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IAC Reports Q2 Results

Tuesday, August 1, 2006 - 01:30

IAC/InterActiveCorp (NASDAQ: IACI) reported Q2 2006 results today.

                             SUMMARY RESULTS
                 $ in millions (except per share amounts)

                                     Q2 2006      Q2 2005    Growth
  Revenue                           $1,612.3     $1,371.8      18%

  Operating Income Before
   Amortization                       $165.1       $123.4      34%
  Adjusted Net Income                 $108.0        $96.6      12%
  Adjusted EPS                         $0.32        $0.28      16%

  Operating Income                     $81.2        $65.6      24%
  Net Income                           $53.8       $618.1     -91%
  GAAP Diluted EPS                     $0.17        $1.77     -91%

  See reconciliation of GAAP to non-GAAP measures beginning on page 13.


  IAC Overall

  -- Reported solid growth in revenue, Operating Income Before Amortization
     and Adjusted EPS for the second quarter of 2006.
  -- Generated $252.7 million in Free Cash Flow, and $371.4 million in net
     cash provided by operating activities, during the first six months of
     2006.
  -- Repurchased 19.5 million shares of common stock at an average price of
     $25.84 between April 29 and July 28, 2006. Year-to-date through July
     28, 2006, IAC repurchased 27.1 million shares at an average price of
     $26.80.
  -- Prior year net income included a $322.1 million after-tax gain on the
     sale of the company's interests in VUE. Prior year net income also
     benefited from a $79.6 million after-tax gain on the sale of Euvia, the
     results of Expedia, and a $62.8 million tax benefit associated with the
     write-off of the company's investment in TVTS, all of which were
     included in discontinued operations. Prior year Adjusted Net Income and
     net income benefited from interest income related to the company's
     interests in VUE.

  Sector Highlights

  -- Retailing results reflect higher revenue from catalogs, partially
     offset by slightly lower revenue at HSN. Strong online performance,
     including a modest contribution from Shoebuy.com (acquired in February
     2006), contributed to overall revenue growth.
  -- Services results benefited from continued worldwide strength at
     Ticketing and top line growth at Lending. Higher marketing and
     operating expenses amid a declining mortgage market adversely impacted
     Lending's profits.
  -- Media & Advertising results include IAC Search & Media, which increased
     revenue by 21% as compared to its prior year period. Citysearch
     delivered strong revenue growth and increased user traffic.
  -- Membership & Subscriptions results benefited from worldwide growth in
     subscribers and higher margins at Personals, as well as increased
     revenue and profits at Vacations.


                              SECTOR RESULTS

  Sector results for the quarter were as follows ($ in millions):

                                     Q2 2006      Q2 2005     Growth
  REVENUE
    Retailing                         $774.9       $761.6        2%
    Services                           533.2        445.7       20%
    Media & Advertising                131.3         11.5     1041%
    Membership & Subscriptions         171.1        161.3        6%
    Emerging Businesses                  6.4          2.8      131%
    Other                               (4.6)       (11.1)      59%
    Total                           $1,612.3     $1,371.8       18%

  OPERATING INCOME BEFORE AMORTIZATION
    Retailing                          $57.9        $58.7       -1%
    Services                            96.1         83.7       15%
    Media & Advertising                 10.7          1.9      468%
    Membership & Subscriptions          29.5         23.6       25%
    Emerging Businesses                 (6.6)        (4.4)     -48%
    Corporate and other                (22.6)       (40.1)      44%
    Total                             $165.1       $123.4       34%

  OPERATING INCOME (LOSS)
    Retailing                          $47.0        $42.9        9%
    Services                            80.9         66.6       21%
    Media & Advertising                (11.3)         1.8       NM
    Membership & Subscriptions          21.3         14.7       44%
    Emerging Businesses                 (6.8)        (4.7)     -44%
    Corporate and other                (49.8)       (55.8)      11%
    Total                              $81.2        $65.6       24%

Please see discussion of financial and operating results beginning on page 3 (including discussion on corporate and other expense on page 7) and reconciliations to the comparable GAAP measures and further segment detail beginning on page 13.

              DISCUSSION OF FINANCIAL AND OPERATING RESULTS

  RETAILING

                                            Q2 2006     Q2 2005    Growth
  Revenue                                           $ in millions
      U.S.                                  $696.2      $667.1         4%
      International                           78.7        94.5       -17%
                                            $774.9      $761.6         2%
  Operating Income Before Amortization
      U.S.                                   $60.5       $59.0         3%
      International                           (2.6)       (0.3)     -879%
                                             $57.9       $58.7        -1%
  Operating Income (Loss)
      U.S.                                   $49.9       $43.5        15%
      International                           (2.9)       (0.6)     -395%
                                             $47.0       $42.9         9%

Retailing results reflect higher revenue from catalogs, partially offset by slightly lower revenue at HSN. Strong online performance, including a modest contribution from Shoebuy.com (acquired in February 2006), contributed to overall revenue growth.

The decline in HSN sales was primarily due to disappointing performance in the Home Hard Goods and Health & Beauty categories, higher return rates in several product categories, as well as product mix shifts into categories with generally higher average return rates, on slightly lower unit volume. These declines were partially offset by a higher average price point. Catalogs revenue growth benefited primarily from higher circulation and average price point, partially offset by slightly higher return rates.

U.S. Operating Income Before Amortization grew slower than revenue primarily due to higher operating costs associated with the increased circulation of catalogs, and higher on-air distribution expenses, partially offset by higher gross margins primarily at the catalogs business. Operating income benefited from lower amortization of intangibles.

International revenue declined and losses increased due to decreased revenue across most product categories and higher return rates. Results were adversely impacted by order processing delays arising from difficulties related to the start up of a new fulfillment center and a decline in cable distribution. Foreign exchange had little impact on results during the period.

  SERVICES
                                            Q2 2006      Q2 2005     Growth
  Revenue                                             $ in millions
      Ticketing                              $295.1       $257.8        14%
      Lending                                 107.9         85.4        26%
      Real Estate                              15.0         14.9         1%
      Teleservices                             99.2         77.0        29%
      Home Services                            16.0         10.6        50%
                                             $533.2       $445.7        20%
  Operating Income Before Amortization
      Ticketing                               $75.9        $62.7        21%
      Lending                                  14.8         20.9       -29%
      Real Estate                              (4.6)        (5.9)       22%
      Teleservices                              5.6          2.4       133%
      Home Services                             4.4          3.6        21%
                                              $96.1        $83.7        15%
  Operating Income (Loss)
      Ticketing                               $68.9        $55.3        24%
      Lending                                   9.8         15.6       -37%
      Real Estate                              (6.8)        (9.4)       27%
      Teleservices                              5.6          2.4       133%
      Home Services                             3.5          2.7        27%
                                              $80.9        $66.6        21%

Services results benefited from continued worldwide strength at Ticketing and top line growth at Lending. Higher marketing and operating expenses amid a declining mortgage market adversely impacted Lending's profits.

Ticketing revenue was driven by a 7% increase in worldwide ticket sales and 6% higher average revenue per ticket in part due to a strong summer concert season and an increased contribution from sporting events. Domestic revenue increased 12% due to higher ticket volumes, particularly for concert events, and higher average revenue per ticket. International revenue grew by 21% due to higher ticket volumes, primarily from the United Kingdom and Australia. Foreign exchange had little impact on results during the period. Margin growth was attributable to operational leverage resulting from increased revenue and sales distribution efficiencies, partially offset by an increase in domestic ticket royalties.

Lending revenue was driven primarily by higher revenue per loan sold, increased sales of loans into the secondary market, and higher transmit revenue due to both growth in QF volume and higher prices on the exchange. Revenue from refinance, home equity and purchase loans grew strongly, despite the difficult market conditions. Profits were impacted by higher marketing expense as a percentage of revenue versus the prior year period due in part to lower close rates and higher costs associated with the origination of loans sold into the secondary market.

Real Estate revenue grew slightly due to the contribution from a new brokerage business, partially offset by the impact of lower close rates at the broker network. Losses decreased on lower marketing spending, partially offset by costs associated with the launch of the brokerage business and website development.

Teleservices reported higher revenue due primarily to strong performance under existing contracts as well as new business growth. Profits grew faster than revenue due primarily to a higher mix of off-shore business.

Home Services revenue benefited from increased customer service requests and a greater number of service providers in the network. Profits grew slower than revenue due to higher marketing and other operating expenses.

  MEDIA & ADVERTISING

                                            Q2 2006     Q2 2005      Growth
                                                     $ in millions
  Revenue                                    $131.3       $11.5       1041%
  Operating Income Before Amortization        $10.7        $1.9        468%
  Operating (Loss) Income                    $(11.3)       $1.8         NM

IAC Search & Media increased revenue by 21% as compared to its prior year period due largely to increases in revenue per query across most properties. Network revenue growth outpaced proprietary revenue growth due to an increase in syndicated search results. Proprietary revenue growth was attributable to strength at Ask.com in the U.S. and the Fun Web Products business, partially offset by weakness at Ask.com in the U.K. Profits declined significantly on a comparable basis to the year ago period due to increased marketing expense, higher revenue share payments to third-party traffic sources and higher other operating expenses. Operating loss for the current period was further impacted by higher amortization of non-cash marketing expense and intangibles of $9.5 million and $12.5 million, respectively. Citysearch delivered strong revenue growth and increased user traffic.

  MEMBERSHIP & SUBSCRIPTIONS

                                             Q2 2006      Q2 2005    Growth
  Revenue                                             $ in millions
      Vacations                               $74.1        $67.8         9%
      Personals                                78.3         61.2        28%
      Discounts                                19.5         33.1       -41%
      Intra-sector Elimination                 (0.8)        (0.7)      -10%
                                             $171.1       $161.3         6%
  Operating Income Before Amortization
      Vacations                               $28.9        $25.8        12%
      Personals                                17.3         10.4        66%
      Discounts                               (16.6)       (12.7)      -31%
                                              $29.5        $23.6        25%
  Operating Income (Loss)
      Vacations                               $22.5        $19.5        16%
      Personals                                16.6          9.5        74%
      Discounts                               (17.9)       (14.3)      -25%
                                              $21.3        $14.7        44%

Membership & Subscriptions results benefited from worldwide growth in subscribers and higher margins at Personals, as well as increased revenue and profits at Vacations.

Vacations revenue and profit growth was driven by a 5% increase in members and 5% growth in confirmations. Profit growth was largely attributable to higher gross margins, driven by 16% growth in confirmations online.

Personals revenue growth benefited from a 15% increase in worldwide paid subscribers and higher pricing. International paid subscribers grew by 16% due to continued expansion in several markets, most notably Scandinavia and the United Kingdom. Profit margins expanded due to lower domestic marketing spending as a percentage of revenue relative to the prior year period partially offset by increased operating costs related to Chemistry.com, which launched nationally during the first quarter.

Discounts revenue declined due to significantly lower sales of its primary spring season product offering. Profits declined due to lower revenue, offset in part by decreased commissions and lower employee costs.

OTHER ITEMS

Q2 Operating Income Before Amortization was also impacted by a decrease in corporate and other expense to $22.6 million. The prior year period included expenses and intercompany eliminations related to the Expedia spin-off totaling $17.0 million.

Q2 operating income was adversely impacted by higher non-cash compensation expense primarily due to the acquisition of IAC Search & Media. Non-cash compensation expense also increased due to equity grants and modifications during and subsequent to Q2 2005.

Q2 other income comparisons were adversely impacted by IAC's sale of its interests in VUE in June 2005 which generated a pre-tax gain of $523.5 and an after-tax gain of $322.1 million in Q2 2005. The VUE interests also produced interest income of $24.2 million and equity income of $43.1 million in Q2 2005. The absence of these items in 2006 was partially offset by a $5.1 million gain in Q2 2006 reflecting changes in the fair value of the derivatives that were created in the Expedia spin-off. The derivatives relate to IAC's obligation to deliver both IAC and Expedia shares upon the conversion of the Ask Convertible Notes and the exercise of certain IAC warrants.

Q2 net income growth was impacted by the above items, as well as by the decreased contribution of discontinued operations. Discontinued operations in Q2 2005 reflects a $79.6 million after-tax gain on the sale of Euvia, the inclusion of Expedia and a $62.8 million tax benefit associated with the write-off of the Company's investment in TVTS. During Q2 2006, Quiz TV Limited, which was previously reported in Emerging Businesses, ceased operations and is included in discontinued operations for all periods presented.

The effective tax rates for continuing operations and adjusted net income were 42% and 40% in Q2 2006, respectively. These effective tax rates were higher than the statutory rate of 35% due principally to state taxes. In addition, continuing operations was unfavorably impacted by interest on tax contingencies, partially offset by the non-taxable gain associated with changes in the fair value of the derivatives that were created in the Expedia spin-off. The effective tax rates for continuing operations and adjusted net income were 39% and 38% in Q2 2005, respectively. These effective tax rates were higher than the statutory rate of 35% due principally to state taxes and non-deductible transaction costs related to the Expedia spin-off. In addition, continuing operations was unfavorably impacted by non-deductible non-cash compensation expense.

LIQUIDITY AND CAPITAL RESOURCES

During Q2, IAC repurchased 17.3 million shares at an average price of $26.86. Additionally, during Q2 2006 $11.1 million of Ask Convertible Notes was converted into 0.4 million IAC common shares and 0.4 million Expedia common shares.

As of June 30, 2006, IAC had approximately $2.2 billion in cash, restricted cash and marketable securities, $1.2 billion in debt and, excluding $350.7 million in LendingTree Loans debt that is non-recourse to IAC, $1.3 billion in pro forma net cash and marketable securities.

DILUTIVE SECURITIES

IAC has various tranches of dilutive securities. The table below details these securities as well as potential dilution at various stock prices (shares in millions).

                                Avg.
                              Strike/
                       Shares  Con-    As of           Dilution at:
                              version 7/28/06

  Share Price                         $24.21  $25.00  $30.00  $35.00  $40.00

  Absolute Shares as of
   7/28/06              298.0          298.0   298.0   298.0   298.0   298.0

  RSUs and Other          8.7            8.7     8.7     8.6     8.5     8.4
  Options                27.7   $20.68   5.9     6.1     7.2     8.0     8.6
  Warrants               34.6   $27.88   4.1     4.3     5.5     7.8    10.4
  Convertible Notes       1.3   $14.82   1.3     1.3     1.3     1.3     1.3

  Total Treasury Method Dilution        19.9    20.4    22.5    25.6    28.7
   % Dilution                           6.3%    6.4%    7.0%    7.9%    8.8%
  Total Treasury Method Diluted Shares
   Outstanding                         317.9   318.4   320.5   323.6   326.7


                             CONFERENCE CALL

IAC will audiocast its conference call with investors and analysts discussing the company's Q2 financial results on Tuesday, August 1, 2006, at 11:00 a.m. Eastern Time (ET). This call will include the disclosure of certain information, including forward-looking information, which may be material to an investor's understanding of IAC's business. The live audiocast is open to the public at www.iac.com/investors.htm.

                            OPERATING METRICS

                                              Q2 2006     Q2 2005    Growth
  RETAILING

  Retailing - U.S.                   (a)
    Units shipped (mm)                          12.7         12.8       -1%
    Gross profit %                              39.8%        39.0%
    Return rate                                 18.0%        17.1%
    Average price point                       $59.97       $57.17        5%
    Internet %                       (b)          26%          23%
    HSN total homes - end of period (mm)        88.9         88.7        0%
    Catalogs mailed (mm)                       111.2        105.7        5%

  SERVICES

  Ticketing
    Number of tickets sold (mm)                 32.8         30.8        7%
    Gross value of tickets sold (mm)          $1,991       $1,705       17%

  Lending
    Transmitted QFs (000s)           (c)     1,062.2        803.8       32%
    Closings - units (000s)          (d)        70.9         71.4       -1%
    Closings - dollars ($mm)         (d)      $8,370       $8,360        0%

  Real Estate
    Closings - units (000s)                      3.4          4.0      -15%
    Closings - dollars ($mm)                    $869         $984      -12%

  MEDIA & ADVERTISING

  IAC Search & Media Revenue by traffic
   source (pro forma)
    Proprietary                                 63.0%        68.1%
    Network                                     37.0%        31.9%

  MEMBERSHIP & SUBSCRIPTIONS

  Vacations
    Members (000s)                             1,822        1,743        5%
    Confirmations (000s)                         227          216        5%
    Share of confirmations online                 23%          20%

  Personals
    Paid Subscribers (000s)                  1,296.4      1,127.9       15%

  (a) Retailing - U.S. metrics include HSN and the catalogs business.
      Cornerstone was acquired in April 2005.
  (b) Internet demand as a percent of total Retailing - U.S. demand
      excluding Liquidations and Services.
  (c) Customer "Qualification Forms" (QFs) transmitted to at least one
      exchange lender (including LendingTree Loans) plus QFs transmitted to
      at least one GetSmart lender.
  (d) Loan closings consist of loans closed by exchange lenders and directly
      by LendingTree Loans.


                        GAAP FINANCIAL STATEMENTS

  IAC CONSOLIDATED STATEMENT OF OPERATIONS
  (unaudited; $ in thousands except per share amounts)

                                Three Months Ended     Six Months Ended
                                     June 30,               June 30,
                                 2006       2005        2006        2005

  Product sales                 $799,071   $796,112  $1,595,916  $1,419,062
  Service revenue                813,251    575,704   1,563,757   1,085,147
     Net revenue               1,612,322  1,371,816   3,159,673   2,504,209
  Cost of sales-product sales    483,640    487,024     972,704     869,859
  Cost of sales-service revenue  372,603    283,408     705,357     533,382
     Gross profit                756,079    601,384   1,481,612   1,100,968

  Selling and marketing expense  334,606    251,491     656,048     432,329
  General and administrative
   expense                       207,246    183,632     398,412     344,141
  Other operating expense         35,231     24,880      70,346      49,802
  Amortization of non-cash
   marketing expense               9,532        -        17,996         -
  Amortization of intangibles     45,662     41,045      97,701      83,756
  Depreciation expense            42,581     34,716      86,386      70,338
     Operating income             81,221     65,620     154,723     120,602

  Other income (expense):
    Interest income               19,508     43,609      38,454      92,012
    Interest expense             (15,851)   (19,450)    (31,007)    (37,667)
    Gain on sale of VUE
     interests                         -    523,487           -     523,487
    Equity in income of
     unconsolidated affiliates     8,103     50,041      17,272      33,355
    Other income                   8,201      8,686       3,938       8,092
  Total other income, net         19,961    606,373      28,657     619,279

  Earnings from continuing
   operations before income
   taxes and minority interest   101,182    671,993     183,380     739,881
  Income tax provision           (42,888)  (262,459)    (77,176)   (303,080)
  Minority interest in income
   of consolidated subsidiaries      794       (818)        671      (1,425)
  Earnings from continuing
   operations                     59,088    408,716     106,875     435,376
  Gain on sale of EUVIA, net
   of tax                              -     79,648           -      79,648
  (Loss) income from
   discontinued operations,
   net of tax                     (5,280)   133,018      (5,884)    178,570
  Earnings before preferred
   dividends                      53,808    621,382     100,991     693,594
  Preferred dividends                -       (3,263)        -        (6,526)
  Net earnings available to
   common shareholders           $53,808   $618,119     100,991    $687,068

  Earnings per share from
   continuing operations:
     Basic earnings per share      $0.19      $1.26       $0.34       $1.28
     Diluted earnings per share    $0.18      $1.17       $0.32       $1.20

  Net earnings per share
   available to common
   shareholders:
     Basic earnings per share      $0.17      $1.92       $0.32       $2.05
     Diluted earnings per share    $0.17      $1.77       $0.31       $1.91


  IAC CONSOLIDATED BALANCE SHEET
  ($ in thousands)

                                               June 30,         December 31,
                                                 2006              2005
                 ASSETS                       (unaudited)        (audited)
   CURRENT ASSETS
   Cash and cash equivalents                  $1,060,666          $987,080
   Restricted cash and cash equivalents           32,769            93,561
   Marketable securities                       1,091,517         1,488,058
   Accounts and notes receivable, net            485,989           485,268
   Loans held for sale, net                      358,098           372,512
   Inventories, net                              364,734           337,186
   Deferred income taxes                          86,916            66,691
   Other current assets                          174,898           163,172
       Total current assets                    3,655,587         3,993,528

   Property, plant and equipment, net            593,476           566,990
   Goodwill                                    7,351,608         7,351,700
   Intangible assets, net                      1,492,311         1,558,188
   Long-term investments                         137,348           122,313
   Other non-current assets                      199,598           325,046
   TOTAL ASSETS                              $13,429,928       $13,917,765

       LIABILITIES AND SHAREHOLDERS' EQUITY
   CURRENT LIABILITIES
   Current maturities of long-term
    obligations and short-term borrowings       $371,461          $375,276
   Accounts payable, trade                       308,182           326,766
   Accounts payable, client accounts             350,420           269,344
   Deferred revenue                              144,913           123,267
   Income taxes payable                          475,771           516,940
   Other accrued liabilities                     551,080           621,404
       Total current liabilities               2,201,827         2,232,997

   Long-term obligations, net of
    current maturities                           858,063           959,410
   Other long-term liabilities                   169,400           223,486
   Deferred income taxes                       1,261,391         1,265,530
   Minority interest                              14,920             5,514


   SHAREHOLDERS' EQUITY
   Preferred stock                                     -                 -
   Common stock                                      406               399
   Class B convertible common stock                   32                32
   Additional paid-in capital                 14,506,663        14,341,668
   Retained earnings                             229,067           128,076
   Accumulated other comprehensive income         42,767            26,073
   Treasury stock                             (5,849,610)       (5,260,422)
   Note receivable from key executive
    for common stock issuance                     (4,998)           (4,998)
       Total shareholders' equity              8,924,327         9,230,828
   TOTAL LIABILITIES AND SHAREHOLDERS'
    EQUITY                                   $13,429,928       $13,917,765



  IAC CONSOLIDATED STATEMENTS OF CASH FLOWS
  (unaudited; $ in thousands)

                                                Six Months Ended June 30,
                                                  2006              2005
  Cash flows from operating activities
   attributable to continuing operations:
  Earnings before preferred dividends           $100,991          $693,594
  Less: loss (income) from discontinued
   operations, net of tax                          5,884          (258,218)
  Earnings from continuing operations            106,875           435,376
  Adjustments to reconcile earnings
   from continuing operations to net
   cash provided by operating
   activities attributable to
   continuing operations:
     Depreciation and amortization of
      intangibles                                184,087           154,094
     Non-cash compensation expense                52,680            29,003
     Amortization of cable distribution fees      41,068            33,781
     Amortization of non-cash marketing expense   17,996               -
     Deferred income taxes                        19,537        (1,048,599)
     Excess tax benefits from stock-based awards       -            10,013
     Gain on sales of loans held for sale       (116,557)          (73,497)
     Gain on sale of VUE interests                     -          (523,487)
     Equity in income of unconsolidated
      affiliates, net of dividends               (17,272)          (33,355)
     Non-cash interest income                          -           (29,127)
     Minority interest in income of consolidated
      subsidiaries                                  (671)            1,425
     Increase in cable distribution fees         (21,772)          (14,850)
  Changes in current assets and liabilities:
     Accounts and notes receivable                19,958            30,694
     Origination of loans held for sale       (4,203,432)       (3,218,173)
     Proceeds from sales of loans held for
      sale                                     4,334,404         3,070,594
     Inventories                                 (26,249)          (53,039)
     Prepaids and other assets                    (8,851)            5,776
     Accounts payable, income taxes payable
      and accrued liabilities                   (114,623)        1,237,336
     Deferred revenue                             23,614            28,831
     Funds collected by Ticketing on behalf
      of clients, net                             55,095           120,170
     Other, net                                   25,467           (22,497)
  Net cash provided by operating activities
   attributable to continuing operations         371,354           140,469
  Cash flows from investing activities
   attributable to continuing operations:
     Acquisitions, net of cash acquired          (57,881)         (725,988)
     Capital expenditures                       (118,143)         (117,095)
     Purchases of marketable securities         (443,413)       (2,427,211)
     Proceeds from sales and maturities of
      marketable securities                      836,917         2,717,188
     Decrease (increase) in long-term
      investments                                  1,475           (30,619)
     Proceeds from sale of VUE interests               -         1,882,291
     Proceeds from sale of Euvia                       -           183,016
     Other, net                                    2,355            19,026
  Net cash provided by investing activities
   attributable to continuing operations         221,310         1,500,608
  Cash flows from financing activities
   attributable to continuing operations:
     Borrowings under warehouse lines of
      credit                                   4,136,983         3,162,825
     Repayments of warehouse lines of
      credit                                  (4,148,560)       (2,945,673)
     Principal payments on long-term
      obligations                                (11,720)          (37,252)
     Purchase of treasury stock                 (583,341)       (1,172,653)
     Issuance of common stock, net of
      withholding taxes                           35,521            28,477
     Preferred dividends                               -            (6,526)
     Excess tax benefits from stock-based
      awards                                      12,304                 -
     Other, net                                   22,269             2,149
  Net cash used in financing activities
   attributable to continuing activities        (536,544)         (968,653)
  Total cash provided by continuing
   operations                                     56,120           672,424
  Net cash (used in) provided by operating
   activities attributable to
   discontinued operations                          (823)          780,316
  Net cash used in investing activities
   attributable to discontinued operations          (104)          (13,977)
  Net cash used in financing activities
   attributable to discontinued operations             -          (136,401)
  Total cash (used in) provided by
   discontinued operations                          (927)          629,938
  Effect of exchange rate changes on
   cash and cash equivalents                      18,393           (29,650)
  Net increase in cash and cash equivalents       73,586         1,272,712
  Cash and cash equivalents at beginning of
   period                                        987,080           999,698
  Cash and cash equivalents at end of
   period                                     $1,060,666        $2,272,410



  RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

  IAC RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO
  FREE CASH FLOW
  (unaudited; $ in millions)

                                                 Six Months Ended June 30,
                                                   2006              2005
  Net cash provided by operating activities
   attributable to continuing operations          $371.4            $140.5
     (Decrease) increase in warehouse
       loans payable                               (11.6)            217.2
     Capital expenditures                         (118.1)           (117.1)
     Tax payments related to the sale of
      VUE interests                                 11.1                 -
     Preferred dividends paid                          -              (6.5)
  Free Cash Flow (a)                              $252.7            $234.0

  (a) In accordance with the Company's adoption of SFAS 123R, excess tax
      benefits from stock-based awards, $12.3 million in the first six
      months of 2006, are included in net cash used in financing activities
      and therefore not included in Free Cash Flow. Accordingly, amounts
      presented for operating cash flows and free cash flows for 2006 will
      be adversely affected in comparison to prior results; however, there
      is no change in economic substance resulting from this change in
      reporting classification. Excess tax benefits from stock-based awards
      in the first six months of 2005 of $10.0 million were included in net
      cash provided by operating activities and Free Cash Flow.

For the six months ended June 30, 2006, consolidated Free Cash Flow increased by $18.7 million from the prior year period due primarily to higher operating income and non-cash expenses. This increase was partially offset by a smaller contribution from Ticketing client cash, higher cash taxes and lower interest income. Ticketing client cash contributed $55.1 million in the current period, versus $120.2 million in the prior year period. In its determination of Free Cash Flow, IAC includes the change in warehouse loans payable, because the change in loans held for sale is already included in cash provided by operating activities. IAC excludes tax payments related to the sale of its interests in VUE from Free Cash Flow because the proceeds on the sale were not included in cash provided by operating activities.

  IAC RECONCILIATION OF GAAP EPS TO ADJUSTED EPS
  (unaudited; $ in thousands except per share amounts)

                                     Three Months Ended   Six Months Ended
                                          June 30,            June 30,
                                       2006      2005      2006      2005

  Diluted earnings per share            $0.17     $1.77     $0.31     $1.91
  GAAP diluted weighted average
   shares outstanding                 324,297   350,178   330,785   363,709
  Net earnings available to common
   shareholders                       $53,808  $618,119  $100,991  $687,068
  Non-cash compensation expense        28,714    16,774    52,680    29,003
  Amortization of non-cash marketing
   expense                              9,532       -      17,996       -
  Amortization of intangibles          45,662    41,045    97,701    83,756
  Equity in income of VUE                 -     (43,126)      -     (21,960)
  Net other (income) expense related
   to fair value adjustment on
   derivatives                         (5,112)      -         236       -
  Gain on sale of VUE interests and
   related effects                      2,781  (523,487)    4,705  (523,487)
  Gain on sale of EUVIA, net of tax       -     (79,648)      -     (79,648)
  Discontinued operations,
   net of tax                           5,280  (133,018)    5,884  (178,570)
  Impact of income taxes and
   minority interest                  (32,947)  199,942   (66,435)  180,125
  Interest on convertible notes           307       -         610       -
  Preferred dividends                     -         -         -         -
  Adjusted Net Income                $108,025   $96,601  $214,368  $176,287

  Adjusted EPS weighted average
   shares outstanding                 332,743   345,806   339,032   358,947

  Adjusted EPS                          $0.32     $0.28     $0.63     $0.49

  GAAP Basic weighted average shares
   outstanding                        311,944   321,858   315,667   335,479
    Options, warrants and restricted
     stock, treasury method            12,353    18,603    15,118    18,513
    Conversion of convertible
     preferred and convertible notes
     (if applicable)                        -     9,717         -     9,717
  GAAP Diluted weighted average
   shares outstanding                 324,297   350,178   330,785   363,709
    Impact of restricted shares and
     convertible preferred and notes
     (if applicable), net               8,446    (4,372)    8,247    (4,762)
  Adjusted EPS shares outstanding     332,743   345,806   339,032   358,947

For Adjusted EPS purposes, the impact of RSUs on shares outstanding is based on the weighted average number of RSUs outstanding as compared with shares outstanding for GAAP purposes, which includes RSUs on a treasury method basis.

  IAC RECONCILIATION OF DETAILED SEGMENT RESULTS TO GAAP
  (unaudited; $ in millions; rounding differences may occur)

                          For the three months ended June 30, 2006

                           Operating  Non-    Amortization Amorti-
                           Income     cash     of non-     zation
                           Before    compen-   cash         of     Operating
                           Amorti-   sation    marketing   in-       income
                           zation   expense(A) expense    tangibles  (loss)

  Retailing
    U.S.                    $60.5     $(1.3)      $-       $(9.3)    $49.9
    International            (2.6)        -        -        (0.3)     (2.9)
  Total Retailing            57.9      (1.3)       -        (9.6)     47.0
  Services:
    Ticketing                75.9         -        -        (7.0)     68.9
    Lending                  14.8         -        -        (5.0)      9.8
    Real Estate              (4.6)        -        -        (2.3)     (6.8)
    Teleservices              5.6         -        -           -       5.6
    Home Services             4.4      (0.2)       -        (0.8)      3.5
  Total Services             96.1      (0.1)       -       (15.1)     80.9
  Media & Advertising        10.7         -     (9.5)      (12.5)    (11.3)
  Membership & Subscriptions:
    Vacations                28.9         -        -        (6.3)     22.5
    Personals                17.3         -        -        (0.6)     16.6
    Discounts               (16.6)        -        -        (1.3)    (17.9)
  Total Membership &
   Subscriptions             29.5         -        -        (8.2)     21.3
  Emerging Businesses        (6.6)        -        -        (0.1)     (6.8)
  Corporate and other       (22.6)    (27.2)       -           -     (49.8)
  Total                    $165.1    $(28.7)   $(9.5)     $(45.7)    $81.2
  Other income, net                                                   20.0
  Earnings from continuing
   operations before
   income taxes and minority
   interest                                                          101.2
  Income tax provision                                               (42.9)
  Minority interest in income of
   consolidated subsidiaries                                           0.8
  Earnings from continuing operations                                 59.1
  Loss from discontinued operations,
   net of tax                                                         (5.3)
  Earnings before preferred dividends                                 53.8
  Preferred dividends                                                   -
  Net earnings available to common
   shareholders                                                      $53.8

  (A) Non-cash compensation expense includes $2.1 million, $2.4 million
      and $24.2 million which are included in cost of sales, selling
      and marketing expense and general and administrative expenses,
      respectively, in the accompanying consolidated statement of
      operations.

  Supplemental: Depreciation expense
  Retailing:
     US                                             $9.7
     International                                   1.3
  Total Retailing                                   10.9
  Services:
     Ticketing                                       9.5
     Lending                                         2.2
     Real Estate                                     0.6
     Teleservices                                    3.8
     Home Services                                   0.4
  Total Services                                    16.5
  Media & Advertising                                6.7
  Membership & Subscriptions:
     Vacations                                       1.9
     Personals                                       1.7
     Discounts                                       1.5
  Total Membership & Subscriptions                   5.1
  Emerging Businesses                                0.6
  Corporate and other                                2.8
  Total Depreciation expense                       $42.6



  IAC RECONCILIATION OF DETAILED SEGMENT RESULTS TO GAAP
  (unaudited; $ in millions; rounding differences may occur)

                            For the six months ended June 30, 2006

                           Operating  Non-    Amortization Amorti-
                           Income     cash     of non-     zation
                           Before    compen-   cash         of     Operating
                           Amorti-   sation    marketing    in-      income
                           zation   expense(A) expense    tangibles  (loss)
  Retailing:
     U.S.                  $119.5     $(2.2)      $-       $(24.8)    $92.5
     International            0.0         -        -         (0.7)     (0.6)
  Total Retailing           119.5      (2.2)       -        (25.5)     91.9
  Services:
     Ticketing              141.7         -        -        (13.9)    127.8
     Lending                 27.7       1.2        -        (10.0)     18.8
     Real Estate             (9.6)      0.6        -         (4.5)    (13.6)
     Teleservices            10.6         -        -            -      10.6
     Home Services            7.6      (0.3)       -         (1.6)      5.7
  Total Services            177.9       1.5        -        (30.1)    149.3
  Media & Advertising        22.3         -    (15.0)       (25.1)    (17.8)
  Membership & Subscriptions:
     Vacations               65.3         -        -        (12.6)     52.7
     Personals               23.2         -     (3.0)        (1.6)     18.6
     Discounts              (30.3)        -        -         (2.6)    (32.9)
  Total Membership &
   Subscriptions             58.2         -     (3.0)       (16.8)     38.4
  Emerging Businesses       (12.5)     (0.1)       -         (0.3)    (12.9)
  Corporate and other       (42.3)    (51.9)       -            -     (94.2)
  Total                    $323.1    $(52.7)  $(18.0)      $(97.7)   $154.7
  Other income, net                                                    28.7
  Earnings from continuing
   operations before income taxes
   and minority interest                                              183.4
  Income tax provision                                                (77.2)
  Minority interest in income of
   consolidated subsidiaries                                            0.7
  Earnings from continuing
   operations                                                         106.9
  Loss from discontinued operations,
   net of tax                                                          (5.9)
  Earnings before preferred
   dividends                                                          101.0
  Preferred dividends                                                    -
  Net earnings available to common
   shareholders                                                      $101.0

  (A) Non-cash compensation expense includes $4.1 million, $4.5 million,
      $44.0 million and $0.1 million which are included in cost of sales,
      selling and marketing expense, general and administrative expenses and
      other operating expense, respectively, in the accompanying
      consolidated statement of operations.

  Supplemental: Depreciation expense
  Retailing:
    US                                          $20.2
    International                                 2.4
  Total Retailing                                22.6
  Services:
    Ticketing                                    19.1
    Lending                                       5.0
    Real Estate                                   1.3
    Teleservices                                  7.5
    Home Services                                 0.7
  Total Services                                 33.6
  Media & Advertising                            13.4
  Membership & Subscriptions:
    Vacations                                     4.0
    Personals                                     3.5
    Discounts                                     2.8
  Total Membership & Subscriptions               10.2
  Emerging Businesses                             1.0
  Corporate and other                             5.6
  Total Depreciation expense                    $86.4



  IAC RECONCILIATION OF DETAILED SEGMENT RESULTS TO GAAP
  (unaudited; $ in millions; rounding differences may occur)

                                 For the three months ended June 30, 2005

                           Operating  Non-    Amortization Amorti-
                           Income     cash     of non-     zation
                           Before    compen-   cash         of     Operating
                           Amorti-   sation    marketing    in-      income
                           zation   expense(A) expense    tangibles  (loss)

  Retailing:
     U.S.                   $59.0      $-         $-       $(15.5)   $43.5
     International           (0.3)      -          -         (0.3)    (0.6)
  Total Retailing            58.7       -          -        (15.8)    42.9
  Services:
     Ticketing               62.7       -          -         (7.4)    55.3
     Lending                 20.9    (0.5)         -         (4.8)    15.6
     Real Estate             (5.9)   (0.2)         -         (3.3)    (9.4)
     Teleservices             2.4       -          -            -      2.4
     Home Services            3.6    (0.2)         -         (0.7)     2.7
  Total Services             83.7    (0.9)         -        (16.2)    66.6
  Media & Advertising         1.9       -          -         (0.1)     1.8
  Membership & Subscriptions:
     Vacations               25.8       -          -         (6.3)    19.5
     Personals               10.4       -          -         (0.9)     9.5
     Discounts              (12.7)      -          -         (1.6)   (14.3)
  Total Membership &
   Subscriptions             23.6       -          -         (8.8)    14.7
  Emerging Businesses        (4.4)   (0.1)         -         (0.1)    (4.7)
  Corporate and other       (40.1)  (15.8)         -            -    (55.8)
  Total                    $123.4  $(16.8)        $-       $(41.0)   $65.6
  Other income, net                                                  606.4
  Earnings from continuing
   operations before
   income taxes and minority
   interest                                                          672.0
  Income tax provision                                              (262.5)
  Minority interest in income of
   consolidated subsidiaries                                          (0.8)
  Earnings from continuing operations                                408.7
  Gain on sale of EUVIA, net of tax                                   79.6
  Income from discontinued operations,
   net of tax                                                        133.0
  Earnings before preferred dividends                                621.4
  Preferred dividends                                                 (3.3)
  Net earnings available to common
   shareholders                                                     $618.1

  (A) Non-cash compensation expense includes $0.9 million, $1.0 million
      and $14.9 million which are included in cost of sales, selling and
      marketing expense and general and administrative expenses,
      respectively, in the accompanying consolidated statement of
      operations.

  Supplemental: Depreciation expense
  Retailing:
     US                                            $10.3
     International                                   1.9
  Total Retailing                                   12.2
  Services:
     Ticketing                                       9.5
     Lending                                         1.3
     Real Estate                                     0.3
     Teleservices                                    3.7
     Home Services                                   0.2
  Total Services                                    15.0
  Media & Advertising                                0.9
  Membership & Subscriptions:
     Vacations                                       1.7
     Personals                                       1.9
     Discounts                                       1.2
  Total Membership & Subscriptions                   4.7
  Emerging Businesses                                0.1
  Corporate and other                                1.8
  Total Depreciation expense                       $34.7



  IAC RECONCILIATION OF DETAILED SEGMENT RESULTS TO GAAP
  (unaudited; $ in millions; rounding differences may occur)

                                For the six months ended June 30, 2005

                           Operating  Non-    Amortization Amorti-
                           Income     cash     of non-     zation
                           Before    compen-   cash         of     Operating
                           Amorti-   sation    marketing    in-      income
                           zation   expense(A) expense    tangibles  (loss)
  Retailing:
     U.S.                  $115.5      $-         $-        $(28.7)   $86.8
     International            2.5       -          -          (0.7)     1.9
  Total Retailing           118.0       -          -         (29.4)    88.7
  Services:
     Ticketing              109.7       -          -         (14.4)    95.3
     Lending                 36.2    (1.0)         -         (13.9)    21.4
     Real Estate            (11.4)   (0.5)         -          (6.5)   (18.5)
     Teleservices             6.6       -          -             -      6.6
     Home Services            5.6     1.0          -          (1.5)     5.2
  Total Services            146.7    (0.4)         -         (36.2)   110.0
  Media & Advertising         1.0       -          -          (0.1)     0.9
  Membership & Subscriptions:
     Vacations               58.9       -          -         (12.6)    46.3
     Personals               15.9       -          -          (1.9)    13.9
     Discounts              (24.7)      -          -          (3.3)   (27.9)
  Total Membership &
   Subscriptions             50.1       -          -         (17.8)    32.3
  Emerging Businesses        (8.4)   (0.1)         -          (0.2)    (8.8)
  Corporate and other       (74.1)  (28.4)         -             -   (102.5)
  Total                    $233.4  $(29.0)        $-        $(83.8)  $120.6
  Other income, net                                                   619.3
  Earnings from continuing
   operations before income
   taxes and minority interest                                        739.9
  Income tax provision                                               (303.1)
  Minority interest in income of
   consolidated subsidiaries                                           (1.4)
  Earnings from continuing operations                                 435.4
  Gain on sale of EUVIA, net of tax                                    79.6
  Income from discontinued operations,
   net of tax                                                         178.6
  Earnings before preferred dividends                                 693.6
  Preferred dividends                                                  (6.5)
  Net earnings available to common
   shareholders                                                      $687.1

  (A) Non-cash compensation expense includes $2.1 million, $1.7 million and
      $25.2 million which are included in cost of sales, selling and
      marketing expense and general and administrative expenses,
      respectively, in the accompanying consolidated statement of
      operations.

  Supplemental: Depreciation expense
  Retailing:
    US                                            $20.5
    International                                   4.3
  Total Retailing                                  24.8
  Services:
    Ticketing                                      18.3
    Lending                                         2.4
    Real Estate                                     0.5
    Teleservices                                    7.5
    Home Services                                   0.4
  Total Services                                   29.1
  Media & Advertising                               2.1
  Membership & Subscriptions:
    Vacations                                       3.5
    Personals                                       4.8
    Discounts                                       2.3
  Total Membership & Subscriptions                 10.6
  Emerging Businesses                               0.1
  Corporate and other                               3.6
  Total Depreciation expense                      $70.3

                 IAC'S PRINCIPLES OF FINANCIAL REPORTING

IAC reports Operating Income Before Amortization, Adjusted Net Income, Adjusted EPS and Free Cash Flow, all of which are supplemental measures to GAAP. These measures are among 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. These non-GAAP measures 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 measures presented by providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non- GAAP measures. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures contained in this release and which we discuss below.

Definitions of Non-GAAP Measures

Operating Income Before Amortization is defined as operating income excluding, if applicable: (1) non-cash compensation expense and amortization of non-cash marketing expense, (2) amortization of intangibles and goodwill impairment, (3) pro forma adjustments for significant acquisitions, and (4) one-time items. We believe this measure is useful to investors because it represents the consolidated operating results from IAC's segments, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of any other non-cash expenses. Operating Income Before Amortization has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses, including non-cash compensation, non-cash marketing expense, and acquisition- related accounting.

Adjusted Net Income generally captures all items on the statement of operations that have been, or ultimately will be, settled in cash and is defined as net income available to common shareholders excluding, net of tax effects and minority interest, (1) non-cash compensation expense and amortization of non-cash marketing expense, (2) amortization of intangibles and goodwill impairment, if applicable, (3) pro forma adjustments for significant acquisitions, if applicable, (4) equity income or loss from IAC's 5.44% interest in VUE and gain on the sale of IAC's interest in VUE, (5) non- cash income or expense reflecting changes in the fair value of the derivatives created in the Expedia spin-off as a result of both IAC and Expedia shares being issuable upon the conversion of the Ask Convertible Notes and the exercise of certain IAC warrants, (6) one-time items, if applicable and (7) discontinued operations. We believe Adjusted Net Income is useful to investors because it represents IAC's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges which are not allocated to the operating businesses such as interest expense, taxes and minority interest, but excluding the effects of any other non-cash expenses.

Adjusted EPS is defined as Adjusted Net Income divided by weighted fully diluted shares outstanding for Adjusted EPS purposes. We include dilution from options and warrants per the treasury stock method and include all restricted shares and restricted stock units ("RSUs") in shares outstanding for Adjusted EPS. This differs from the GAAP method for including RSUs, which treats them on a treasury method basis. In addition, convertible instruments are assumed to be converted in determining shares outstanding for Adjusted EPS, if the effect is dilutive. Shares outstanding for Adjusted EPS purposes are therefore higher than shares outstanding for GAAP EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, IAC's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges which are not allocated to the operating businesses such as interest expense, taxes and minority interest, but excluding the effects of any other non-cash expenses. Adjusted Net Income and Adjusted EPS have the same limitations as Operating Income Before Amortization, and in addition Adjusted Net Income and Adjusted EPS do not account for IAC's former passive ownership in VUE. Therefore, we think it is important to evaluate these measures along with our consolidated statement of operations.

Free Cash Flow is defined as net cash provided by operating activities, including preferred dividends received from VUE, less capital expenditures and preferred dividends paid by IAC. For purposes of Free Cash Flow, we also include changes in warehouse loans payable in Lending due to the close connection that exists with changes in loans held by sale which are included in cash provided by operations. In addition, Free Cash Flow excludes the tax payments related to the sale of IAC's interests in VUE due to the exclusion of the proceeds on the sale from cash provided by operating activities. We believe Free Cash Flow is useful to investors because it represents the cash that our operating businesses generate, before taking into account cash movements that are non-operational. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. For example, it does not take into account stock repurchases. Therefore, we think it is important to evaluate Free Cash Flow along with our consolidated statement of cash flows.

Pro Forma Results

We will only present Operating Income Before Amortization, Adjusted Net Income and Adjusted EPS on a pro forma basis if we view a particular transaction as significant in size or transformational in nature. For the periods presented in this release, there are no transactions that we have included on a pro forma basis.

One-Time Items

Operating Income Before Amortization and Adjusted Net Income are presented before one-time items, if applicable. These items are truly one-time in nature and non-recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. GAAP results include one-time items. For the periods presented in this release, there are no adjustments for any one-time items.

Non-Cash Expenses That Are Excluded From Our Non-GAAP Measures

Non-cash compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of restricted stock, restricted stock units and stock options. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding which, for restricted stock units and stock options, are included on a treasury method basis. We view the true cost of our restricted stock units as the dilution to our share base, and as such all units are included in our shares outstanding for Adjusted EPS purposes.

Amortization of non-cash marketing expense consists of non-cash advertising secured from Universal Television as part of the transaction pursuant to which VUE was created, and the subsequent transaction by which IAC sold its partnership interests in VUE (collectively referred to as "NBC Universal Advertising"). The NBC Universal Advertising is available for television advertising on various NBC Universal network and cable channels without any cash cost.

The NBC Universal Advertising is excluded from Operating Income Before Amortization and Adjusted Net Income because it is non-cash and generally is incremental to the advertising the Company otherwise secures as a result of its ordinary cost/benefit marketing planning process. Accordingly, the Company's aggregate level of advertising, and the increased concentration of that advertising on NBC Universal network and cable channels, does not reflect what our advertising effort would otherwise be without these credits, which will expire on September 30, 2008 if not exhausted before then. As a result, management believes that treating the NBC Universal Advertising as an expense does not appropriately reflect its true cost/benefit relationship, nor does it best reflect the Company's long-term level of advertising expenditures. Nonetheless, while the benefits directly attributable to television advertising are always difficult to determine, and especially so with respect to the NBC Universal Advertising due to its incrementality and heavy concentration, it is likely that the Company does derive benefits from it, though management believes such benefits are generally less than those received through its regular advertising for the reasons stated above. Operating Income Before Amortization and Adjusted Net Income therefore have the limitation of including those benefits while excluding the associated expense.

Amortization of intangibles is a non-cash expense relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as supplier contracts and customer relationships, are valued and amortized over their estimated lives. While it is likely that we will have significant intangible amortization expense as we continue to acquire companies, we believe that since intangibles represent costs incurred by the acquired company to build value prior to acquisition, they were part of transaction costs.

Equity income or loss from IAC's 5.44% common interest in VUE is excluded from Adjusted Net Income and Adjusted EPS because IAC has no operating control over VUE, has no way to forecast this business, and does not consider the results of VUE in evaluating the performance of IAC's businesses. The gain from the sale in June 2005 of IAC's interests in VUE and related effects are excluded from Adjusted Net Income and Adjusted EPS for similar reasons.

Non-cash income or expense reflecting changes in the fair value of the derivatives created in the Expedia spin-off is excluded from Adjusted Net Income and Adjusted EPS because the obligations underlying these derivatives, which relate to the Ask Convertible Notes and certain IAC warrants, are expected to ultimately be settled in shares of IAC common stock and Expedia common stock, and not in cash.

Free Cash Flow

We look at Free Cash Flow as a measure of the strength and performance of our businesses, not for valuation purposes. In our view, applying "multiples" to Free Cash Flow is inappropriate because it is subject to timing, seasonality and one-time events. We manage our business for cash and we think it is of utmost importance to maximize cash - but our primary valuation metrics are Operating Income Before Amortization and Adjusted EPS. In addition, because Free Cash Flow is subject to timing, seasonality and one- time events, we believe it is not appropriate to annualize quarterly Free Cash Flow results.

OTHER INFORMATION

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release and our conference call to be held at 11:00 a.m. Eastern Time today may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements relating to IAC's anticipated financial performance, business prospects, new developments and similar matters, and/or statements that use words such as "anticipates," "estimates," "expects," "intends," "plans," "believes" and similar expressions. These forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: changes in economic conditions generally or in any of the markets or industries in which IAC's businesses operate, changes in senior management at IAC and/or its businesses, the rate of growth of the Internet, the e-commerce industry and broadband access, the rate of online migration in the various markets and industries in which IAC's businesses operate, technological changes, regulatory changes, changes in the interest rate environment or a slowdown in the domestic housing market, effectiveness of hedging activities, consumer acceptance of new products and services, changes in the advertising market and the ability of IAC to expand successfully in international markets. Certain of these and other risks and uncertainties are discussed in IAC's filings with the Securities and Exchange Commission ("SEC"). Other unknown or unpredictable factors also could have a material adverse effect on IAC's business, financial condition and results of operations. In light of these risks and uncertainties, these forward-looking statements may not occur. Accordingly, readers should not place undue reliance on these forward-looking statements, which only reflect the views of IAC management as of the date of this press release. IAC does not undertake to update these forward-looking statements.

About IAC/InterActiveCorp

IAC operates leading and diversified businesses in sectors being transformed by the internet, online and offline... our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world. To view a full list of the companies of IAC please visit our website at http://iac.com/

  IAC Investor Relations
  Roger Clark / Eoin Ryan
  (212) 314-7400

  IAC Corporate Communications
  Andrea Riggs / Martha Negin
  (212) 314-7280 / 7253

SOURCE: IAC/InterActiveCorp

CONTACT: IAC Investor Relations: Roger Clark or Eoin Ryan,
+1-212-314-7400, or IAC Corporate Communications: Andrea Riggs,
+1-212-314-7280, or Martha Negin, +1-212-314-7253

Web site: http://www.iac.com/
http://www.iac.com/investors.htm

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