Exhibit 99.2
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
On August 20, 2008, IAC/InterActiveCorp (“IAC”) completed the spin-off transaction which separated IAC into five publicly traded companies:
· IAC, which includes:
· the businesses currently comprising its Media & Advertising sector;
· the Match and ServiceMagic segments;
· the businesses currently comprising its Emerging Businesses group, including Shoebuy and ReserveAmerica, which were formerly included in the Retailing and Ticketmaster segments, respectively; and
· certain investments in unconsolidated affiliates.
· HSN, Inc. (“HSNi”), which includes HSN TV, HSN.com, and the Cornerstone Brands, Inc. portfolio of catalogs, websites and retail locations;
· Interval Leisure Group, Inc. (“ILG”), which includes the businesses currently comprising the Interval segment;
· Ticketmaster, which includes its primary domestic and international operations as well as certain investments in unconsolidated affiliates; and
· Tree.com, Inc. (“Tree.com”), which includes the businesses currently comprising the Lending and Real Estate segments.
In addition, on May 30, 2008, IAC sold Entertainment Publications, Inc. (“EPI”), which was previously reported in IAC’s Entertainment segment. Accordingly, the results of operations of HSNi, ILG, Ticketmaster, Tree.com and EPI have been classified as discontinued operations in the accompanying unaudited pro forma condensed combined statements of operations for all periods presented. The assets and liabilities of HSNi, ILG, Ticketmaster and Tree.com (each, a “Spinco” and collectively, the “Spincos”) have been presented as assets and liabilities of discontinued operations for all periods presented in the accompanying unaudited pro forma condensed combined balance sheets. The assets and liabilities of EPI have been classified as “Assets held for sale” and “Liabilities held for sale” in the accompanying unaudited pro forma condensed combined balance sheets until the second quarter of 2008. These unaudited pro forma condensed combined financial statements give effect to the operations of HSNi, ILG, Ticketmaster, Tree.com and EPI being discontinued effective January 1, 2005.
The following unaudited pro forma condensed combined balance sheet of IAC as of June 30, 2008 has been derived from:
· the unaudited historical consolidated balance sheets of IAC, ILG and Tree.com as of June 30, 2008; and
· the unaudited historical combined balance sheets of HSNi and Ticketmaster as of June 30, 2008.
The following unaudited pro forma condensed combined balance sheets of IAC as of December 31, 2007 and 2006 have been derived from:
· the audited historical consolidated balance sheets of IAC, ILG and Tree.com as of December 31, 2007 and 2006;
1
· the audited historical combined balance sheets of HSNi and Ticketmaster as of December 31, 2007 and 2006; and
· the unaudited historical consolidated balance sheet of EPI as of December 31, 2006.
The following unaudited pro forma condensed combined statements of operations of IAC for the six months ended June 30, 2008 and 2007 have been derived from:
· the unaudited historical consolidated statements of operations of IAC, ILG and Tree.com for the six months ended June 30, 2008 and 2007; and
· the unaudited historical combined statements of operations of HSNi and Ticketmaster for the six months ended June 30, 2008 and 2007.
The following unaudited pro forma condensed combined statements of operations of IAC for each of the years in the three-year period ended December 31, 2007 have been derived from:
· the audited historical consolidated statements of operations of IAC, ILG and Tree.com for each of the years in the three-year period ended December 31, 2007;
· the audited historical combined statements of operations of HSNi and Ticketmaster for each of the years in the three-year period ended December 31, 2007; and
· the unaudited historical consolidated statements of operations of EPI for each of the years in the three-year period ended December 31, 2007.
The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have been achieved by IAC if the operations of HSNi, ILG, Ticketmaster, Tree.com and EPI had been discontinued at January 1, 2005, nor is it indicative of the future operating results or financial position of IAC. The pro forma adjustments are based upon information and assumptions available at the time of the filing of this Form 8-K. The pro forma information should be read in conjunction with the accompanying notes thereto and with IAC’s historical consolidated financial statements and related notes thereto.
2
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
| | IAC
Condensed
June 30,
2008 | | HSN, Inc.
Condensed
June 30,
2008 | | Interval
Leisure
Group, Inc.
Condensed
June 30,
2008 | | Ticketmaster
Condensed
June 30,
2008 | | Tree.com, Inc.
Condensed
June 30,
2008 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
June 30,
2008 | |
| | (In thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,431,991 | | $ | 5,057 | | $ | 76,208 | | $ | 520,795 | | $ | 53,301 | | $ | 655,361 | | $ | 776,630 | | $ | (115,240 | ) | (a), (c) | | $ | 661,390 | |
Restricted cash and cash equivalents | | 9,331 | | — | | 5,085 | | — | | 2,905 | | 7,990 | | 1,341 | | — | | | | 1,341 | |
Marketable securities | | 143,391 | | — | | — | | 4,133 | | — | | 4,133 | | 139,258 | | — | | | | 139,258 | |
Prepaid and other current assets | | 1,242,116 | | 555,344 | | 80,491 | | 259,989 | | 112,132 | | 1,007,956 | | 234,160 | | 11,145 | | (b) | | 245,305 | |
Current assets of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 1,779,535 | | (c) | | 1,779,535 | |
Total current assets | | 2,826,829 | | 560,401 | | 161,784 | | 784,917 | | 168,338 | | 1,675,440 | | 1,151,389 | | 1,675,440 | | | | 2,826,829 | |
Property and equipment, net | | 655,695 | | 151,125 | | 35,982 | | 112,434 | | 20,077 | | 319,618 | | 336,077 | | — | | | | 336,077 | |
Goodwill | | 6,415,138 | | 2,662,830 | | 513,323 | | 1,389,179 | | 9,285 | | 4,574,617 | | 1,840,521 | | 2,303 | | (b) | | 1,842,824 | |
Intangible assets, net | | 1,343,628 | | 489,208 | | 175,965 | | 224,635 | | 67,884 | | 957,692 | | 385,936 | | — | | | | 385,936 | |
Long-term investments and other non-current assets | | 787,009 | | 10,719 | | 41,354 | | 222,870 | | 184 | | 275,127 | | 511,882 | | 92,039 | | (b) | | 603,921 | |
Non-current assets of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 6,032,712 | | (c) | | 6,032,712 | |
TOTAL ASSETS | | $ | 12,028,299 | | $ | 3,874,283 | | $ | 928,408 | | $ | 2,734,035 | | $ | 265,768 | | $ | 7,802,494 | | $ | 4,225,805 | | $ | 7,802,494 | | | | $ | 12,028,299 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES: | | | | | | | | | | | | | | | | | | | | | |
Current maturities of long-term obligations and short-term borrowings | | $ | 77,773 | | $ | 57 | | $ | — | | $ | 2,269 | | $ | 75,433 | | $ | 77,759 | | $ | 14 | | $ | — | | | | $ | 14 | |
Accrued expenses and other current liabilities | | 1,518,500 | | 355,333 | | 177,428 | | 597,287 | | 76,668 | | 1,206,716 | | 311,784 | | 39,651 | | (b), (c) | | 351,435 | |
Current liabilities of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 1,244,824 | | (c) | | 1,244,824 | |
Total current liabilities | | 1,596,273 | | 355,390 | | 177,428 | | 599,556 | | 152,101 | | 1,284,475 | | 311,798 | | 1,284,475 | | | | 1,596,273 | |
Long-term obligations, net of current maturities | | 835,199 | | — | | — | | 1,641 | | — | | 1,641 | | 833,558 | | — | | | | 833,558 | |
Income taxes payable | | 263,430 | | 163 | | — | | 1,022 | | 819 | | 2,004 | | 261,426 | | (17 | ) | (b) | | 261,409 | |
Other long-term liabilities | | 177,592 | | 8,277 | | 144,727 | | 5,625 | | 2,071 | | 160,700 | | 16,892 | | — | | | | 16,892 | |
Non-current liabilities of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 1,097,550 | | (c) | | 1,097,550 | |
Deferred income taxes | | 926,861 | | 788,728 | | 106,341 | | 66,245 | | 24,944 | | 986,258 | | (59,397 | ) | 60,197 | | (b) | | 800 | |
Minority interest | | 39,445 | | — | | 519 | | 7,331 | | — | | 7,850 | | 31,595 | | 723 | | (b) | | 32,318 | |
Commitments and contingencies | | | | | | | | | | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | | | | | | |
Invested capital | | — | | 4,280,408 | | 726,795 | | 2,604,162 | | 766,365 | | 8,377,730 | | (8,377,730 | ) | 8,377,730 | | (c) | | — | |
(Receivable from) payable to IAC and subsidiaries | | — | | (1,559,460 | ) | (495,374 | ) | (606,947 | ) | 46,454 | | (2,615,327 | ) | 2,615,327 | | (2,615,327 | ) | (c) | | — | |
Preferred stock $.01 par value | | — | | — | | — | | — | | — | | — | | — | | — | | | | — | |
Common stock $.001 par value | | 419 | | — | | — | | — | | — | | — | | 419 | | — | | | | 419 | |
Class B convertible common stock $.001 par value | | 32 | | — | | — | | — | | — | | — | | 32 | | — | | | | 32 | |
Additional paid-in capital | | 14,807,363 | | — | | — | | — | | — | | — | | 14,807,363 | | — | | | | 14,807,363 | |
Retained earnings (accumulated deficit) | | 199,039 | | — | | 266,784 | | — | | (726,986 | ) | (460,202 | ) | 659,241 | | (460,202 | ) | (c) | | 199,039 | |
Accumulated other comprehensive income | | 96,975 | | 777 | | 1,188 | | 55,400 | | — | | 57,365 | | 39,610 | | 57,365 | | (c) | | 96,975 | |
Treasury stock | | (6,914,329 | ) | — | | — | | — | | — | | — | | (6,914,329 | ) | — | | | | (6,914,329 | ) |
Total shareholders’ equity | | 8,189,499 | | 2,721,725 | | 499,393 | | 2,052,615 | | 85,833 | | 5,359,566 | | 2,829,933 | | 5,359,566 | | | | 8,189,499 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 12,028,299 | | $ | 3,874,283 | | $ | 928,408 | | $ | 2,734,035 | | $ | 265,768 | | $ | 7,802,494 | | $ | 4,225,805 | | $ | 7,802,494 | | | | $ | 12,028,299 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
3
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
| | IAC
Condensed
December 31,
2007 | | HSN, Inc.
Condensed
December 31,
2007 | | Interval
Leisure
Group, Inc.
Condensed
December 31,
2007 | | Ticketmaster
Condensed
December 31,
2007 | | Tree.com, Inc.
Condensed
December 31,
2007 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
December 31,
2007 | |
| | (In thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,585,302 | | $ | 6,220 | | $ | 67,113 | | $ | 568,417 | | $ | 45,940 | | $ | 687,690 | | $ | 897,612 | | $ | (21,468 | ) | (a), (c) | | $ | 876,144 | |
Restricted cash and cash equivalents | | 23,701 | | — | | 5,817 | | 853 | | 14,953 | | 21,623 | | 2,078 | | — | | | | 2,078 | |
Marketable securities | | 326,788 | | — | | — | | — | | — | | — | | 326,788 | | — | | | | 326,788 | |
Assets held for sale | | 126,996 | | — | | — | | — | | — | | — | | 126,996 | | — | | | | 126,996 | |
Prepaid and other current assets | | 1,363,450 | | 589,808 | | 74,633 | | 223,590 | | 111,618 | | 999,649 | | 363,801 | | 1,238 | | (b) | | 365,039 | |
Current assets of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 1,729,192 | | (c) | | 1,729,192 | |
Total current assets | | 3,426,237 | | 596,028 | | 147,563 | | 792,860 | | 172,511 | | 1,708,962 | | 1,717,275 | | 1,708,962 | | | | 3,426,237 | |
Property and equipment, net | | 641,697 | | 155,805 | | 34,963 | | 95,122 | | 21,466 | | 307,356 | | 334,341 | | — | | | | 334,341 | |
Goodwill | | 6,453,664 | | 2,884,389 | | 514,308 | | 1,090,418 | | 140,892 | | 4,630,007 | | 1,823,657 | | 122 | | (b) | | 1,823,779 | |
Intangible assets, net | | 1,363,237 | | 571,662 | | 188,895 | | 92,325 | | 108,440 | | 961,322 | | 401,915 | | — | | | | 401,915 | |
Long-term investments and other non-current assets | | 705,967 | | 12,747 | | 36,888 | | 235,809 | | 278 | | 285,722 | | 420,245 | | 82,542 | | (b) | | 502,787 | |
Non-current assets of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 6,101,743 | | (c) | | 6,101,743 | |
TOTAL ASSETS | | $ | 12,590,802 | | $ | 4,220,631 | | $ | 922,617 | | $ | 2,306,534 | | $ | 443,587 | | $ | 7,893,369 | | $ | 4,697,433 | | $ | 7,893,369 | | | | $ | 12,590,802 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES: | | | | | | | | | | | | | | | | | | | | | |
Current maturities of long-term obligations and short-term borrowings | | $ | 111,857 | | $ | 117 | | $ | — | | $ | 14 | | $ | 99,622 | | $ | 99,753 | | $ | 12,104 | | $ | — | | | | $ | 12,104 | |
Liabilities held for sale | | 59,689 | | — | | — | | — | | — | | — | | 59,689 | | — | | | | 59,689 | |
Accrued expenses and other current liabilities | | 1,562,687 | | 448,726 | | 160,275 | | 522,929 | | 89,376 | | 1,221,306 | | 341,381 | | 55,752 | | (b), (c) | | 397,133 | |
Current liabilities of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 1,265,307 | | (c) | | 1,265,307 | |
Total current liabilities | | 1,734,233 | | 448,843 | | 160,275 | | 522,943 | | 188,998 | | 1,321,059 | | 413,174 | | 1,321,059 | | | | 1,734,233 | |
Long-term obligations, net of current maturities | | 834,566 | | — | | — | | — | | — | | — | | 834,566 | | — | | | | 834,566 | |
Income taxes payable | | 265,962 | | 137 | | — | | 982 | | 730 | | 1,849 | | 264,113 | | — | | | | 264,113 | |
Other long-term liabilities | | 169,490 | | 8,796 | | 141,330 | | 3,204 | | 2,529 | | 155,859 | | 13,631 | | — | | | | 13,631 | |
Non-current liabilities of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | 1,127,479 | | (c) | | 1,127,479 | |
Deferred income taxes | | 962,408 | | 819,969 | | 107,133 | | 32,416 | | 36,706 | | 996,224 | | (33,816 | ) | 34,054 | | (b) | | 238 | |
Minority interest | | 40,481 | | — | | 512 | | 7,812 | | — | | 8,324 | | 32,157 | | 723 | | (b) | | 32,880 | |
Commitments and contingencies | | | | | | | | | | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | | | | | | |
Invested capital | | — | | 4,522,873 | | 726,919 | | 2,172,497 | | 751,923 | | 8,174,212 | | (8,174,212 | ) | 8,174,212 | | (c) | | — | |
(Receivable from) payable to IAC and subsidiaries | | — | | (1,581,157 | ) | (436,475 | ) | (474,110 | ) | 20,067 | | (2,471,675 | ) | 2,471,675 | | (2,471,675 | ) | (c) | | — | |
Preferred stock $.01 par value | | — | | — | | — | | — | | — | | — | | — | | — | | | | — | |
Common stock $.001 par value | | 417 | | — | | — | | — | | — | | — | | 417 | | — | | | | 417 | |
Class B convertible common stock $.001 par value | | 32 | | — | | — | | — | | — | | — | | 32 | | — | | | | 32 | |
Additional paid-in capital | | 14,744,318 | | — | | — | | — | | — | | — | | 14,744,318 | | — | | | | 14,744,318 | |
Retained earnings (accumulated deficit) | | 567,820 | | — | | 222,484 | | — | | (557,366 | ) | (334,882 | ) | 902,702 | | (334,882 | ) | (c) | | 567,820 | |
Accumulated other comprehensive income (loss) | | 39,814 | | 1,170 | | 439 | | 40,790 | | — | | 42,399 | | (2,585 | ) | 42,399 | | (c) | | 39,814 | |
Treasury stock | | (6,768,739 | ) | — | | — | | — | | — | | — | | (6,768,739 | ) | — | | | | (6,768,739 | ) |
Total shareholders’ equity | | 8,583,662 | | 2,942,886 | | 513,367 | | 1,739,177 | | 214,624 | | 5,410,054 | | 3,173,608 | | 5,410,054 | | | | 8,583,662 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 12,590,802 | | $ | 4,220,631 | | $ | 922,617 | | $ | 2,306,534 | | $ | 443,587 | | $ | 7,893,369 | | $ | 4,697,433 | | $ | 7,893,369 | | | | $ | 12,590,802 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
4
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
| | IAC
Condensed
Including EPI
December 31,
2006 | | (d)
EPI
December 31,
2006 | | Subtotal | | HSN, Inc.
Condensed
December 31,
2006 | | Interval
Leisure
Group, Inc.
Condensed
December 31,
2006 | | Ticketmaster
Condensed
December 31,
2006 | | Tree.com, Inc.
Condensed
December 31,
2006 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
December 31,
2006 | |
| | (In thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,428,140 | | $ | — | | $ | 1,428,140 | | $ | 53,367 | | $ | 37,557 | | $ | 317,577 | | $ | 99,498 | | $ | 507,999 | | $ | 920,141 | | $ | (27,853 | ) | (a), (c) | | $ | 892,288 | |
Restricted cash and cash equivalents | | 27,855 | | — | | 27,855 | | — | | 293 | | — | | 15,467 | | 15,760 | | 12,095 | | — | | | | 12,095 | |
Marketable securities | | 897,742 | | — | | 897,742 | | — | | — | | — | | — | | — | | 897,742 | | — | | | | 897,742 | |
Assets held for sale | | 226,880 | | (177,033 | ) | 403,913 | | 226,880 | | — | | — | | — | | 226,880 | | 177,033 | | — | | | | 177,033 | |
Prepaid and other current assets | | 1,377,640 | | (2,511 | ) | 1,380,151 | | 548,516 | | 54,974 | | 152,230 | | 389,973 | | 1,145,693 | | 234,458 | | 33,798 | | (b) | | 268,256 | |
Current assets of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | — | | — | | 1,890,387 | | (c) | | 1,890,387 | |
Total current assets | | 3,958,257 | | (179,544 | ) | 4,137,801 | | 828,763 | | 92,824 | | 469,807 | | 504,938 | | 1,896,332 | | 2,241,469 | | 1,896,332 | | | | 4,137,801 | |
Property and equipment, net | | 594,536 | | 12,035 | | 582,501 | | 143,209 | | 21,330 | | 82,599 | | 30,677 | | 277,815 | | 304,686 | | — | | | | 304,686 | |
Goodwill | | 6,849,976 | | 66,703 | | 6,783,273 | | 2,883,769 | | 473,879 | | 1,051,732 | | 582,295 | | 4,991,675 | | 1,791,598 | | 21 | | (b) | | 1,791,619 | |
Intangible assets, net | | 1,463,972 | | 53,115 | | 1,410,857 | | 584,343 | | 153,220 | | 110,629 | | 142,781 | | 990,973 | | 419,884 | | — | | | | 419,884 | |
Long-term investments and other non-current assets | | 330,047 | | 1,323 | | 328,724 | | 18,083 | | 26,424 | | 100,944 | | 354 | | 145,805 | | 182,919 | | 854 | | (b) | | 183,773 | |
Non-current assets of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | — | | — | | 6,405,393 | | (c) | | 6,405,393 | |
TOTAL ASSETS | | $ | 13,196,788 | | $ | (46,368 | ) | $ | 13,243,156 | | $ | 4,458,167 | | $ | 767,677 | | $ | 1,815,711 | | $ | 1,261,045 | | $ | 8,302,600 | | $ | 4,940,556 | | $ | 8,302,600 | | | | $ | 13,243,156 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | | |
Current maturities of long-term obligations and short-term borrowings | | $ | 357,679 | | $ | — | | $ | 357,679 | | $ | — | | $ | — | | $ | 27 | | $ | 350,072 | | $ | 350,099 | | $ | 7,580 | | $ | — | | | | $ | 7,580 | |
Liabilities held for sale | | 64,345 | | (43,523 | ) | 107,868 | | 64,345 | | — | | — | | — | | 64,345 | | 43,523 | | — | | | | 43,523 | |
Accrued expenses and other current liabilities | | 1,844,964 | | 13,098 | | 1,831,866 | | 423,826 | | 136,028 | | 410,138 | | 75,403 | | 1,045,395 | | 786,471 | | 59,809 | | (b), (c) | | 846,280 | |
Current liabilities of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | — | | — | | 1,400,030 | | (c) | | 1,400,030 | |
Total current liabilities | | 2,266,988 | | (30,425 | ) | 2,297,413 | | 488,171 | | 136,028 | | 410,165 | | 425,475 | | 1,459,839 | | 837,574 | | 1,459,839 | | | | 2,297,413 | |
Long-term obligations, net of current maturities | | 856,408 | | — | | 856,408 | | — | | — | | 13 | | 19,347 | | 19,360 | | 837,048 | | — | | | | 837,048 | |
Other long-term liabilities | | 196,460 | | 2,516 | | 193,944 | | 9,709 | | 124,690 | | 3,497 | | 3,794 | | 141,690 | | 52,254 | | — | | | | 52,254 | |
Non-current liabilities of discontinued operations | | — | | — | | — | | — | | — | | — | | — | | — | | — | | 1,249,315 | | (c) | | 1,249,315 | |
Deferred income taxes | | 1,112,577 | | (18,459 | ) | 1,131,036 | | 836,571 | | 98,072 | | 43,530 | | 38,976 | | 1,017,149 | | 113,887 | | (70,447 | ) | (b) | | 43,440 | |
Minority interest | | 24,881 | | — | | 24,881 | | — | | — | | 669 | | — | | 669 | | 24,212 | | — | | | | 24,212 | |
Commitments and contingencies | | | | | | | | | | | | | | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | | | | | | | | | | |
Invested capital | | — | | — | | — | | 4,569,019 | | 612,532 | | 1,874,710 | | 750,331 | | 7,806,592 | | (7,806,592 | ) | 7,806,592 | | (c) | | — | |
(Receivable from) payable to IAC and subsidiaries | | — | | — | | — | | (1,483,873 | ) | (355,057 | ) | (539,861 | ) | 29,126 | | (2,349,665 | ) | 2,349,665 | | (2,349,665 | ) | (c) | | — | |
Preferred stock $.01 par value | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | | | — | |
Common stock $.001 par value | | 410 | | — | | 410 | | — | | — | | — | | — | | — | | 410 | | — | | | | 410 | |
Class B convertible common stock $.001 par value | | 32 | | — | | 32 | | — | | — | | — | | — | | — | | 32 | | — | | | | 32 | |
Additional paid-in capital | | 14,636,478 | | — | | 14,636,478 | | — | | — | | — | | — | | — | | 14,636,478 | | — | | | | 14,636,478 | |
Retained earnings (accumulated deficit) | | 291,192 | | — | | 291,192 | | — | | 151,198 | | — | | (6,004 | ) | 145,194 | | 145,998 | | 145,194 | | (c) | | 291,192 | |
Accumulated other comprehensive income | | 76,505 | | — | | 76,505 | | 38,570 | | 214 | | 22,988 | | — | | 61,772 | | 14,733 | | 61,772 | | (c) | | 76,505 | |
Treasury stock | | (6,260,145 | ) | — | | (6,260,145 | ) | — | | — | | — | | — | | — | | (6,260,145 | ) | — | | | | (6,260,145 | ) |
Note receivable from key executive for common stock issuance | | (4,998 | ) | — | | (4,998 | ) | — | | — | | — | | — | | — | | (4,998 | ) | — | | | | (4,998 | ) |
Total shareholders’ equity | | 8,739,474 | | — | | 8,739,474 | | 3,123,716 | | 408,887 | | 1,357,837 | | 773,453 | | 5,663,893 | | 3,075,581 | | 5,663,893 | | | | 8,739,474 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 13,196,788 | | $ | (46,368 | ) | $ | 13,243,156 | | $ | 4,458,167 | | $ | 767,677 | | $ | 1,815,711 | | $ | 1,261,045 | | $ | 8,302,600 | | $ | 4,940,556 | | $ | 8,302,600 | | | | $ | 13,243,156 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
5
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
| | IAC
Condensed
Six Months
Ended
June 30,
2008 | | HSN, Inc.
Condensed
Six Months
Ended
June 30,
2008 | | Interval Leisure
Group, Inc.
Condensed
Six Months
Ended
June 30,
2008 | | Ticketmaster
Condensed
Six Months
Ended
June 30,
2008 | | Tree.com, Inc.
Condensed
Six Months
Ended
June 30,
2008 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
Six Months
Ended
June 30,
2008 | |
| | (In thousands) | |
Product sales | | $ | 1,428,675 | | $ | 1,372,712 | | $ | — | | $ | — | | $ | — | | $ | 1,372,712 | | $ | 55,963 | | $ | — | | | | $ | 55,963 | |
Service revenue | | 1,748,273 | | — | | 219,121 | | 731,350 | | 130,176 | | 1,080,647 | | 667,626 | | 1,231 | | (e) | | 668,857 | |
Net revenue | | 3,176,948 | | 1,372,712 | | 219,121 | | 731,350 | | 130,176 | | 2,453,359 | | 723,589 | | 1,231 | | | | 724,820 | |
Cost of sales—product sales (exclusive of depreciation shown separately below) | | 925,838 | | 888,663 | | — | | — | | — | | 888,663 | | 37,175 | | 384 | | (e), (g) | | 37,559 | |
Cost of sales—service revenue (exclusive of depreciation shown separately below) | | 801,469 | | — | | 70,321 | | 469,571 | | 35,141 | | 575,033 | | 226,436 | | (33 | ) | (e), (g) | | 226,403 | |
Gross profit | | 1,449,641 | | 484,049 | | 148,800 | | 261,779 | | 95,035 | | 989,663 | | 459,978 | | 880 | | | | 460,858 | |
Selling and marketing expense | | 639,784 | | 280,995 | | 25,775 | | 44,029 | | 64,480 | | 415,279 | | 224,505 | | 633 | | (e) | | 225,138 | |
General and administrative expense | | 437,202 | | 110,161 | | 40,134 | | 87,497 | | 38,036 | | 275,828 | | 161,374 | | 5,969 | | (e), (f), (g) | | 167,343 | |
Other operating expense | | 61,964 | | 28,811 | | — | | — | | 3,552 | | 32,363 | | 29,601 | | (8 | ) | (g) | | 29,593 | |
Amortization of non-cash marketing | | 10,128 | | 4,261 | | — | | — | | — | | 4,261 | | 5,867 | | — | | | | 5,867 | |
Amortization of intangibles | | 172,258 | | 82,454 | | 12,954 | | 20,403 | | 40,706 | | 156,517 | | 15,741 | | — | | | | 15,741 | |
Depreciation | | 84,195 | | 18,421 | | 4,627 | | 22,883 | | 3,546 | | 49,477 | | 34,718 | | — | | | | 34,718 | |
Goodwill impairment | | 354,005 | | 221,500 | | — | | — | | 130,957 | | 352,457 | | 1,548 | | (1,548 | ) | (g) | | — | |
Operating (loss) income | | (309,895 | ) | (262,554 | ) | 65,310 | | 86,967 | | (186,242 | ) | (296,519 | ) | (13,376 | ) | (4,166 | ) | | | (17,542 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | |
Interest income | | 18,493 | | 39 | | 7,135 | | 3,022 | | 11 | | 10,207 | | 8,286 | | 5,490 | | (e) | | 13,776 | |
Interest expense | | (27,377 | ) | — | | (113 | ) | (5,905 | ) | (328 | ) | (6,346 | ) | (21,031 | ) | (4,833 | ) | (e) | | (25,864 | ) |
Equity in income (losses) of unconsolidated affiliates | | 11,425 | | — | | — | | (802 | ) | — | | (802 | ) | 12,227 | | — | | | | 12,227 | |
Other (expense) income | | (87,012 | ) | — | | (540 | ) | 657 | | (2 | ) | 115 | | (87,127 | ) | (1,797 | ) | (g) | | (88,924 | ) |
Total other (expense) income, net | | (84,471 | ) | 39 | | 6,482 | | (3,028 | ) | (319 | ) | 3,174 | | (87,645 | ) | (1,140 | ) | | | (88,785 | ) |
(Loss) earnings from continuing operations before income taxes and minority interest | | (394,366 | ) | (262,515 | ) | 71,792 | | 83,939 | | (186,561 | ) | (293,345 | ) | (101,021 | ) | (5,306 | ) | | | (106,327 | ) |
Income tax benefit (provision) | | 7,516 | | 22,544 | | (27,485 | ) | (29,675 | ) | 13,842 | | (20,774 | ) | 28,290 | | (10,052 | ) | (h) | | 18,238 | |
Minority interest in losses (income) of consolidated subsidiaries | | 2,262 | | — | | (7 | ) | 1,455 | | — | | 1,448 | | 814 | | — | | | | 814 | |
(Loss) earnings from continuing operations | | $ | (384,588 | ) | $ | (239,971 | ) | $ | 44,300 | | $ | 55,719 | | $ | (172,719 | ) | $ | (312,671 | ) | $ | (71,917 | ) | $ | (15,358 | ) | | | $ | (87,275 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Loss per share from continuing operations: (i) | | | | | | | | | | | | | | | | | | | | | |
Basic loss per share | | $ | (1.38 | ) | | | | | | | | | | | | | | | | | $ | (0.63 | ) |
Diluted loss per share | | $ | (1.38 | ) | | | | | | | | | | | | | | | | | $ | (0.63 | ) |
| | | | | | | | | | | | | | | |
Non-cash compensation expense is included in the following line items in the condensed combined statements of operations: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Cost of sales | | $ | 4,441 | | $ | 603 | | $ | 240 | | $ | 538 | | $ | 162 | | $ | 1,543 | | $ | 2,898 | | $ | — | | | | $ | 2,898 | |
Selling and marketing expense | | 4,861 | | 660 | | 263 | | 588 | | 177 | | 1,688 | | 3,173 | | — | | | | 3,173 | |
General and administrative expense | | 52,531 | | 6,468 | | 2,590 | | 10,267 | | 1,878 | | 21,203 | | 31,328 | | 7 | | (g) | | 31,335 | |
Other operating expense | | 106 | | 6 | | — | | — | | 2 | | 8 | | 98 | | (7 | ) | (g) | | 91 | |
Total non-cash compensation expense | | $ | 61,939 | | $ | 7,737 | | $ | 3,093 | | $ | 11,393 | | $ | 2,219 | | $ | 24,442 | | $ | 37,497 | | $ | — | | | | $ | 37,497 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
6
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
| | IAC
Condensed
Six Months
Ended
June 30,
2007 | | HSN, Inc.
Condensed
Six Months
Ended
June 30,
2007 | | Interval Leisure
Group, Inc.
Condensed
Six Months
Ended
June 30,
2007 | | Ticketmaster
Condensed
Six Months
Ended
June 30,
2007 | | Tree.com, Inc.
Condensed
Six Months
Ended
June 30,
2007 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
Six Months
Ended
June 30,
2007 | |
| | (In thousands) | |
Product sales | | $ | 1,389,133 | | $ | 1,348,211 | | $ | — | | $ | — | | $ | — | | $ | 1,348,211 | | $ | 40,922 | | $ | 2 | | (e) | | $ | 40,924 | |
Service revenue | | 1,572,607 | | — | | 172,318 | | 596,993 | | 220,638 | | 989,949 | | 582,658 | | (5,241 | ) | (e), (g) | | 577,417 | |
Net revenue | | 2,961,740 | | 1,348,211 | | 172,318 | | 596,993 | | 220,638 | | 2,338,160 | | 623,580 | | (5,239 | ) | | | 618,341 | |
Cost of sales—product sales (exclusive of depreciation shown separately below) | | 868,221 | | 840,180 | | — | | — | | — | | 840,180 | | 28,041 | | 984 | | (e), (g) | | 29,025 | |
Cost of sales—service revenue (exclusive of depreciation shown separately below) | | 677,633 | | — | | 41,452 | | 368,644 | | 41,438 | | 451,534 | | 226,099 | | (6,717 | ) | (e), (g) | | 219,382 | |
Gross profit | | 1,415,886 | | 508,031 | | 130,866 | | 228,349 | | 179,200 | | 1,046,446 | | 369,440 | | 494 | | | | 369,934 | |
Selling and marketing expense | | 641,826 | | 290,009 | | 23,075 | | 15,231 | | 113,330 | | 441,645 | | 200,181 | | 1,209 | | (e) | | 201,390 | |
General and administrative expense | | 392,532 | | 105,040 | | 33,065 | | 74,150 | | 62,158 | | 274,413 | | 118,119 | | 6,413 | | (e), (f), (g) | | 124,532 | |
Other operating expense | | 57,937 | | 28,747 | | — | | — | | 8,166 | | 36,913 | | 21,024 | | 124 | | (g) | | 21,148 | |
Amortization of non-cash marketing | | 24,458 | | 450 | | — | | — | | — | | 450 | | 24,008 | | — | | | | 24,008 | |
Amortization of intangibles | | 59,240 | | 6,786 | | 12,610 | | 13,520 | | 10,287 | | 43,203 | | 16,037 | | — | | | | 16,037 | |
Depreciation | | 73,800 | | 17,089 | | 3,853 | | 18,592 | | 5,419 | | 44,953 | | 28,847 | | — | | | | 28,847 | |
Operating income (loss) | | 166,093 | | 59,910 | | 58,263 | | 106,856 | | (20,160 | ) | 204,869 | | (38,776 | ) | (7,252 | ) | | | (46,028 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | |
Interest income | | 37,750 | | 189 | | 5,278 | | 13,877 | | 277 | | 19,621 | | 18,129 | | 16,215 | | (e) | | 34,344 | |
Interest expense | | (30,613 | ) | — | | (116 | ) | (399 | ) | (521 | ) | (1,036 | ) | (29,577 | ) | (180 | ) | (e) | | (29,757 | ) |
Equity in income of unconsolidated affiliates | | 14,483 | | — | | — | | 1,825 | | — | | 1,825 | | 12,658 | | — | | | | 12,658 | |
Other income (expense) | | 7,650 | | (256 | ) | (849 | ) | (125 | ) | 1 | | (1,229 | ) | 8,879 | | — | | | | 8,879 | |
Total other income (expense), net | | 29,270 | | (67 | ) | 4,313 | | 15,178 | | (243 | ) | 19,181 | | 10,089 | | 16,035 | | | | 26,124 | |
Earnings (loss) from continuing operations before income taxes and minority interest | | 195,363 | | 59,843 | | 62,576 | | 122,034 | | (20,403 | ) | 224,050 | | (28,687 | ) | 8,783 | | | | (19,904 | ) |
Income tax (provision) benefit | | (71,258 | ) | (22,771 | ) | (24,005 | ) | (44,510 | ) | 7,788 | | (83,498 | ) | 12,240 | | (4,473 | ) | (h) | | 7,767 | |
Minority interest in losses (income) of consolidated subsidiaries | | 240 | | — | | (3 | ) | 205 | | — | | 202 | | 38 | | — | | | | 38 | |
Earnings (loss) from continuing operations | | $ | 124,345 | | $ | 37,072 | | $ | 38,568 | | $ | 77,729 | | $ | (12,615 | ) | $ | 140,754 | | $ | (16,409 | ) | $ | 4,310 | | | | $ | (12,099 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Earnings (loss) per share from continuing operations: (i) | | | | | | | | | | | | | | | | | | | | | |
Basic earnings (loss) per share | | $ | 0.43 | | | | | | | | | | | | | | | | | | $ | (0.08 | ) |
Diluted earnings (loss) per share | | $ | 0.41 | | | | | | | | | | | | | | | | | | $ | (0.08 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Non-cash compensation expense is included in the following line items in the condensed combined statements of operations: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Cost of sales | | $ | 3,886 | | $ | 480 | | $ | 107 | | $ | 390 | | $ | 176 | | $ | 1,153 | | $ | 2,733 | | $ | — | | | | $ | 2,733 | |
Selling and marketing expense | | 4,254 | | 525 | | 117 | | 428 | | 192 | | 1,262 | | 2,992 | | — | | | | 2,992 | |
General and administrative expense | | 42,518 | | 5,247 | | 1,133 | | 4,124 | | 2,109 | | 12,613 | | 29,905 | | 5 | | (g) | | 29,910 | |
Other operating expense | | 101 | | 4 | | — | | — | | 2 | | 6 | | 95 | | (5 | ) | (g) | | 90 | |
Total non-cash compensation expense | | $ | 50,759 | | $ | 6,256 | | $ | 1,357 | | $ | 4,942 | | $ | 2,479 | | $ | 15,034 | | $ | 35,725 | | $ | — | | | | $ | 35,725 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
7
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
| | IAC
Condensed
Including EPI
Year Ended
December 31,
2007 | | (j)
EPI
Year Ended
December 31,
2007 | | Subtotal | | HSN, Inc.
Condensed
Year Ended
December 31,
2007 | | Interval Leisure
Group, Inc.
Condensed
Year Ended
December 31,
2007 | | Ticketmaster
Condensed
Year Ended
December 31,
2007 | | Tree.com, Inc.
Condensed Year Ended
December 31,
2007 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
Year Ended
December 31,
2007 | |
| | (In thousands) | |
Product sales | | $ | 3,180,771 | | $ | 179,143 | | $ | 3,001,628 | | $ | 2,908,242 | | $ | — | | $ | — | | $ | — | | $ | 2,908,242 | | $ | 93,386 | | $ | 4 | | (e) | | $ | 93,390 | |
Service revenue | | 3,192,639 | | — | | 3,192,639 | | — | | 360,407 | | 1,240,477 | | 346,378 | | 1,947,262 | | 1,245,377 | | (6,185 | ) | (e), (g) | | 1,239,192 | |
Net revenue | | 6,373,410 | | 179,143 | | 6,194,267 | | 2,908,242 | | 360,407 | | 1,240,477 | | 346,378 | | 4,855,504 | | 1,338,763 | | (6,181 | ) | | | 1,332,582 | |
Cost of sales—product sales (exclusive of depreciation shown separately below) | | 1,934,976 | | 51,662 | | 1,883,314 | | 1,820,048 | | — | | — | | — | | 1,820,048 | | 63,266 | | 1,641 | | (e), (g) | | 64,907 | |
Cost of sales—service revenue (exclusive of depreciation shown separately below) | | 1,439,480 | | 58 | | 1,439,422 | | — | | 100,799 | | 766,538 | | 73,114 | | 940,451 | | 498,971 | | (9,557 | ) | (e), (g) | | 489,414 | |
Gross profit | | 2,998,954 | | 127,423 | | 2,871,531 | | 1,088,194 | | 259,608 | | 473,939 | | 273,264 | | 2,095,005 | | 776,526 | | 1,735 | | | | 778,261 | |
Selling and marketing expense | | 1,343,542 | | 83,712 | | 1,259,830 | | 595,911 | | 45,835 | | 43,487 | | 187,612 | | 872,845 | | 386,985 | | 4,537 | | (e) | | 391,522 | |
General and administrative expense | | 842,938 | | 29,801 | | 813,137 | | 211,955 | | 71,913 | | 149,478 | | 122,111 | | 555,457 | | 257,680 | | 15,871 | | (e), (f), (g) | | 273,551 | |
Other operating expense | | 106,329 | | 811 | | 105,518 | | 59,051 | | — | | — | | (9 | ) | 59,042 | | 46,476 | | (48 | ) | (g) | | 46,428 | |
Amortization of non-cash marketing | | 54,112 | | — | | 54,112 | | 4,442 | | — | | — | | — | | 4,442 | | 49,670 | | — | | | | 49,670 | |
Amortization of intangibles | | 147,417 | | 11,455 | | 135,962 | | 12,681 | | 26,879 | | 26,200 | | 34,469 | | 100,229 | | 35,733 | | — | | | | 35,733 | |
Depreciation | | 156,416 | | 5,261 | | 151,155 | | 34,363 | | 8,415 | | 38,458 | | 10,058 | | 91,294 | | 59,861 | | — | | | | 59,861 | |
Goodwill impairment | | 507,764 | | 48,301 | | 459,463 | | — | | — | | — | | 459,463 | | 459,463 | | — | | — | | | | — | |
Operating (loss) income | | (159,564 | ) | (51,918 | ) | (107,646 | ) | 169,791 | | 106,566 | | 216,316 | | (540,440 | ) | (47,767 | ) | (59,879 | ) | (18,625 | ) | | | (78,504 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | 67,516 | | 188 | | 67,328 | | 252 | | 10,345 | | 33,065 | | 1,171 | | 44,833 | | 22,495 | | 36,436 | | (e) | | 58,931 | |
Interest expense | | (61,069 | ) | (2 | ) | (61,067 | ) | — | | (205 | ) | (1,003 | ) | (986 | ) | (2,194 | ) | (58,873 | ) | (181 | ) | (e) | | (59,054 | ) |
Gain on sale of VUE interests | | 16,669 | | — | | 16,669 | | — | | — | | — | | — | | — | | 16,669 | | — | | | | 16,669 | |
Equity in income of unconsolidated affiliates | | 28,653 | | — | | 28,653 | | — | | — | | 6,301 | | — | | 6,301 | | 22,352 | | — | | | | 22,352 | |
Other income (expense) | | 35,717 | | (71 | ) | 35,788 | | (256 | ) | (606 | ) | 1,120 | | 14 | | 272 | | 35,516 | | — | | | | 35,516 | |
Total other income (expense), net | | 87,486 | | 115 | | 87,371 | | (4 | ) | 9,534 | | 39,483 | | 199 | | 49,212 | | 38,159 | | 36,255 | | | | 74,414 | |
(Loss) earnings from continuing operations before income taxes and minority interest | | (72,078 | ) | (51,803 | ) | (20,275 | ) | 169,787 | | 116,100 | | 255,799 | | (540,241 | ) | 1,445 | | (21,720 | ) | 17,630 | | | | (4,090 | ) |
Income tax (provision) benefit | | (138,052 | ) | 9,123 | | (147,175 | ) | (64,554 | ) | (45,032 | ) | (89,007 | ) | (10,161 | ) | (208,754 | ) | 61,579 | | (63,900 | ) | (h) | | (2,321 | ) |
Minority interest in losses (income) of consolidated subsidiaries | | 4,561 | | — | | 4,561 | | — | | (12 | ) | 2,559 | | — | | 2,547 | | 2,014 | | — | | | | 2,014 | |
(Loss) earnings from continuing operations | | $ | (205,569 | ) | $ | (42,680 | ) | $ | (162,889 | ) | $ | 105,233 | | $ | 71,056 | | $ | 169,351 | | $ | (550,402 | ) | $ | (204,762 | ) | $ | 41,873 | | $ | (46,270 | ) | | | $ | (4,397 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Loss per share from continuing operations: (i) | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic loss per share | | $ | (0.72 | ) | | | | | | | | | | | | | | | | | | | | | $ | (0.03 | ) |
Diluted loss per share | | $ | (0.72 | ) | | | | | | | | | | | | | | | | | | | | | $ | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-cash compensation expense is included in the following line items in the condensed combined statements of operations: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Cost of sales | | $ | 7,978 | | $ | 59 | | $ | 7,919 | | $ | 937 | | $ | 282 | | $ | 800 | | $ | 248 | | $ | 2,267 | | $ | 5,652 | | $ | — | | | | $ | 5,652 | |
Selling and marketing expense | | 8,732 | | 65 | | 8,667 | | 1,025 | | 308 | | 876 | | 272 | | 2,481 | | 6,186 | | — | | | | 6,186 | |
General and administrative expense | | 88,699 | | 617 | | 88,082 | | 10,189 | | 3,039 | | 10,896 | | 2,403 | | 26,527 | | 61,555 | | 11 | | (g) | | 61,566 | |
Other operating expense | | 203 | | — | | 203 | | 9 | | — | | — | | 2 | | 11 | | 192 | | (11 | ) | (g) | | 181 | |
Total non-cash compensation expense | | $ | 105,612 | | $ | 741 | | $ | 104,871 | | $ | 12,160 | | $ | 3,629 | | $ | 12,572 | | $ | 2,925 | | $ | 31,286 | | $ | 73,585 | | $ | — | | | | $ | 73,585 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
8
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
| | IAC
Condensed
Including EPI
Year Ended
December 31,
2006 | | (j)
EPI
Year Ended
December 31,
2006 | | Subtotal | | HSN, Inc.
Condensed
Year Ended
December 31,
2006 | | Interval Leisure
Group, Inc.
Condensed
Year Ended
December 31,
2006 | | Ticketmaster
Condensed
Year Ended
December 31,
2006 | | Tree.com, Inc.
Condensed
Year Ended
December 31,
2006 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
Year Ended
December 31,
2006 | |
| | (In thousands) | |
Product sales | | $ | 3,127,958 | | $ | 194,002 | | $ | 2,933,956 | | $ | 2,877,954 | | $ | — | | $ | — | | $ | — | | $ | 2,877,954 | | $ | 56,002 | | $ | 19 | | (e) | | $ | 56,021 | |
Service revenue | | 2,780,944 | | — | | 2,780,944 | | — | | 288,646 | | 1,062,672 | | 476,478 | | 1,827,796 | | 953,148 | | (8,576 | ) | (e), (g) | | 944,572 | |
Net revenue | | 5,908,902 | | 194,002 | | 5,714,900 | | 2,877,954 | | 288,646 | | 1,062,672 | | 476,478 | | 4,705,750 | | 1,009,150 | | (8,557 | ) | | | 1,000,593 | |
Cost of sales—product sales (exclusive of depreciation shown separately below) | | 1,860,245 | | 55,302 | | 1,804,943 | | 1,765,203 | | — | | — | | — | | 1,765,203 | | 39,740 | | 1,794 | | (e), (g) | | 41,534 | |
Cost of sales—service revenue (exclusive of depreciation shown separately below) | | 1,120,174 | | 2,935 | | 1,117,239 | | — | | 66,293 | | 637,152 | | 73,217 | | 776,662 | | 340,577 | | (13,031 | ) | (e), (g) | | 327,546 | |
Gross profit | | 2,928,483 | | 135,765 | | 2,792,718 | | 1,112,751 | | 222,353 | | 425,520 | | 403,261 | | 2,163,885 | | 628,833 | | 2,680 | | | | 631,513 | |
Selling and marketing expense | | 1,265,840 | | 85,682 | | 1,180,158 | | 584,997 | | 41,635 | | 20,123 | | 218,910 | | 865,665 | | 314,493 | | 8,027 | | (e) | | 322,520 | |
General and administrative expense | | 748,220 | | 27,481 | | 720,739 | | 186,261 | | 61,538 | | 118,317 | | 119,284 | | 485,400 | | 235,339 | | 15,016 | | (e), (f), (g) | | 250,355 | |
Other operating expense | | 114,188 | | 3,892 | | 110,296 | | 56,800 | | — | | — | | 15,168 | | 71,968 | | 38,328 | | (641 | ) | (g) | | 37,687 | |
Amortization of non-cash marketing | | 37,125 | | — | | 37,125 | | — | | — | | — | | — | | — | | 37,125 | | — | | | | 37,125 | |
Amortization of intangibles | | 182,732 | | 29,933 | | 152,799 | | 34,224 | | 25,220 | | 27,109 | | 24,018 | | 110,571 | | 42,228 | | — | | | | 42,228 | |
Depreciation | | 150,503 | | 5,704 | | 144,799 | | 37,273 | | 7,832 | | 35,080 | | 11,710 | | 91,895 | | 52,904 | | — | | | | 52,904 | |
Goodwill impairment | | 189,085 | | 189,085 | | — | | — | | — | | — | | — | | — | | — | | — | | | | — | |
Operating income (loss) | | 240,790 | | (206,012 | ) | 446,802 | | 213,196 | | 86,128 | | 224,891 | | 14,171 | | 538,386 | | (91,584 | ) | (19,722 | ) | | | (111,306 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | 70,381 | | 401 | | 69,980 | | 586 | | 8,914 | | 33,982 | | 1,307 | | 44,789 | | 25,191 | | 38,561 | | (e) | | 63,752 | |
Interest expense | | (60,075 | ) | (1 | ) | (60,074 | ) | — | | (357 | ) | (302 | ) | (1,556 | ) | (2,215 | ) | (57,859 | ) | (18 | ) | (e) | | (57,877 | ) |
Equity in income of unconsolidated affiliates | | 34,324 | | — | | 34,324 | | — | | — | | 2,997 | | — | | 2,997 | | 31,327 | | — | | | | 31,327 | |
Other (expense) income | | (2,458 | ) | — | | (2,458 | ) | (1,040 | ) | (774 | ) | 982 | | (207 | ) | (1,039 | ) | (1,419 | ) | (337 | ) | (g) | | (1,756 | ) |
Total other income (expense), net | | 42,172 | | 400 | | 41,772 | | (454 | ) | 7,783 | | 37,659 | | (456 | ) | 44,532 | | (2,760 | ) | 38,206 | | | | 35,446 | |
Earnings (loss) from continuing operations before income taxes and minority interest | | 282,962 | | (205,612 | ) | 488,574 | | 212,742 | | 93,911 | | 262,550 | | 13,715 | | 582,918 | | (94,344 | ) | 18,484 | | | | (75,860 | ) |
Income tax (provision) benefit | | (119,245 | ) | 41,741 | | (160,986 | ) | (79,210 | ) | (35,868 | ) | (85,967 | ) | (5,022 | ) | (206,067 | ) | 45,081 | | 3,380 | | (h) | | 48,461 | |
Minority interest in losses of consolidated subsidiaries | | 548 | | — | | 548 | | — | | — | | 118 | | — | | 118 | | 430 | | 337 | | (g) | | 767 | |
Earnings (loss) from continuing operations | | $ | 164,265 | | $ | (163,871 | ) | $ | 328,136 | | $ | 133,532 | | $ | 58,043 | | $ | 176,701 | | $ | 8,693 | | $ | 376,969 | | $ | (48,833 | ) | $ | 22,201 | | | | $ | (26,632 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings (loss) per share from continuing operations: (i) | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings (loss) per share | | $ | 0.54 | | | | | | | | | | | | | | | | | | | | | | $ | (0.17 | ) |
Diluted earnings (loss) per share | | $ | 0.51 | | | | | | | | | | | | | | | | | | | | | | $ | (0.17 | ) |
Non-cash compensation expense is included in the following line items in the condensed combined statements of operations: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Cost of sales | | $ | 6,962 | | $ | (6 | ) | $ | 6,968 | | $ | 755 | | $ | 225 | | $ | 654 | | $ | 263 | | $ | 1,897 | | $ | 5,071 | | $ | — | | | | $ | 5,071 | |
Selling and marketing expense | | 7,621 | | (5 | ) | 7,626 | | 1,117 | | 210 | | 646 | | 289 | | 2,262 | | 5,364 | | — | | | | 5,364 | |
General and administrative expense | | 77,613 | | (54 | ) | 77,667 | | 9,867 | | 2,851 | | 6,539 | | 1,603 | | 20,860 | | 56,807 | | 6 | | (g) | | 56,813 | |
Other operating expense | | 148 | | — | | 148 | | 7 | | — | | — | | 22 | | 29 | | 119 | | (6 | ) | (g) | | 113 | |
Total non-cash compensation expense | | $ | 92,344 | | $ | (65 | ) | $ | 92,409 | | $ | 11,746 | | $ | 3,286 | | $ | 7,839 | | $ | 2,177 | | $ | 25,048 | | $ | 67,361 | | $ | — | | | | $ | 67,361 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
9
IAC/INTERACTIVECORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
| | IAC
Condensed
Including EPI
Year Ended
December 31,
2005 | | (j)
EPI
Year Ended
December 31,
2005 | | Subtotal | | HSN, Inc.
Condensed
Year Ended
December 31,
2005 | | Interval Leisure
Group, Inc.
Condensed
Year Ended
December 31,
2005 | | Ticketmaster
Condensed
Year Ended
December 31,
2005 | | Tree.com, Inc.
Condensed
Year Ended
December 31,
2005 | | Total
Spincos | | Subtotal | | Spincos
Pro Forma
Adjustments | | Notes | | Total
Pro Forma
Condensed
Year Ended
December 31,
2005 | |
| | (In thousands) | |
Product sales | | $ | 2,887,029 | | $ | 216,078 | | $ | 2,670,951 | | $ | 2,670,951 | | $ | — | | $ | — | | $ | — | | $ | 2,670,951 | | $ | — | | $ | — | | | | $ | — | |
Service revenue | | 2,137,606 | | — | | 2,137,606 | | — | | 260,843 | | 928,704 | | 421,355 | | 1,610,902 | | 526,704 | | (3,211 | ) | (e), (g) | | 523,493 | |
Net revenue | | 5,024,635 | | 216,078 | | 4,808,557 | | 2,670,951 | | 260,843 | | 928,704 | | 421,355 | | 4,281,853 | | 526,704 | | (3,211 | ) | | | 523,493 | |
Cost of sales—product sales (exclusive of depreciation shown separately below) | | 1,715,154 | | 68,575 | | 1,646,579 | | 1,647,857 | | — | | — | | — | | 1,647,857 | | (1,278 | ) | 1,287 | | (e), (g) | | 9 | |
Cost of sales—service revenue (exclusive of depreciation shown separately below) | | 892,295 | | 3,841 | | 888,454 | | — | | 60,794 | | 561,060 | | 66,342 | | 688,196 | | 200,258 | | (7,146 | ) | (e), (g) | | 193,112 | |
Gross profit | | 2,417,186 | | 143,662 | | 2,273,524 | | 1,023,094 | | 200,049 | | 367,644 | | 355,013 | | 1,945,800 | | 327,724 | | 2,648 | | | | 330,372 | |
Selling and marketing expense | | 965,077 | | 85,408 | | 879,669 | | 500,877 | | 38,424 | | 17,691 | | 176,749 | | 733,741 | | 145,928 | | 4,606 | | (e) | | 150,534 | |
General and administrative expense | | 725,911 | | 33,753 | | 692,158 | | 171,180 | | 56,213 | | 121,695 | | 101,975 | | 451,063 | | 241,095 | | 14,752 | | (e), (f), (g) | | 255,847 | |
Other operating expense | | 87,687 | | 3,604 | | 84,083 | | 55,494 | | — | | — | | 15,001 | | 70,495 | | 13,588 | | (812 | ) | (g) | | 12,776 | |
Amortization of intangibles | | 185,157 | | 6,384 | | 178,773 | | 59,444 | | 25,220 | | 28,748 | | 35,314 | | 148,726 | | 30,047 | | — | | | | 30,047 | |
Depreciation | | 127,073 | | 4,766 | | 122,307 | | 40,947 | | 7,368 | | 33,495 | | 6,720 | | 88,530 | | 33,777 | | — | | | | 33,777 | |
Operating income (loss) | | 326,281 | | 9,747 | | 316,534 | | 195,152 | | 72,824 | | 166,015 | | 19,254 | | 453,245 | | (136,711 | ) | (15,898 | ) | | | (152,609 | ) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | 138,478 | | 133 | | 138,345 | | 345 | | 6,518 | | 17,417 | | 195 | | 24,475 | | 113,870 | | 20,330 | | (e) | | 134,200 | |
Interest expense | | (77,316 | ) | (14 | ) | (77,302 | ) | (992 | ) | (623 | ) | (65 | ) | (2,195 | ) | (3,875 | ) | (73,427 | ) | (135 | ) | (e) | | (73,562 | ) |
Gain on sale of VUE interests | | 523,487 | | — | | 523,487 | | — | | — | | — | | — | | — | | 523,487 | | — | | | | 523,487 | |
Equity in income of unconsolidated affiliates | | 47,844 | | — | | 47,844 | | — | | — | | 3,401 | | — | | 3,401 | | 44,443 | | — | | | | 44,443 | |
Other (expense) income | | (12,552 | ) | 325 | | (12,877 | ) | (1,118 | ) | (272 | ) | 689 | | (35 | ) | (736 | ) | (12,141 | ) | (327 | ) | (g) | | (12,468 | ) |
Total other income (loss), net | | 619,941 | | 444 | | 619,497 | | (1,765 | ) | 5,623 | | 21,442 | | (2,035 | ) | 23,265 | | 596,232 | | 19,868 | | | | 616,100 | |
Earnings from continuing operations before income taxes and minority interest | | 946,222 | | 10,191 | | 936,031 | | 193,387 | | 78,447 | | 187,457 | | 17,219 | | 476,510 | | 459,521 | | 3,970 | | | | 463,491 | |
Income tax provision | | (375,188 | ) | (5,037 | ) | (370,151 | ) | (66,310 | ) | (29,204 | ) | (68,288 | ) | (11,420 | ) | (175,222 | ) | (194,929 | ) | 29,538 | | (h) | | (165,391 | ) |
Minority interest in (income) losses of consolidated subsidiaries | | (2,129 | ) | — | | (2,129 | ) | — | | — | | (1,470 | ) | 52 | | (1,418 | ) | (711 | ) | 327 | | (g) | | (384 | ) |
Earnings from continuing operations | | $ | 568,905 | | $ | 5,154 | | $ | 563,751 | | $ | 127,077 | | $ | 49,243 | | $ | 117,699 | | $ | 5,851 | | $ | 299,870 | | $ | 263,881 | | $ | 33,835 | | | | $ | 297,716 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per share from continuing operations: (i) | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 1.70 | | | | | | | | | | | | | | | | | | | | | | $ | 1.76 | |
Diluted earnings per share | | $ | 1.60 | | | | | | | | | | | | | | | | | | | | | | $ | 1.66 | |
Non-cash compensation expense is included in the following line items in the condensed combined statements of operations:
Cost of sales | | $ | 7,364 | | $ | 60 | | $ | 7,304 | | $ | 524 | | $ | 82 | | $ | 1,664 | | $ | 317 | | $ | 2,587 | | $ | 4,717 | | $ | — | | | | $ | 4,717 | |
Selling and marketing expense | | 5,840 | | 47 | | 5,793 | | 1,143 | | 46 | | 621 | | 333 | | 2,143 | | 3,650 | | — | | | | 3,650 | |
General and administrative expense | | 124,215 | | 989 | | 123,226 | | 12,057 | | 1,131 | | 18,020 | | 6,620 | | 37,828 | | 85,398 | | 1 | | (g) | | 85,399 | |
Other operating expense | | 118 | | 1 | | 117 | | 1 | | — | | — | | 115 | | 116 | | 1 | | (1 | ) | (g) | | — | |
Total non-cash compensation expense | | $ | 137,537 | | $ | 1,097 | | $ | 136,440 | | $ | 13,725 | | $ | 1,259 | | $ | 20,305 | | $ | 7,385 | | $ | 42,674 | | $ | 93,766 | | $ | — | | | | $ | 93,766 | |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
10
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(In thousands)
| | | As of
June 30,
2008 | | As of
December 31,
2007 | | As of
December 31,
2006 | |
| | | | | | | | |
(a) | To record the decrease to IAC’s cash and cash equivalents pursuant to the terms of the spin-off. | |
| | | | | | | | |
| | Cash and cash equivalents | | $ | (150,807 | ) | $ | (77,755 | ) | $ | (82,694 | ) |
| | | | | | | | |
(b) | To reflect the Spincos’ historical income tax assets and liabilities and related impact to the carrying value of the Spincos’ goodwill as if each had been a member of IAC’s consolidated group for all periods presented. | |
| | | | | | | | |
| | Current deferred tax asset | | $ | 11,145 | | $ | 1,238 | | $ | 33,798 | |
| | Goodwill | | 2,303 | | 122 | | 21 | |
| | Non-current deferred tax asset | | 92,039 | | 82,542 | | 854 | |
| | Current income taxes payable | | 4,084 | | (535 | ) | 4,968 | |
| | Non-current income taxes payable | | (17 | ) | — | | — | |
| | Non-current deferred tax liability | | 60,197 | | 34,054 | | (70,447 | ) |
| | Minority interest | | 723 | | 723 | | — | |
| | | | | | | | |
(c) | To reclassify the Spincos’ historical assets, liabilities and shareholders’ equity, including pro forma adjustments above, from continuing operations to discontinued operations. | |
| | | | | | | | |
| | Cash and cash equivalents | | $ | 35,567 | | $ | 56,287 | | $ | 54,841 | |
| | Current assets of discontinued operations | | 1,779,535 | | 1,729,192 | | 1,890,387 | |
| | Non-current assets of discontinued operations | | 6,032,712 | | 6,101,743 | | 6,405,393 | |
| | Accounts payable, trade | | 35,567 | | 56,287 | | 54,841 | |
| | Current liabilities of discontinued operations | | 1,244,824 | | 1,265,307 | | 1,400,030 | |
| | Non-current liabilities of discontinued operations | | 1,097,550 | | 1,127,479 | | 1,249,315 | |
| | Invested capital | | 8,377,730 | | 8,174,212 | | 7,806,592 | |
| | (Receivable from) payable to IAC and subsidiaries | | (2,615,327 | ) | (2,471,675 | ) | (2,349,665 | ) |
| | (Accumulated deficit) retained earnings | | (460,202 | ) | (334,882 | ) | 145,194 | |
| | Accumulated other comprehensive income | | 57,365 | | 42,399 | | 61,772 | |
(d) | To reclassify the assets and liabilities of EPI as “Assets held for sale” and “Liabilities held for sale” as of December 31, 2006. | |
11
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Continued)
(In thousands)
| | | For the Six Months
Ended | | For the Year Ended | |
| | | June 30,
2008 | | June 30,
2007 | | December 31,
2007 | | December 31,
2006 | | December 31,
2005 | |
| | |
(e) | To reclassify the previously recorded elimination of intercompany transactions between the Spincos and IAC’s other subsidiaries from continuing operations to discontinued operations as follows: | |
| | |
| Product sales | | $ | — | | $ | 2 | | $ | 4 | | $ | 19 | | $ | — | |
| Service revenue | | 1,231 | | 1,312 | | 3,591 | | 614 | | 758 | |
| Cost of sales-product sales | | 325 | | 600 | | 1,352 | | 1,095 | | 166 | |
| Cost of sales-service revenue | | 26 | | 220 | | 508 | | (3,142 | ) | (2,056 | ) |
| Selling and marketing expense | | 633 | | 1,209 | | 4,537 | | 8,027 | | 4,606 | |
| General and administrative expense | | 16 | | 45 | | 99 | | 25 | | (723 | ) |
| Interest income | | 5,490 | | 16,215 | | 36,436 | | 38,561 | | 20,330 | |
| Interest expense | | (4,833 | ) | (180 | ) | (181 | ) | (18 | ) | (135 | ) |
| | | | | | | | | | | | |
(f) | To reverse allocations previously made to the Spincos by IAC in the preparation of each Spinco’s historical carve-out financial statements. | |
| | |
| General and administrative expense | | $ | 5,945 | | $ | 7,452 | | $ | 16,684 | | $ | 14,350 | | $ | 14,663 | |
| | | | | | | | | | | | |
(g) | To reverse classification and other adjustments made by IAC in the preparation of the Spincos’ historical carve- out financial statements. | |
| | |
| Service revenue | | $ | — | | $ | (6,553 | ) | $ | (9,776 | ) | $ | (9,190 | ) | $ | (3,969 | ) |
| Cost of sales-product sales | | 59 | | 384 | | 289 | | 699 | | 1,121 | |
| Cost of sales-service revenue | | (59 | ) | (6,937 | ) | (10,065 | ) | (9,889 | ) | (5,090 | ) |
| General and administrative expense | | 8 | | (1,084 | ) | (912 | ) | 641 | | 812 | |
| Other operating expense | | (8 | ) | 124 | | (48 | ) | (641 | ) | (812 | ) |
| Goodwill impairment | | (1,548 | ) | — | | — | | — | | — | |
| Other (expense) income | | (1,797 | ) | — | | — | | (337 | ) | (327 | ) |
| Minority interest in losses of unconsolidated subsidiaries | | — | | — | | — | | 337 | | 327 | |
| | | | | | | | | | | | |
(h) | To reflect each Spinco’s historical income tax (provision) benefit as if it had been a member of IAC’s consolidated group for all periods presented. | |
| | |
| Income tax (provision) benefit | | $ | (10,052 | ) | $ | (4,473 | ) | $ | (63,900 | ) | $ | 3,380 | | $ | 29,538 | |
| | | | | | | | | | | |
(i) | Historical (loss) earnings per share have been restated to give effect to the one-for-two reverse stock split. | |
| | |
(j) | To classify the results of operations of EPI as discontinued operations for each of the years in the three-year period ended December 31, 2007. | |
| | | | | | | | | | | | | | | | | | |
12
