants of stock options, restricted stock units ("RSUs"), performance-based RSUs and market-based awards. 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 and market-based awards are included only to the extent the applicable performance or market condition(s) has 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, performance-based RSUs and market-based awards, 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 or, in the case of leasehold improvements, the lease term, if shorter.
Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as trade names, 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. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.
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 the ongoing cost of doing business.
Effects of Changes in Foreign Exchange Rates on Match Group Revenue

The impact of foreign exchange rates on Match Group, due to its global reach, may be an important factor in understanding period over period comparisons if movement in rates is significant. International revenues are favorably

impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S dollar strengthens relative to other foreign currencies. We believe the presentation of revenue excluding foreign exchange, in addition to reported revenue, helps improve the ability to understand Match Group's performance because it excludes the impact of foreign currency volatility that is not indicative of Match Group's core operating results.
Revenue, excluding foreign exchange impact compares results between periods as if exchange rates had remained constant period over period. Revenue, excluding foreign exchange impact is calculated by translating current period revenues using prior period exchange rates. Revenue growth, excluding foreign exchange impact (expressed as a percentage), is calculated by determining the increase in current period revenues over prior period revenues where current period revenues are translated using prior period exchange rates.
This non-GAAP measure should be considered in addition to results reported in accordance with GAAP, but should not be considered a substitute for or superior to GAAP.
The impact of changes in foreign exchange rates on Match Group revenue was not material to the consolidated statement of operations for the year ended December 31, 2016 compared to the year ended December 31, 2015.
The following table presents the impact of foreign exchange on Match Group consolidated revenue, Match Group Dating revenue and Match Group International Direct Revenue for the year ended December 31, 2015 compared to the year ended December 31, 2014:
 Years Ended December 31,
 2015 $ Change % Change 2014
 (Dollars in thousands)
Match Group consolidated revenue, as reported$1,020,431
 $132,163
 15% $888,268
Foreign exchange impact48,109
      
Match Group consolidated revenue, excluding foreign exchange impact$1,068,540
 $180,272
 20% $888,268
        
Match Group Dating revenue, as reported$909,705
 $73,247
 9% $836,458
Foreign exchange effect48,109
      
Match Group Dating revenue, excluding foreign exchange impact$957,814
 $121,356
 15% $836,458
        
Match Group International Direct Revenue, as reported$283,351
 $9,752
 4% $273,599
Foreign exchange effect47,080
      
Match Group International Direct Revenue, excluding foreign exchange impact$330,431
 $56,832
 21% $273,599


FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Position
  December 31, 2016 December 31, 2015
  (In thousands)
Cash and cash equivalents:    
United States (a)
 $815,588
 $1,109,331
All other countries (b) (c)
 513,599
 372,116
Total cash and cash equivalents 1,329,187
 1,481,447
Marketable securities (United States) (d)
 89,342
 39,200
Total cash and cash equivalents and marketable securities (e)
 $1,418,529
 $1,520,647
     
Match Group Debt:    
2015 Match Group Senior Notes $445,172
 $445,172
2016 Match Group Senior Notes 400,000
 
Match Group Term Loan due November 16, 2022 (f) (g)
 350,000
 800,000
Total Match Group long-term debt 1,195,172
 1,245,172
Less: Current maturities of Match Group long-term debt 
 40,000
Less: Unamortized original issue discount and original issue premium, net 5,245
 11,691
Less: Unamortized debt issuance costs 13,434
 16,610
Total Match Group debt, net of current maturities 1,176,493
 1,176,871
     
IAC Debt:    
2013 Senior Notes 390,214
 500,000
2012 Senior Notes 38,109
 54,732
Total IAC long-term debt 428,323
 554,732
Less: Current portion of IAC long-term debt

 20,000
 
Less: Unamortized debt issuance costs 2,332
 4,649
Total IAC debt, net of current portion 405,991
 550,083
     
Total long-term debt, net of current portion $1,582,484
 $1,726,954

(a)Domestically, cash equivalents primarily consist of AAA rated government money market funds, commercial paper rated A1/P1 or better and treasury discount notes.
(b)Internationally, cash equivalents primarily consist of AAA rated treasury money market funds with maturities of less than 91 days from the date of purchase, and time deposits with maturities of less than 91 days.
(c)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.
(d)Marketable securities consist of commercial paper rated A1/P1, treasury discount notes, short-to-medium-term debt securities issued by investment grade corporate issuers and an equity security (which was sold in the second quarter of 2016). 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.
(e)At December 31, 2016 and 2015, cash and cash equivalents includes Match Group's domestic and international cash and cash equivalents of $114.0 million and $139.6 million; and $34.4 million and $53.8 million, respectively. Marketable securities at December 31, 2015 include $11.6 million at Match Group. There are no marketable securities at December 31, 2016 at Match Group. Match Group is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, we cannot freely access the cash of Match Group and its subsidiaries. Match Group generated $234.1 million and $209.1 million of operating cash flows for the years ended December 31, 2016 and 2015, respectively. In addition, agreements governing Match Group’s indebtedness limit the payment of dividends or distributions, loans or advances to stockholders, including the Company, in the event a default has occurred or Match Group's leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0.

(f)Proceeds from the 2016 Match Group Senior Notes were used to prepay a portion of the Match Group Term Loan. A final payment of $350 million is due at maturity.
(g)The Match Group Term Loan matures on November 16, 2022; provided that, if any of the 2015 Match Group Senior Notes remain outstanding on the date that is 91 days prior to the maturity date of the 2015 Match Group Senior Notes, the Match Group Term Loan maturity date shall be the date that is 91 days prior to the maturity date of the 2015 Match Group Senior Notes.
Match Group Senior Notes:
On June 1, 2016, Match Group issued $400 million aggregate principal amount of the 2016 Match Group Senior Notes due June 1, 2024.
Promptly following the closing of the Match Exchange Offer on November 16, 2015, Match Group and its subsidiaries were designated as unrestricted subsidiaries of IAC for purposes of the indentures governing the 2013 and 2012 Senior Notes and the IAC Credit Facility. Following the designation, neither Match Group nor any of its subsidiaries guarantee any debt of IAC, or are subject to any of the covenants related to such debt.
The indentures governing the 2016 and 2015 Match Group Senior Notes contain covenants that would limit Match Group's ability to pay dividends or to make distributions and repurchase or redeem Match Group stock in the event a default has occurred or Match Group's leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0. As of December 31, 2016, Match Group was in compliance with all applicable covenants and was below the 5.0 to 1.0 leverage ratio.
Match Group Term Loan and Match Group Credit Facility:
On November 16, 2015, under a credit agreement (the "Match Group Credit Agreement"), Match Group borrowed $800 million in the form of a term loan. On March 31, 2016, the Company made a $10.0 million principal payment on the Term Loan. On June 1, 2016, the proceeds of the 2016 Match Group Senior Notes were used to prepay a portion of the Match Group Term Loan and, as a result, quarterly principal payments of $10 million under the Match Group Term Loan are no longer due. On December 8, 2016, Match Group made an additional $40 million principal payment on the Match Group Term Loan. In addition, the remaining outstanding balance of $350 million, which is due at maturity, was repriced; following the repricing, Match Group Term Loan bears interest, at Match Group's option, at a base rate or LIBOR, plus 2.25% or 3.25%, respectively, and in the case of LIBOR, a floor of 0.75%. The interest rate at December 31, 2016 is 4.20%. Interest payments are due at least semi-annually through the term of the loan. The Match Group Term Loan provides for additional annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio set forth in the Match Group Credit Agreement.
Match Group has a $500 million revolving credit facility that expires on October 7, 2020 (the "Match Group Credit Facility"). The annual commitment fee on undrawn funds based on the current leverage ratio is 30 basis points. Borrowings under the Match Group Credit Facility bear interest, at Match Group's option, at a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on Match Group's consolidated net leverage ratio. The terms of the Match Group Credit Facility require Match Group to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0 and a minimum interest coverage ratio of not less than 2.5 to 1.0 (in each case as defined in the Match Group Credit Agreement).
There are additional covenants under the Match Group Credit Facility and the Match Group Term Loan that limit the ability of Match Group and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. While the Match Group Term Loan remains outstanding, these same covenants under the Match Group Credit Agreement are more restrictive than the covenants that are applicable to the Match Group Credit Facility. Obligations under the Match Group Credit Facility and Match Group Term Loan are unconditionally guaranteed by certain Match Group wholly-owned domestic subsidiaries, and are also secured by the stock of certain Match Group domestic and foreign subsidiaries. The Match Group Term Loan and outstanding borrowings, if any, under the Match Group Credit Facility rank equally with each other, and have priority over the 2016 and 2015 Match Group Senior Notes to the extent of the value of the assets securing the borrowings under the Match Group Credit Agreement.
IAC Senior Notes:
The indenture governing the 2013 Senior Notes contains covenants that would limit our ability to pay dividends or to make distributions and repurchase or redeem our stock in the event a default has occurred or our leverage ratio (as defined in the indenture) exceeds 3.0 to 1.0. At December 31, 2016, there were no limitations pursuant thereto. There are additional covenants that limit the Company's ability and the ability of its restricted subsidiaries to, among other things, (i) incur

indebtedness, make investments, or sell assets in the event we are not in compliance with the financial ratio set forth in the indenture, and (ii) incur liens, enter into agreements limiting our restricted subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of our assets. The indenture governing the 2012 Senior Notes was amended to eliminate substantially all of the restrictive covenants contained therein in connection with the Match Exchange Offer.
IAC Credit Facility:
IAC has a $300 million revolving credit facility that expires October 7, 2020 (the "IAC Credit Facility"). The annual commitment fee on undrawn funds is currently 35 basis points and is based on the leverage ratio most recently reported. Borrowings under the IAC Credit Facility bear interest, at the Company's option, at a base rate or LIBOR, in each case, plus an applicable margin, which is determined by reference to a pricing grid based on the Company's leverage ratio. The terms of the IAC Credit Facility require that the Company maintains a leverage ratio (as defined in the agreement) of not more than 3.25 to 1.0 and restrict our ability to incur additional indebtedness. Borrowings under the IAC Credit Facility are unconditionally guaranteed by the same domestic subsidiaries that guarantee the 2013 and 2012 Senior Notes and are also secured by the stock of certain of our domestic and foreign subsidiaries. The 2013 and 2012 Senior Notes rank equally with each other, and are subordinate to outstanding borrowings under the IAC Credit Facility to extent of the value of the assets securing such borrowings.
Cash Flow Information
In summary, the Company's cash flows attributable to continuing operations are as follows:
 December 31,
 2016 2015 2014
 (In thousands)
Net cash provided by operating activities$292,377
 $349,405
 $424,048
Net cash provided by (used in) investing activities12,862
 (582,721) (439,794)
Net cash (used in) provided by financing activities(451,065) 734,808
 (80,980)
2016
Net cash provided by operating activities attributable to continuing operations consists of earnings from continuing operations, adjusted for stock-based compensation expense, depreciation, amortization of intangibles, goodwill impairment, excess tax benefits, deferred income taxes, acquisition-related contingent consideration fair value adjustments, adjustments related to gains on the sale of businesses, investments and assets, impairments of long-term investments, and the effect of changes in working capital. Adjustments to earnings primarily consist of $275.4 million of goodwill impairment at the Publishing segment, $119.2 million of deferred income taxes, $104.8 million of stock-based compensation expense, $79.4 million of amortization of intangibles, $71.7 million of depreciation, $51.8 million in excess tax benefits, $51.0 million of net gains on the sale of businesses, investments and assets, and $10.7 million of impairment of long-term investments. The deferred income tax benefit primarily relates to the Publishing goodwill impairment. The decrease from changes in working capital consist primarily of a decrease in accounts payable and other current liabilities of $52.4 million, an increase in other assets of $12.9 million, partially offset by an increase in deferred revenue of $35.8 million, and an increase in income taxes payable of $9.0 million. The decrease in accounts payable and other current liabilities is due to (i) a decrease in accrued advertising and revenue share expense at Publishing and Applications mainly due to the effect of the new Google contract, which became effective April 1, 2016, (ii) a decrease in VAT payables related mainly to decreases in international revenue at Publishing, and (iii) decreases in payables at Match Group due to the timing of payments. The increase in other assets is primarily related to an increase in production costs at IAC Films. The increase in deferred revenue is mainly due to growth in prepaid revenue at Match Group, HomeAdvisor and Vimeo. The increase in income taxes payable is primarily due to (i) receipt of 2015 capital loss refund in 2016, (ii) current year income tax accruals in excess of current year income tax payments, partially offset by (iii) payment of 2015 tax liabilities in 2016.
Net cash provided by investing activities attributable to continuing operations in 2016 includes net proceeds from the sale of businesses, investments and assets of $172.2 million, which mainly consists of proceeds from the sale of PriceRunner and ShoeBuy, partially offset by capital expenditures of $78.0 million, primarily related to Match Group and HomeAdvisor investments in internal development of software to support their products and services, as well as leasehold improvements and

computer hardware, purchases (net of sales and maturities) of marketable debt securities of $61.6 million, and cash used in acquisitions and investments of $31.0 million.
Net cash used in financing activities attributable to continuing operations in 2016 includes $308.9 million for the repurchase of 6.2 million shares of common stock at an average price of $49.74 per share, and $126.4 million for the redemption and repurchase of a portion of the 2012 and 2013 Senior Notes, partially offset by excess tax benefits from stock-based awards of $51.8 million. Additionally, a payment of $450.0 million was made toward the Match Group Term Loan, of which $400.0 million was financed by the issuance of the 2016 Match Group Senior Notes.
2015
Adjustments to earnings from continuing operations primarily consist of $140.0 million of amortization of intangibles, $105.5 million of stock-based compensation, $62.2 million of depreciation and $14.1 million of goodwill impairment, partially offset by $59.8 million of deferred income taxes, $56.4 million of excess tax benefits from stock-based awards, $34.3 million of gain on a real estate transaction and $15.5 million in acquisition-related contingent consideration fair value adjustments. The deferred income tax benefit primarily relates to amortization of intangibles and stock-based compensation. The increase from changes in working capital consist primarily of an increase in deferred revenue of $66.9 million and an increase in income taxes payable of $24.2 million, partially offset by an increase in accounts receivable of $29.7 million and an increase in other assets of $21.2 million. The increase in deferred revenue was due mainly to growth in prepaid revenue at Match Group, Vimeo and HomeAdvisor, increases related to acquisitions, and increases at Electus, CollegeHumor and Notional mainly due to the timing of various production deals. The increase in income taxes payable was due to 2015 income tax accruals in excess of 2015 income tax payments. The increase in accounts receivable was primarily due to growth in Match Group's in-app purchases sold through their mobile products and revenue growth at HomeAdvisor. The increase in other assets was primarily due to Match Group, relating to an increase in prepaid expenses, primarily from growth and the signing of longer-term contracts, as well as an increase in VAT refund receivables in the Publishing segment.
Net cash used in investing activities attributable to continuing operations in 2015 includes the purchase of acquisitions and investments of $651.9 million, which includes PlentyOfFish, and capital expenditures of $62.0 million, primarily related to the internal development of software to support our products and services, and computer hardware, partially offset by purchases (net of sales and maturities) of marketable securities of $125.3 million, and net proceeds from the sale of long-term investments and an asset of $9.4 million.
Net cash provided by financing activities attributable to continuing operations in 2015 includes $788.0 million in borrowings from the Match Group Term Loan, $428.8 million in net proceeds received from Match Group's initial public offering and excess tax benefits from stock-based awards of $56.4 million, partially offset by $200.0 million used for the repurchase of 3.0 million shares of common stock at an average price of $67.68 per share, $113.2 million related to the payment of cash dividends to IAC shareholders, $80.0 million for the early redemption of the Liberty Bonds, $38.4 million in proceeds related to the issuance of common stock, net of withholding taxes, $32.2 million for the purchase of noncontrolling interests, $23.4 million for the repurchase of stock-based awards and $19.1 million of debt issuance costs primarily associated with the Match Group Term Loan and revolving credit facility.
2014
Adjustments to earnings from continuing operations primarily consist of $76.9 million of deferred income taxes, $66.6 million of impairments related to long-term investments, $61.2 million of depreciation, $59.6 million of stock-based compensation expense and $57.9 million of amortization of intangibles, partially offset by $45.0 million of excess tax benefits from stock-based awards, a $21.9 million adjustment related to gains on sales of a business and long-term investments and $13.4 million in acquisition-related contingent consideration fair value adjustments. The deferred income tax provision primarily relates to a net reduction in deferred tax assets related to the expiration of statutes of limitations for federal income taxes for the years 2001 through 2009. The changes from working capital activities consist of a decrease in income taxes payable of $94.5 million and an increase in accounts receivable of $19.9 million, partially offset by an increase in deferred revenue of $30.1 million. The decrease in income taxes payable is primarily due to a net reduction in tax reserves related to the expiration of statutes of limitations for federal income taxes for the years 2001 through 2009, partially offset by 2014 income tax accruals in excess of 2014 income tax payments. The increase in accounts receivable is primarily due to revenue growth at HomeAdvisor. The increase in deferred revenue is due to increases related to acquisitions and growth in membership and subscription revenue at Match Group and Vimeo, respectively.
Net cash used in investing activities attributable to continuing operations in 2014 includes acquisitions and investments of $283.7 million, which include the ValueClick O&O website businesses, The Princeton Review, SlimWare and LoveScout24, purchases (net of sales and maturities) of marketable securities of $154.2 million, and capital expenditures of $57.2 million

primarily related to the internal development of software to support our products and services, partially offset by $58.4 million of proceeds from the sales of a business and long-term investments.
Net cash used in financing activities attributable to continuing operations in 2014 includes $97.3 million related to the payment of cash dividends to IAC shareholders, $33.2 million for the purchase of noncontrolling interests in Tinder and Meetic, and $8.1 million in contingent consideration payments related principally to the 2013 Twoo acquisition, partially offset by excess tax benefits from stock-based awards of $45.0 million.
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. IAC has a $300 million revolving credit facility that expires on October 7, 2020. Match Group has a $500 million revolving credit facility that expires on October 7, 2020. At December 31, 2016, there were no outstanding borrowings under the IAC Credit Facility or the Match Group Credit Facility.
At December 31, 2016, IAC had 9.3 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.
IAC's consolidated cash and cash equivalents at December 31, 2016 were $1.3 billion, of which $253.7 million was held by Match Group. The Company generated $292.4 million of operating cash flows for the year ended December 31, 2016, of which $234.1 million was generated by Match Group. Match Group is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, we cannot freely access the cash of the Match Group and its subsidiaries. In addition, agreements governing Match Group's indebtedness limit the payment of dividends or distributions and loans or advances to stockholders, including the Company, in the event a default has occurred or Match Group's leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0.
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's 2017 capital expenditures are expected to be higher than 2016 by approximately 5% to 10%, driven, in part, by certain Corporate related expenditures and HomeAdvisor's sales center and corporate headquarters expansion.
Awards made under our subsidiary denominated equity plans are settled on a net basis, with the award holder entitled to receive a payment in IAC shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment. Awards made to employees of Match Group subsidiaries may be settled in either IAC shares or Match Group shares, at our option. The tax withholding payment associated with these awards is made by the Company in cash on behalf of the employee at the time these awards are exercised; in the case of Match Group awards, the tax withholding payment is made by Match Group in cash at the time these awards are exercised. In either case, the cash tax withholding payments will vary based on the ultimate number of awards exercised, the intrinsic value of the awards upon exercise and relevant withholding tax rates. We expect a reduction in future corporate income taxes equal to a substantial portion of any such withholding tax payments by virtue of the income tax deduction we will recognize based on the intrinsic value of the awards at exercise. However, there may be some delay in the timing of the realization of the cash benefit of the income tax deduction because it will be dependent upon the amount and timing of future taxable income and the timing of estimated income tax payments. As it relates to awards made to employees of Match Group subsidiaries, if the Company elects to settle these awards in IAC shares, we will receive Match Group shares equal in value to the IAC shares issued.  If the Company elects to settle these awards in Match Group shares, our ownership interest in Match Group will be diluted. The Match Group subsidiary denominated equity plan at Tinder has a number of scheduled option exercise periods, and the next period is in May 2017; the Company expects to settle a sufficient number of exercises in IAC shares to maintain an economic interest in Match Group of at least 80%. See "Note 13—Stock-Based Compensation" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data" for additional discussion of subsidiary denominated equity plans.
The Company believes its existing cash, cash equivalents, marketable securities and expected positive cash flows generated from operations will be sufficient to fund our normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes on behalf of employees for net-settled stock-based awards, and investing and other commitments for the foreseeable future. The Company's liquidity could be negatively affected by a decrease in demand for our products and services. The Company’s indebtedness could limit our ability to: (i) obtain additional financing to fund working capital needs, acquisitions, capital expenditure or debt service or other requirements; and (ii) use operating cash flow to make acquisitions, capital expenditures, invest in other areas, such as developing properties and exploiting business opportunities, in

the event a default has occurred or in certain circumstances our leverage ratio (as defined in the indenture) exceeds 3.0 to 1.0. 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.

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)
$111,108
 $539,396
 $154,759
 $1,349,491
 $2,154,754
Operating leases(c)
31,834
 55,977
 31,762
 189,070
 308,643
Purchase obligations(d)
10,581
 10,000
 
 
 20,581
Total contractual obligations$153,523
 $605,373
 $186,521
 $1,538,561
 $2,483,978

(a)The Company has excluded $37.8 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 3—Income Taxes" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
(b)Represents contractual amounts due including interest on both fixed and variable rate instruments. Long-term debt at December 31, 2016 consists of $1.3 billion, which bears interest at fixed rates, and a $350 million Match Group Term Loan, which bears interest at a variable rate. The Match Group Term Loan bears interest at LIBOR plus 3.25%, or 4.20%, at December 31, 2016. The amount of interest ultimately paid on the Match Group Term Loan may differ based on changes in interest rates. For additional information on long-term debt, see "Note 9—Long-term Debt" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
(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. For additional information on operating leases, see "Note 15—Commitments" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
(d)The purchase obligations principally include a web hosting commitment.
 Amount of Commitment Expiration Per Period
Other Commercial Commitments(e)
Less Than
1 Year
 
1–3
Years
 
3–5
Years
 
More Than
5 Years
 Total
 (In thousands)
Letters of credit and surety bonds$768
 $63
 $
 $1,437
 $2,268

(e)Commercial commitments are funding commitments that could potentially require registrant performance in the event of demands by third parties or contingent events.
Off-Balance Sheet Arrangements
Other than the items described above, the Company does not have any off-balance sheet arrangements as of December 31, 2016.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The following disclosure is provided to supplement the descriptions of IAC's accounting policies contained in "Note 2—Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data" in regard to significant areas of judgment. Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated financial statements in accordance with U.S. generally accepted accounting principles. These estimates, judgments and assumptions impact the reported amount of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on our consolidated financial statements than others. What follows is a discussion of some of our more significant accounting policies and estimates.
Business Combinations and Contingent Consideration Arrangements
Acquisitions are an important part of the Company's growth strategy. The Company invested $18.4 million, $617.4 million and $259.4 million in acquisitions in the years ended December 31, 2016, 2015 and 2014, respectively. The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. The fair value of these intangible assets is based on detailed valuations that use information and assumptions provided by management. The excess purchase price over the net tangible and identifiable intangible assets is recorded as goodwill and is assigned to the reporting unit(s) that is expected to benefit from the combination as of the acquisition date.
In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price. Each of these arrangements are recorded at its fair value at the time of the acquisition and reflected at current fair value for each subsequent reporting period thereafter until settled. The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics. The Company determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated with the obligation to determine the net amount reflected in the consolidated financial statements. Determining the fair value of these arrangements is inherently difficult and subjective. Significant changes in forecasted earnings or operating metrics would result in a significantly higher or lower fair value measurement and can have a material impact on our consolidated financial statements. The changes in the estimated fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in “General and administrative expense” in the accompanying consolidated statement of operations. See "Note 8—Fair Value Measurements and Financial Instruments" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data" for a discussion of contingent consideration arrangements.
Recoverability of Goodwill and Indefinite-Lived Intangible Assets
Goodwill is the Company's largest asset with a carrying value of $1.9 billion and $2.2 billion at December 31, 2016 and 2015, respectively. Indefinite-lived intangible assets, which consist of the Company's acquired trade names and trademarks, have a carrying value of $320.6 million and $380.1 million at December 31, 2016 and 2015, respectively.
Goodwill and indefinite-lived intangible assets are assessed annually for impairment as of October 1 or, more frequently, if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value. In performing its annual assessment, the Company has the option to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
For the Company's annual goodwill test at October 1, 2016, a qualitative assessment of the Match Group, HomeAdvisor Domestic, HomeAdvisor International, Vimeo, Daily Burn and ShoeBuy reporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values. The primary factors that the Company considered in its qualitative assessment for each of these reporting units is described below:
Match Group's October 1, 2016 market capitalization of $4.8 billion exceeded its carrying value by more than 970% and Match Group's strong operating performance.
The Company performed valuations of the HomeAdvisor Domestic, HomeAdvisor International, Vimeo and Daily Burn reporting units during 2016. These valuations were prepared primarily in connection with the issuance and/or settlement of equity grants that are denominated in the shares of these businesses. The valuations were prepared time proximate to, however, not as of October 1, 2016. The fair value of each of these businesses was significantly in excess of its October 1, 2016 carrying value.

ShoeBuy's expected sales price was significantly in excess of its October 1, 2016 carrying value; which was confirmed by the sales price realized in its sale on December 30, 2016, which resulted in a pre-tax gain of $37.5 million.
When the Company elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value a reporting unit is greater than its carrying value goodwill must be tested for impairment. For the Company's annual goodwill test at October 1, 2016, the Company concluded that it was not more likely than not that the fair values of the Applications and Connected Ventures reporting units were greater than their respective carrying values and performed a quantitative test of these reporting units. The Company's quantitative test indicated that the fair value of each of these reporting units is in excess of its respective carrying value; therefore, the goodwill of these reporting units is not impaired. The Publishing reporting unit had no goodwill as of October 1, 2016 because the Company recorded an impairment charge equal to the entire $275.4 million balance of the Publishing reporting unit goodwill during the second quarter of 2016, which is more fully described below, following a quantitative impairment test as of June 30, 2016. The quantitative impairment test is performed using the two-step process described below.
The first step of an annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of each of the Company's reporting units to its carrying value, including goodwill. The fair value of the Company's reporting units is determined using both an income approach based on discounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year. The Company uses the same approach in determining the fair value of its businesses in connection with its subsidiary denominated stock based compensation plans, which can be a significant factor in the decision to apply the qualitative screen. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on the reporting units' current results and forecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in determining the fair value of the Company's reporting units ranged from 10% to 17.5% in 2016 and 12% to 22% in 2015. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors. While a primary driver in the determination of the fair values of the Company's reporting units is the estimate of future revenue and profitability, the determination of fair value is based, in part, upon the Company's assessment of macroeconomic factors, industry and competitive dynamics and the strategies of its businesses in response to these factors.
If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying value of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its carrying value to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess. The Company has adopted the provisions of Accounting Standards Update No. 2017-04, IntangiblesGoodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, effective January 1, 2017. Therefore, any goodwill impairment charge that might result in the future would be determined based solely upon the excess of the carrying value of the reporting unit over its fair value. The second step of the impairment analysis that is described above will no longer be performed.
At October 1, 2016, the fair value of each of the Company's reporting units with goodwill exceeded its carrying value by more than 20%.
While the Company has the option to qualitatively assess whether it is more likely than not that the fair value of its indefinite-lived intangible asset are less than its carrying value, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. Assumptions used in the avoided royalty

DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessment ranged from 11% to 16% in both 2016 and 2015, and the royalty rates used ranged from 2% to 7% in 2016 and 1% to 9% in 2015.
While the 2016 annual assessment did not identify any material impairments, during the second quarter of 2016, the Company recorded impairment charges equal to the entire $275.4 million balance of the Publishing reporting unit goodwill and $11.6 million related to certain Publishing indefinite-lived intangible assets. The 2015 annual assessment identified impairment charges related to certain intangible assets of the Publishing reporting unit and the goodwill on the ShoeBuy reporting unit of $88.0 million and $14.1 million, respectively. These impairment charges are more fully described above in "Results of Operations for the Years Ended December 31, 2016, 2015 and 2014—Operating income (loss)" and "Note 2—Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."
Recoverability and Estimated Useful Lives of Long-Lived Assets
We review the carrying value of all long-lived assets, comprising property and equipment, including leasehold improvements, and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. In addition, the Company reviews the useful lives of its long-lived assets whenever events or changes in circumstances indicate that these lives may be changed. The carrying value of property and equipment and definite-lived intangible assets is $341.1 million and $363.5 million at December 31, 2016 and 2015, respectively.
Income Taxes
The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. As of December 31, 2016 and 2015, the balance of deferred tax liabilities, net, is $226.3 million and $346.8 million, respectively.
We recognize liabilities for uncertain tax positions based on the two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. At December 31, 2016 and 2015, the Company has unrecognized tax benefits of $41.0 million and $43.4 million, including interest, respectively. Changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed by the Company are recorded in the period they become known.
The ultimate amount of deferred income tax assets realized and the amounts paid for deferred income tax liabilities and uncertain tax positions may vary from our estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the various tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results.
No income taxes have been provided on indefinitely reinvested earnings of certain foreign subsidiaries aggregating $680.2 million at December 31, 2016. The estimated amount of the unrecognized deferred income tax liability with respect to such earnings would be $169.3 million.
Stock-Based Compensation
The Company recorded stock-based compensation expense of $104.8 million, $105.4 million and $59.6 million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company estimated the fair value of stock options issued in 2016, 2015 and 2014 using a Black-Scholes option pricing model and, for those with a market condition, a lattice model. For stock options, including subsidiary denominated equity, the value of the stock option is measured at the grant date at fair value and expensed over the vesting term. The impact on stock-based compensation expense for the year ended December 31, 2016, assuming a 1% increase in the risk-free interest rate, a 10% increase in the volatility factor and a one-year increase in the weighted average expected term of the outstanding options would be an increase of $3.5 million, $15.9 million and

$7.1 million, respectively. The Company also issues RSUs and performance-based RSUs. For RSUs issued, the value of the instrument is measured at the grant date as the fair value of the underlying IAC common stock and expensed as stock-based compensation expense over the vesting term. For performance-based RSUs issued, the value of the instrument is measured at the grant date as the fair value of the underlying IAC common stock and expensed as stock-based compensation over the vesting term when the performance targets are considered probable of being achieved.
Marketable Securities and Long-term Investments
At December 31, 2016, marketable securities of $89.3 million consist of commercial paper rated A1/P1, treasury discount notes and short-to-medium-term debt securities issued by investment grade corporate issuers. Long-term investments at December 31, 2016 of $122.8 million include equity securities accounted for under the cost and equity methods.
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. Marketable securities are adjusted to fair value each quarter, and the unrealized gains and losses, net of tax, are included in accumulated other comprehensive income as a separate component of shareholders' equity. The specific-identification method is used to determine the cost of securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income into earnings. The Company recognizes unrealized losses on marketable securities in net earnings when the losses are determined to be other-than-temporary. Additionally, the Company evaluates each cost and equity method investment for indicators of impairment on a quarterly basis, and recognizes an impairment loss if the decline in value is deemed to be other-than-temporary. Future events may result in reconsideration of the nature of losses as other-than-temporary and market and other factors may cause the value of the Company's investments to decline.
The Company employs a methodology that considers available evidence in evaluating potential other-than-temporary impairments of its investments. Investments are considered to be impaired when a decline in fair value below the amortized cost basis is determined to be other-than-temporary. Such impairment evaluations include, but are not limited to: the length of time and extent to which fair value has been less than the cost basis, the current business environment, including competition; going concern considerations such as financial condition, the rate at which the investee utilizes cash and the investee's ability to obtain additional financing to achieve its business plan; the need for changes to the investee's existing business model due to changing business and regulatory environments and its ability to successfully implement necessary changes; and comparable valuations. During 2016, 2015 and 2014, the Company recognized other-than-temporary impairments of $10.0 million, $6.7 million and $66.6 million, respectively, related to cost method investments. These charges are described above in "Results of Operations for the Years Ended December 31, 2016, 2015 and 2014—Other income (expense), net."
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see "Note 2—Summary of Significant Accounting Policies" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates relates primarily to the Company's cash equivalents, marketable debt securities and long-term debt, including current maturities.
The Company invests its excess cash in certain cash equivalents and marketable debt securities, which consist of money market funds, commercial paper, treasury discount notes and short-to-medium-term debt securities issued by investment grade corporate issuers. The Company employs a methodology that considers available evidence in evaluating potential other-than-temporary impairments of its investments. Investments are considered to be impaired when a decline in fair value below the amortized cost basis is determined to be other-than-temporary. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in current earnings and a new cost basis in the investment is established. During 2016, the Company did not record any material other-than-temporary impairment charges related to its cash equivalents and marketable debt securities.
Based on the Company's total investment in marketable debt securities at December 31, 2016, a 100 basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of these securities by $0.1 million. Such potential increase or decrease in fair value is based on certain simplifying assumptions, including a constant level and rate of debt securities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period. However, since almost all of the Company's cash and cash equivalents balance of $1.3 billion was invested in short-term fixed or variable rate money market instruments, the Company would also earn more (less) interest income due to such an increase (decrease) in interest rates.
At December 31, 2016, the Company's outstanding debt was $1.6 billion (including $20.0 million of 2013 Senior Notes classified as current, pending redemption) of which $1.3 billion bears interest at fixed rates and $350 million Match Group Term Loan, which bears interest at a variable rate. If market rates decline, the Company runs the risk that the related required payments on the fixed rate debt will exceed those based on market rates. A 100 basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by $53.9 million. Such potential increase or decrease in fair value is based on certain simplifying assumptions, including a constant level and rate of fixed-rate debt for all maturities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period. The Match Group Term Loan bears interest at LIBOR plus 3.25%. As of December 31, 2016, the rate in effect was 4.20%. If LIBOR were to increase by 100 basis points, then the annual interest expense and payments on the Match Group Term Loan would increase by $3.5 million. If LIBOR were to decrease by 100 basis points, the effective interest rate would decrease by 20 basis points to the LIBOR floor of 0.75% and the annual interest expense and payments in the current year would decrease by $0.7 million.
Foreign Currency Exchange Risk
The Company conducts business in certain foreign markets, primarily in the European Union, and is exposed to foreign exchange risk for both the Euro and British Pound ("GBP").
For both the years ended December 31, 2016 and 2015, international revenue accounted for 26% 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 essentially flat in 2016 compared to 2015.
Foreign currency exchange gains and losses included in the Company's earnings for the years ended December 31, 2016, 2015 and 2014 are gains and (losses) of $34.4 million, $5.4 million and $(1.6) million, respectively. Historically foreign currency exchange gains and losses have not been material to the Company, however, the significant decline in the GBP due to the Brexit vote, on June 23, 2016, generated significant foreign currency exchange gains during 2016. This gain is primarily related to (1) U.S. dollar denominated cash, the majority of which is from the proceeds received in the PriceRunner sale in March 2016, held by a foreign subsidiary with a GBP functional currency and (2) a U.S. dollar denominated intercompany loan related to a recent acquisition in which the receivable is held by a foreign subsidiary with a GBP functional currency.
If the GBP had declined 10% further versus the U.S. dollar during the year ended December 31, 2016, the gain would have been greater by $2.0 million and if the GBP had declined 10% less versus the U.S. dollar the gain would have been reduced by $2.6 million.
Historically, the Company has not hedged 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.

Item 8.    Consolidated Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of IAC/InterActiveCorp
We have audited the accompanying consolidated balance sheet of IAC/InterActiveCorp and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of IAC/InterActiveCorp and subsidiaries as of December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), IAC/InterActiveCorp's internal control over financial reporting as of December 31, 2016, based on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2017 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP
New York, New York
February 28, 2017


IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
 December 31,
 2016 2015
 (In thousands, except share data)
ASSETS   
Cash and cash equivalents$1,329,187
 $1,481,447
Marketable securities89,342
 39,200
Accounts receivable, net of allowance of $16,405 and $16,528, respectively220,138
 250,077
Other current assets204,068
 174,286
Total current assets1,842,735
 1,945,010
    
Property and equipment, net306,248
 302,817
Goodwill1,924,052
 2,245,364
Intangible assets, net355,451
 440,828
Long-term investments122,810
 137,386
Other non-current assets94,577
 117,286
TOTAL ASSETS$4,645,873
 $5,188,691
LIABILITIES AND SHAREHOLDERS' EQUITY   
LIABILITIES:   
Current portion of long-term debt$20,000
 $40,000
Accounts payable, trade62,863
 86,883
Deferred revenue285,615
 258,412
Accrued expenses and other current liabilities344,910
 383,251
Total current liabilities713,388
 768,546
    
Long-term debt, net of current portion1,582,484
 1,726,954
Income taxes payable33,528
 33,692
Deferred income taxes228,798
 348,773
Other long-term liabilities44,178
 64,510
    
Redeemable noncontrolling interests32,827
 30,391
    
Commitments and contingencies
 
    
SHAREHOLDERS' EQUITY:   
Common stock $.001 par value; authorized 1,600,000,000 shares; issued 255,672,125 and 254,014,976 shares and outstanding 72,595,470 and 77,245,709 shares, respectively256
 254
Class B convertible common stock $.001 par value; authorized 400,000,000 shares; issued 16,157,499 shares and outstanding 5,789,499 shares16
 16
Additional paid-in capital11,921,559
 11,486,315
Retained earnings290,114
 331,394
Accumulated other comprehensive loss(166,123) (152,103)
Treasury stock 193,444,655 and 187,137,267 shares, respectively(10,176,600) (9,861,350)
Total IAC shareholders' equity1,869,222
 1,804,526
Noncontrolling interests141,448
 411,299
Total shareholders' equity2,010,670
 2,215,825
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$4,645,873
 $5,188,691
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
 Years Ended December 31,
 2016 2015 2014
 (In thousands, except per share data)
Revenue$3,139,882
 $3,230,933
 $3,109,547
Operating costs and expenses:     
Cost of revenue (exclusive of depreciation shown separately below)755,730
 778,161
 860,204
Selling and marketing expense1,245,263
 1,345,576
 1,147,409
General and administrative expense547,160
 525,629
 443,610
Product development expense197,885
 185,766
 160,515
Depreciation71,676
 62,205
 61,156
Amortization of intangibles79,426
 139,952
 57,926
Goodwill impairment275,367
 14,056
 
Total operating costs and expenses3,172,507
 3,051,345
 2,730,820
Operating (loss) income(32,625) 179,588
 378,727
Interest expense(109,110) (73,636) (56,314)
Other income (expense), net60,461
 36,921
 (52,484)
(Loss) earnings from continuing operations before income taxes(81,274) 142,873
 269,929
Income tax benefit (provision)64,934
 (29,516) (35,372)
(Loss) earnings from continuing operations(16,340) 113,357
 234,557
Earnings from discontinued operations, net of tax189
 17
 174,673
Net (loss) earnings(16,151) 113,374
 409,230
Net (earnings) loss attributable to noncontrolling interests(25,129) 6,098
 5,643
Net (loss) earnings attributable to IAC shareholders$(41,280) $119,472
 $414,873
      
Per share information attributable to IAC shareholders:     
Basic (loss) earnings per share from continuing operations$(0.52) $1.44
 $2.88
Diluted (loss) earnings per share from continuing operations$(0.52) $1.33
 $2.71
Basic (loss) earnings per share$(0.52) $1.44
 $4.98
Diluted (loss) earnings per share$(0.52) $1.33
 $4.68
      
Dividends declared per share$
 $1.36
 $1.16
      
Stock-based compensation expense by function:     
Cost of revenue$2,305
 $1,210
 $949
Selling and marketing expense6,000
 10,186
 2,144
General and administrative expense77,151
 82,798
 49,862
Product development expense19,364
 11,256
 6,679
Total stock-based compensation expense$104,820
 $105,450
 $59,634
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS

 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Net (loss) earnings$(16,151) $113,374
 $409,230
Other comprehensive (loss) income, net of tax:     
Change in foreign currency translation adjustment (a)
(43,126) (68,844) (66,874)
Change in unrealized gains and losses of available-for-sale securities (net of tax benefits of $884 and $1,852 in 2016 and 2014, respectively, and tax provision of $576 in 2015) (b)
1,484
 3,140
 (8,591)
Total other comprehensive loss(41,642) (65,704) (75,465)
Comprehensive (loss) income(57,793) 47,670
 333,765
Comprehensive (income) loss attributable to noncontrolling interests(18,638) 7,399
 6,454
Comprehensive (loss) income attributable to IAC shareholders$(76,431) $55,069
 $340,219
________________________
(a) The years ended December 31, 2016 and 2015 include amounts reclassified out of other comprehensive income into earnings. See "Note 11—Accumulated Other Comprehensive Loss" for additional information.
(b) The years ended December 31, 2016 and 2015 include unrealized gains reclassified out of other comprehensive income into earnings. See "Note 6—Marketable Securities" and "Note 11—Accumulated Other Comprehensive Loss" for additional information.


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



IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Years Ended December 31, 2016, 2015 and 2014



    IAC Shareholders' Equity    
                         
    Common Stock $.001 Par Value Class B Convertible Common Stock $.001 Par Value 
Additional
Paid-in
Capital
   
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
      
 
Redeemable
Noncontrolling
Interests
  $ Shares $ Shares  (Accumulated Deficit) Retained Earnings   
Total IAC
Shareholders'
Equity
 
Noncontrolling
Interests
 
Total
Shareholders'
Equity
    (In thousands)
Balance as of December 31, 2013$42,861
  $251
 250,982
 $16
 16,157
 $11,562,567
 $(32,735) $(13,046) $(9,830,317) $1,686,736
 $42,665
 $1,729,401
Net (loss) earnings(5,643)  
 
 
 
 
 414,873
 
 
 414,873
 
 414,873
Other comprehensive (loss) income, net of tax(914)  
 
 
 
 
 
 (74,654) 
 (74,654) 103
 (74,551)
Stock-based compensation expense558
  
 
 
 
 59,362
 
 
 
 59,362
 (286) 59,076
Issuance of common stock pursuant to stock-based awards, net of withholding taxes
  1
 1,188
 
 
 (167,340) 
 
 168,967
 1,628
 
 1,628
Income tax benefit related to stock-based awards
  
 
 
 
 37,451
 
 
 
 37,451
 
 37,451
Dividends
  
 
 
 
 (39,557) (57,020) 
 
 (96,577) 
 (96,577)
Noncontrolling interests related to acquisitions17,886
  
 
 
 
 
 
 
 
 
 
 
Purchase of redeemable noncontrolling interests(41,743)  
 
 
 
 
 
 
 
 
 
 
Purchase of noncontrolling interests
  
 
 
 
 
 
 
 
 
 (50,662) (50,662)
Adjustment of redeemable noncontrolling interests and noncontrolling interests to fair value27,750
  
 
 
 
 (37,119) 
 
 
 (37,119) 9,369
 (27,750)
Other(328)  
 
 
 
 253
 
 
 
 253
 
 253
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(7,737)  
 
 
 
 
 119,472
 
 
 119,472
 1,639
 121,111
Other comprehensive loss, net of tax(1,301)  
 
 
 
 
 
 (64,403) 
 (64,403) 
 (64,403)
Stock-based compensation expense6,725
  
 
 
 
 87,685
 
 
 
 87,685
 4,808
 92,493
Issuance of common stock pursuant to stock-based awards, net of withholding taxes
  2
 1,845
 
 
 (37,733) 
 
 
 (37,731) 
 (37,731)
Income tax benefit related to stock-based awards
  
 
 
 
 44,577
 
 
 
 44,577
 
 44,577
Dividends
  
 
 
 
 
 (113,196) 
 
 (113,196) 
 (113,196)
Purchase of treasury stock
  
 
 
 
 
 
 
 (200,000) (200,000) 
 (200,000)
Purchase of redeemable noncontrolling interests(32,207)  
 
 
 
 
 
 
 
 
 
 
Adjustment of redeemable noncontrolling interests to fair value23,155
  
 
 
 
 (23,155) 
 
 
 (23,155) 
 (23,155)
Noncontrolling interests related to Match Group IPO, net of fees and expenses
  
 
 
 
 
 
 
 
 
 428,283
 428,283
Repurchase of stock-based awards
  
 
 
 
 
 
 
 
 
 (23,431) (23,431)
Transfer from noncontrolling interests to redeemable noncontrolling interests1,189
  
 
 
 
 
 
 
 
 
 (1,189) (1,189)
Other140
  
 
 
 
 (676) 
 
 
 (676) 
 (676)
Balance as of December 31, 2015$30,391
  $254
 254,015
 $16
 16,157
 $11,486,315
 $331,394
 $(152,103) $(9,861,350) $1,804,526
 $411,299
 $2,215,825


IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)
Years Ended December 31, 2016, 2015 and 2014


    IAC Shareholders' Equity    
                         
    Common Stock $.001 Par Value Class B Convertible Common Stock $.001 Par Value 
Additional
Paid-in
Capital
   
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
      
 
Redeemable
Noncontrolling
Interests
  $ Shares $ Shares  (Accumulated Deficit) Retained Earnings   
Total IAC
Shareholders'
Equity
 
Noncontrolling
Interests
 
Total
Shareholders'
Equity
    (In thousands)
Net (loss) earnings$(3,849)  $
 
 $
 
 $
 $(41,280) $
 $
 $(41,280) $28,978
 $(12,302)
Other comprehensive income (loss), net of tax385
  
 
 
 
 
 
 (35,151) 
 (35,151) (6,876) (42,027)
Stock-based compensation expense1,632
  
 
 
 
 50,201
 
 
 
 50,201
 44,523
 94,724
Issuance of common stock pursuant to stock-based awards, net of withholding taxes
  2
 1,657
 
 
 (772) 
 
 
 (770) 
 (770)
Income tax benefit related to stock-based awards
  
 
 
 
 49,406
 
 
 
 49,406
 
 49,406
Purchase of treasury stock
  
 
 
 
 
 
 
 (315,250) (315,250) 
 (315,250)
Purchase of redeemable noncontrolling interests(2,529)  
 
 
 
 
 
 
 
 
 
 
Adjustment of redeemable noncontrolling interests to fair value7,921
  
 
 
 
 (7,560) 
 
 
 (7,560) 
 (7,560)
Purchase of noncontrolling interests
  
 
 
 
 
 
 
 
 
 (211) (211)
Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes
  
 
 
 
 
 
 
 
 
 10,224
 10,224
Reallocation of shareholders' equity balances related to the noncontrolling interests created in the Match Group IPO
  
 
 
 
 342,507
 
 21,131
 
 363,638
 (363,638) 
Changes in noncontrolling interests of Match Group due to the issuance of its common stock
  
 
 
 
 (7,691) 
 
 
 (7,691) 7,691
 
Noncontrolling interests created in an acquisition
  
 
 
 
 12,222
 
 
 
 12,222
 9,811
 22,033
Other(1,124)  
 
 
 
 (3,069) 
 
 
 (3,069) (353) (3,422)
Balance as of December 31, 2016$32,827
  $256
 255,672
 $16
 16,157
 $11,921,559
 $290,114
 $(166,123) $(10,176,600) $1,869,222
 $141,448
 $2,010,670
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Cash flows from operating activities attributable to continuing operations:     
Net (loss) earnings$(16,151) $113,374
 $409,230
Less: earnings from discontinued operations, net of tax189
 17
 174,673
(Loss) earnings from continuing operations(16,340) 113,357
 234,557
Adjustments to reconcile (loss) earnings from continuing operations to net cash provided by operating activities attributable to continuing operations:     
Stock-based compensation expense104,820
 105,450
 59,634
Depreciation71,676
 62,205
 61,156
Amortization of intangibles79,426
 139,952
 57,926
Goodwill impairment275,367
 14,056
 
Impairment of long-term investments10,680
 6,689
 66,601
 Excess tax benefits from stock-based awards(51,764) (56,418) (44,957)
Deferred income taxes(119,181) (59,786) 76,869
Equity in losses (earnings) of unconsolidated affiliates549
 (772) 9,697
 Acquisition-related contingent consideration fair value adjustments2,555
 (15,461) (13,367)
 Gains on sale of businesses, investments and assets, net(50,965) (1,005) (21,946)
 Gain on real estate transaction
 (34,341) 
 Other adjustments, net4,734
 26,496
 20,789
 Changes in assets and liabilities, net of effects of acquisitions and dispositions:     
Accounts receivable1,283
 (29,680) (19,918)
Other assets(12,905) (21,174) (3,606)
Accounts payable and other current liabilities(52,359) 8,756
 4,963
Income taxes payable8,998
 24,167
 (94,492)
Deferred revenue35,803
 66,914
 30,142
Net cash provided by operating activities attributable to continuing operations292,377
 349,405
 424,048
Cash flows from investing activities attributable to continuing operations:     
Acquisitions, net of cash acquired(18,403) (617,402) (259,391)
Capital expenditures(78,039) (62,049) (57,233)
Investments in time deposits(87,500) 
 
Proceeds from maturities of time deposits87,500
 
 
Proceeds from maturities and sales of marketable debt securities252,369
 218,462
 21,644
Purchases of marketable debt securities(313,943) (93,134) (175,826)
Purchases of investments(12,565) (34,470) (24,334)
Net proceeds from the sale of businesses, investments and assets172,228
 9,413
 58,388
Other, net11,215
 (3,541) (3,042)
Net cash provided by (used in) investing activities attributable to continuing operations12,862
 (582,721) (439,794)
Cash flows from financing activities attributable to continuing operations:     
Borrowings under Match Group Term Loan
 788,000
 
Principal payments on Match Group Term Loan(450,000) 
 
Proceeds from Match Group 2016 Senior Notes offering400,000
 
 
Principal payments on IAC debt, including redemptions and repurchases of Senior Notes(126,409) (80,000) 
Debt issuance costs(7,811) (19,050) (383)
Fees and expenses related to note exchange
 (6,954) 
Proceeds from Match Group initial public offering, net of fees and expenses
 428,789
 
Purchase of treasury stock(308,948) (200,000) 
Dividends
 (113,196) (97,338)
Issuance of IAC common stock pursuant to stock-based awards, net of withholding taxes(895) (38,418) 1,609
Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes9,548
 
 
Repurchase of stock-based awards
 (23,431) 
Excess tax benefits from stock-based awards51,764
 56,418
 44,957
 Purchase of noncontrolling interests(2,740) (32,207) (33,165)
Acquisition-related contingent consideration payments(2,180) (5,750) (8,109)
 Funds held in escrow for MyHammer tender offer(10,548) 
 
Other, net(2,846) (19,393) 11,449
Net cash (used in) provided by financing activities attributable to continuing operations(451,065) 734,808
 (80,980)
Total cash (used in) provided by continuing operations(145,826) 501,492
 (96,726)
Total cash used in discontinued operations
 (152) (145)
Effect of exchange rate changes on cash and cash equivalents(6,434) (10,298) (13,168)
Net (decrease) increase in cash and cash equivalents(152,260) 491,042
 (110,039)
Cash and cash equivalents at beginning of period1,481,447
 990,405
 1,100,444
Cash and cash equivalents at end of period$1,329,187
 $1,481,447
 $990,405
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATION
IAC is a leading media and Internet company comprised of widely known consumer brands, such as HomeAdvisor, Vimeo, Dictionary.com, The Daily Beast, Investopedia, and Match Group's online dating portfolio, which includes Match, Tinder, PlentyOfFish and OkCupid.
All references to "IAC," the "Company," "we," "our" or "us" in this report are to IAC/InterActiveCorp.
The Company has six reportable segments, which are described below.
Match Group
Our Match Group segment includes the dating and non-dating businesses of Match Group, Inc., which completed its initial public offering ("IPO") on November 24, 2015. As of December 31, 2016, IAC’s ownership interest and voting interest in Match Group were 82.5% and 97.9%, respectively.
Our Match Group segment consists of our North America dating business (which includes Match, Tinder, PlentyOfFish, OkCupid, our various affinity brands and other dating businesses operating within the United States and Canada), our International dating business (which includes Meetic, Pairs, Twoo, the international operations of Tinder and PlentyOfFish andall other dating businesses operating outside of the United States and Canada) and Match Group's non-dating business, The Princeton Review.
Through the brands within our dating business, we are a leading provider of membership-based and ad-supported dating products servicing North America, Western Europe and many other regions around the world. We provide these services through websites and applications that we own and operate.
Match Group's non-dating business consists of The Princeton Review, which provides a variety of educational test preparation, academic tutoring and college counseling services.
HomeAdvisor
HomeAdvisor is a leading global home services digital marketplace that helps connect consumers with home professionals in North America, as well as in France, the Netherlands and Italy under various brands. On November 3, 2016, HomeAdvisor acquired a controlling interest in MyHammer Holding AG, the leading home services marketplace in Germany.
Video
Our Video segment consists primarily of Vimeo, Electus, CollegeHumor, Notional, IAC Films and Daily Burn.
Vimeo operates a global video sharing platform for creators and their audiences. Through Vimeo, we offer video creators simple, professional grade tools to share, manage, distribute and monetize content online, and provide viewers with a clutter-free environment to watch content across a variety of Internet-enabled devices, including mobile devices and connected television platforms.
Electus provides production and producer services for both unscripted and scripted television, feature film and digital content, primarily for initial sale and distribution in the United States. Our content is distributed on a wide range of platforms, including broadcast television, premium and basic cable television, subscription-based and ad-supported video-on-demand services and through theatrical releases and other outlets. Electus also operates Electus Digital, which consists of the following websites and properties: CollegeHumor.com, Dorkly.com and WatchLOUD.com; YouTube channels WatchLOUD, Nuevon and Hungry; and Big Breakfast (a production company). Through Electus, we also operate Notional.
Daily Burn is a health and fitness property that provides streaming fitness and workout videos across a variety of platforms, including iOS, Android, Roku and other Internet-enabled television platforms.
Applications

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Our Applications segment includes Consumer, which includes our direct-to-consumer downloadable desktop applications, including Apalon, which houses our mobile applications operations, and SlimWare, which houses our downloadable desktop software and services operations; and Partnerships, which includes our business-to-business partnership operations.
Through our Consumer business, we develop, market and distribute a variety of applications, including desktop applications through which users can access search services and which are tailored to a number of specific online uses. Apalon is an award-winning mobile development company with one of the largest and most popular portfolios of mobile applications worldwide. SlimWare is a provider of community-powered software and services that clean, repair, update and optimize personal computers.
Through our Partnerships business, we work closely with partners in the software, media and other industries to design and develop customized browser-based search applications to be bundled and distributed with these partners’ products and services.
Publishing
The Publishing segment includes our Premium Brands business, which is composed of About.com, Dictionary.com, Investopedia and The Daily Beast; and our Ask & Other business, which primarily includes Ask.com, CityGrid and, for periods prior to its sale on June 30, 2016, ASKfm.
Premium Brands
Our Premium Brands business primarily consists of the following destination websites:
About.com, which provides detailed information and content written by independent, freelance subject matter experts;
Dictionary.com, which primarily provides online and mobile dictionary, thesaurus and reference services;
Investopedia, a resource for investment and personal finance education and information; and
The Daily Beast, a website dedicated to news, commentary, culture and entertainment that curates and publishes existing and original online content from its own roster of contributors in the United States.
During 2016, About.com evolved from a general content website to a collection of vertical brands by transitioning content from the various network channels on its general content website to stand-alone vertical domains, each with its own unique branding and user experience. To date, content from four network channels (specifically, Health, Money, Tech, and Home) has been transitioned to four verticals (Verywell.com, TheBalance.com, Lifewire.com and TheSpruce.com, respectively).
Ask & Other
Our Ask & Other business primarily consists of:
Ask.com, which provides general search services, as well as question and answer services that provide direct answers to natural-language questions;
CityGrid, an advertising network that integrates local content and advertising for distribution to affiliated and third party publishers across web and mobile platforms; and
For periods prior to its sale on June 30, 2016, ASKfm, a questions and answers social network.
Other
Our Other segment consisted of ShoeBuy, an Internet retailer of footwear and related apparel and accessories, and PriceRunner, a shopping comparison website. ShoeBuy and PriceRunner were sold on December 30, 2016 and March 18, 2016, respectively.

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NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Investments in the common stock or in-substance common stock of entities in which the Company does not have the ability to exercise significant influence over the operating and financial matters of the investee are accounted for using the cost method. Investments in companies that IAC does not control, which are not in the form of common stock or in-substance common stock, are also accounted for using the cost method. The Company evaluates each cost and equity 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. Such impairment evaluations include, but are not limited to: the current business environment, including competition; going concern considerations such as financial condition, the rate at which the investee utilizes cash and the investee's ability to obtain additional financing to achieve its business plan; the need for changes to the investee's existing business model due to changing business and regulatory environments and its ability to successfully implement necessary changes; and comparable valuations. 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.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates, judgments and assumptions 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 recoverability of definite-lived intangible assets and property and equipment; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts; the determination of revenue reserves; the fair value of acquisition-related contingent consideration arrangements; 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.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, services are rendered or merchandise is delivered to customers, the fee or price charged is fixed or determinable and collectability is reasonably assured. Deferred revenue is recorded when payments are received, or contractually due, in advance of the Company's rendering of services or delivery of merchandise.
Match Group
Revenue of the dating businesses is substantially derived directly from users in the form of recurring membership fees for subscription-based online personals and related services. Membership revenue is presented net of credits and credit card

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chargebacks. Members pay in advance, primarily by using a credit card or through mobile app stores, and, subject to certain conditions identified in our terms and conditions, all purchases are final and nonrefundable. Fees collected, or contractually due, in advance for memberships are deferred and recognized using the straight-line method over the terms of the applicable membership period, which primarily range from one to six months, and corresponding mobile app store fees incurred on such transactions, if any, are deferred and expensed over the same period. Deferred revenue at Dating is $161.1 million and $144.4 million at December 31, 2016 and 2015, respectively. Revenue is also earned from online advertising, the purchase of à la carte features and offline events. Online advertising revenue is recognized every time an advertisement is displayed. Revenue from the purchase of à la carte features is recognized based on usage. Revenue and the related expenses associated with offline events are recognized when each event occurs.
Non-dating's revenue consists primarily of fees received directly from students for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services. Fees from classes and access to online materials are recognized over the period of the course and the period of the online access, respectively. Tutoring fees are recognized based on usage. Deferred revenue at Non-dating is $23.3 million and $25.7 million at December 31, 2016 and 2015, respectively.
HomeAdvisor
HomeAdvisor's lead acceptance revenue is generated and recognized when an in-network home service professional is delivered a consumer lead. HomeAdvisor's membership subscription revenue is generated through subscription sales to service professionals and is deferred and recognized over the term of the applicable membership. Membership can be one month, three months, or one year. HomeAdvisor's website hosting revenue is deferred and recognized over the period of the hosting agreement. Deferred revenue at HomeAdvisor is $18.8 million and $11.9 million at December 31, 2016 and 2015, respectively.
Video
Revenue of businesses included in this segment is generated primarily through media production and distribution, subscriptions and advertising. Production revenue is recognized when the production is available for the customer to broadcast or exhibit, subscription fee revenue is recognized over the terms of the applicable subscriptions, which are one month or one year, and advertising revenue is recognized when an ad is displayed or over the period earned. Deferred revenue at Vimeo is $36.7 million and $30.4 million at December 31, 2016 and 2015, respectively. Deferred revenue at Electus, CollegeHumor and Notional totals $23.1 million and $24.4 million at December 31, 2016 and 2015, respectively.
Applications
Substantially all of Applications' revenue consists of advertising revenue generated principally through the display of paid listings in response to search queries. The substantial majority of the paid listings displayed by our Applications businesses are supplied to us by Google Inc. ("Google") pursuant to our services agreement with Google.
Pursuant to this agreement, those of our Applications businesses that provide search services transmit search queries to Google, which in turn transmits a set of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occurs independently of, but concurrently with, the generation of algorithmic search results for the same search queries. Google paid listings are displayed separately from algorithmic search results and are identified as sponsored listings on search results pages. Paid listings are priced on a price per click basis and when a user submits a search query through one of our Applications businesses and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with us. We recognize paid listing revenue from Google when it delivers the user's click. In cases where the user’s click is generated due to the efforts of a third party distributor, we recognize the amount due from Google as revenue and record a revenue share or other payment obligation to the third party distributor as traffic acquisition costs.
To a significantly lesser extent, Applications' revenue also consists of fees related to subscription downloadable applications which are recognized over the terms of the applicable subscriptions, primarily one to two years, and fees related to paid mobile downloadable applications and display advertisements, which are recognized at the time of the sale and when the ad is displayed, respectively. Deferred revenue at SlimWare is $26.1 million and $21.0 million at December 31, 2016 and 2015, respectively.

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Publishing
Publishing's revenue consists principally of advertising revenue, which is generated primarily through the display of paid listings in response to search queries, display advertisements (sold directly and through programmatic ad sales) and fees related to paid mobile downloadable applications. The substantial majority of the paid listings that our Publishing businesses display are supplied to us by Google in the manner and pursuant to the services agreement with Google, which is described above under "Applications."
Other
ShoeBuy's revenue consisted of merchandise sales, reduced by incentive discounts and sales returns, and was recognized when delivery to the customer had occurred. Delivery was considered to have occurred when the customer took title and assumed the risks and rewards of ownership, which was on the date of shipment. Accruals for returned merchandise were based on historical experience. Shipping and handling fees billed to customers was recorded as revenue. The costs associated with shipping goods to customers were recorded as cost of revenue.
PriceRunner's revenue consisted principally of advertising revenue that, depending on the terms of the arrangement, was recognized when a user clicked on an ad, or when a user clicked-through on the ad and took a specified action on the destination site.
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term investments, with maturities of less than 91 days from the date of purchase. Domestically, cash equivalents primarily consist of AAA rated government money market funds, commercial paper rated A1/P1 or better and treasury discount notes. Internationally, cash equivalents primarily consist of AAA rated treasury money market funds and time deposits.
Marketable Securities
At December 31, 2016, marketable securities consist of commercial paper rated A1/P1, treasury discount notes and short-to-medium-term debt securities issued by investment grade corporate issuers. 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 marketable equity securities as part of its investment strategy. All marketable securities are classified as available-for-sale and are reported at fair value. The unrealized gains and losses on marketable securities, net of tax, are included in accumulated other comprehensive income as a separate component of shareholders' equity. The specific-identification method is used to determine the cost of securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income into earnings.
The Company employs a methodology that considers available evidence in evaluating potential other-than-temporary impairments of its investments. Investments are considered to be impaired when a decline in fair value below the amortized cost basis is determined to be other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the amortized cost basis, the financial condition and near-term prospects of the issuer, and whether it is not more likely than not that the Company will be required to sell the security before the recovery of the amortized cost basis, which may be maturity. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in current earnings and a new cost basis in the investment is established.
Certain Risks and Concentrations
A significant 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. For the years ended December 31, 2016, 2015 and 2014, revenue from Google represents 26%, 40% and 45%, respectively, of the Company's consolidated revenue. The Company's service agreement became effective on April 1, 2016, following the expiration of the previous services agreement. The services

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agreement expires on March 31, 2020; however, the Company may choose to terminate the agreement effective March 31, 2019. The services agreement requires that we comply with certain guidelines promulgated by Google. Google may generally unilaterally update its policies and guidelines without advance notice, which could in turn require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results of operations. For the years ended December 31, 2016, 2015 and 2014, revenue earned from Google is $824.4 million, $1.3 billion and $1.4 billion, respectively. This revenue is earned by the businesses comprising the Applications and Publishing segments. For the years ended December 31, 2016, 2015 and 2014, Google revenue represents 87% and 73%; 94% and 83%; and 97% and 83%, of Applications and Publishing revenue, respectively. Accounts receivable related to revenue earned from Google totaled $65.8 million and $97.2 million at December 31, 2016 and 2015, respectively.
The Company's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.
Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents and marketable securities. Cash and cash equivalents are maintained with financial institutions and are in excess of Federal Deposit Insurance Corporation insurance limits.
Accounts Receivable
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts and revenue reserves. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company's previous loss history, the specific customer's ability to pay its obligation to the Company and the condition of the general economy and the customer's industry. The Company writes off accounts receivable when they become uncollectible. The Company also maintains allowances to reserve for potential credits issued to customers or other revenue adjustments. The amounts of these reserves are based, in part, on historical experience.
Property and Equipment
Property and equipment, including significant improvements, are recorded at cost. Repairs and maintenance costs are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, or, in the case of leasehold improvements, the lease term, if shorter.
Asset Category
Estimated
Useful Lives
Buildings and leasehold improvements3 to 39 Years
Computer equipment and capitalized software2 to 3 Years
Furniture and other equipment3 to 12 Years
The Company capitalizes certain internal use software costs including external direct costs utilized in developing or obtaining the software and compensation for personnel directly associated with the development of the software. Capitalization of such costs begins when the preliminary project stage is complete and ceases when the project is substantially complete and ready for its intended purpose. The net book value of capitalized internal use software is $46.9 million and $39.6 million at December 31, 2016 and 2015, respectively.

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Business Combinations
The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. The fair value of these intangible assets is based on detailed valuations that use information and assumptions provided by management. The excess purchase price over the net tangible and identifiable intangible assets is recorded as goodwill and is assigned to the reporting unit(s) that is expected to benefit from the combination as of the acquisition date.
In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price. Each of these arrangements are initially recorded at its fair value at the time of the acquisition and reflected at current fair value for each subsequent reporting period thereafter until settled. The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics. The Company determines the fair value of the contingent consideration arrangements using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated with the obligation to determine the net amount reflected in the consolidated financial statements. Determining the fair value of these arrangements is inherently difficult and subjective. Significant changes in forecasted earnings or operating metrics would result in a significantly higher or lower fair value measurement and can have a material impact on our consolidated financial statements. The changes in the remeasured fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in “General and administrative expense” in the accompanying consolidated statement of operations. See "Note 8—Fair Value Measurements and Financial Instruments" for a discussion of contingent consideration arrangements.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill acquired in a business combination is assigned to the reporting unit(s) that is expected to benefit from the combination as of the acquisition date. The Company assesses goodwill and indefinite-lived intangible assets for impairment annually as of October 1, or, more frequently, if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value.
When the Company elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit's goodwill is necessary; otherwise, a quantitative assessment is performed and the fair value of the reporting unit is determined. If the carrying value of the reporting unit exceeds its fair value, the implied fair value of the reporting unit's goodwill is calculated (in the same manner as a business combination) and an impairment loss equal to the excess is recorded.
For the Company's annual goodwill test at October 1, 2016, a qualitative assessment of the Match Group, HomeAdvisor Domestic, HomeAdvisor International, Vimeo, Daily Burn and ShoeBuy reporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values. The primary factors that the Company considered in its qualitative assessment for each of these reporting units is described below:
Match Group's October 1, 2016 market capitalization of $4.8 billion exceeded its carrying value by more than 970% and Match Group's strong operating performance.
The Company performed valuations of the HomeAdvisor Domestic, HomeAdvisor International, Vimeo and Daily Burn reporting units during 2016. These valuations were prepared primarily in connection with the issuance and/or settlement of equity grants that are denominated in the shares of these businesses. The valuations were prepared time proximate to, however, not as of October 1, 2016. The fair value of each of these businesses was significantly in excess of its October 1, 2016 carrying value.
ShoeBuy's expected sales price was significantly in excess of its October 1, 2016 carrying value; which was confirmed by the sales price realized in its sale on December 30, 2016, which resulted in a pre-tax gain of $37.5 million.


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For the Company's annual goodwill test at October 1, 2016, the Company concluded that it was not more likely than not that the fair values of the Applications and Connected Ventures reporting units were greater than their respective carrying values and performed a quantitative test of these reporting units. The Company's quantitative test indicated that the fair value of each of these reporting units is in excess of its respective carrying value; therefore, the goodwill of these reporting units is not impaired. The Publishing reporting unit had no goodwill as of October 1, 2016 because the Company recorded an impairment charge equal to the entire $275.4 million balance of the Publishing reporting unit goodwill during the second quarter of 2016, which is more fully described below, following a quantitative impairment test as of June 30, 2016.
The fair value of the Company's reporting units is determined using both an income approach based on discounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year. The Company uses the same approach in determining the fair value of its businesses in connection with its subsidiary denominated stock based compensation plans, which can be a significant factor in the decision to apply the qualitative screen. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on each reporting unit's current results and forecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in determining the fair value of the Company's reporting units ranged from 10% to 17.5% in 2016 and 12% to 22% in 2015. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors. While a primary driver in the determination of the fair values of the Company's reporting units is the estimate of future revenue and profitability, the determination of fair value is based, in part, upon the Company's assessment of macroeconomic factors, industry and competitive dynamics and the strategies of its businesses in response to these factors.
At October 1, 2016, the fair value of each of the Company's reporting units with goodwill exceeded its carrying value by more than 20%.
While the Company has the option to qualitatively assess whether it is more likely than not that the fair value of its indefinite-lived intangible asset are less than its carrying value, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1. The Company determines the fair values of its indefinite-lived intangible assets using avoided royalty DCF analyses. Significant judgments inherent in these analyses include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessment ranged from 11% to 16% in both 2016 and 2015, and the royalty rates used ranged from 2% to 7% in 2016 and 1% to 9% in 2015.
While the 2016 annual assessment did not identify any material impairments, during the second quarter of 2016 the Company recorded impairment charges related to the entire $275.4 million balance of the Publishing reporting unit goodwill and $11.6 million related to certain Publishing indefinite-lived intangible assets. The goodwill impairment charge at Publishing was driven by the impact from the new Google contract, traffic trends and monetization challenges and the corresponding impact on the current estimate of fair value. The expected cash flows used in the Publishing DCF analysis were based on the Company's most recent forecast for the second half of 2016 and each of the years in the forecast period, which were updated to include the effects of the new Google contract, traffic trends and monetization challenges and the cost savings from our restructuring efforts. For years beyond the forecast period, the Company's estimated cash flows were based on forecasted growth rates. The discount rate used in the DCF analysis reflected the risks inherent in the expected future cash flows of the Publishing reporting unit. Determining fair value using a market approach considers multiples of financial metrics based on

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both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple was determined which was applied to financial metrics to estimate the fair value of the Publishing reporting unit. To determine a peer group of companies for Publishing, we considered companies relevant in terms of business model, revenue profile, margin and growth characteristics and brand strength. The indefinite-lived intangible asset impairment charge related to certain trade names and trademarks and were due to reduced level of revenue and profits, which, in turn, also led to a reduction in the assumed royalty rates for these assets. The royalty rates used to value the trade names that were impaired ranged from 2% to 6% and the discount rate that was used reflected the risks inherent in the expected future cash flows of the trade names and trademarks. The impairment charge is included in "Amortization of intangibles" in the accompanying consolidated statement of operations.
In 2015, the Company identified and recorded impairment charges of $88.0 million related to certain indefinite-lived intangible assets at the Publishing segment and $14.1 million at the Other segment related to goodwill at ShoeBuy. The indefinite-lived intangible asset impairment charge at Publishing related to certain trade names of certain Ask & Other direct marketing brands, including Ask.com. The impairment charge reflected the impact of Google ecosystem changes that have impacted our ability to market, the effect of the reduced revenue share on mobile under the terms of the services agreement with Google, and the shift in focus to higher margin businesses in Publishing's Premium Brands. The combined impact of these factors has reduced the forecasted revenue and profits for these brands and the impairment charge reflected the resultant reduction in fair value. The goodwill impairment charge at ShoeBuy was due to increased investment and the seasonal effect of high inventory levels as of October 1, 2015. The 2014 annual assessment identified no material impairments.
The Company's reporting units are consistent with its determination of its operating segments. Goodwill is tested for impairment at the reporting unit level. See "Note 14—Segment Information" for additional information regarding the Company's method of determining operating and reportable segments.
Long-Lived Assets and Intangible Assets with Definite Lives
Long-lived assets, which consist of property and equipment and intangible assets with definite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. Amortization of definite-lived intangible assets is computed either on a straight-line basis or based on the pattern in which the economic benefits of the asset will be realized.
Fair Value Measurements
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 "Note 8—Fair Value Measurements and Financial Instruments" for a discussion of fair value measurements made using Level 3 inputs.

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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.
Traffic Acquisition Costs
Traffic acquisition costs consist of (i) payments made to partners who distribute our Partnerships customized browser-based applications and who integrate our paid listings into their websites and (ii) fees related to the distribution and facilitation of in-app purchase of product features. These payments include amounts based on revenue share and other arrangements. The Company expenses these payments in the period incurred as a component of cost of revenue.
Advertising Costs
Advertising costs are expensed in the period incurred (when the advertisement first runs for production costs that are initially capitalized) and represent online marketing, including fees paid to search engines and third parties that distribute our Consumer downloadable applications, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the Match Group brands. Advertising expense is $1.0 billion, $1.2 billion and $994.7 million for the years ended December 31, 2016, 2015 and 2014, respectively.
The Company capitalizes and amortizes the costs associated with certain distribution arrangements that require it to pay a fee per access point delivered. These access points are generally in the form of downloadable applications associated with our Consumer operations. These fees are amortized over the estimated useful lives of the access points to the extent the Company can reasonably estimate a probable future economic benefit and the period over which such benefit will be realized (generally 18 months). Otherwise, the fees are charged to expense as incurred.
Legal Costs
Legal costs are expensed as incurred.
Income Taxes
The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax expense.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.
Earnings Per Share
Basic earnings per share is computed by dividing net earnings attributable to IAC shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vested resulting in the issuance of common stock that could share in the earnings of the Company.
Foreign Currency Translation and Transaction Gains and Losses
The financial position and operating results of foreign entities whose primary economic environment is based on their local currency are consolidated using the local currency as the functional currency. These local currency assets and liabilities

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses of these operations are translated at average rates of exchange during the period. Translation gains and losses are included in accumulated other comprehensive income as a component of shareholders' equity. Transaction gains and losses resulting from assets and liabilities denominated in a currency other than the functional currency are included in the consolidated statement of operations as a component of other income (expense), net. See "Note 20—Consolidated Financial Statement Details" for additional information regarding foreign currency exchange gains and losses.
Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated other comprehensive income (loss) into earnings. Such gains totaled $2.2 million during the year ended December 31, 2015 and is included in "Other income (expense), net" in the accompanying consolidated statement of operations.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is generally expensed over the requisite service period. See "Note 13—Stock-based Compensation" for a discussion of the Company's stock-based compensation plans.
Redeemable Noncontrolling Interests
Noncontrolling interests in the consolidated subsidiaries of the Company are ordinarily reported on the consolidated balance sheet within shareholders' equity, separately from the Company's equity. However, securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of shareholders' equity. Accordingly, all noncontrolling interests that are redeemable at the option of the holder are presented outside of shareholders' equity in the accompanying consolidated balance sheet.
In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The Company is party to fair value put and call arrangements with respect to these interests. These put and call arrangements allow management of these businesses to require the Company to purchase their interests or allow the Company to acquire such interests at fair value, respectively. The put arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement. These put and call arrangements become exercisable by the Company and the counter-party at various dates in the future. During the years ended December 31, 2016 and 2015, one and two of these arrangements, respectively, were exercised. No put or call arrangements were exercised during 2014. These put arrangements are exercisable by the counter-party outside the control of the Company. Accordingly, to the extent that the fair value of these interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital. During the years ended December 31, 2016, 2015 and 2014, the Company recorded adjustments of $7.9 million, $23.2 million and $27.8 million, respectively, to increase these interests to fair value. Fair value determinations require high levels of judgment and are based on various valuation techniques, including market comparables and discounted cash flow projections.
Noncontrolling Interests
During the quarter ended March 31, 2016, the Company reallocated amounts within the accounts comprising shareholders' equity to correct the amount of noncontrolling interests that was initially recorded following the IPO of Match Group, which occurred on November 24, 2015. The noncontrolling interests should have been recorded using the net book value of Match Group rather than the net IPO proceeds. In addition, the adjustment allocates the proportionate share of the accumulated other comprehensive loss to the noncontrolling interests balance. The reallocation has no effect on net income or earnings per share. Based on our assessment of both companies agreed best reflectsqualitative and quantitative factors, the reallocation was not considered material to the consolidated financial statements of the Company as of and for the year ended December 31, 2016, or any of the interim reporting periods included therein, and for the year ended December 31, 2015. Therefore, the adjustment was initially reflected in the consolidated financial statements of the Company as of and for the three months ended March 31, 2016, and was also reflected in the year-to-date consolidated financial statements of each subsequent interim period in 2016 and in the accompanying consolidated financial statements for the year ending December 31, 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Recent Accounting Pronouncements
Accounting Pronouncements not yet adopted by the Company
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 August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU 2014-09 for all entities by one year. In March, April, May and December 2016, the FASB issued ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20, respectively, which provide further revenue recognition guidance related to principal versus agent considerations, performance obligations and licensing, and narrow-scope improvements and practical expedients. 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 using the modified retrospective approach with the cumulative effect recognized as of the date of initial application. The Company will adopt ASU No. 2014-09, as amended by ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20, using the modified retrospective approach effective January 1, 2018. The Company is currently evaluating the impact the adoption of these standard updates will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases (Topic 840)" and generally requires all leases to be recognized in the statement of financial position. The provisions of ASU No. 2016-02 are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU No. 2016-02 are to be applied using a modified retrospective approach. The Company is currently evaluating the impact the adoption of this standard update will have on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payments Accounting (Topic 718). The update is intended to simplify existing guidance on various aspects of the accounting and presentation of employee share-based payments in financial statements including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification on the statement of cash flows. The provisions of ASU No. 2016-09 are effective for reporting periods beginning after December 15, 2016; early adoption is permitted.
The primary effects of the adoption of ASU No. 2016-09 on the Company’s results of operations, cash flows and earnings per share will be due to the change in the treatment of the excess tax benefit (deficiency) related to equity awards to employees upon exercise of stock options and the vesting of restricted stock units. The table below illustrates this effect.
Excess tax benefit (deficiency) of equity awards to employees upon exercise of stock options and the vesting of restricted stock units:Accounting under current GAAP:Accounting following adoption of ASU No. 2016-09:
Statement of operationsTreated as an increase (or decrease) to additional paid-in capital when realized (i.e., reduction of income taxes payable)Included in the determination of the income tax provision or benefit upon option exercise or share vesting
Statement of cash flowsTreated as a financing cash flowTreated as an operating cash flow
Calculation of fully diluted shares for the determination of earnings per shareIncluded as a component of the assumed proceeds in applying the treasury stock methodExcluded from the assumed proceeds in applying the treasury stock method
The expected effect of the adoption of ASU No. 2016-09 for the Company will be to increase reported net earnings (or reduce reported net loss), operating cash flow and basic earnings per share (or reduce reported net loss per share). The number of shares used in the calculation of fully diluted earnings per share will also increase due to the reduction in assumed proceeds under the treasury stock method. The actual effect on fully diluted earnings per share could be an increase or a decrease in any period, which will depend upon the increase in reported earnings and the increase in the number of shares included in the fully diluted earnings per share calculation.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


As of January 1, 2017, the Company will adopt the change in treatment of excess tax benefit (deficiency) using the modified retrospective approach with the cumulative effect recognized as of the date of initial adoption and will apply the provisions of ASU No. 2016-09 related to the presentation on the statement of cash flows using the retrospective approach.
To illustrate the effect of ASU No. 2016-09 on the Company’s results for the year ended December 31, 2016, the table below illustrates the change in the Company’s reported results after giving pro forma effect to ASU No. 2016-09 as if it had been in effect on January 1, 2016.
  Reported results under current GAAP Pro forma results assuming ASU No. 2016-09 had been in effect on January 1, 2016
  (In thousands, except per share data)
Net (loss) earnings $(16,151) $33,255
Net earnings attributable to noncontrolling interests (25,129) (30,024)
Net (loss) earnings attributable to IAC shareholders (41,280) 3,231
Cash flows provided by operating activities attributable to continuing operations 292,377
 344,141
Cash flows used in financing activities attributable to continuing operations (451,065) (502,829)
Basic (loss) earnings per share from continuing operations $(0.52) $0.10
Fully diluted loss per share from continuing operations $(0.52) $(0.19)
In August 2016, the FASB ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which makes clarifications to how cash receipts and cash payments in certain transactions are presented and classified on the statement of cash flows. The provisions of ASU No. 2016-15 are effective for reporting periods beginning after December 15, 2017, including interim periods, and will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable; early adoption is permitted. The Company does not expect the adoption of this standard update to have a material impact on its consolidated financial statements and is currently evaluating the method and timing of adoption.
In January 2017, the FASB issued ASU No. 2017-04, IntangiblesGoodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which is intended to simplify the accounting for goodwill impairment. The guidance will eliminate the requirement to calculate the implied fair value of goodwill under today’s two-step impairment test to measure a goodwill impairment charge. The provisions of ASU No. 2017-04 are effective for reporting periods beginning after December 15, 2019; early adoption is permitted. The provisions of ASU 2017-04 are to be applied using a prospective approach. The Company will adopt the provisions of ASU 2017-04 on January 1, 2017 and does not expect the adoption of this standard update to have a material impact on its consolidated financial statements.
Accounting Pronouncement adopted by the Company
In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, and in August 2015, the FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. Together, this guidance requires that deferred debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with debt discounts and premiums, while debt issuance costs related to line-of-credit arrangements may still continue to be classified as assets. The Company adopted the provisions of ASU No. 2015-03 and ASU No. 2015-15 in the first quarter of 2016 and applied the provisions retrospectively, resulting in $21.3 million of deferred debt issuance costs being reclassified from other non-current assets to long-term debt, net of current portion, in the accompanying December 31, 2015 consolidated balance sheet.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 3—INCOME TAXES
U.S. and foreign (loss) earnings from continuing operations before income taxes are as follows:
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
U.S. $(248,622) $79,639
 $174,792
Foreign167,348
 63,234
 95,137
     Total$(81,274) $142,873
 $269,929
The components of the (benefit) provision for income taxes attributable to continuing operations are as follows:
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Current income tax provision (benefit):     
Federal$23,343
 $67,505
 $(45,842)
State3,662
 7,785
 (14,787)
Foreign27,242
 14,012
 19,132
     Current income tax provision (benefit)54,247
 89,302
 (41,497)
Deferred income tax (benefit) provision:     
Federal(100,798) (50,254) 74,255
State(9,518) (3,727) 3,090
Foreign(8,865) (5,805) (476)
     Deferred income tax (benefit) provision(119,181) (59,786) 76,869
     Income tax (benefit) provision$(64,934) $29,516
 $35,372
The current income tax payable was reduced by $51.8 million, $56.4 million and $45.0 million for the years ended December 31, 2016, 2015 and 2014, respectively, for excess tax deductions attributable to stock-based compensation. The related income tax benefits are recorded as increases to additional paid-in capital.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Income taxes receivable (payable) and deferred tax assets (liabilities) are included in the following captions in the accompanying consolidated balance sheet at December 31, 2016 and 2015:
 December 31,
 2016 2015
 (In thousands)
Income taxes receivable (payable):   
Other current assets$41,352
 $26,793
Other non-current assets1,615
 1,564
Accrued expenses and other current liabilities(5,788) (33,029)
Income taxes payable(33,528) (33,692)
     Net income taxes receivable (payable)$3,651
 $(38,364)
    
Deferred tax assets (liabilities):   
Other non-current assets$2,511
 $1,970
Deferred income taxes(228,798) (348,773)
     Net deferred tax liabilities$(226,287) $(346,803)
The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.
 December 31,
 2016 2015
 (In thousands)
Deferred tax assets:   
Accrued expenses$40,273
 $36,418
Net operating loss carryforwards63,948
 68,048
Tax credit carryforwards11,570
 13,753
Stock-based compensation87,914
 76,285
Cost method investments9,955
 6,251
Equity method investments17,455
 17,105
Intangible and other assets13,708
 
Other20,089
 16,057
     Total deferred tax assets264,912
 233,917
Less valuation allowance(88,170) (90,482)
     Net deferred tax assets176,742
 143,435
Deferred tax liabilities:   
Investment in subsidiaries(385,474) (382,254)
Intangible and other assets
 (88,846)
Other(17,555) (19,138)
     Total deferred tax liabilities(403,029) (490,238)
     Net deferred tax liabilities$(226,287) $(346,803)
At December 31, 2016, the Company has federal and state net operating losses ("NOLs") of $71.8 million and $123.5 million, respectively. If not utilized, the federal NOLs will primarily expire at various times between 2030 and 2036, and the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


state NOLs will expire at various times between 2017 and 2036. Utilization of federal and state NOLs will be subject to limitations under Section 382 of the Internal Revenue Code and applicable state law. At December 31, 2016, the Company has foreign NOLs of $126.3 million available to offset future income. Of these foreign NOLs, $112.4 million can be carried forward indefinitely and $13.9 million will expire at various times between 2017 and 2036. During 2016, the Company recognized tax benefits related to NOLs of $19.8 million. At December 31, 2016, the Company has federal and state capital losses of $16.5 million and $26.2 million, respectively. If not utilized, the capital losses will expire between 2017 and 2021. Utilization of capital losses will be limited to the Company's ability to generate future capital gains.
At December 31, 2016, the Company has tax credit carryforwards of $18.3 million. Of this amount, $9.1 million relates to state tax credits for research activities, $3.9 million relates to federal credits for foreign taxes, and $5.3 million relates to various state and local tax credits. Of these credit carryforwards, $11.0 million can be carried forward indefinitely and $7.3 million will expire primarily by 2018.
During 2016, the Company's valuation allowance decreased by $2.3 million primarily due to the decrease in state and foreign net operating losses and foreign tax credits, partially offset by an increase in federal and state capital losses and other-than-temporary impairment charges on certain cost method investments. At December 31, 2016, the Company has a valuation allowance of $88.2 million related to the portion of tax loss carryforwards and other items for which it is more likely than not that the tax benefit will not be realized.
A reconciliation of the income tax (benefit) provision to the amounts computed by applying the statutory federal income tax rate to earnings from continuing operations before income taxes is shown as follows:
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Income tax (benefit) provision at the federal statutory rate of 35%$(28,446) $50,006
 $94,475
Change in tax reserves, net(828) (2,928) (86,151)
Foreign income taxed at a different statutory tax rate(20,277) (6,077) (10,456)
State income taxes, net of effect of federal tax benefit(3,880) 2,208
 7,240
Realization of certain deferred tax assets
 (22,440) 
Non-taxable contingent consideration fair value adjustments1,020
 (4,517) (4,439)
Non-taxable foreign currency exchange gains(6,837) (4,306) 
Unbenefited losses1,730
 4,264
 5,433
Non-deductible goodwill associated with the sale of Urbanspoon
 
 6,982
Non-taxable sale and non-deductible goodwill associated with ShoeBuy(13,142) 4,920
 
Goodwill impairment of Publishing10,649
 
 
Non-deductible impairments for certain cost method investments3,489
 2,341
 23,310
Deferred tax adjustment for enacted changes in tax laws and rates(4,594) 
 
Other, net(3,818) 6,045
 (1,022)
     Income tax (benefit) provision$(64,934) $29,516
 $35,372
No income taxes have been provided on indefinitely reinvested earnings of certain foreign subsidiaries aggregating $680.2 million at December 31, 2016. The estimated amount of the unrecognized deferred income tax liability with respect to such earnings would be $169.3 million.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows:
 December 31,
 2016 2015 2014
 (In thousands)
Balance at January 1$40,808
 $30,386
 $275,813
Additions based on tax positions related to the current year2,033
 4,227
 2,159
Additions for tax positions of prior years2,676
 14,467
 1,622
Reductions for tax positions of prior years(743) (1,556) (5,611)
Settlements(5,107) 
 (5,092)
Expiration of applicable statutes of limitations(1,295) (6,716) (238,505)
Balance at December 31$38,372
 $40,808
 $30,386
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 years ended December 31, 2016, 2015 and 2014 is a $0.4 million expense, $0.1 million expense and $58.5 million benefit, respectively, net of related deferred taxes of $0.2 million, less than $0.1 million and $35.3 million, respectively, for interest on unrecognized tax benefits. Included in the income tax provision for discontinued operations for the years ended December 31, 2016, 2015 and 2014 is a less than $0.1 million benefit, less than $0.1 million benefit and $19.7 million benefit, respectively, net of related deferred taxes of less than $0.1 million, less than $0.1 million and $11.7 million, respectively, for interest on unrecognized tax benefits. At December 31, 2016 and 2015, the Company has accrued $2.6 million and $2.5 million, respectively, for the payment of interest. At December 31, 2016 and 2015, the Company has accrued $1.7 million and $2.2 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 actualincome 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. The statute of limitations for the years 2010 through 2012 has been extended to December 31, 2017. Various other jurisdictions are open to examination for 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 income tax contingencies and the amounts owed by the Company are recorded in the period they become known.
At December 31, 2016 and 2015, unrecognized tax benefits, including interest, were $41.0 million and $43.4 million, respectively. If unrecognized tax benefits at December 31, 2016 are subsequently recognized, $37.7 million, net of related deferred tax assets and interest, would reduce income tax expense for continuing operations. The comparable amount as of December 31, 2015 was $41.0 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $6.9 million by December 31, 2017, due to settlements and expirations of statutes of limitations; all of which would reduce the income tax provision for continuing operations.
NOTE 4—BUSINESS COMBINATION
On October 28, 2015, Match Group completed the purchase of all the outstanding shares of Plentyoffish Media Inc. ("PlentyOfFish"), a leading provider of subscription-based and ad-supported online personals servicing North America, Europe, Latin America and Australia. Services are provided through websites and mobile applications that PlentyOfFish owns and operates. The purchase price was $574.1 million in cash and is net of a $0.9 million working capital adjustment paid to Match Group in the second quarter of 2016.
The financial results of PlentyOfFish are included in the Company's consolidated financial statements, within the Match Group segment, beginning October 28, 2015. For the year ended December 31, 2015, the Company included $8.0 million of revenue and $0.7 million of net earnings in its consolidated statement of operations related to PlentyOfFish.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
 (In thousands)
Cash and cash equivalents$4,626
Other current assets4,460
Computer and other equipment2,990
Goodwill488,644
Intangible assets84,100
Other non-current assets1,073
Total assets585,893
Current liabilities(6,418)
Other long-term liabilities(5,325)
Net assets acquired$574,150
The purchase price was based on the expected financial performance of PlentyOfFish, not on the value of the net identifiable assets at the time spent (and timeof acquisition, which resulted in a significant portion of the purchase price being attributed to goodwill. The expected financial performance of PlentyOfFish reflects that it is complementary and synergistic to the existing Match Group dating businesses.
Intangible assets are as follows:
 (In thousands) 
Weighted-Average Useful Life
(Years)
Indefinite-lived trade name$66,300
 Indefinite
Customer relationships10,100
 Less than 1
New registrants3,100
 Less than 1
Non-compete agreement3,000
 5
Developed technology1,600
 2
    Total intangible assets acquired$84,100
  
PlentyOfFish's other current assets, property and equipment, other non-current assets, current liabilities and other long-term liabilities were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of trade names, customer relationships and the non-compete agreement were determined using variations of the income approach; specifically, in respective order, the relief from royalty, excess earnings and with or without methodologies. The fair values of new registrants and developed technology were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
Pro forma Financial Information
The unaudited pro forma financial information in the table below presents the combined results of the Company and PlentyOfFish as if the acquisition of PlentyOfFish had occurred on January 1, 2014. The pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisition actually occurred on January 1, 2014. For the years ended December 31, 2015 and 2014, pro forma adjustments reflected below include increases of $1.4 million and $14.6 million, respectively, in amortization of intangible assets. The pro forma adjustments reflected below for the year ended December 31, 2014 also include a reduction in revenue of $5.1 million due to the write-off of deferred revenue at the date of acquisition.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Years Ended December 31,
 2015 2014
 (In thousands, except per share data)
Revenue$3,309,287
 $3,157,893
Net earnings attributable to IAC shareholders$155,599
 $413,299
Basic earnings per share attributable to IAC shareholders$1.88
 $4.96
Diluted earnings per share attributable to IAC shareholders$1.76
 $4.67

NOTE 5—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net are as follows:
 December 31,
 2016 2015
 (In thousands)
Goodwill$1,924,052
 $2,245,364
Intangible assets with indefinite lives320,645
 380,137
Intangible assets with definite lives, net34,806
 60,691
Total goodwill and intangible assets, net$2,279,503
 $2,686,192
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2016:
 Balance at
December 31, 2015
 Additions (Deductions) Impairment Foreign
Exchange
Translation
 Balance at
December 31, 2016
 (In thousands)
Match Group$1,293,109
 $603
 $(3,063) $
 $(9,689) $1,280,960
HomeAdvisor150,251
 21,985
 
 
 (1,625) 170,611
Video15,590
 9,649
 
 
 
 25,239
Applications447,242
 
 
 
 
 447,242
Publishing277,192
 
 (1,968) (275,367) 143
 
Other61,980
 
 (62,780) 
 800
 
Total$2,245,364
 $32,237
 $(67,811) $(275,367) $(10,371) $1,924,052
The December 31, 2016 goodwill balance reflects accumulated impairment losses of $598.0 million, $529.1 million and $11.6 million at Publishing, Applications and Connected Ventures (included in the Video segment), respectively.
The additions primarily relate to the acquisitions of MyHammer Holding AG (included in the HomeAdvisor segment) and VHX (included in the Video segment). The deductions primarily relate to the sales of PriceRunner and ShoeBuy (both included in the Other segment). See "Note 2—Summary of Significant Accounting Policies" for information on the 2016 impairment charge at Publishing.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2015:
 Balance at
December 31, 2014
 Additions Impairment Foreign
Exchange
Translation
 Allocation of IAC's former Search & Applications Segment Goodwill Based on Relative Fair Value Balance at
December 31, 2015
 (In thousands)
Search & Applications (a)
$774,822
 $1,450
 $
 $(1,230) $(775,042) $
            
Match Group791,474
 547,910
 
 (46,275) 
 1,293,109
HomeAdvisor151,321
 
 
 (1,070) 
 150,251
Video15,590
 
 
 
 
 15,590
Applications
 
 
 
 447,242
 447,242
Publishing
 3,504
 
 963
 272,725
 277,192
Other21,719
 
 (14,056) (758) 55,075
 61,980
Total$1,754,926
 $552,864
 $(14,056) $(48,370) $
 $2,245,364
________________________
(a)Prior to the fourth quarter of 2015, Search & Applications was a reportable segment consisting of one operating segment and one reporting unit. In the fourth quarter of 2015, Search &Applications was split into three new operating segments and reporting units: Applications, Publishing and PriceRunner (included in the Other segment). The goodwill of Search & Applications was allocated to these three reporting units based upon their relative fair values as of October 1, 2015. It was not possible to reflect this allocation on a retrospective basis because of acquisitions and dispositions during the three years in the period ended December 31, 2015.
The additions primarily relate to Match Group's acquisitions of PlentyOfFish and Eureka. See "Note 2—Summary of Significant Accounting Policies" for information on the 2015 impairment charge at ShoeBuy.
The December 31, 2015 goodwill balance includes accumulated impairment losses of $529.1 million, $322.6 million and $65.2 million, which were re-allocated from the former Search & Applications segment, to Applications, Publishing and PriceRunner, respectively, based on their relative fair values as of October 1, 2015 following the change in reportable segments that occurred during the fourth quarter of 2015. The goodwill balance at December 31, 2015 also includes accumulated impairment losses of $42.1 million and $11.6 million at ShoeBuy (included in the Other segment) and Connected Ventures (included in the Video segment), respectively.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. During the second quarter of 2016, the Company changed the classification of certain intangibles from indefinite-lived to definite-lived at Publishing. At December 31, 2016 and 2015, intangible assets with definite lives are as follows:
 December 31, 2016
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net Weighted-Average
Useful Life
(Years)
 (In thousands)  
Trade names$63,855
 $(52,927) $10,928
 1.8
Technology38,602
 (27,667) 10,935
 3.4
Content14,802
 (8,965) 5,837
 4.3
Customer lists12,485
 (9,997) 2,488
 3.7
Advertiser and supplier relationships and other7,230
 (2,612) 4,618
 4.5
Total$136,974
 $(102,168) $34,806
 2.8
 December 31, 2015
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net Weighted-Average
Useful Life
(Years)
 (In thousands)  
Trade names$32,123
 $(26,268) $5,855
 2.5
Technology55,487
 (37,012) 18,475
 3.2
Content62,082
 (48,937) 13,145
 4.1
Customer lists28,836
 (13,078) 15,758
 2.1
Advertiser and supplier relationships and other15,709
 (8,251) 7,458
 4.2
Total$194,237
 $(133,546) $60,691
 3.3
At December 31, 2016, amortization of intangible assets with definite lives for each of the next five years is estimated to be spent)as follows:
Years Ending December 31,(In thousands)
2017$23,815
20186,922
20192,866
20201,203
Total$34,806
NOTE 6—MARKETABLE SECURITIES
At December 31, 2016, current available-for-sale marketable securities are as follows:

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Amortized
Cost
 Gross
Unrealized
Gains
 Gross
Unrealized
Losses
 Fair Value
 (In thousands)
Commercial paper$49,797
 $
 $
 $49,797
Treasury discount notes34,978
 
 (4) 34,974
Corporate debt securities4,575
 2
 (6) 4,571
Total debt securities89,350
 2
 (10) 89,342
Total marketable securities$89,350
 $2
 $(10) $89,342
The contractual maturities of debt securities classified as current available-for-sale at December 31, 2016 are within one year.
The aggregate fair value of available-for-sale marketable debt securities with unrealized losses is $37.0 million as of December 31, 2016. There are no investments in current available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of December 31, 2016. The gross unrealized losses on the marketable debt securities relate primarily to changes in interest rates. The Company does not consider the gross unrealized losses to be other-than-temporary because the Company does not intend to sell the marketable debt securities that generated the gross unrealized losses at December 31, 2016, and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized costs bases, which may be maturity.
At December 31, 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$27,765
 $
 $(187) $27,578
Equity security8,659
 2,963
 
 11,622
Total marketable securities$36,424
 $2,963
 $(187) $39,200
The unrealized gains and losses in the tables above are included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. The gross unrealized losses on the marketable debt securities relate primarily to changes in interest rates. The Company does not consider the gross unrealized losses to be other-than-temporary because the Company does not intend to sell the marketable debt securities that generated the gross unrealized losses at December 31, 2015, and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized costs bases, which may be maturity.
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:
 December 31,
 2016 2015 2014
 (In thousands)
Proceeds from maturities and sales of available-for-sale marketable securities$279,485
 $218,976
 $25,223
Gross realized gains3,556
 443
 3,362
There were no gross realized losses from the maturities and sales of available-for-sale marketable securities for the years ended December 31, 2016, 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 were expected to be sold by Mr. Dillerthe Company, in part, to fund its cash needs related to Match Group's acquisition of PlentyOfFish for $575 million.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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 income (expense), net" in the accompanying consolidated statement of operations.
NOTE 7—LONG-TERM INVESTMENTS
Long-term investments consist of:
 December 31,
 2016 2015
 (In thousands)
Cost method investments$116,133
 $114,532
Equity method investments6,677
 11,262
Marketable equity security
 7,542
Auction rate security
 4,050
Total long-term investments$122,810
 $137,386
Cost method investments
In 2016, 2015 and 2014, the Company recorded $10.0 million, $4.5 million and $66.6 million, respectively, 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. These charges are included in "Other income (expense), net" in the accompanying consolidated statement of operations.
The Company's largest cost method investment, through Match Group, is a 21% interest in the voting common stock of Zhenai Inc. ("Zhenai"), a leading provider of online dating and matchmaking services in China. However, given that our interest relative to other shareholders is not significant, we do not have the ability to exercise significant influence over the operating and financial matters of Zhenai and this investment is accounted for as a cost method investment.
Equity method investments
In 2016 and 2014, the Company recorded other-than-temporary impairment charges on certain of its investments of $0.6 million and $4.2 million, respectively. The other-than-temporary impairment charge recorded in 2014 related to one of its investments following the sale of a majority of the investee's assets. These charges are included in "Other income (expense), net" in the accompanying consolidated statement of operations.
Marketable equity security
The cost basis of the Company's long-term marketable equity security at December 31, 2015 was $5.0 million with a gross unrealized gain of $2.6 million. The gross unrealized gain at December 31, 2015 was included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. During the second quarter of 2016, this marketable equity security was classified as short-term due to the Company's decision to sell this security. During the third quarter of 2016, the security had been sold.
Auction rate security
See "Note 8—Fair Value Measurements and Financial Instruments" for information regarding the auction rate security.
NOTE 8—FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 December 31, 2016
 
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$667,662
 $
 $
 $667,662
Time deposits
 79,000
 
 79,000
Treasury discount notes24,991
 
 
 24,991
Commercial paper
 123,640
 
 123,640
Marketable securities:       
Commercial paper
 49,797
 
 49,797
Treasury discount notes34,974
 
 
 34,974
Corporate debt securities
 4,571
 
 4,571
Total$727,627
 $257,008
 $
 $984,635
        
Liabilities:       
Contingent consideration arrangements$
 $
 $(33,871) $(33,871)

 December 31, 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$601,848
 $
 $
 $601,848
Time deposits
 125,038
 
 125,038
Commercial paper
 302,418
 
 302,418
Marketable securities:       
Corporate debt securities
 27,578
 
 27,578
Equity security11,622
 
 
 11,622
Long-term investments:       
Auction rate security
 
 4,050
 4,050
Marketable equity security7,542
 
 
 7,542
Total$621,012
 $455,034
 $4,050
 $1,080,096
        
Liabilities:       
Contingent consideration arrangements$
 $
 $(33,873) $(33,873)

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
 For the Year Ended
 December 31, 2016 December 31, 2015
 
Auction Rate
Security
 
Contingent
Consideration
Arrangements
 
Auction Rate
Security
 
Contingent
Consideration
Arrangements
 (In thousands)
Balance at January 1$4,050
 $(33,873) $6,070
 $(30,140)
Total net gains (losses):       
Included in earnings:       
Fair value adjustments
 (2,555) 
 15,461
Foreign currency exchange gains
 
 
 626
Included in other comprehensive income (loss)5,950
 (1,571) (2,020) 1,872
Fair value at date of acquisition
 (185) 
 (27,442)
Settlements
 2,180
 
 5,750
Proceeds from sale(10,000) 
 
 
Other
 2,133
 
 
Balance at December 31$
 $(33,871) $4,050
 $(33,873)
Contingent consideration arrangements
As of December 31, 2016, there are seven contingent consideration arrangements related to business acquisitions. The maximum contingent payments related to these seven arrangements are $132.8 million and the fair value of these arrangements at December 31, 2016 is $33.9 million.
The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics. The Company determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risks associated with the obligation to determine the net amount reflected in the consolidated financial statements. The number of scenarios in the probability-weighted analyses can vary; generally, more scenarios are prepared for longer duration and more complex arrangements. The fair values of the contingent consideration arrangements at December 31, 2016 and 2015 reflect discount rates ranging from 12% to 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, including the accretion of the discount, if applicable, and changes are recognized in “General and administrative expense” in the accompanying consolidated statement of operations. The contingent consideration arrangement liability at December 31, 2016 and 2015 includes a current portion of $33.4 million and $2.6 million, respectively, and non-current portion of $0.4 million and $31.2 million, respectively, which are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet.
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:

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 December 31, 2016 December 31, 2015
 Carrying
Value
 Fair
Value
 Carrying
Value
 Fair
Value
 (In thousands)
Current portion of long-term debt$(20,000) $(20,311) $(40,000) $(39,850)
Long-term debt, net of current portion(1,582,484) (1,657,861) (1,726,954) (1,761,601)
The fair value of long-term debt, including the current portion 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 9—LONG-TERM DEBT
Long-term debt consists of:
 December 31,
 2016 2015
 (In thousands)
Match Group Debt:   
6.75% Senior Notes due December 15, 2022 (the "2015 Match Group Senior Notes"); interest payable each June 15 and December 15, which commenced on June 15, 2016$445,172
 $445,172
6.375% Senior Notes due June 1, 2024 (the "2016 Match Group Senior Notes"); interest payable each June 1 and December 1, which commenced on December 1, 2016400,000
 
Match Group Term Loan due November 16, 2022 (a)
350,000
 800,000
Total Match Group long-term debt1,195,172
 1,245,172
Less: Current maturities of Match Group long-term debt
 40,000
Less: Unamortized original issue discount and original issue premium, net5,245
 11,691
Less: Unamortized debt issuance costs13,434
 16,610
Total Match Group debt, net of current maturities1,176,493
 1,176,871
    
IAC Debt:   
4.875% Senior Notes due November 30, 2018 (the "2013 Senior Notes"); interest payable each May 30 and November 30, which commenced on May 30, 2014390,214
 500,000
4.75% Senior Notes due December 15, 2022 (the "2012 Senior Notes"); interest payable each June 15 and December 15, which commenced on June 15, 201338,109
 54,732
Total IAC long-term debt428,323
 554,732
Less: Current portion of IAC long-term debt20,000
 
Less: Unamortized debt issuance costs2,332
 4,649
Total IAC debt, net of current portion405,991
 550,083
    
Total long-term debt, net of current portion$1,582,484
 $1,726,954
________________________
(a)
The Match Group Term Loan matures on November 16, 2022; provided that, if any of the 2015 Match Group Senior Notes remain outstanding on the date that is 91 days prior to the maturity date of the 2015 Match Group Senior Notes, the Match Group Term Loan maturity date shall be the date that is 91 days prior to the maturity date of the 2015 Match Group Senior Notes.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Match Group Senior Notes:
The 2016 Match Group Senior Notes were issued on June 1, 2016. The proceeds of $400 million were used to prepay a portion of indebtedness outstanding under the Match Group Term Loan. At any time prior to June 1, 2019, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, these notes may be redeemed at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:
Year Percentage
2019 104.781%
2020 103.188%
2021 101.594%
2022 and thereafter 100.000%
The 2015 Match Group Senior Notes were issued on November 16, 2015, in exchange for a portion of the IAC 2012 Senior Notes (the "Match Exchange Offer"). Promptly following the closing of the Match Exchange Offer, Match Group and its subsidiaries were designated as unrestricted subsidiaries of IAC for purposes of the indentures governing the 2013 and 2012 Senior Notes and the IAC Credit Facility. Following the designation, neither Match Group nor any of its subsidiaries guarantee any debt of IAC, or are subject to any of the covenants related to such debt.
At any time prior to December 15, 2017, the 2015 Match Group Senior Notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, the 2015 Match Group Senior Notes may be redeemed at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15 of the years indicated below:
Year Percentage
2017 102.375%
2018 101.583%
2019 100.792%
2020 and thereafter 100.000%
The indentures governing the 2016 and 2015 Match Group Senior Notes contain covenants that would limit Match Group's ability to pay dividends or to make distributions and repurchase or redeem Match Group stock in the event a default has occurred or Match Group's leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0. At December 31, 2016, there were no limitations pursuant thereto. There are additional covenants that limit Match Group's ability and the ability of its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event Match Group is not in compliance with the leverage ratio set forth in the indenture, and (ii) incur liens, enter into agreements restricting Match Group subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets.
Match Group Term Loan and Match Group Credit Facility:
On November 16, 2015, under a credit agreement (the "Match Group Credit Agreement"), Match Group borrowed $800 million in the form of a term loan (the "Match Group Term Loan"). On March 31, 2016, Match Group made a $10 million principal payment on the Match Group Term Loan. On June 1, 2016, the $400 million in proceeds from the 2016 Match Group Senior Notes, described above, were used to prepay a portion of the Match Group Term Loan. On December 8, 2016, Match Group made an additional $40 million principal payment on the Match Group Term Loan. In addition, the remaining outstanding balance of $350 million, which is due at maturity, was repriced. The Match Group Term Loan provides for additional annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


by the secured net leverage ratio contained in the Match Group Credit Agreement. The Match Group Term Loan bears interest, at Match Group's option, at a base rate or LIBOR, plus 2.25% or 3.25%, respectively, and in the case of LIBOR, a floor of 0.75%. The interest rate at December 31, 2016 is 4.20%. Interest payments are due at least semi-annually through the term of the loan.
Match Group has a $500 million revolving credit facility (the "Match Group Credit Facility") that expires on October 7, 2020. At December 31, 2016 and 2015, there were no outstanding borrowings under the Match Group Credit Facility. The annual commitment fee on undrawn funds based on the current leverage ratio is 30 basis points. Borrowings under the Match Group Credit Facility bear interest, at Match Group's option, at a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on Match Group's consolidated net leverage ratio. The terms of the Match Group Credit Facility require Match Group to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0 and a minimum interest coverage ratio of not less than 2.5 to 1.0 (in each case as defined in the agreement).
There are additional covenants under the Match Group Credit Facility and the Match Group Term Loan that limit the ability of Match Group and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. While the Match Group Term Loan remains outstanding, these same covenants under the Match Group Credit Agreement are more restrictive than the covenants that are applicable to the Match Group Credit Facility. Obligations under the Match Group Credit Facility and Match Group Term Loan are unconditionally guaranteed by certain Match Group wholly-owned domestic subsidiaries, and are also secured by the stock of certain Match Group domestic and foreign subsidiaries. The Match Group Term Loan and outstanding borrowings, if any, under the Match Group Credit Facility rank equally with each other, and have priority over the 2016 and 2015 Match Group Senior Notes to the extent of the value of the assets securing the borrowings under the Match Group Credit Agreement.
IAC Senior Notes:
The 2013 and 2012 Senior Notes were issued by IAC on November 15, 2013 and December 21, 2012, respectively. The 2013 and 2012 Senior Notes are unconditionally guaranteed by certain wholly-owned domestic subsidiaries, which are designated as guarantor subsidiaries. The guarantor subsidiaries are the same for the 2013 and 2012 Senior Notes. See "Note 22—Guarantor and Non-guarantor Financial Information" for financial information relating to guarantor and non-guarantor.
For the year ended December 31, 2016, the Company redeemed and repurchased $109.8 million of its 2013 Senior Notes and repurchased $16.6 million of its 2012 Senior Notes.
The indenture governing the 2013 Senior Notes contains covenants that would limit our ability to pay dividends or to make distributions and repurchase or redeem our stock in the event a default has occurred or our leverage ratio (as defined in the indenture) exceeds 3.0 to 1.0. At December 31, 2016, there were no limitations pursuant thereto. There are additional covenants that limit the Company's ability and the ability of its restricted subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event we are not in compliance with the financial ratio set forth in the indenture, and (ii) incur liens, enter into agreements limiting our restricted subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of our assets. The indenture governing the 2012 Senior Notes was amended to eliminate substantially all of the restrictive covenants contained therein in connection with the Match Exchange Offer.
The Company may redeem the 2013 Senior Notes at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on November 30 of the years indicated below:
Year Percentage
2016 101.625%
2017 and thereafter 100.000%
The redemption prices for the 2012 Senior Notes and the related time periods are identical to the 2015 Match Group Senior Notes presented above.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


IAC Credit Facility:
IAC has a $300 million revolving credit facility (the "IAC Credit Facility") that expires October 7, 2020. At December 31, 2016 and 2015, there were no outstanding borrowings under the IAC Credit Facility. The annual commitment fee on undrawn funds is currently 35 basis points, and is based on the leverage ratio most recently reported. Borrowings under the IAC Credit Facility bear interest, at the Company's option, at a base rate or LIBOR, in each case, plus an applicable margin, which is determined by reference to a pricing grid based on the Company's leverage ratio. The terms of the IAC Credit Facility require that the Company maintains a leverage ratio (as defined in the agreement) of not more than 3.25 to 1.0 and restrict our ability to incur additional indebtedness. Borrowings under the IAC Credit Facility are unconditionally guaranteed by the same domestic subsidiaries that guarantee the 2013 and 2012 Senior Notes and are also secured by the stock of certain of our domestic and foreign subsidiaries. The 2013 and 2012 Senior Notes rank equally with each other, and are subordinate to outstanding borrowings under the IAC Credit Facility to extent of the value of the assets securing such borrowings.
Long-term debt maturities:
Years Ending December 31,(In thousands)
2018$390,214
2022833,281
2024400,000
Total1,623,495
Less: Current portion of long-term debt20,000
Less: Unamortized original issue discount and original issue premium, net5,245
Less: Unamortized debt issuance costs15,766
Total long term debt, net of current portion$1,582,484

NOTE 10—SHAREHOLDERS' EQUITY
Description of Common Stock and Class B Convertible Common Stock
Each holder of shares of IAC common stock and IAC Class B common stock vote together as a single class with respect to matters that may be submitted to a vote or for the consent of IAC's shareholders generally, including the election of directors. In connection with any such vote, each holder of IAC common stock is entitled to one vote for each share of IAC common stock held and each holder of IAC Class B common stock is entitled to ten votes for each share of IAC Class B common stock held. Notwithstanding the foregoing, the holders of shares of IAC common stock, acting as a single class, are entitled to elect 25% of the total number of IAC's directors, and, in the event that 25% of the total number of directors shall result in a fraction of a director, then the holders of shares of IAC common stock, acting as a single class, are entitled to elect the next higher whole number of IAC's directors. In addition, Delaware law requires that certain matters be approved by the holders of shares of IAC common stock or holders of IAC Class B common stock voting as a separate class.
Shares of IAC Class B common stock are convertible into shares of IAC common stock at the option of the holder thereof, at any time, on a share-for-share basis. Such conversion ratio will in all events be equitably preserved in the event of any recapitalization of IAC by means of a stock dividend on, or a stock split or combination of, outstanding shares of IAC common stock or IAC Class B common stock, or in the event of any merger, consolidation or other reorganization of IAC with another corporation. Upon the conversion of shares of IAC Class B common stock into shares of IAC common stock, those shares of IAC Class B common stock will be retired and will not be subject to reissue. Shares of IAC common stock are not convertible into shares of IAC Class B common stock.
Except as described herein, shares of IAC common stock and IAC Class B common stock are identical. The holders of shares of IAC common stock and the holders of shares of IAC Class B common stock are entitled to receive, share for share, such dividends as may be declared by IAC's Board of Directors out of funds legally available therefore. In the event of a liquidation, dissolution, distribution of assets or winding-up of IAC, the holders of shares of IAC common stock and the holders

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


of shares of IAC Class B common stock are entitled to receive, share for share, all the assets of IAC available for distribution to its stockholders, after the rights of the holders of any IAC preferred stock have been satisfied.
Reserved Common Shares
In connection with equity compensation plans, 17.9 million shares of IAC common stock are reserved at December 31, 2016.
Common Stock Repurchases
During 2016 and 2015, the Company purchased 6.3 million and 3.0 million shares of IAC common stock for aggregate consideration, on a trade date basis, of $315.3 million and $200.0 million, respectively. During 2014, the Company did not purchase any shares of IAC common stock.
On May 3, 2016, IAC's Board of Directors authorized the repurchase of an additional 10.0 million shares of IAC common stock. At December 31, 2016, the Company has approximately 9.3 million shares remaining in its share repurchase authorization.
NOTE 11—ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated other comprehensive loss into earnings:
 Year Ended December 31, 2016
 Foreign Currency Translation Adjustment Unrealized Gains On Available-For-Sale Securities Accumulated Other Comprehensive (Loss) Income
 (In thousands)
Balance at January 1$(154,645) $2,542
 $(152,103)
Other comprehensive (loss) income before reclassifications, net of tax benefit of $0.7 million related to unrealized losses on available-for-sale securities(46,943) 4,855
 (42,088)
Amounts reclassified to earnings9,850
 (2,913)
(a) 
6,937
Net current period other comprehensive (loss) income(37,093) 1,942
 (35,151)
Reallocation of accumulated other comprehensive loss (income) related to the noncontrolling interests created in the Match Group IPO21,589
 (458) 21,131
Balance at December 31$(170,149) $4,026
 $(166,123)
_________________________
(a)Amount is net of a tax provision of $0.2 million.

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Year Ended December 31, 2015
 Foreign Currency Translation Adjustment Unrealized (Losses) Gain On Available-For-Sale Securities Accumulated Other Comprehensive Loss
 (In thousands)
Balance at January 1$(86,848) $(852) $(87,700)
Other comprehensive (loss) income before reclassifications, net of tax provision of $0.6 million related to unrealized gains on available-for-sale securities(65,606) 3,537
 (62,069)
Amounts reclassified to earnings(2,191) (143)
(b) 
(2,334)
Net current period other comprehensive (loss) income(67,797) 3,394
 (64,403)
Balance at December 31$(154,645) $2,542
 $(152,103)
_________________________
(b)    Amount is net of a tax provision of $0.1 million.

NOTE 12—(LOSS) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted (loss) earnings per share attributable to IAC shareholders.
 Years Ended December 31,
 2016 2015 2014
 Basic Diluted Basic Diluted Basic Diluted
 (In thousands, except per share data)
Numerator:           
(Loss) earnings from continuing operations$(16,340) $(16,340) $113,357
 $113,357
 $234,557
 $234,557
Net (earnings) loss attributable to noncontrolling interests(25,129) (25,129) 6,098
 6,098
 5,643
 5,643
Impact from Match Group's dilutive securities (a) (b)

 
 
 (1,799) 
 
(Loss) earnings from continuing operations attributable to IAC shareholders(41,469) (41,469) 119,455
 117,656
 240,200
 240,200
Earnings from discontinued operations attributable to IAC shareholders189
 189
 17
 17
 174,673
 174,673
Net (loss) earnings attributable to IAC shareholders$(41,280) $(41,280) $119,472
 $117,673
 $414,873
 $414,873
            
Denominator:           
Weighted average basic shares outstanding80,045
 80,045
 82,944
 82,944
 83,292
 83,292
Dilutive securities including subsidiary denominated equity, stock options and RSUs(c) (d) (e)(f)

 
 
 5,323
 
 5,266
Denominator for earnings per share—weighted average shares(c) (d) (e)(f)
80,045
 80,045
 82,944
 88,267
 83,292
 88,558
            
(Loss) earnings per share attributable to IAC shareholders:
(Loss) earnings per share from continuing operations$(0.52) $(0.52) $1.44
 $1.33
 $2.88
 $2.71
Discontinued operations
 
 
 
 2.10
 1.97
(Loss) earnings per share$(0.52) $(0.52) $1.44
 $1.33
 $4.98
 $4.68

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(a)Represents the impact on earnings related to Match Group's dilutive securities under the if-converted method.
(b)The impact on earnings of Match Group's dilutive securities is not applicable for the year ended December 31, 2014 as it was a wholly-owned subsidiary of the Company until its IPO on November 24, 2015. For the year ended December 31, 2016, the impact on earnings related to Match Group's dilutive securities under the if-converted method is excluded as the impact is anti-dilutive.
(c)For the year ended December 31, 2016, the Company had a loss from continuing operations; therefore, approximately 11.3 million potentially dilutive securities were excluded from 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.
(d)If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of subsidiary denominated equity, stock options and vesting of restricted stock units ("RSUs"). For the years ended December 31, 2015 and 2014, 1.2 million and 0.3 million potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
(e)Market-based awards and performance-based stock units (“PSUs”) are considered contingently issuable shares. Market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs are dilutive for the respective reporting periods. For the year ended December 31, 2015, 0.6 million market-based awards and PSUs were excluded from the calculation of diluted earnings per share because the market or performance conditions had not been met. For the year ended December 31, 2014, less than 0.1 million PSUs were excluded from the calculation of diluted earnings per share because the performance conditions had not been met.
(f)See "Note 13—Stock-based Compensation" for additional information on equity instruments denominated in the shares of certain subsidiaries.
NOTE 13—STOCK-BASED COMPENSATION
IAC currently has two active plans under which awards have been granted. These plans cover stock options to acquire shares of IAC common stock, RSUs, PSUs and restricted stock, as well as provide for the future grant of these and other equity awards. These plans authorize the Company to grant awards to its employees, officers, directors and consultants. At December 31, 2016, there are 5.9 million shares available for grant under the plans.
The plans were adopted in 2008 and 2013, have a stated term of ten years, and provide that the exercise price of stock options granted will not be less than the market price of the Company's common stock on the grant date. The plans do not specify grant dates or vesting schedules of awards as those determinations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee"). Each grant agreement reflects the vesting schedule for that particular grant as determined by the Committee. Broad-based stock option awards issued to date have generally vested in equal annual installments over a four-year period and RSU awards currently outstanding generally vest in three 33% installments over a three-year period, in each case, from the grant date.
The amount of stock-based compensation expense recognized in the consolidated statement of operations is reduced by estimated forfeitures, as the expense recorded is based on awards that are ultimately expected to vest. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimated rate. At December 31, 2016, there is $177.9 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 2.6 years.
The total income tax benefit recognized in the accompanying consolidated statement of operations for the years ended December 31, 2016, 2015 and 2014 related to stock-based compensation is $34.8 million, $36.6 million and $22.2 million, respectively.
IAC Stock Options
Stock options outstanding at December 31, 2016 and changes during the year ended December 31, 2016 are as follows:

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 December 31, 2016
 Shares Weighted
Average
Exercise
Price
 Weighted
Average
Remaining
Contractual
Term
 Aggregate
Intrinsic
Value
 (Shares and intrinsic value in thousands)
Options outstanding at January 1, 20167,283
 $52.13
    
Granted1,722
 46.25
    
Exercised(740) 34.90
    
Forfeited(142) 53.30
    
Expired(65) 55.31
    
Options outstanding at December 31, 20168,058
 $52.41
 6.7 $120,681
Options exercisable4,170
 $44.91
 4.9 $87,865
The aggregate intrinsic value in the table above represents the difference between IAC's closing stock price on the two companies. Shared Costslast trading day of 2016 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on December 31, 2016. The total intrinsic value of stock options exercised during the years ended December 31, 2016, 2015 and 2014 is $17.1 million, $53.0 million and $63.3 million, respectively.
The following table summarizes the information about stock options outstanding and exercisable at December 31, 2016:
 Options Outstanding Options Exercisable
Range of Exercise PricesOutstanding at
December 31,
2016
 Weighted-
Average
Remaining
Contractual
Life in Years
 Weighted-
Average
Exercise
Price
 Exercisable at
December 31,
2016
 Weighted-
Average
Remaining
Contractual
Life in Years
 Weighted-
Average
Exercise
Price
 (Shares in thousands)
$10.01 to $20.00404
 2.6 $18.02
 404
 2.6 $18.02
$20.01 to $30.00238
 2.3 20.97
 238
 2.3 20.97
$30.01 to $40.00913
 4.1 31.61
 913
 4.1 31.61
$40.01 to $50.002,727
 7.1 44.31
 1,389
 5.1 46.35
$50.01 to $60.00464
 5.7 58.30
 333
 4.3 58.80
$60.01 to $70.001,850
 8.0 64.70
 540
 7.2 64.72
$70.01 to $80.00962
 8.2 74.23
 228
 7.8 73.20
$80.01 to $90.00500
 8.3 84.31
 125
 8.3 84.31
 8,058
 6.7 $52.41
 4,170
 4.9 $44.91
The fair value of stock option awards, with the exception of market-based awards, is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions, including expected volatility and expected term. During 2016, 2015 and 2014, expected stock price volatilities were estimated based on the Company's historical volatility. The risk-free interest rates are based on U.S. Treasuries with comparable terms as the awards, in effect at the grant date. Expected term is based upon the historical exercise behavior of our employees and the dividend yields are based on IAC's historical dividend payments. The following are the weighted average assumptions used in the Black-Scholes option pricing model:

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Years Ended December 31,
 2016 2015 2014
Expected volatility29% 28% 31%
Risk-free interest rate1.2% 1.6% 1.5%
Expected term4.8 years
 5.3 years
 4.8 years
Dividend yield% 2.0% 1.5%
During 2015, the Company granted market-based stock options to certain employees. These awards only vest if the price of IAC common stock exceeds the relevant price threshold for a twenty-day consecutive period and the service requirement is met. The service requirement provides that these awards vest in four equal annual installments beginning on the first anniversary of the grant date. The grant date fair value of each market-based award is estimated using a lattice model that incorporates a Monte Carlo simulation of IAC's stock price. The inputs used to fair value these awards include costsa weighted average expected volatility of 27%, risk-free interest rate of 2.3% and a 1.8% dividend yield. The expected term of these awards is derived from the output of the option valuation model. Expense is recognized over the longer of the vesting period of each of the four installments or the expected term. The weighted average expected term of these awards is 4 years.
Approximately 1.7 million, 2.5 million and 0.7 million stock options were granted by the Company during the years ended December 31, 2016, 2015 and 2014, respectively. The weighted average fair value of stock options granted during the years ended December 31, 2016, 2015 and 2014 with exercise prices equal to the market prices of IAC's common stock on the date of grant are $12.34, $15.24 and $16.67, respectively. During the year ended December 31, 2015, the weighted average exercise price and weighted average fair value of stock options granted with exercise prices greater than the market value of IAC's common stock on the date of grant are $84.31 and $12.00, respectively.
Cash received from stock option exercises and the related tax benefit realized for personal usethe years ended December 31, 2016, 2015 and 2014 are: $25.8 million and $6.1 million; $27.3 million and $25.8 million; and $39.1 million and $25.5 million, respectively. In January 2014, a portion of carsthe Company's former Chief Executive Officer (the "Executive") who became the Chairman of Match Group outstanding IAC stock options were canceled and replaced with equity denominated in Match Group and various subsidiaries of Match Group. The incremental expense associated with this modification was $7.4 million.
IAC Restricted Stock Units and Performance-based Stock Units
RSUs and PSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of IAC common stock and with the value of each RSU and PSU equal to the fair value of IAC common stock at the date of grant. Each RSU and PSU grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. PSUs also include performance-based vesting, where certain performance targets set at the time of grant must be achieved before an award vests. For RSU grants, the expense is measured at the grant date as the fair value of IAC common stock and expensed as stock-based compensation over the vesting term. For PSU grants, the expense is measured at the grant date as the fair value of IAC common stock and expensed as stock-based compensation over the vesting term if the performance targets are considered probable of being achieved.
Unvested RSUs and PSUs outstanding at December 31, 2016 and changes during the year ended December 31, 2016 are as follows:

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 RSUs PSUs
 Number
of shares
 Weighted
Average
Grant Date
Fair Value
 Number
of shares
 Weighted
Average
Grant Date
Fair Value
 (Shares in thousands)
Unvested at January 1, 2016650
 $57.76
 2
 $71.39
Granted148
 46.92
 
 
Vested(268) 52.41
 (2) 71.39
Forfeited(4) 61.68
 
 
Unvested at December 31, 2016526
 $57.41
 
 $
The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2016, 2015 and 2014 based on market prices of IAC's common stock on the grant date was $46.92, $67.71 and $68.13, respectively. The total fair value of RSUs and PSUs that vested during the years ended December 31, 2016, 2015 and 2014 was $13.5 million, $16.8 million and $20.4 million, respectively.
Equity Instruments Denominated in the Shares of Certain Subsidiaries
The following description excludes awards denominated in the shares of the Company's publicly-traded subsidiary, Match Group. Match Group stock-based awards are issued pursuant to its stock incentive plan.
IAC has granted stock options and stock settled stock appreciation rights denominated in the equity of its subsidiaries to employees and management of certain subsidiaries. These equity awards vest over a period of years or upon the occurrence of certain prescribed events. The value of the stock options and stock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries. Accordingly, these interests only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price. These interests can have significant value in the event of significant appreciation. The interests are ultimately settled in IAC common stock with fair market value generally determined by negotiation or arbitration, at various dates through 2026. These equity awards are settled on a net basis, with the award holder entitled to receive a payment in shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment. The number of shares ultimately needed to settle these awards may vary significantly from the estimated numbers below as a result of both movements in our stock price and a determination of fair value of the relevant subsidiary that is different than our estimate. The expense associated with these equity awards is initially measured at fair value at the grant date and is expensed as stock-based compensation over the vesting term. The aggregate number of IAC common shares that would be required to settle these interests, other than for Match Group subsidiaries, at current estimated fair values, including vested and unvested interests (which will be reduced by the number of shares withheld to cover employee withholding taxes), at December 31, 2016 is 2.8 million shares, which is included in the calculation of diluted earnings per share, if the effect is dilutive. The comparable amount at December 31, 2015 is 2.3 million shares. Giving effect to withholding taxes, which will be paid by the Company on behalf of the employees at exercise, the aggregate number of shares and cash that would be required to settle the vested and unvested interests at estimated fair values on December 31, 2016 is 1.4 million shares and $90.8 million, respectively, assuming a 50% withholding rate; the comparable amounts at December 31, 2015 are 1.1 million shares and $69.1 million, respectively.
Following the completion of the Match Group IPO, equity awards that relate to the subsidiaries of Match Group will be settleable, at IAC's election, in shares of IAC common stock or Match Group common stock. To the extent shares of IAC common stock are issued in settlement of these awards, Match Group will reimburse IAC for the cost of those shares by issuing IAC shares of Match Group common stock. The aggregate number of IAC common shares at December 31, 2016 that would be required to settle Match Group subsidiary equity awards at current estimated fair values, including vested and unvested interests (which will be reduced by the number of shares withheld to cover employee withholding taxes), is 5.1 million shares and the comparable amount at December 31, 2015 is 4.1 million shares. Giving effect to withholding taxes, which will be paid by Match Group on behalf of the employees at exercise, the aggregate number of shares and cash that would be required to settle the vested and unvested interests at estimated fair values on December 31, 2016 is 2.5 million shares and $164.6 million, respectively, assuming a 50% withholding rate; the comparable amounts at December 31, 2015 are 2.1 million shares and $123.2 million, respectively. These amounts are in addition to the numbers in the paragraph above. Assuming no change in the

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


value of the Company’s common stock at December 31, 2016, each incremental increase of 10% over the Company’s December 31, 2016 fair value estimate of these Match Group subsidiaries would require approximately 0.7 million incremental aggregate shares to settle these awards.
During 2016 and 2015, the Company granted a nominal amount of IAC denominated market-based awards to certain Match Group employees. The number of awards that ultimately vest is dependent upon Match Group's stock price. The grant date fair value of each market-based award is estimated using a lattice model that incorporates a Monte Carlo simulation of Match Group's stock price. Each market-based award is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. Some of the market-based awards contain performance targets set at the time of grant that must be achieved before an award vests.
During the first quarter of 2016, the Company modified certain subsidiary denominated equity awards resulting in a modification charge of $7.3 million of which $6.3 million was recognized as stock-based compensation for the year ended December 31, 2016 and $1.0 million will be recognized over the remaining life of the modified awards.
During the first quarter of 2015, the Company modified certain subsidiary denominated equity awards resulting in a modification charge of $5.8 million of which $0.6 million and $3.5 million was recognized in 2016 and 2015, respectively, and the remaining charge will be recognized over the remaining life of the modified awards through 2019. During the third quarter of 2015, the Company modified certain subsidiary denominated vested equity awards and recognized a modification charge of $6.8 million. During the fourth quarter of 2015, the Company repurchased certain subsidiary denominated vested equity awards in exchange for $23.4 million in cash and fully vested modified equity awards and recognized a modification charge of $7.7 million. These modification charges are included in stock-based compensation for the year ended December 31, 2015.
During 2014, the Company granted an equity award denominated in shares of a subsidiary of the Company to a non-employee. This award is marked to market each reporting period. The award vests at multiple times a year and is fully vested in October 2017. In the third quarter of 2016, the Company settled the vested portion of the award for cash of $13.4 million. At December 31, 2016, the total fair value of the remaining award, at current estimated fair value, including vested and unvested interests, is $14.3 million.
NOTE 14—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 Other reportable segment, do not meet the quantitative thresholds that require presentation as separate operating segments.
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Revenue:     
Match Group$1,222,526
 $1,020,431
 $888,268
HomeAdvisor498,890
 361,201
 283,541
Video228,649
 213,317
 182,454
Applications604,140
 760,748
 776,707
Publishing407,313
 691,686
 791,549
Other178,949
 184,095
 187,834
Inter-segment elimination(585) (545) (806)
Total$3,139,882
 $3,230,933
 $3,109,547

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Operating Income (Loss):     
Match Group$305,908
 $193,556
 $228,567
HomeAdvisor35,343
 6,452
 1,061
Video(27,656) (38,756) (43,346)
Applications109,663
 175,145
 178,960
Publishing(334,417) (26,692) 110,523
Other(2,037) (9,186) 8,108
Corporate(119,429) (120,931) (105,146)
Total$(32,625) $179,588
 $378,727
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Adjusted EBITDA:(a)
     
Match Group$403,955
 $278,667
 $273,448
HomeAdvisor48,546
 18,529
 17,701
Video(21,247) (38,384) (39,916)
Applications132,276
 184,258
 186,192
Publishing(7,571) 87,788
 150,960
Other1,227
 10,621
 13,134
Corporate(55,967) (55,689) (57,443)
Total$501,219
 $485,790
 $544,076
 December 31,
 2016 2015
 (In thousands)
Segment Assets:(b)
   
Match Group$509,936
 $330,736
HomeAdvisor97,751
 32,116
Video230,269
 90,671
Applications109,019
 108,997
Publishing409,838
 391,450
Other
 64,550
Corporate1,009,557
 1,483,979
Total$2,366,370
 $2,502,499

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Capital expenditures:     
Match Group$48,903
 $29,156
 $21,793
HomeAdvisor16,660
 10,170
 6,775
Video2,508
 2,466
 1,878
Applications1,196
 4,681
 4,220
Publishing2,093
 6,283
 13,481
Other2,907
 3,175
 2,845
Corporate3,772
 6,118
 6,241
Total$78,039
 $62,049
 $57,233

(a)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, if applicable, 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, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. 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.
(b)Consistent with the Company's primary metric (described in (a) above), the Company excludes, if applicable, goodwill and intangible assets from the measure of segment assets presented above.
Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below:
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Revenue     
United States$2,318,976
 $2,376,035
 $2,146,189
All other countries820,906
 854,898
 963,358
Total$3,139,882
 $3,230,933
 $3,109,547
 December 31,
 2016 2015
 (In thousands)
Long-lived assets (excluding goodwill and intangible assets)   
United States$281,725
 $279,913
All other countries24,523
 22,904
Total$306,248
 $302,817

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following tables reconcile operating income (loss) for the Company's reportable segments and net (loss) earnings attributable to IAC shareholders to Adjusted EBITDA:
 Year Ended December 31, 2016
 Operating
Income
(Loss)
 Stock-Based
Compensation
Expense
 Depreciation Amortization
of Intangibles
 Acquisition-related Contingent Consideration Fair Value Adjustments Goodwill Impairment Adjusted EBITDA
 (In thousands)
Match Group$305,908
 $52,988
 $31,227
 $23,029
 $(9,197) $
 $403,955
HomeAdvisor35,343
 1,631
 8,419
 3,153
 
 
 48,546
Video(27,656) 640
 1,785
 4,176
 (192) 
 (21,247)
Applications109,663
 
 5,095
 5,483
 12,035
 
 132,276
Publishing(334,417) 
 8,531
 42,948
 
 275,367
 (7,571)
Other(2,037) 
 2,718
 637
 (91) 
 1,227
Corporate(119,429) 49,561
 13,901
 
 
 
 (55,967)
Total$(32,625) $104,820
 $71,676
 $79,426
 $2,555
 $275,367
 $501,219
Interest expense(109,110)            
Other income, net60,461
            
Loss from continuing operations before income taxes(81,274)            
Income tax benefit64,934
            
Loss from continuing operations(16,340)            
Earnings from discontinued operations, net of tax189
            
Net loss(16,151)            
Net earnings attributable to noncontrolling interests(25,129)            
Net loss attributable to IAC shareholders$(41,280)            

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Year Ended December 31, 2015
 
Operating
Income
(Loss)
 
Stock-Based
Compensation
Expense
 Depreciation 
Amortization
of Intangibles
 Acquisition-related Contingent Consideration Fair Value Adjustments Goodwill Impairment Adjusted EBITDA
 (In thousands)
Match Group$193,556
 $50,083
 $25,983
 $20,101
 $(11,056) $
 $278,667
HomeAdvisor6,452
 1,649
 6,593
 3,835
 
 
 18,529
Video(38,756) 360
 1,091
 1,558
 (2,637) 
 (38,384)
Applications175,145
 
 4,617
 6,264
 (1,768) 
 184,258
Publishing(26,692) 
 9,577
 104,903
 
 
 87,788
Other(9,186) 
 2,460
 3,291
 
 14,056
 10,621
Corporate(120,931) 53,358
 11,884
 
 
 
 (55,689)
Total179,588
 $105,450
 $62,205
 $139,952
 $(15,461) $14,056
 $485,790
Interest expense(73,636)            
Other income, net36,921
            
Earnings from continuing operations before income taxes142,873
            
Income tax provision(29,516)            
Earnings from continuing operations113,357
            
Earnings from discontinued operations, net of tax17
            
Net earnings113,374
            
Net loss attributable to noncontrolling interests6,098
            
Net earnings attributable to IAC shareholders$119,472
            

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Year Ended December 31, 2014
 Operating
Income
(Loss)
 Stock-Based
Compensation
Expense
 Depreciation 
Amortization
of Intangibles
 Acquisition-related Contingent Consideration Fair Value Adjustments Adjusted EBITDA
 (In thousands)
Match Group$228,567
 $20,851
 $25,547
 $11,395
 $(12,912) $273,448
HomeAdvisor1,061
 558
 6,520
 9,562
 
 17,701
Video(43,346) 647
 899
 2,099
 (215) (39,916)
Applications178,960
 
 4,385
 2,521
 326
 186,192
Publishing110,523
 
 11,856
 28,581
 
 150,960
Other8,108
 
 1,824
 3,768
 (566) 13,134
Corporate(105,146) 37,578
 10,125
 
 
 (57,443)
Total378,727
 $59,634
 $61,156
 $57,926
 $(13,367) $544,076
Interest expense(56,314)          
Other expense, net(52,484)          
Earnings from continuing operations before income taxes269,929
          
Income tax provision(35,372)          
Earnings from continuing operations234,557
          
Earnings from discontinued operations, net of tax174,673
          
Net earnings409,230
          
Net loss attributable to noncontrolling interests5,643
          
Net earnings attributable to IAC shareholders$414,873
          
The following tables reconcile segment assets to total assets:
 December 31, 2016
 Segment Assets Goodwill Indefinite-Lived
Intangible Assets
 Definite-Lived
Intangible Assets
 Total Assets
 (In thousands)
Match Group$509,936
 $1,280,960
 $238,361
 $10,809
 $2,040,066
HomeAdvisor97,751
 170,611
 4,884
 5,908
 279,154
Video230,269
 25,239
 1,800
 4,167
 261,475
Applications109,019
 447,242
 60,600
 2,481
 619,342
Publishing409,838
 
 15,000
 11,441
 436,279
Other
 
 
 
 
Corporate(c)
1,009,557
 
 
 
 1,009,557
Total$2,366,370
 $1,924,052
 $320,645
 $34,806
 $4,645,873


IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 December 31, 2015
 Segment Assets Goodwill 
Indefinite-Lived
Intangible Assets
 
Definite-Lived
Intangible Assets
 Total Assets
 (In thousands)
Match Group$330,736
 $1,293,109
 $243,697
 $32,711
 $1,900,253
HomeAdvisor32,116
 150,251
 600
 5,727
 188,694
Video90,671
 15,590
 1,800
 3,343
 111,404
Applications108,997
 447,242
 60,600
 7,964
 624,803
Publishing391,450
 277,192
 59,805
 7,849
 736,296
Other64,550
 61,980
 13,635
 3,097
 143,262
Corporate(c)
1,483,979
 
 
 
 1,483,979
Total$2,502,499
 $2,245,364
 $380,137
 $60,691
 $5,188,691

(c)Corporate assets consist primarily of cash and cash equivalents, marketable securities and IAC's headquarters building.
NOTE 15—COMMITMENTS
The Company leases land, office space, data center facilities and equipment dedicatedused in connection with its operations under various operating leases, many of which contain escalation clauses. The Company is also committed to Mr. Diller’s usepay a portion of the related operating expenses under a data center lease agreement. These operating expenses are not included in the table below.
Future minimum payments under operating lease agreements are as follows:
Years Ending December 31, (In thousands)
2017 $31,834
2018 31,661
2019 24,316
2020 18,523
2021 13,239
Thereafter 189,070
Total $308,643
Expenses charged to operations under these agreements are $49.3 million, $39.4 million and expenses$41.2 million for the years ended December 31, 2016, 2015 and 2014, respectively.
The Company's most significant operating lease is a seventy-seven year land lease for IAC's headquarters building in New York City and approximates 57% of the future minimum payments due under all operating lease agreements in the table above.
The Company also has funding commitments that could potentially require its performance in the event of demands by third parties or contingent events as follows:

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Amount of Commitment Expiration Per Period
 
Less Than
1 Year
 
1-3
Years
 
3-5
Years
 
More Than
5 Years
 
Total
Amounts
Committed
 (In thousands)
Purchase obligations$10,581
 $10,000
 $
 $
 $20,581
Letters of credit and surety bonds768
 63
 
 1,437
 2,268
Total commercial commitments$11,349
 $10,063
 $
 $1,437
 $22,849
The purchase obligations principally include a web hosting commitment. The letters of credit support the Company's casualty insurance program.
NOTE 16—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 3—Income Taxes" for additional information related to income tax contingencies.
NOTE 17—SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental Disclosure of Non-Cash Transactions:
The Company recorded acquisition-related contingent consideration liabilities of $0.2 million, $27.4 million and $8.8 million during the years ended December 31, 2016, 2015 and 2014, respectively, in connection with various acquisitions. See "Note 8—Fair Value Measurements and Financial Instruments" for additional information on contingent consideration arrangements.
On November 16, 2015, Match Group exchanged $445.3 million of 2012 Senior Notes for $445.2 million of Match Group Senior Notes. See "Note 9—Long-term Debt" for additional information on the note exchange.
Supplemental Disclosure of Cash Flow Information:
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Cash paid (received) during the year for:     
Interest$107,360
 $51,666
 $54,027
Income tax payments69,103
 70,762
 63,521
Income tax refunds(23,877) (5,619) (10,477)

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 18—RELATED PARTY TRANSACTIONS
IAC and Match Group:
IAC and Match Group, in connection with Match Group's IPO, entered into the following agreements:
A Master Transaction Agreement, under which Match Group agrees to assume all of the assets and liabilities related to its business and agrees to indemnify IAC against any losses arising out of any breach by Match Group of the Master Transaction Agreement or other IPO related agreements;
An Investor Rights Agreement that provides IAC with (i) specified registration and other rights relating to Mr. Diller’s support staff.  Costs in 2015 forshares of Match Group's common stock and (ii) anti-dilution rights with respect to Match Group's common stock;
An Employee Matters Agreement, which governs the respective rights, responsibilities and obligations of IAC and Match Group after the IPO with respect to a range of compensation and benefit issues;
A Tax Sharing Agreement, which governs the respective rights, responsibilities and obligations of IAC and Match Group with respect to tax liabilities and benefits, entitlement to refunds, preparation of tax returns, tax contests and other tax matters regarding U.S. federal, state, local and foreign income taxes; and
A Services Agreement, under which IAC billed Expediahas agreed to provide a range of services to Match Group, including, among others, (i) assistance with certain legal, finance, internal audit, treasury, information technology support, insurance and tax affairs, including assistance with certain public company reporting obligations; (ii) payroll processing services; (iii) tax compliance services; and (iv) such other services as to which IAC and Match Group may agree, and Match Group agrees to provide IAC informational technology services and such other services as to which IAC and Match Group may agree.
For the year ended December 31, 2016, 1.0 million shares of Match Group common stock were approximately $495,000issued to IAC pursuant to these arrangements.

Aircraft Arrangements.the employee matters agreement; 0.5 million of which were issued as reimbursement for shares of IAC common stock issued in connection with the exercise and settlement of equity awards denominated in shares of a subsidiary of Match Group; and 0.4 million of which were issued as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by Match Group employees.

For the year ended December 31, 2016 and for the period from the date of the IPO through December 31, 2015, Match Group was charged $11.8 million and $0.7 million, respectively, by the Company for services rendered pursuant to a services agreement. These amounts were paid in full by Match Group at December 31, 2016 and 2015, respectively.
At December 31, 2016, Match Group had a tax receivable of $9.0 million due from the Company pursuant to the tax sharing agreement. Payments made to the Company during 2016 pursuant to this agreement were $19.9 million.
IAC and Expedia:
Each of IAC and Expedia has a 50% ownership interest in two aircraft that aremay be used by both companies (the “Aircraft”). IACcompanies. The Company and Expedia entered into an amended and restated operating agreement that allocatespurchased the costssecond of operating and maintaining the Aircraft between the parties. Fixed costs are allocated 50% to each company and variable costs are allocated based on usage. These costs are generallythese two aircraft during 2013. The Company paid by each company to third parties in accordance with the terms$25 million (50% of the amendedtotal purchase price and restated operating agreement.

In the event Mr. Diller ceases to serve as Chairman of either IAC or Expedia, each of IAC and Expedia will have a put right (to the other party) with respect torefurbish costs) for its owned interest in the aircraft that it does not primarily use (with such determination to be based on relative usage over the twelve months preceding such event), in each case, at fair market value for the aircraft in question.

interest. Members of the aircrafts' flight crew for the Aircraftcrews are employed by an entity in which each of IACthe Company and Expedia has a 50% ownership interest. IACThe Company and Expedia have agreed to share costs relating to flight crew compensation and benefits pro ratapro-rata according to each company’scompany's respective usage of the Aircraft,aircraft, for which they are separately billed by the entity described above. DuringThe Company and Expedia are related parties since they are under common control, given that Mr. Diller serves as Chairman and Senior Executive of both IAC and Expedia. For the years ended December 31, 2016, 2015 and 2014, total payments in the amount of approximately $1.8 million were made to this entity by IAC.

Commercial Agreements.  In connectionthe Company were not material.

NOTE 19—BENEFIT PLANS
IAC has a retirement savings plan in the United States that qualifies under Section 401(k) of the Internal Revenue Code. Under the IAC/InterActiveCorp Retirement Savings Plan ("the Plan"), participating employees may contribute up to 50% of

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


their pre-tax earnings, but not more than statutory limits. IAC contributes fifty cents for each dollar a participant contributes in this plan, with a maximum contribution of 3% of a participant's eligible earnings. Matching contributions for the Plan for the years ended December 31, 2016, 2015 and 2014 are $10.0 million, $9.1 million and $7.5 million, respectively. Matching contributions are invested in the same manner as each participant's voluntary contributions in the investment options provided under the Plan. An investment option in the Plan is IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock. The increase in matching contributions in 2016 and 2015 are due primarily to an increase in participation in the Plan due to an increase in headcount. The increase in matching contributions in 2015 was further impacted by an increase in participation due to acquisitions.
IAC also has or participates in various benefit plans, principally defined contribution plans, for its international employees. IAC's contributions for these plans for the years ended December 31, 2016, 2015 and 2014 are $2.1 million, $2.5 million and $2.5 million, respectively. The decrease in contributions in 2016 is due, in part, to the sale of PriceRunner.
NOTE 20—CONSOLIDATED FINANCIAL STATEMENT DETAILS
 December 31,
 2016 2015
 (In thousands)
Other current assets:   
Income taxes receivable$41,352
 $26,793
Production costs39,763
 24,804
Prepaid expenses37,665
 40,091
Capitalized downloadable search toolbar costs, net28,737
 27,929
Other56,551
 54,669
Other current assets$204,068
 $174,286
 December 31,
 2016 2015
 (In thousands)
Property and equipment, net:   
Buildings and leasehold improvements$247,451
 $235,545
Computer equipment and capitalized software259,464
 239,309
Furniture and other equipment93,002
 88,664
Projects in progress13,048
 18,676
Land5,117
 5,117
 618,082
 587,311
Accumulated depreciation and amortization(311,834) (284,494)
Property and equipment, net$306,248
 $302,817
 December 31,
 2016 2015
 (In thousands)
Accrued expenses and other current liabilities:   
Accrued employee compensation and benefits$106,301
 $104,481
Accrued advertising expense68,916
 87,064
Other169,693
 191,706
Accrued expenses and other current liabilities$344,910
 $383,251

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Revenue:     
Service revenue$2,967,474
 $3,077,080
 $2,957,735
Product revenue172,408
 153,853
 151,812
Revenue$3,139,882
 $3,230,933
 $3,109,547
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Cost of revenue:     
Cost of service revenue$617,058
 $652,137
 $734,222
Cost of product revenue138,672
 126,024
 125,982
Cost of revenue$755,730
 $778,161
 $860,204
 Years Ended December 31,
 2016 2015 2014
 (In thousands)
Other income (expense), net$60,461
 $36,921
 $(52,484)
Other income, net in 2016(a) includes gains of $37.5 million and $12.0 million related to the sale of ShoeBuy and PriceRunner, respectively, $34.3 million in net foreign currency exchange gains due to strengthening of the dollar relative to the British Pound and Euro, interest income of $5.1 million and a $3.6 million gain related to the sale of marketable equity securities, partially offset by a non-cash charge of $12.1 million related to the write-off of a proportionate share of original issue discount and deferred financing costs associated with the repayment of $440 million of the Match Group Term Loan, $10.0 million in other-than-temporary impairment charges related to certain cost method investments as a result of our assessment of the near-term prospects and financial condition of the investees, a loss of $3.8 million related to the sale of ASKfm and a $3.6 million loss on the 2012 and 2013 Senior Note redemptions and repurchases.
Other income, net in 2015 included a gain of $34.3 million from a real estate transaction, $5.4 million in net foreign currency exchange gains and $4.3 million in interest income, partially offset by $6.7 million in other-than-temporary impairment charges related to certain cost method investments.
Other expense, net in 2014 included $66.6 million in other-than-temporary impairment charges related to certain cost method investments and a $4.2 million other-than-temporary impairment charge on one of our equity method investments following the Expedia Spin-Off, certain IAC businesses entered into commercial agreements with certain Expedia businesses. IAC believes that these arrangements are ordinary course and have been negotiated at arm’s length. In addition, IAC believes that nonesale of these arrangements, whether taken individually or in the aggregate, constitute a material contract to IAC. None of these arrangements, whether taken individually or together with other similar agreements, involved payments to or from IAC and its businesses in excess of $120,000 in 2015.

DIRECTOR INDEPENDENCE

Under the Marketplace Rules, the Board has a responsibility to make an affirmative determination that those membersmajority of the Board who serve as independent directors do not have any relationships that would interfere withinvestee's assets, partially offset by a $19.4 million gain related to the exercisesale of independent judgmentUrbanspoon, $4.4 million in carrying outinterest income and $3.6 million in gains related to the responsibilitiessale of a director. In connection withseveral long-term investments.

________________________
(a)PriceRunner was sold on March 18, 2016. PriceRunner's 2016 revenue, operating income and Adjusted EBITDA were $7.1 million, $2.2 million and $2.6 million, respectively. Included in PriceRunner's operating income were $0.3 million of amortization of intangibles and $0.1 million of depreciation. ASKfm was sold on June 30, 2016. ASKfm's 2016 revenue, operating loss and Adjusted EBITDA loss were $3.0 million, $4.9 million and $3.9 million, respectively. Included in ASKfm's operating loss were $0.5 million of amortization of intangibles and $0.5 million of depreciation. ShoeBuy was sold on December 30, 2016. ShoeBuy's 2016 revenue, operating loss and Adjusted EBITDA loss were $171.8 million, $4.2 million and $1.3 million, respectively. Included in ShoeBuy's operating loss were $2.7 million of depreciation and $0.3 million of amortization of intangibles.
PriceRunner's full year 2015 revenue, operating income and Adjusted EBITDA were $32.3 million, $9.7 million and $13.0 million, respectively. Included in PriceRunner's operating income were $2.9 million of amortization of intangibles and $0.4 million of depreciation. ASKfm's full year 2015 revenue, operating loss and Adjusted EBITDA loss were $10.9 million, $9.1 million and $6.1 million, respectively. Included in ASKfm's operating loss were $2.0 million of amortization of intangibles and $1.1 million of depreciation. ShoeBuy's full year 2015 revenue, operating loss

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


and Adjusted EBITDA loss were $151.8 million, $18.9 million and $2.4 million, respectively. Included in ShoeBuy's operating loss were $14.1 million of goodwill impairment, $2.0 million of depreciation and $0.4 million of amortization of intangibles.
NOTE 21—RESTRUCTURING CHARGES
Publishing and Applications segments
During 2016, the independence determinations described below,Company recognized significant declines in Publishing and Applications revenue due to the Board reviewed information regarding transactions, relationships and arrangements relevant to independence, including those required byeffects of the Marketplace Rules. This information is obtained from director responses to questionnaires circulated by Company management,new Google contract, which was effective April 1, 2016, as well as declines from certain other legacy businesses. In an effort to manage overall costs, the Company recordsincurred restructuring charges throughout 2016 related to lease termination costs and publicly available information. Following this determination, Company management monitors those transactions, relationships and arrangements that were relevant to such determination, as well as periodically solicits updated information potentially relevant to independence from internal personnel and directors, to determine whether there have been any developments that could potentially have an adverse impact onseverance. For the Board’s prior independence determination.

In Februaryyear ended December 31, 2016, the Board determined that eachCompany incurred $18.3 million in costs related to this restructure. A summary of Messrs. Bronfman, Eisner, Lourd, Rosenblatt, Spoonthe costs incurred, payments made and Zanninothe related accruals for both the Publishing and Mmes. ClintonApplications segments at December 31, 2016 is presented below.

See "Note 2Summary of Significant Accounting PoliciesCertain Risks and Hammer is independent. In connection with this determination, the Board considered thatConcentrations" for additional information on revenue earned from Google.
 Year Ended December 31, 2016
 Publishing Applications Total
 (In thousands)
Lease termination costs$8,172
 $100
 $8,272
Severance7,461
 2,532
 9,993
Total$15,633
 $2,632
 $18,265
 December 31, 2016
 Lease Termination Costs Severance Total
 (In thousands)
Publishing accrual:     
Charges incurred$8,172
 $7,461
 $15,633
Payments made(314) (5,074) (5,388)
Publishing accrual as of December 31$7,858
 $2,387
 $10,245
 December 31, 2016
 Lease Termination Costs Severance Total
 (In thousands)
Applications accrual:     
Charges incurred$100
 $2,532
 $2,632
Payments made
 (1,933) (1,933)
Applications accrual as of December 31$100
 $599
 $699

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The costs are allocated as follows in the ordinary courseaccompanying consolidated statement of business, IAC and its businesses sell products and services to, purchase products and services from, co-invest with and develop and produce projects with, companies at which certain directors are employed or serve as directors, or over which certain directors otherwise exert control. Furthermore, the Board considered whether there were any payments made to (or received from) such entities by IAC and its businesses. Specific payments the Board considered are as follows:

operations:

 Year Ended December 31, 2016
 Publishing Applications Total
 (In thousands)
Cost of revenue$9,186
 $931
 $10,117
Selling and marketing expense3,080
 593
 3,673
General and administrative expense2,175
 351
 2,526
Product development expense1,192
 757
 1,949
Total$15,633
 $2,632
 $18,265
Match Group segment
·                  the payment of a license fee (for the online distribution of a film) by an IAC business to a portfolio company of Tornante (Mr. Eisner is Chairman of Tornante);

·                  the payment of license fees (for the distribution of programming) to an IAC business by certain businesses overseen and managed by Ms. Hammer in her role as Chairman of NBCUniversal Cable Entertainment (Ms. Hammer is not a named executive officer of the ultimate parent corporation that owns and controls NBCUniversal);

·                  payments for services made by an IAC business to CAA, where Mr. Lourd is Managing Director;

·                  a co-investment by IAC in an entity in which Polaris Partners was an existing equity investor, as well as payments for services between the Company and certain Polaris Partners portfolio companies (Mr. Spoon was a Managing General Partner (now Partner Emeritus) of Polaris Partners); and

·                  payments for data licensing services made by an IAC business to a portfolio company of CCMP Capital Advisors, LLC, where Mr. Zannino is a Managing Director and member of the firm’s Investment Committee. The agreement pursuant to which the IAC business made these payments was entered into by the parties before Mr. Zannino began serving on the Board and before CCMP acquired the company.

In the case of Messrs. Bronfman and Rosenblatt and Ms. Clinton, there were no such payments known to Company management for the Board to consider. Of the remaining incumbent directors, Messrs. Diller, Kaufman and Levin are executive officers of the Company and Mr. von Furstenberg is Mr. Diller’s stepson. Given these relationships, none of these directors is independent.

In addition to the satisfactionrestructuring charges at the Publishing and Applications segments discussed above, the Match Group has been in the process of modernizing and streamlining its underlying Dating technology infrastructure that supports both its mobile and desktop platforms, as well as consolidating its European operations from seven principal locations down to three. The project is complete at December 31, 2016. For the year ended December 31, 2016, the Match Group incurred $4.9 million in costs related to this project, compared to $16.8 million for the year ended December 31, 2015. A summary of the director independence requirementscosts incurred, payments made and the related accruals for the Match Group segment at December 31, 2016 and 2015 are presented below.

 December 31, 2016
 Severance Professional Fees & Other Total
 (In thousands)
Accrual as of January 1$3,013
 $564
 $3,577
    Charges incurred345
 4,576
 4,921
    Payments made(2,404) (4,844) (7,248)
Accrual as of December 31$954
 $296
 $1,250
 December 31, 2015
 Severance Professional Fees & Other Total
 (In thousands)
Accrual as of January 1$795
 $933
 $1,728
    Charges incurred8,350
 8,417
 16,767
    Payments made(6,132) (8,786) (14,918)
Accrual as of December 31$3,013
 $564
 $3,577
The costs are allocated as follows in the statement of operations:
 Year Ended December 31,
 2016 2015
 (In thousands)
Cost of revenue$566
 $2,947
Selling and marketing expense560
 1,678
General and administrative expense1,647
 8,160
Product development expense2,148
 3,982
     Total$4,921
 $16,767

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 22—GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The 2013 and 2012 Senior Notes are unconditionally guaranteed, jointly and severally, by certain domestic subsidiaries which are 100% owned by the Company. The following tables present condensed consolidating financial information at December 31, 2016 and 2015 and for the years ended December 31, 2016, 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.
Balance sheet at December 31, 2016:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations IAC Consolidated
 (In thousands)
Cash and cash equivalents$552,699
 $
 $776,488
 $
 $1,329,187
Marketable securities89,342
 
 
 
 89,342
Accounts receivable, net
 90,807
 129,331
 
 220,138
Other current assets71,152
 30,515
 102,401
 
 204,068
Intercompany receivables
 735,108
 1,047,757
 (1,782,865) 
Property and equipment, net4,350
 178,806
 123,092
 
 306,248
Goodwill
 521,740
 1,402,312
 
 1,924,052
Intangible assets, net
 83,179
 272,272
 
 355,451
Investment in subsidiaries3,659,570
 557,802
 
 (4,217,372) 
Other non-current assets52,228
 111,037
 169,595
 (115,473) 217,387
Total assets$4,429,341
 $2,308,994
 $4,023,248
 $(6,115,710) $4,645,873
          
Current portion of long-term debt$20,000
 $
 $
 $
 $20,000
Accounts payable, trade2,697
 38,283
 21,883
 
 62,863
Other current liabilities42,159
 120,279
 468,087
 
 630,525
Long-term debt, net of current portion405,991
 
 1,176,493
 
 1,582,484
Income taxes payable
 3,470
 30,274
 (216) 33,528
Intercompany liabilities1,782,865
 
 
 (1,782,865) 
Other long-term liabilities306,407
 22,714
 59,112
 (115,257) 272,976
Redeemable noncontrolling interests
 
 32,827
 
 32,827
IAC shareholders' equity1,869,222
 2,124,248
 2,093,124
 (4,217,372) 1,869,222
Noncontrolling interests
 
 141,448
 
 141,448
Total liabilities and shareholders' equity$4,429,341
 $2,308,994
 $4,023,248
 $(6,115,710) $4,645,873

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Balance sheet at December 31, 2015:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations IAC Consolidated
 (In thousands)
Cash and cash equivalents$1,073,053
 $
 $408,394
 $
 $1,481,447
Marketable securities27,578
 
 11,622
 
 39,200
Accounts receivable, net33
 115,280
 134,764
 
 250,077
Other current assets30,813
 46,128
 97,345
 
 174,286
Intercompany receivables
 637,324
 963,146
 (1,600,470) 
Property and equipment, net4,432
 198,890
 99,495
 
 302,817
Goodwill
 776,569
 1,468,795
 
 2,245,364
Intangible assets, net
 135,817
 305,011
 
 440,828
Investment in subsidiaries3,128,765
 466,601
 
 (3,595,366) 
Other non-current assets84,368
 11,258
 174,038
 (14,992) 254,672
Total assets$4,349,042
 $2,387,867
 $3,662,610
 $(5,210,828) $5,188,691
          
Current portion of long-term debt$
 $
 $40,000
 $
 $40,000
Accounts payable, trade4,711
 42,104
 40,068
 
 86,883
Other current liabilities62,833
 140,077
 438,753
 
 641,663
Long-term debt, net of current portion550,083
 
 1,176,871
 
 1,726,954
Income taxes payable152
 3,435
 30,105
 
 33,692
Intercompany liabilities1,600,470
 
 
 (1,600,470) 
Other long-term liabilities326,267
 18,160
 83,848
 (14,992) 413,283
Redeemable noncontrolling interests
 
 30,391
 
 30,391
IAC shareholders' equity1,804,526
 2,184,091
 1,411,275
 (3,595,366) 1,804,526
Noncontrolling interests
 
 411,299
 
 411,299
Total liabilities and shareholders' equity$4,349,042
 $2,387,867
 $3,662,610
 $(5,210,828) $5,188,691

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Statement of operations for the year ended December 31, 2016:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations IAC Consolidated
 (In thousands)
Revenue$
 $1,381,525
 $1,771,568
 $(13,211) $3,139,882
Operating costs and expenses:         
Cost of revenue (exclusive of depreciation shown separately below)859
 302,293
 452,990
 (412) 755,730
Selling and marketing expense2,353
 689,933
 565,906
 (12,929) 1,245,263
General and administrative expense89,583
 163,315
 294,132
 130
 547,160
Product development expense4,807
 82,071
 111,007
 
 197,885
Depreciation1,610
 31,366
 38,700
 
 71,676
Amortization of intangibles
 41,157
 38,269
 
 79,426
Goodwill impairment
 253,245
 22,122
 
 275,367
Total operating costs and expenses99,212
 1,563,380
 1,523,126
 (13,211) 3,172,507
Operating (loss) income(99,212) (181,855) 248,442
 
 (32,625)
Equity in earnings (losses) of unconsolidated affiliates49,536
 (23,573) 
 (25,963) 
Interest expense(26,876) 
 (82,234) 
 (109,110)
Other (expense) income, net(2,059) 10,040
 52,480
 
 60,461
(Loss) earnings from continuing operations before income taxes(78,611) (195,388) 218,688
 (25,963) (81,274)
Income tax benefit (provision)37,142
 60,504
 (32,712) 
 64,934
(Loss) earnings from continuing operations
(41,469) (134,884) 185,976
 (25,963) (16,340)
Earnings from discontinued operations, net of tax189
 
 9
 (9) 189
Net (loss) earnings(41,280) (134,884) 185,985
 (25,972) (16,151)
Net earnings attributable to noncontrolling interests
 
 (25,129) 
 (25,129)
Net (loss) earnings attributable to IAC shareholders$(41,280) $(134,884) $160,856
 $(25,972) $(41,280)
Comprehensive (loss) income attributable to IAC shareholders$(76,431) $(115,899) $114,376
 $1,523
 $(76,431)


IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Statement of operations for the year ended December 31, 2015:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations IAC Consolidated
 (In thousands)
Revenue$
 $1,635,345
 $1,605,597
 $(10,009) $3,230,933
Operating costs and expenses:         
Cost of revenue (exclusive of depreciation shown separately below)720
 334,931
 443,700
 (1,190) 778,161
Selling and marketing expense3,210
 819,354
 531,872
 (8,860) 1,345,576
General and administrative expense93,090
 157,013
 275,485
 41
 525,629
Product development expense4,311
 85,582
 95,873
 
 185,766
Depreciation1,918
 27,276
 33,011
 
 62,205
Amortization of intangibles
 102,622
 37,330
 
 139,952
Goodwill impairment
 14,056
 
 
 14,056
Total operating costs and expenses103,249
 1,540,834
 1,417,271
 (10,009) 3,051,345
Operating (loss) income(103,249) 94,511
 188,326
 
 179,588
Equity in earnings of unconsolidated affiliates215,092
 18,137
 
 (233,229) 
Interest expense(49,405) (6,130) (18,101) 
 (73,636)
Other (expense) income, net(3,201) 27,903
 12,219
 
 36,921
Earnings from continuing operations before income taxes59,237
 134,421
 182,444
 (233,229) 142,873
Income tax benefit (provision)60,218
 (47,280) (42,454) 
 (29,516)
Earnings from continuing operations119,455
 87,141
 139,990
 (233,229) 113,357
Earnings (loss) from discontinued operations, net of tax17
 
 (12) 12
 17
Net earnings119,472
 87,141
 139,978
 (233,217) 113,374
Net loss attributable to noncontrolling interests
 
 6,098
 
 6,098
Net earnings attributable to IAC shareholders$119,472
 $87,141
 $146,076
 $(233,217) $119,472
Comprehensive income attributable to IAC shareholders$55,069
 $83,664
 $80,248
 $(163,912) $55,069

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Statement of operations for the year ended December 31, 2014:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations IAC Consolidated
 (In thousands)
Revenue$
 $1,637,345
 $1,484,041
 $(11,839) $3,109,547
Operating costs and expenses:         
Cost of revenue (exclusive of depreciation shown separately below)998
 414,255
 447,704
 (2,753) 860,204
Selling and marketing expense2,138
 696,173
 457,401
 (8,303) 1,147,409
General and administrative expense105,221
 127,122
 211,222
 45
 443,610
Product development expense6,496
 76,482
 78,365
 (828) 160,515
Depreciation1,426
 25,670
 34,060
 
 61,156
Amortization of intangibles
 31,863
 26,063
 
 57,926
Total operating costs and expenses116,279
 1,371,565
 1,254,815
 (11,839) 2,730,820
Operating (loss) income(116,279) 265,780
 229,226
 
 378,727
Equity in earnings of unconsolidated affiliates257,714
 3,369
 
 (261,083) 
Interest expense(51,988) (4,187) (139) 
 (56,314)
Other (expense) income, net(1,444) 6,381
 (57,421) 
 (52,484)
Earnings from continuing operations before income taxes88,003
 271,343
 171,666
 (261,083) 269,929
Income tax benefit (provision)152,197
 (104,606) (82,963) 
 (35,372)
Earnings from continuing operations240,200
 166,737
 88,703
 (261,083) 234,557
Earnings from discontinued operations, net of tax174,673
 
 570
 (570) 174,673
Net earnings414,873
 166,737
 89,273
 (261,653) 409,230
Net loss attributable to noncontrolling interests
 
 5,643
 
 5,643
Net earnings attributable to IAC shareholders$414,873
 $166,737
 $94,916
 $(261,653) $414,873
Comprehensive income attributable to IAC shareholders$340,219
 $158,538
 $23,409
 $(181,947) $340,219

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Statement of cash flows for the year ended December 31, 2016:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations IAC Consolidated
 (In thousands)
Net cash (used in) provided by operating activities attributable to continuing operations$(84,770) $203,563
 $173,584
 $
 $292,377
Cash flows from investing activities attributable to continuing operations:         
Acquisitions, net of cash acquired
 
 (18,403) 
 (18,403)
Capital expenditures(479) (19,317) (58,243) 
 (78,039)
Investments in time deposits
 
 (87,500) 
 (87,500)
Proceeds from maturities of time deposits
 
 87,500
 
 87,500
Proceeds from maturities and sales of marketable debt securities252,369
 
 
 
 252,369
Purchases of marketable debt securities(313,943) 
 
 
 (313,943)
Purchases of investments
 
 (12,565) 
 (12,565)
Net proceeds from the sale of businesses and investments73,843
 1,779
 96,606
 
 172,228
Intercompany(215,711) 
 
 215,711
 
Other, net126
 643
 10,446
 
 11,215
Net cash (used in) provided by investing activities attributable to continuing operations(203,795) (16,895) 17,841
 215,711
 12,862
Cash flows from financing activities attributable to continuing operations:         
Principal payments on Match Group Term Loan
 
 (450,000) 
 (450,000)
Proceeds from Match Group 2016 Senior Notes offering
 
 400,000
 
 400,000
Principal payments on IAC debt, including redemptions and repurchases of Senior Notes(126,409) 
 
 
 (126,409)
Debt issuance costs
 
 (7,811) 
 (7,811)
Purchase of treasury stock(308,948) 
 
 
 (308,948)
Issuance of IAC common stock pursuant to stock-based awards, net of withholding taxes(895) 
 
 
 (895)
Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes
 
 9,548
 
 9,548
Excess tax benefits from stock-based awards22,084
 
 29,680
 
 51,764
Purchase of noncontrolling interests(1,400) 
 (1,340) 
 (2,740)
Acquisition-related contingent consideration payments
 (351) (1,829) 
 (2,180)
Funds held in escrow for MyHammer tender offer
 
 (10,548) 
 (10,548)
Intercompany184,233
 (184,233) 215,711
 (215,711) 
    Other, net(454) (2,084) (308) 
 (2,846)
Net cash (used in) provided by financing activities attributable to continuing operations(231,789) (186,668) 183,103
 (215,711) (451,065)
Total cash (used in) provided by continuing operations(520,354) 
 374,528
 
 (145,826)
Effect of exchange rate changes on cash and cash equivalents
 
 (6,434) 
 (6,434)
Net (decrease) increase in cash and cash equivalents(520,354) 
 368,094
 
 (152,260)
Cash and cash equivalents at beginning of period1,073,053
 
 408,394
 
 1,481,447
Cash and cash equivalents at end of period$552,699
 $
 $776,488
 $
 $1,329,187

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Statement of cash flows for the year ended December 31, 2015:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries IAC Consolidated
 (In thousands)
Net cash (used in) provided by operating activities attributable to continuing operations$(139,227) $258,582
 $230,050
 $349,405
Cash flows from investing activities attributable to continuing operations:       
Acquisitions, net of cash acquired
 (6,078) (611,324) (617,402)
Capital expenditures(1,332) (21,905) (38,812) (62,049)
Proceeds from maturities and sales of marketable debt securities218,462
 
 
 218,462
Purchases of marketable debt securities(93,134) 
 
 (93,134)
Purchases of investments(6,978) 
 (27,492) (34,470)
Net proceeds from the sale of investments and business1,277
 
 8,136
 9,413
Other, net3,613
 385
 (7,539) (3,541)
Net cash provided by (used in) investing activities attributable to continuing operations121,908
 (27,598) (677,031) (582,721)
Cash flows from financing activities attributable to continuing operations:       
Borrowings under Match Group Term Loan
 
 788,000
 788,000
Principal payment on Liberty Bond
 (80,000) 
 (80,000)
Debt issuance costs(1,876) 
 (17,174) (19,050)
Fees and expenses related to note exchange
 
 (6,954) (6,954)
Proceeds from Match Group IPO, net of fees and expenses
 
 428,789
 428,789
Purchase of treasury stock(200,000) 
 
 (200,000)
Dividends(113,196) 
 
 (113,196)
Issuance of IAC common stock pursuant to stock-based awards, net of withholding taxes(38,418) 
 
 (38,418)
Repurchase of stock-based awards
 
 (23,431) (23,431)
Excess tax benefits from stock-based awards18,034
 
 38,384
 56,418
Purchase of noncontrolling interests
 
 (32,207) (32,207)
Acquisition-related contingent consideration payments
 (240) (5,510) (5,750)
Intercompany683,571
 (150,744) (532,827) 
Other, net(19,834) 
 441
 (19,393)
Net cash provided by (used in) financing activities attributable to continuing operations328,281
 (230,984) 637,511
 734,808
Total cash provided by continuing operations310,962
 
 190,530
 501,492
Total cash used in discontinued operations(140) 
 (12) (152)
Effect of exchange rate changes on cash and cash equivalents
 
 (10,298) (10,298)
Net increase in cash and cash equivalents310,822
 
 180,220
 491,042
Cash and cash equivalents at beginning of period762,231
 
 228,174
 990,405
Cash and cash equivalents at end of period$1,073,053
 $
 $408,394
 $1,481,447

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Statement of cash flows for the year ended December 31, 2014:
 IAC Guarantor Subsidiaries Non-Guarantor Subsidiaries IAC Consolidated
 (In thousands)
Net cash (used in) provided by operating activities attributable to continuing operations$(109,745) $329,671
 $204,122
 $424,048
Cash flows from investing activities attributable to continuing operations:       
Acquisitions, net of cash acquired
 (97,463) (161,928) (259,391)
Capital expenditures(1,843) (26,640) (28,750) (57,233)
Proceeds from maturities and sales of marketable debt securities21,644
 
 
 21,644
Purchases of marketable debt securities(175,826) 
 
 (175,826)
Purchases of investments(4,800) (2,087) (17,447) (24,334)
Net proceeds from the sale of investments and assets
 
 58,388
 58,388
Other, net(2,000) 11
 (1,053) (3,042)
Net cash used in investing activities attributable to continuing operations(162,825) (126,179) (150,790) (439,794)
Cash flows from financing activities attributable to continuing operations:       
Debt issuance costs(383) 
 
 (383)
Dividends(97,338) 
 
 (97,338)
Issuance of IAC common stock pursuant to stock-based awards, net of withholding taxes1,609
 
 
 1,609
Excess tax benefits from stock-based awards29,186
 
 15,771
 44,957
Purchase of noncontrolling interests
 
 (33,165) (33,165)
Acquisition-related contingent consideration payments
 (406) (7,703) (8,109)
Intercompany321,192
 (201,802) (119,390) 
Other, net
 (1,310) 12,759
 11,449
Net cash provided by (used in) financing activities attributable to continuing operations254,266
 (203,518) (131,728) (80,980)
Total cash used in continuing operations(18,304) (26) (78,396) (96,726)
Total cash used in discontinued operations(116) 
 (29) (145)
Effect of exchange rate changes on cash and cash equivalents
 26
 (13,194) (13,168)
Net decrease in cash and cash equivalents(18,420) 
 (91,619) (110,039)
Cash and cash equivalents at beginning of period780,651
 
 319,793
 1,100,444
Cash and cash equivalents at end of period$762,231
 $
 $228,174
 $990,405


IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 23—QUARTERLY RESULTS (UNAUDITED)
 
Quarter Ended
March 31(a)
 
Quarter Ended
June 30(b)
 
Quarter Ended
September 30
 
Quarter Ended
December 31(a)
 (In thousands, except per share data)
Year Ended December 31, 2016       
Revenue$819,179
 $745,439
 $764,102
 $811,162
Cost of revenue193,734
 170,397
 179,131
 212,468
Operating income (loss)21,417
 (252,446) 85,584
 112,820
Earnings (loss) from continuing operations7,934
 (190,542) 52,340
 113,928
Net earnings (loss)7,934
 (190,542) 52,340
 114,117
Net earnings (loss) attributable to IAC shareholders8,282
 (194,775) 43,162
 102,051
Per share information attributable to IAC shareholders:
Basic earnings (loss) per share from continuing operations(d)
$0.10
 $(2.45) $0.54
 $1.29
Diluted earnings (loss) per share from continuing operations(d)
$0.09
 $(2.45) $0.49
 $1.18
Basic earnings (loss) per share(d)
$0.10
 $(2.45) $0.54
 $1.29
Diluted earnings (loss) per share(d)
$0.09
 $(2.45) $0.49
 $1.18
        
        
 
Quarter Ended
March 31
 
Quarter Ended
June 30
 
Quarter Ended
September 30
 
Quarter Ended
December 31(c)
 (In thousands, except per share data)
Year Ended December 31, 2015       
Revenue$772,512
 $771,132
 $838,561
 $848,728
Cost of revenue186,737
 177,963
 199,377
 214,084
Operating income (loss)35,119
 62,769
 87,130
 (5,430)
Earnings (loss) from continuing operations21,863
 57,885
 65,026
 (31,417)
Net earnings (loss)21,988
 57,732
 65,043
 (31,389)
Net earnings (loss) attributable to IAC shareholders26,405
 59,305
 65,611
 (31,849)
Per share information attributable to IAC shareholders:
Basic earnings (loss) per share from continuing operations(d)
$0.31
 $0.72
 $0.79
 $(0.38)
Diluted earnings (loss) per share from continuing operations(d)
$0.30
 $0.68
 $0.74
 $(0.38)
Basic earnings (loss) per share(d)
$0.32
 $0.72
 $0.79
 $(0.38)
Diluted earnings (loss) per share(d)
$0.30
 $0.68
 $0.74
 $(0.38)

(a)The first quarter and fourth quarter of 2016 include after-tax gains of $11.9 million and $37.5 million related to the sale of PriceRunner and ShoeBuy, respectively.
(b)The second quarter of 2016 includes after-tax impairment charges related to goodwill and indefinite-lived intangible assets of $183.5 million and $7.2 million, respectively.
(c)The fourth quarter of 2015 includes after-tax impairment charges related to indefinite-lived intangible assets and goodwill of $55.3 million and $14.1 million, respectively.
(d)Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.

Item 9A.    Controls and Procedures
Conclusion Regarding the Effectiveness of the Company's Disclosure Controls and Procedures
The Company monitors and evaluates on an ongoing basis its disclosure controls and procedures in order to improve their 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) of the Exchange Act, IAC management, including the Chairman and Senior Executive, the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on this evaluation, the Chairman and Senior Executive, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.
Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company. The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2016. In making this assessment, our management used the criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management has determined that, as of December 31, 2016, the Company's internal control over financial reporting is effective. The effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report, included herein.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
The Company monitors and evaluates on an ongoing basis its 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(d), IAC management, including the Chairman and Senior Executive, the Chief Executive Officer and the Chief Financial Officer, also conducted an evaluation of the Company's internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Based on that evaluation, there has been no such change during the quarter ended December 31, 2016.


Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of IAC/InterActiveCorp
We have audited IAC/InterActiveCorp's internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). IAC/InterActiveCorp's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, IAC/InterActiveCorp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of IAC/InterActiveCorp and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2016 and our report dated February 28, 2017 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP
New York, New York
February 28, 2017


Item 9B.    Other Information
Not applicable.

PART III
The information required by Part III (Items 10, 11, 12, 13 and 14) has been incorporated herein by reference to IAC's definitive Proxy Statement to be used in connection with its 2017 Annual Meeting of Stockholders (the "2017 Proxy Statement"), as set forth below in accordance with General Instruction G(3) of Form 10-K.

Item 10.    Directors, Executive Officers and Corporate Governance
The information required by Items 401 and 405 of Regulation S-K relating to directors and executive officers of IAC and their compliance with Section 16(a) of the Exchange Act is set forth in the Marketplace Rules, memberssections entitled "Information Concerning Director Nominees" and "Information Concerning IAC Executive Officers Who Are Not Directors," and "Section 16(a) Beneficial Ownership Reporting Compliance," respectively, in the 2017 Proxy Statement and is incorporated herein by reference. The information required by Item 406 of the Audit and Compensation and Human Resources Committees have also satisfied separate independence requirementsRegulation S-K relating to IAC's Code of Ethics is set forth under the current standards imposedcaption "Part I-Item 1-Business-Description of IAC Businesses-Additional Information-Code of Ethics" of this annual report and is incorporated herein by reference. The information required by subsections (c)(3), (d)(4) and (d)(5) of Item 407 of Regulation S-K is set forth in the SECsections entitled "Corporate Governance" and "The Board and Board Committees" in the Marketplace Rules for audit committee members2017 Proxy Statement and is incorporated herein by reference.

Item 11.    Executive Compensation
The information required by Item 402 of Regulation S-K relating to executive and director compensation is set forth in the SEC,sections entitled "Executive Compensation" and "Director Compensation" in the Marketplace Rules2017 Proxy Statement and the Internal Revenue Service foris incorporated herein by reference. The information required by subsections (e)(4) and (e)(5) of Item 407 of Regulation S-K relating to certain compensation committee members.

In February 2015,matters is set forth in the sections entitled "The Board determinedand Board Committees," "Compensation Committee Report" and "Compensation Committee Interlocks and Insider Participation" in the 2017 Proxy Statement and is incorporated herein by reference; provided, that one formerthe information set forth in the section entitled "Compensation Committee Report" shall be deemed furnished herein and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.


Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information regarding ownership of IAC common stock and Class B common stock required by Item 403 of Regulation S-K and securities authorized for issuance under IAC's various equity compensation plans required by Item 201(d) of Regulation S-K is set forth in the sections entitled "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information," respectively, in the 2017 Proxy Statement and is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions involving IAC required by Item 404 of Regulation S-K and director Sonali De Rycker, was independent. In connection with this determination, there were no such payments known to Company management forindependence determinations required by Item 407(a) of Regulation S-K is set forth in the Board to consider.

sections entitled "Certain Relationships and Related Person Transactions" and "Corporate Governance," respectively, in the 2017 Proxy Statement and is incorporated herein by reference.


Item 14.    Principal Accounting Fees and Services.

The following table sets forthServices

Information required by Item 9(e) of Schedule 14A regarding the fees for all professionaland services rendered by Ernst & Youngof IAC's independent registered public accounting firm and the pre-approval policies and procedures applicable to services provided to IAC for the years ended December 31, 2015 and 2014:

 

 

2015

 

2014

 

Audit Fees

 

$

5,919,000

(1)

$

3,667,000

(2)

Audit-Related Fees(3)

 

$

50,000

 

$

50,000

 

Total Audit and Audit-Related Fees

 

$

5,969,000

 

$

3,717,000

 

Tax Fees(4)

 

$

1,250,000

 

$

1,175,000

 

Total Fees

 

$

7,219,000

 

$

4,892,000

 


(1)                                 Audit Fees in 2015 include: (i) fees associated with the annual audit of financial statements and internal control over financial reporting and the review of periodic reports, (ii) fees associated with the initial public offering of Match Group, Inc. (“Match Group”) in November 2015, as well as the review of (and,by such firm is set forth in the case of consentssections entitled "Fees Paid to Our Independent Registered Public Accounting Firm" and the comfort letter, the issuance of) the related SEC registration statements, consents and comfort letter, accounting consultations and other services related to the offering, (iii) fees for the audit performed in connection with Match Group’s acquisition of Plentyoffish Media Inc. in October 2015, (iv) statutory audits (audits performed for certain IAC businesses in various jurisdictions abroad, which audits are required by local law), (v) fees for services performed in connection with the issuance of Match Group’s 6.75% Senior Notes due 2022 in November 2015, as well as the review and issuance of the related comfort letter and other services related to the issuance, and (vi) accounting consultations.

Fees for services described in (i), (ii), (iii) and (v) above in the aggregate amount $3,980,000 were either allocated by the Company to Match Group (based on Match Group’s revenue as a percentage of IAC’s total revenue) or paid by IAC and reimbursed by Match Group.

(2)                                 Audit Fees in 2014 include: (i) fees associated with the annual audit of financial statements and internal control over financial reporting, the review of periodic reports, the review of (and, in the case of consents, the issuance of) SEC registration statements and consents and other services related to SEC matters, (ii) accounting consultations and (iii) statutory audits.

Fees for services described in (i) and (iii) above in the aggregate amount $2,075,000 were allocated by the Company to Match Group (based on Match Group’s revenue as a percentage of IAC’s total revenue).

(3)                                 Audit-Related Fees in 2015 and 2014 include fees for benefit plan audits.

(4)                                 Tax Fees in 2015 and 2014 primarily include fees paid for the preparation of federal, state and local tax returns (including amended returns) in the United States and certain jurisdictions abroad and research and development tax credit studies, as well as the tax compliance services in 2015.

Audit"Audit and Non-Audit Services Pre-Approval Policy,

The Audit Committee has a policy governing" respectively, in the pre-approval of all audit2017 Proxy Statement and permitted non-audit services performedis incorporated herein by IAC’s independent registered public accounting firm in order to ensure that the provision of these services does not impair such firm’s independence from IAC and its management. Unless a type of service to be provided by IAC’s independent registered public accounting firm has received general pre-approval, it requires specific pre-approval by the Audit Committee. Any proposed services in excess of pre-approved cost levels also require specific pre-approval by the Audit Committee. In all pre-approval instances, the Audit Committee considers whether such services are consistent with SEC rules regarding auditor independence.

All Tax services require specific pre-approval by the Audit Committee. In addition, the Audit Committee has designated specific services that have the pre-approval of the Audit Committee (each of which is subject to pre-approved cost levels) and has classified these pre-approved services into one of three categories: Audit, Audit-Related and All Other (excluding Tax). The term of any pre-approval is 12 months from the date of the pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee revises the list of pre-approved services from time to time. Pre-approved fee levels for all services to be provided by IAC’s independent registered public accounting firm are established periodically from time to time by the Audit Committee.

Pursuant to the pre-approval policy, the Audit Committee may delegate its authority to grant pre-approvals to one or more of its members, and has currently delegated this authority to its Chairman. The decisions of the Chairman (or any other member(s) to whom such authority may be delegated) to grant pre-approvals must be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee may not delegate its responsibilities to pre-approve services to management.

reference.



PART IV

Item 15.    Exhibits and Financial Statement Schedules.

Schedules

(a)   List of documents filed as part of this Report:

(1)   Consolidated Financial Statements of IAC
Report of Independent Registered Public Accounting Firm: Ernst & Young LLP.
Consolidated Balance Sheet as of December 31, 2016 and 2015.
Consolidated Statement of Operations for the Years Ended December 31, 2016, 2015 and 2014.
Consolidated Statement of Comprehensive Operations for the Years Ended December 31, 2016, 2015 and 2014.
Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 2016, 2015 and 2014.
Consolidated Statement of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014.
Notes to Consolidated Financial Statements.

(2)  Consolidated Financial Statement Schedule of IAC
Schedule
Number
IIValuation and Qualifying Accounts.
All other financial statements and schedules not listed have been omitted since the required information is either included in the Consolidated Financial Statements or the notes thereto, is not applicable or is not required.


(3)   Exhibits

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

Exhibit
No.

Description

31.3

Exhibit
No.
DescriptionLocation
2.1
Stock Purchase Agreement, dated as of July 13, 2015, by and among Match.com Inc., Plentyoffish Media Inc., Markus Frind, Markus Frind Family Trust No. 2, and Frind Enterprises Ltd.Exhibit 2.1 to the Registrant's Current Report on Form 8-K, filed on July 17, 2015.
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 (dated as of August 20, 2008).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 (amended and restated as of December 1, 2010).Exhibit 3.1(II) to the Registrant's Current Report on Form 8-K, filed on December 6, 2010.
4.1
Indenture for 4.75% Senior Notes due 2022, dated as of December 21, 2012, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
4.2
Supplemental Indenture for 4.75% Senior Notes due 2022, dated as of May 30, 2013, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.Exhibit 4.4 to the Registrant's Registration Statement on Form S-4, as amended, filed on June 5, 2013.
4.3
Indenture for 4.875% Senior Notes due 2018, dated as of November 15, 2013, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.Exhibit 4.1 to the Registrant's Registration Statement on Form S-4, filed on December 13, 2013.
4.4
Supplemental Indenture for 4.75% Senior Notes due 2022, dated as of March 12, 2014, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014.

4.5
Supplemental Indenture for 4.875% Senior Notes due 2018, dated as of March 12, 2014, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014.

4.6
Supplemental Indenture for 4.75% Senior Notes due 2022, dated as of May 1, 2014, among IAC/InterActiveCorp, the Guarantor named therein and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014.

4.7
Supplemental Indenture for 4.875% Senior Notes due 2018, dated as of May 1, 2014, among IAC/InterActiveCorp, the Guarantor named therein and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014.

4.8
Supplemental Indenture for 4.75% Senior Notes due 2022, dated as of May 15, 2014, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.3 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014.

4.9
Supplemental Indenture for 4.875% Senior Notes due 2018, dated as of May 15, 2014, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014.


4.10
Supplemental Indenture for 4.75% Senior Notes due 2022, dated as of October 30, 2015, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed on November 20, 2015.

4.11
Supplemental Indenture for 4.75% Senior Notes due 2022, dated as of May 11, 2016, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.(1)

4.12
Supplemental Indenture for 4.875% Senior Notes due 2018, dated as of May 11, 2016, among IAC/InterActiveCorp, the Guarantors named therein and Computershare Trust Company, N.A., as Trustee.(1)

4.13
Indenture, dated November 16, 2015, between Match Group, Inc. and Computershare Trust Company, N.A., as Trustee.
Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed on November 20, 2015.

4.14
Indenture, dated June 1, 2016, between Match Group, Inc. and Computershare Trust Company, N.A., as Trustee.

Exhibit 4.1 to Match Group, Inc.’s Current Report on Form 8-K, filed on June 2, 2016.

10.1
Amended and Restated Governance Agreement, dated as of August 9, 2005, among the Registrant, Liberty Media Corporation and Barry Diller.Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005.
10.2
Second Amended and Restated Governance Agreement, by and among IAC/InterActiveCorp, a Delaware corporation, Barry Diller and other persons signatory thereto, dated as of November 1, 2016Exhibit 10.1 to the Registrant's Current Report on Form 8-K/A, filed on November 7, 2016.
10.3
Letter Agreement, dated as of December 1, 2010, by and among the Registrant, Liberty Media Corporation, Liberty USA Holdings, LLC and Barry Diller.
Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on December 6, 2010.

10.4
Letter Agreement, dated as of December 1, 2010, by and between the Registrant and Barry Diller.Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on December 6, 2010.
10.5
IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2)Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013.
10.6
Form of Terms and Conditions for Stock Options granted under the IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2)Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
10.7
Form of Terms and Conditions for Restricted Stock Units granted under the IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2)Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
10.8
IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2)
Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

10.9
Form of Terms and Conditions for Stock Options granted under the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2)Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
10.10
Form of Terms and Conditions for Restricted Stock Units granted under the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2)Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
10.11
IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(2)Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
10.12
Form of Terms and Conditions for Stock Options granted under the IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(2)Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008.
10.13
Summary of Non-Employee Director Compensation Arrangements.(2)Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009.

10.14
2011 IAC/InterActiveCorp Deferred Compensation Plan for Non-Employee Directors.(2)Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011.
10.15
Second Amended and Restated Employment Agreement between Victor A. Kaufman and the Registrant, dated as of March 15, 2012.(2)Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012.
10.16
Employment Agreement between Gregg Winiarski and the Registrant, dated as of February 26, 2010.(2)Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.
10.17
Employment Agreement between Glenn H. Schiffman and the Registrant, dated as of April 7, 2016.(2)

Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2016.

10.18
Google Services Agreement, dated as of January 1, 2008, between the Registrant and Google Inc.Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
10.19
Amendment No. 4 to Google Services Agreement, dated as of April 1, 2011, between the Registrant and Google Inc.Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011.
10.20
Google Services Agreement, dated as of October 26, 2015, between the Registrant and Google Inc.(3)Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
10.21
Amended and Restated Credit Agreement, dated as of October 7, 2015, among IAC/InterActiveCorp, as Borrower, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto.(4)
Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

10.22
Amendment No. 3, dated as of December 8, 2016, to the Credit Agreement dated as of October 7, 2015, as amended and restated as of November 16, 2015, as further amended as of December 16, 2015, among Match Group, Inc., as borrower, the Lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other parties thereto.(4)

Exhibit 10.1 to Match Group, Inc.'s Current Report on Form 8-K, filed on December 8, 2016.

10.23
Master Transaction Agreement, dated as of November 24, 2015, by and between Match Group, Inc. and IAC/InterActiveCorp.Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on November 24, 2015.
10.24
Employee Matters Agreement, dated as of November 24, 2015, by and between Match Group, Inc. and IAC/InterActiveCorp.Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on November 24, 2015.
10.25
Amendment No.1 to Employee Matters Agreement, dated as of April 13, 2016, by and between Match Group, Inc. and IAC/InterActiveCorp.

Exhibit 99.2 to the Schedule 13D related to Match Group, Inc. filed by the Registrant on April 14, 2016.

10.26
Investor Rights Agreement, dated as of November 24, 2015, by and between Match Group, Inc. and IAC/InterActiveCorp.Exhibit 10.3 to the Registrant's Current Report on Form 8-K, filed on November 24, 2015.
10.27
Tax Sharing Agreement, dated as of November 24, 2015, by and between Match Group, Inc. and IAC/InterActiveCorp.Exhibit 10.4 to the Registrant's Current Report on Form 8-K, filed on November 24, 2015.
10.28
Services Agreement, dated as of November 24, 2015, by and between Match Group, Inc. and IAC/InterActiveCorp.Exhibit 10.5 to the Registrant's Current Report on Form 8-K, filed on November 24, 2015.
21.1
Subsidiaries of the Registrant as of December 31, 2016.(1)
23.1
Consent of Ernst & Young LLP.(1)

31.1
Certification of the Chairman and Senior Executive pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)

31.4

31.2


Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act as amended,of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)

31.5

31.3


Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(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 of 2002.(5)
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 of 2002.(5)
32.3
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(5)
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.

(1)Filed herewith.
(2)Reflects management contracts and management and director compensatory plans.
(3)Certain portions of this document have been omitted pursuant to a confidential treatment request.
(4)Certain schedules and similar attachments have been omitted and the Registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.
(5)Furnished herewith.




SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

April 29, 2016

IAC/INTERACTIVECORP

February 28, 2017

By:

/s/ Gregg Winiarski

IAC/INTERACTIVECORP

Gregg Winiarski

By:
/s/ GLENN H. SCHIFFMAN

Glenn H. Schiffman
Executive Vice President General Counsel & Secretary

and Chief Financial Officer

31


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 28, 2017:
SignatureTitle
/s/ BARRY DILLERChairman of the Board, Senior Executive and Director
Barry Diller
/s/ JOSEPH LEVINChief Executive Officer and Director
Joseph Levin
Vice Chairman and Director
Victor A. Kaufman
/s/ GLENN H. SCHIFFMANExecutive Vice President and Chief Financial Officer
Glenn H. Schiffman
/s/ MICHAEL H. SCHWERDTMANSenior Vice President and Controller (Chief Accounting Officer)
Michael H. Schwerdtman
/s/ EDGAR BRONFMAN, JR.Director
Edgar Bronfman, Jr.
/s/ CHELSEA CLINTONDirector
Chelsea Clinton
/s/ MICHAEL D. EISNERDirector
Michael D. Eisner
/s/ BONNIE S. HAMMERDirector
Bonnie S. Hammer
/s/ BRYAN LOURDDirector
Bryan Lourd
/s/ DAVID S. ROSENBLATTDirector
David S. Rosenblatt
/s/ ALAN G. SPOONDirector
Alan G. Spoon
/s/ ALEXANDER VON FURSTENBERGDirector
Alexander von Furstenberg
/s/ RICHARD F. ZANNINODirector
Richard F. Zannino


Schedule II
IAC/INTERACTIVECORP AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Description
Balance at
Beginning
of Period
 
Charges to
Earnings
 
Charges to
Other Accounts
 Deductions 
Balance at
End of Period
 (In thousands)
2016         
Allowance for doubtful accounts and revenue reserves$16,528
 $19,070
(a) 
$(695) $(18,498)
(d) 
$16,405
Sales returns accrual828
 14,998
 (962) (14,784) 80
Deferred tax valuation allowance90,482
 (837)
(b) 
(1,475)
(c) 

 88,170
Other reserves2,801
       2,822
2015         
Allowance for doubtful accounts and revenue reserves$12,437
 $17,912
(a) 
$(536) $(13,285)
(d) 
$16,528
Sales returns accrual1,119
 17,569
 
 (17,860)
  
828
Deferred tax valuation allowance98,350
 (6,072)
(e) 
(1,796)
(f) 

  
90,482
Other reserves2,204
  
  
   
  
2,801
2014   
  
 
  
 
  
 
Allowance for doubtful accounts and revenue reserves$8,540
 $15,226
(a) 
$(116) $(11,213)
(d) 
$12,437
Sales returns accrual1,208
 19,743
 
 (19,832)
  
1,119
Deferred tax valuation allowance62,353
 35,119
(g) 
878
(h) 

  
98,350
Other reserves2,518
  
  
   
  
2,204

(a)Additions to the allowance for doubtful accounts are charged to expense. Additions to the revenue reserves are charged against revenue.
(b)Amount is primarily related to other-than-temporary impairment charges for certain cost method investments and an increase in federal capital and net operating losses, partially offset by a decrease in state net operating losses, foreign tax credits, and foreign net operating losses.
(c)Amount is primarily related to the realization of previously unbenefited unrealized losses on available-for-sale marketable equity securities included in accumulated other comprehensive income and currency translation adjustments on foreign net operating losses.
(d)Write-off of fully reserved accounts receivable.
(e)Amount is primarily related to the release of a valuation allowance on the other-than-temporary impairment charges for certain cost method investments, partially offset by an increase in federal, foreign and state net operating and capital losses.
(f)Amount is primarily related to a net reduction in unbenefited unrealized losses on available-for-sale marketable equity securities included in accumulated other comprehensive income and currency translation adjustments on foreign net operating losses.
(g)Amount is primarily related to other-than-temporary impairment charges for certain cost method investments and an increase in federal net operating losses, foreign tax credits, and state tax credits.
(h)Amount is primarily related to unbenefited unrealized losses on long-term marketable equity securities included in accumulated other comprehensive income, partially offset by currency translation adjustments on foreign net operating losses.


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