Press Releases

From the latest breaking news to media galleries, find a range of information on IAC and our businesses.

Press Releases

BACK

IAC Reports Q2 Results

Tuesday, August 2, 2005 - 01:30

IAC/InterActiveCorp (NASDAQ: IACI) reported Q2 results today. The previously announced spin-off of Expedia, Inc. ("Expedia") is expected to occur next week, with IAC and Expedia beginning trading as independent public companies on August 9, 2005. Given the short time between our quarterly results and the spin-off date, we are providing below IAC's operating results excluding Expedia. Expedia's results are available in a separate release, also issued today. IAC's consolidated results (including Expedia) are summarized further below and provided in full later in this release.

  Excluding Expedia's results, IAC reported the following:


                                            As if Expedia is a Discontinued
                                                    Operation in Q2

                                            Q2 2005      Q2 2004     Growth
                                                    $ in millions
  Revenue                                   $1,405.4      $976.6       44%
  Operating Income Before Amortization        $124.3       $89.3       39%
  Operating Income                             $66.5       $29.3      127%

In line with our goal of simplifying and streamlining how we view and report IAC, we have introduced sector reporting that corresponds to the broad areas of interactivity in which we operate: Retailing, Services, Media & Advertising, and Membership & Subscriptions. We also report the performance of our Emerging Businesses and our corporate expenses. Please see page 2 for these sector results.

Each of the IAC sectors delivered double digit gains despite softness at HSN -- U.S. The two largest sectors, Retailing and Services, grew by more than 40% driven primarily by the acquisition of Cornerstone Brands, a strong contribution from LendingTree and a robust summer concert season.

"This is an excellent beginning for the new IAC in our first report as a balanced enterprise of interactive businesses - and the first rate results of Expedia underscore the positive rationale for separating the assets, providing clarity in the growth of both the IAC businesses as well as the purely travel Expedia," said Chairman and CEO, Barry Diller.

  Including Expedia's results, IAC reported the following:
  -- Revenue up 34% to $2.0 billion
  -- Operating Income Before Amortization up 24% to $308.2 million
  -- Operating income up 58% to $172.6 million
  -- Net income of $618.1 million; Diluted EPS of $0.89.  These include
     after-tax gains from the sale of Euvia and the VUE interests of $79.6
     million and $322.1 million, respectively
  -- Adjusted Net Income up 23% to $214.9 million; Adjusted EPS up 34% to
     $0.30

Please see page 8 for GAAP financial statements and page 15 for definitions of non-GAAP measures.

SECTOR RESULTS

The sector results below are presented as if IAC treated Expedia as a discontinued operation in Q2. Accordingly, certain corporate expenses, primarily non-cash compensation recognized by IAC related to Expedia employees have been excluded from these results ($ in millions).

                                             Q2 2005      Q2 2004     Growth
  REVENUE
   Retailing                                  $761.6      $517.5        47%
   Services                                    475.8       312.2        52%
   Media & Advertising                          11.5         6.9        66%
   Membership & Subscriptions                  161.3       145.6        11%
   Emerging Businesses                           6.2         0.2      2422%
   Other                                       (11.1)       (5.9)      -87%
   Total                                    $1,405.4      $976.6        44%

  OPERATING INCOME BEFORE AMORTIZATION
   Retailing                                   $58.7       $42.0        40%
   Services                                     83.7        56.5        48%
   Media & Advertising                           1.9        (4.3)       NM
   Membership & Subscriptions                   23.6        19.4        21%
   Emerging Businesses                          (3.4)       (1.1)     -221%
   Corporate and other                         (40.2)      (23.3)      -73%
   Total                                      $124.3       $89.3        39%

  OPERATING INCOME (LOSS)
   Retailing                                   $42.9       $28.4        51%
   Services                                     66.6        43.5        53%
   Media & Advertising                           1.8       (16.0)       NM
   Membership & Subscriptions                   14.7         9.3        59%
   Emerging Businesses                          (3.5)       (1.3)     -163%
   Corporate and other                         (56.1)      (34.5)      -62%
   Total                                       $66.5       $29.3       127%

For GAAP purposes Expedia will be treated as a discontinued operation by IAC beginning in Q3.

Please see page 13 for further segment detail and reconciliations to the comparable GAAP measure.

              DISCUSSION OF FINANCIAL AND OPERATING RESULTS

  RETAILING

                                           Q2 2005      Q2 2004    Growth
  Revenue                                          $ in millions
              U.S.                          $667.1       $438.2       52%
              International                   94.5         79.3       19%
                                            $761.6       $517.5       47%
  Operating Income Before Amortization
              U.S.                           $59.0        $41.6       42%
              International                   (0.3)         0.4       NM
                                             $58.7        $42.0       40%
  Operating Income
              U.S.                           $43.5        $28.3       54%
              International                   (0.6)         0.1       NM
                                             $42.9        $28.4       51%

Retailing results were driven primarily by the acquisition of Cornerstone Brands ("Cornerstone") in April.

The U.S. segment consists of HSN and the Cornerstone catalog and internet brands. HSN had a disappointing second quarter with modest year over year sales growth as performance was impacted by disappointing sales productivity in several merchandise categories, and certain product mix effects. Operating income before amortization grew at a slower rate than revenue for the U.S. segment because the Cornerstone brands typically operate at lower percentage margins than HSN and they were included in Q2 2005, but not in the prior year period.

Stronger performance at HSE Germany contributed to higher International revenue, which increased 14% excluding the benefit of foreign exchange. International profit declined due to an arbitration settlement in connection with a former Spanish language service. Results for Euvia, the sale of which was completed in Q2, are included in discontinued operations and prior periods have been restated accordingly.

   SERVICES

                                            Q2 2005      Q2 2004   Growth
  Revenue                                           $ in millions
         Ticketing                           $257.8       $195.1      32%
         Financial Services and Real Estate   130.3         44.6     192%
         Teleservices                          77.0         72.5       6%
         Home Services                         10.6           -       NM
                                             $475.8       $312.2      52%
  Operating Income Before Amortization
         Ticketing                            $62.7        $46.7      34%
         Financial Services and Real Estate    15.0          5.6     166%
         Teleservices                           2.4          4.2     -43%
         Home Services                          3.6           -       NM
                                              $83.7        $56.5      48%
  Operating Income
         Ticketing                            $55.3        $40.5      37%
         Financial Services and Real Estate     6.2         (1.2)     NM
         Teleservices                           2.4          4.2     -43%
         Home Services                          2.7           -       NM
                                              $66.6        $43.5      53%

Services results were driven primarily by contribution from LendingTree and higher ticket sales.

Ticketing results were driven by 32% higher worldwide ticket sales. Domestic ticketing revenue increased 28%, benefiting from a considerably stronger summer concert season as compared to the prior year period and 5% higher average revenue per ticket. International revenue grew by 45%, or 39% excluding the benefit of foreign exchange, driven primarily by Ticketmaster's purchase of the remaining interest in its Australian joint venture in April 2005, acquisitions in Sweden and Finland in 2004, and strong ticket sales in Canada and Ireland. These effects on international revenue were offset by lower revenue per ticket due to geographic mix and the absence of license income related to the 2004 Olympics. Ticketing profit growth reflects higher revenue, partially offset by higher domestic ticket royalties and increased costs associated with the development and support of ticketing technology.

Financial Services and Real Estate results were driven principally by 194% higher revenue per transaction, reflecting LendingTree's strategy to close in its own name a portion of the loans sourced through the LendingTree network. The dollar value of closed loans rose 7% in the period to $8.4 billion, with higher purchase activity and flat refinance activity. Real Estate revenue increased due to a higher number of closings and referrals, which partially benefited from the acquisition of iNest and integration of ServiceMagic's real estate business. Financial Services and Real Estate profit growth was due primarily to higher revenue per closing, partially offset by increased marketing costs and Real Estate customer rebates. Operating income was further impacted by increased amortization of intangible assets.

   MEDIA & ADVERTISING

                                          Q2 2005      Q2 2004   Growth
                                                  $ in millions
  Revenue                                   $11.5         $6.9      66%
  Operating Income Before Amortization       $1.9        $(4.3)     NM
  Operating Income                           $1.8       $(16.0)     NM

Media & Advertising results were driven primarily by higher revenue at Citysearch which benefited from strength in its pay-for-performance business, lower operating costs and decreased amortization of intangibles. This was Citysearch's first-ever profitable quarter. Media & Advertising will include Ask Jeeves beginning in Q3.

   MEMBERSHIP & SUBSCRIPTIONS
                                            Q2 2005     Q2 2004   Growth
  Revenue                                          $ in millions
             Vacations                        $67.8       $63.7      6%
             Personals                         61.2        48.5     26%
             Discounts                         33.1        34.0     -3%
             Intra-sector Elimination          (0.7)       (0.6)   -14%
                                             $161.3      $145.6     11%
  Operating Income Before Amortization
             Vacations                        $25.8       $21.5     20%
             Personals                         10.4         9.5      9%
             Discounts                        (12.7)      (11.6)    -9%
                                              $23.6       $19.4     21%
  Operating Income
             Vacations                        $19.5       $15.2     28%
             Personals                          9.5         7.8     22%
             Discounts                        (14.3)      (13.7)    -4%
                                              $14.7        $9.3     59%

Membership & Subscriptions results were driven primarily by membership and subscriber growth.

Vacations results were driven primarily by increases in membership revenue, higher exchange confirmations and higher average fees. Vacations profit growth was due to higher revenue, lower selling and marketing expenses, and a higher percentage of online transactions, partially offset by higher general and administrative expenses.

Personals results were driven largely by a 13% increase in paid subscribers and higher average revenue per paid subscriber. Personals profit growth was the result of higher revenue and lower operating expenses, including depreciation, partially offset by higher marketing expenses in connection with Match.com's marketing campaign which began in Q1. Lower amortization of intangibles also contributed to higher operating income.

OTHER ITEMS

Excluding the results of Expedia, which have been presented here as a discontinued operation in Q2, Operating Income Before Amortization was impacted by a 73% increase in corporate and other expense to $40.2 million, driven mainly by transaction expenses related to the spin-off of $9.1 million in Q2 and $14 million year-to-date. Operating income was impacted by the increase noted above, plus slightly higher non-cash compensation expense.

As noted on page 1, net income was impacted by the sale of Euvia and the VUE common and preferred interests in Q2, resulting in pre-tax gains of $129.3 million and $523.5 million, and after-tax gains of $79.6 million and $322.1 million, respectively. Net income was also impacted by a $62.8 million tax benefit related to the write-off of the Company's investment in TVTS.

The consolidated effective tax rates for continuing operations and adjusted net income were 39% in Q2 2005 compared to 39% and 37%, respectively, in Q2 2004. Q2 2005 effective tax rates were higher than the federal statutory rate of 35% due principally to state taxes and non-deductible transaction expenses related to the spin-off. The Q2 2005 effective tax rate for continuing operations was further impacted by the non-deductible amortization of non-cash compensation. Q2 2004 effective tax rates were higher than the federal statutory rate principally due to state taxes and the effective tax rate for continuing operations was further impacted by non- deductible amortization of intangibles.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2005, IAC, on a consolidated basis, had $4.7 billion in cash and marketable securities. This includes $264 million in net funds collected on behalf of clients by Ticketing and $758.3 million in combined deferred merchant bookings and deferred revenue at Expedia. As of June 30, 2005, IAC had total debt of $1.6 billion, $789.9 million of which is included in current maturities. Total debt consists mainly of 7.00% Senior Notes due 2013, 6.75% Senior Notes due 2005, and short-term borrowings at LendingTree Loans, and does not include IAC's convertible preferred stock with a balance sheet carrying value based on the par value of $0.01 per share and an aggregate face value of $656 million. Substantially all of the shares of the convertible preferred stock will be redeemed in connection with the spin-off.

As of June 30, 2005, IAC would have had approximately $1.8 billion in net cash and marketable securities, pro forma for the acquisition of Ask Jeeves (including the assumption of cash and convertible debt), the spin-off of Expedia, redemption of substantially all of IAC's convertible preferred, taxes to be paid in connection with IAC's sale of the VUE interests, the maturity of IAC's 6 3/4 % Senior Notes, and excluding LendingTree Loans' debt that is non- recourse to IAC.

                            OPERATING METRICS

                                         Q2 2005     Q2 2004     Growth
  RETAILING

  Retailing - U.S.
    Units Shipped (mm)                      12.8         9.5        34%
    Gross Profit %                          39.0%       38.0%
    Return Rate                             16.6%       16.9%
    Average price point                   $57.17      $50.32        14%
    Internet %                        (a)     23%         15%
    HSN total homes - end of period (mm)    88.7        84.1         5%
    Catalogs Mailed (mm)                   109.3        16.8       552%


  SERVICES

  Ticketing
    Number of tickets sold (mm)             30.8        23.3        32%
    Gross value of tickets sold (mm)      $1,705      $1,270        34%

  Financial Services & Real Estate
    Loan closings - units (000s)       (b)  71.4        70.1         2%
    Loan closings - dollars (mm)       (b)$8,360      $7,847         7%
    Real Estate closings - units (000s)      4.0         2.6        53%
    Real Estate closings - dollars (mm)   $984.2      $647.3        52%
    Total transactions - units
     (000s)                            (c) 1,664       1,672         0%
    Revenue per transaction               $78.31      $26.68       194%

  MEDIA & ADVERTISING

    Citysearch average monthly
     unique users (mm)                 (d)  13.0         7.2        80%


  MEMBERSHIP & SUBSCRIPTIONS

  Vacations
    Members (000s)                         1,743       1,651         6%
    Confirmations (000s)                     216         211         2%
    Share of confirmations online           20.5%       17.5%

  Personals
    Paid Subscribers (000s)              1,127.9       997.6        13%

  (a) Internet % is Internet demand as a percent of total Retailing - U.S.
      demand excluding Liquidations and Services.
  (b) Loan closings consist of direct loans and loans through the exchange.
  (c) Transactions are comprised of lending and real estate transmits and
      closings.  For qualifying forms sent to multiple parties, each
      transmit is counted as a transaction.
  (d) Internal estimate.


                        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,
                              2005        2004       2005        2004

  Service revenue         $1,160,649    $919,312  $2,177,151  $1,764,470
  Product sales              799,567     543,988   1,426,269   1,131,320
   Net revenue             1,960,216   1,463,300   3,603,420   2,895,790
  Cost of sales-service
   revenue                   418,434     331,356     783,638     656,388
  Cost of sales-product
   sales                     486,989     336,238     869,817     701,506
   Gross profit            1,054,793     795,706   1,949,965   1,537,896

  Selling and marketing
   expense                   423,092     295,649     760,674     599,415
  General and
   administrative
   expense                   234,947     171,041     447,842     336,250
  Other operating
   expense                    27,606      21,063      54,931      41,141
  Amortization of cable
   distribution fees          17,054      17,811      33,781      35,033
  Amortization of non-
   cash distribution
   and marketing
   expense                     3,485       4,733       3,917      11,072
  Amortization of non-
   cash compensation
   expense                    59,382      55,342     109,910     124,310
  Amortization of
   intangibles                72,828      78,511     147,204     156,808
  Depreciation expense        43,848      42,286      87,991      83,914
   Operating income          172,551     109,270     303,715     149,953

  Other income (expense):
   Interest income            45,741      48,126      99,750      93,334
   Interest expense          (18,946)    (19,457)    (40,609)    (38,850)
   Gain on sale of VUE       523,487           -     523,487           -
   Equity in the income
    of VUE                    43,126      11,038      21,960      10,686
   Equity in the income of
    unconsolidated
    affiliates and other      19,080       5,195      24,000      12,370
  Total other income,
   net                       612,488      44,902     628,588      77,540

  Earnings from
   continuing
   operations before
   income taxes and
   minority interest         785,039     154,172     932,303     227,493
    Income tax expense      (304,327)    (59,417)   (376,039)    (88,241)
    Minority interest in
     income of
     consolidated
     subsidiaries             (1,469)       (974)     (1,820)     (1,485)
  Earnings from
   continuing
   operations                479,243      93,781     554,444     137,767
    Gain on sale of
     Euvia, net of tax        79,648           -      79,648           -
    Income (loss) from
     discontinued
     operations, net of
     tax                      62,492     (20,585)     59,502     (23,044)
  Earnings before
   preferred dividends       621,383      73,196     693,594     114,723
  Preferred dividends         (3,263)     (3,262)     (6,526)     (6,526)
  Net earnings
   available to common
   shareholders             $618,120     $69,934    $687,068    $108,197

  Earnings per share
     Basic earnings per
      share from
      continuing
      operations               $0.74       $0.13       $0.82       $0.19
     Diluted earnings
      per share from
      continuing
      operations               $0.68       $0.12       $0.76       $0.17

     Basic earnings per
      share                    $0.96       $0.10       $1.02       $0.16
     Diluted earnings
      per share                $0.89       $0.09       $0.95       $0.14

  IAC CONSOLIDATED BALANCE SHEET
  (unaudited; $ in thousands)

                                          June 30,    December 31,
                                            2005          2004
                               ASSETS
   CURRENT ASSETS
   Cash and cash equivalents             $2,492,039    $1,099,698
   Restricted cash and cash equivalents      69,414        41,377
   Marketable securities                  2,143,878     2,409,745
   Accounts and notes receivable, net       611,298       497,485
   Loans available for sale, net            427,383       206,256
   Inventories, net                         388,129       240,977
   Deferred income taxes                    170,450       109,752
   Assets held for sale                       5,149       339,880
   Other current assets                     256,178       170,597
   Total current assets                   6,563,918     5,115,767

   Computer and broadcast equipment         852,998       789,236
   Buildings and leasehold improvements     175,504       163,972
   Furniture and other equipment            181,487       158,298
   Land                                      20,394        21,168
   Projects in progress                     147,528        71,247
                                          1,377,911     1,203,921
   Less: accumulated depreciation and
    amortization                           (801,085)     (695,238)
   Total property, plant and equipment      576,826       508,683

   Goodwill                              11,741,157    11,210,964
   Intangible assets, net                 2,540,096     2,333,663
   Long-term investments                    119,085     1,609,335
   Preferred interest exchangeable for
    common stock                                -       1,428,530
   Cable distribution fees, net              57,109        77,484
   Notes receivable and advances, net
    of current portion                          625           615
   Deferred charges and other               177,026       105,075
   Non-current assets of discontinued
    operations                                7,731         8,749
   TOTAL ASSETS                         $21,783,573   $22,398,865

                   LIABILITIES AND SHAREHOLDERS' EQUITY
   CURRENT LIABILITIES
   Current maturities of long-term
    obligations and short-term
    borrowings                             $789,862      $562,966
   Accounts payable, trade                  941,253       787,915
   Accounts payable, client accounts        316,635       176,921
   Accrued distribution fees                 33,979        36,904
   Deferred merchant bookings               750,804       361,199
   Deferred revenue                         128,514       104,611
   Income tax payable                     1,342,644        57,093
   Liabilities held for sale                    -         295,773
   Other accrued liabilities                533,358       476,152
   Current liabilities of discontinued
    operations                               33,641        32,904
   Total current liabilities              4,870,690     2,892,438

   Long-term obligations, net of
    current maturities                      794,272       796,715
   Other long-term liabilities              147,683       151,580
   Non-current liabilities of
    discontinued operations                   8,319         5,546
   Deferred income taxes                  1,631,339     2,479,678
   Common stock exchangeable for
    preferred interest                          -       1,428,530
   Minority interest                         86,246        39,074

   SHAREHOLDERS' EQUITY
   Preferred stock                              131           131
   Common stock                               7,021         6,970
   Class B convertible common stock             646           646
   Additional paid-in capital            15,637,219    14,058,797
   Retained earnings                      3,115,828     2,428,760
   Accumulated other comprehensive
    income                                   32,777        81,051
   Treasury stock                        (4,543,600)   (1,966,053)
   Note receivable from key executive
    for common stock issuance                (4,998)       (4,998)
   Total shareholders' equity            14,245,024    14,605,304
   TOTAL LIABILITIES AND SHAREHOLDERS'
    EQUITY                              $21,783,573   $22,398,865


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

                                          Six Months Ended June 30,
                                              2005        2004
  Cash flows from operating activities:
  Earnings from continuing operations       $554,444    $137,767
  Adjustments to reconcile earnings from
   continuing operations to net cash
   provided by operating activities:
    Depreciation and amortization            235,195     240,722
    Amortization of non-cash distribution
     and marketing expense                     3,917      11,072
    Amortization of non-cash compensation
     expense                                 109,910     124,310
    Amortization of cable distribution
     fees                                     33,781      35,033
    Amortization of deferred financing
     costs                                       -           161
    Deferred income taxes                 (1,023,239)    (56,212)
    Gain on sale of VUE                     (523,487)        -
    Equity in income of unconsolidated
     affiliates, including VUE               (32,560)    (20,319)
    Non-cash interest income                 (29,127)    (24,518)
    Minority interest in income of
     consolidated subsidiaries                 1,820       1,485
    Increase in cable distribution fees      (14,850)    (14,732)
  Changes in current assets and
   liabilities:
    Accounts and notes receivable            (17,459)     26,549
    Loans available for sale                (221,076)        -
    Inventories                              (52,985)    (19,699)
    Prepaids and other assets                (54,612)    (45,621)
    Accounts payable and accrued
     liabilities                           1,421,803     192,516
    Deferred revenue                          30,951      19,365
    Deferred merchant bookings               388,907     295,429
    Funds collected by Ticketmaster on
     behalf of clients, net                  120,170      50,159
    Other, net                               (16,012)     10,749
    Net cash provided by operating
     activities                              915,491     964,216
  Cash flows provided by (used in)
   investing activities:
    Acquisitions, net of cash acquired      (712,409)   (286,928)
     Capital expenditures                   (143,419)    (99,629)
    (Increase) decrease in long-term
     investments and notes receivable        (33,012)     21,818
    Purchase of marketable securities     (2,427,212) (2,180,134)
    Proceeds from sale of marketable
     securities                            2,718,188   2,084,851
    Proceeds from sale of VUE              1,882,291         -
    Proceeds from sale of Euvia              183,016         -
    Other, net                                19,191       1,082
  Net cash provided by (used in)
   investing activities                    1,486,634    (458,940)
  Cash flows used in financing
   activities:
    Warehouse loan borrowings, net           217,152         -
    Principal payments on long-term
     obligations                             (37,238)       (729)
    Purchase of treasury stock by IAC     (1,172,653)   (249,463)
    Proceeds from subsidiary stock,
     including stock options                     555         -
    Proceeds from issuance of common
     stock, including stock options           28,477      65,949
    Preferred dividends                       (6,526)     (6,526)
    Other, net                                (3,326)      4,766
  Net cash used in financing activities     (973,559)   (186,003)
  Net cash (used in) provided by
   discontinued operations                    (3,391)      6,368
  Effect of exchange rates changes on
   cash and cash equivalents                 (32,834)     (3,497)
  Net increase in cash and cash
   equivalents                             1,392,341     322,144
  Cash and cash equivalents at beginning
   of period                               1,099,698     859,618
  Cash and cash equivalents at end of
   period                                 $2,492,039  $1,181,762


                           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/       As of
                                     Shares      Conversion     7/25/05

  Average Share Price                                           $26.78

  Absolute Shares as of 7/25/05       669.0                      669.0

  RSUs                                 11.3                       11.3
  Options                              91.9        $14.21         27.0
  Warrants                             71.9        $24.82         11.0
  Convertible Notes                     8.6        $13.34          8.6
  Convertible Preferred                19.4        $33.75          0.0
                                              (initial)
  Total Treasury Method Dilution                                  58.0
   % Dilution                                                      8.0%
  Total Treasury Method Diluted Shares
   Outstanding                                                   727.0


                                                Dilution at:

  Average Share Price               $30.00     $35.00     $40.00     $45.00

  Absolute Shares as of 7/25/05      669.0      669.0      669.0      669.0

  RSUs                                11.3       11.3       11.3       11.3
  Options                             28.8       31.2       33.1       34.7
  Warrants                            14.4       19.6       25.9       30.8
  Convertible Notes                    8.6        8.6        8.6        8.6
  Convertible Preferred                0.0       19.4       20.2       20.8

  Total Treasury Method Dilution      63.1       90.2       99.2      106.3
    % Dilution                         8.6%      11.9%      12.9%      13.7%
  Total Treasury Method Diluted Shares
   Outstanding                       732.1      759.3      768.2      775.3

IAC has outstanding approximately 12.4 million shares of restricted stock and restricted stock units ("RSUs"), which generally vest over five years from date of grant, including 5.6 million issued in 2005, and 1.1 million which will be settled in cash and therefore have no dilutive effect.

The shares above reflect the acquisition of Ask Jeeves on July 19, 2005. The shares above do not reflect the reverse 1-for-2 stock split IAC intends to do immediately prior to, and the adjustments as a result of, the spin-off of Expedia. Also, in connection with the spin-off, holders of over 99% of IAC's convertible preferred stock elected to receive $50 in cash per share plus accrued and unpaid dividends in return for their shares. This amount will be paid upon completion of the spin-off.

IAC has repurchased 52.8 million shares year-to-date under its authorized plan through July 31, at an average price of $22.21, including 48 million shares purchased during Q2 at an average price of $22.24. Additionally, IAC repurchased 56.6 million shares in connection with the VUE transaction.

               RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

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

                                     Six Months Ended June 30,
                                       2005           2004
  Net Cash Provided by
   Operating Activities               $915.5         $964.2
    Warehouse loans payable            217.2              -
    Capital expenditures              (143.4)         (99.6)
    Preferred dividend paid             (6.5)          (6.5)
  Free Cash Flow                      $982.8         $858.1

For the six months ended June 30, 2005, consolidated free cash flow increased by $124.7 million due primarily to higher earnings, an increased contribution to working capital from deferred merchant bookings and deferred revenue at Expedia, and Ticketing client cash, offset by increases in accounts receivable at Expedia and Retailing, higher cash taxes paid, higher capital expenditures and higher inventory at Retailing. Free Cash Flow includes an increase in warehouse loans payable in Financial Services and Real Estate, which is offset by a use of working capital related to an increase in loans held for sale. Deferred merchant bookings and deferred revenue at Expedia contributed $391.0 million to the change in operating cash flows during the period, versus $292.0 million in the prior year. Ticketing client cash contributed $120.2 million to the change in operating cash flows, versus $50.2 million in the prior year.

  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,
                              2005      2004      2005      2004

  Diluted earnings
   per share                 $0.89     $0.09     $0.95     $0.14
  GAAP diluted
   weighted average
   shares
   outstanding             700,355   750,622   727,417   751,395
  Net income              $618,120   $69,934  $687,068  $108,197
  Amortization of
   distribution and
   marketing expense         3,485     4,733     3,917    11,072
  Amortization of
   compensation
   expense                  59,382    55,342   109,910   124,310
  Amortization of
   intangibles              72,828    78,511   147,204   156,808
  Gain on sale of
   Euvia, net of tax       (79,648)      -     (79,648)      -
  Discontinued
   operations, net
   of tax                  (62,492)   20,585   (59,502)   23,044
  Gain on sale of
   VUE                    (523,487)      -    (523,487)      -
  Equity in the
   income of VUE           (43,126)  (11,038)  (21,960)  (10,686)
  Impact of income
   taxes and
   minority interest       166,559   (45,926)  121,569  (103,217)
  Preferred
   dividends                 3,263     3,262     6,526     6,526
  Adjusted Net
   Income                 $214,884  $175,403  $391,597  $316,054

  Adjusted EPS
   weighted average
   shares
   outstanding             711,046   776,534   737,329   777,031

  Adjusted EPS               $0.30     $0.23     $0.53     $0.41

  GAAP Basic
   weighted average
   shares
   outstanding             643,716   698,564   670,958   698,032
  Options, warrants
   and restricted
   stock, treasury
   method                   37,205    52,058    37,025    53,363
  Conversion of
   preferred shares
   to common (if
   applicable)              19,434       -      19,434       -
  GAAP Diluted
   weighted average
   shares
   outstanding             700,355   750,622   727,417   751,395

  Add'l restricted
   shares and
   convertible
   preferred (if
   applicable)              10,691    25,912     9,912    25,636
  Adjusted EPS
   shares
   outstanding             711,046   776,534   737,329   777,031

For adjusted EPS purposes, the impact of RSU's is based on the weighted average amount of RSU's outstanding as compared with shares outstanding for GAAP purposes, which includes RSU's on a treasury method basis.

  IAC RECONCILIATION OF DETAILED SEGMENT RESULTS TO GAAP Q2 AND YTD
  (unaudited; $ in millions; rounding differences may occur)

                          Three Months Ended    Six Months Ended
                              June 30,             June 30,
                           2005      2004       2005      2004
  Revenue
   Retailing:
    U.S.                  $667.1    $438.2    $1,165.1   $906.0
    International           94.5      79.3       195.4    172.6
    Total Retailing        761.6     517.5     1,360.5  1,078.5
   Services:
    Ticketing              257.8     195.1       469.1    397.4
    Financial Services &
     Real Estate           130.3      44.6       236.2     84.3
    Teleservices            77.0      72.5       154.1    144.3
    Home Services           10.6         -        18.3        -
   Total Services          475.8     312.2       877.7    626.1
   Media & Advertising      11.5       6.9        20.5     12.7
   Membership &
    Subscriptions:
    Vacations               67.8      63.7       142.8    133.1
    Personals               61.2      48.5       115.3     97.3
    Discounts               33.1      34.0        57.7     60.3
    Intra-sector
     elimination            (0.7)     (0.6)       (0.7)    (0.6)
   Total Membership &
    Subscriptions          161.3     145.6       315.1    290.1
   Expedia, Inc.           555.0     487.0     1,040.1    900.2
   Emerging Businesses       6.2       0.2        10.0      0.2
   Other                   (11.3)     (6.2)      (20.4)   (12.2)
  Total Revenue         $1,960.2  $1,463.3    $3,603.4 $2,895.8

  Operating Income
   Before Amortization
   Retailing:
    U.S.                   $59.0     $41.6      $115.5    $83.2
    International           (0.3)      0.4         2.5      1.7
    Total Retailing         58.7      42.0       118.0     84.8
   Services:
    Ticketing               62.7      46.7       109.7     93.5
    Financial Services
     and Real Estate        15.0       5.6        24.7      8.7
    Teleservices             2.4       4.2         6.6      7.4
    Home Services            3.6         -         5.6        -
   Total Services           83.7      56.5       146.7    109.6
   Media & Advertising:      1.9      (4.3)        1.0     (9.0)
   Membership &
    Subscriptions:
    Vacations               25.8      21.5        58.9     47.6
    Personals               10.4       9.5        15.9     15.9
    Discounts              (12.7)    (11.6)      (24.7)   (20.2)
   Total Membership &
    Subscriptions           23.6      19.4        50.1     43.2
   Expedia, Inc.           177.4     155.4       317.4    257.0
   Emerging Businesses      (3.4)     (1.1)       (5.9)    (1.8)
   Corporate Expense and
    other                  (33.7)    (20.1)      (62.6)   (41.8)
  Total Operating
   Income Before
   Amortization           $308.2    $247.9      $564.7   $442.1

  Amortization of Non-
   Cash Items
   Retailing:
    U.S.                   $15.5     $13.2       $28.7    $26.5
    International            0.3       0.3         0.7      0.7
    Total Retailing         15.8      13.6        29.4     27.1
   Services:
    Ticketing                7.4       6.2        14.4     12.4
    Financial Services
     and Real Estate         8.8       6.8        21.8     13.4
    Teleservices               -         -           -        -
    Home Services            0.9         -         0.5        -
    Total Services          17.1      13.0        36.7     25.8
   Media & Advertising       0.1      11.7         0.1     23.8
   Membership &
    Subscriptions:
    Vacations                6.3       6.3        12.6     12.6
    Personals                0.9       1.7         1.9      5.2
    Discounts                1.6       2.1         3.3      4.3
    Total Membership &
     Subscriptions           8.8      10.2        17.8     22.1
   Expedia, Inc.            36.2      35.4        68.6     70.5
   Emerging Businesses       0.1       0.3         0.2      0.3
   Corporate Expense and
    other                   57.5      54.4       108.3    122.5
  Total amortization of
   non-cash items         $135.7    $138.6      $261.0   $292.2


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

                                Three Months          Six Months
                               Ended June 30,       Ended June 30,
                              2005       2004      2005        2004
  Operating Income
   Retailing
    U.S.                     $43.5      $28.3     $86.8       $56.7
    International             (0.6)       0.1       1.9         1.0
    Total Retailing           42.9       28.4      88.7        57.7
   Services:
    Ticketing                 55.3       40.5      95.3        81.1
    Financial Services and
     Real Estate               6.2       (1.2)      2.9        (4.7)
    Teleservices               2.4        4.2       6.6         7.4
    Home Services              2.7          -       5.2           -
    Total Services            66.6       43.5     110.0        83.8
   Media and Advertising       1.8      (16.0)      0.9       (32.8)
   Membership &
    Subscriptions:
    Vacations                 19.5       15.2      46.3        35.0
    Personals                  9.5        7.8      13.9        10.7
    Discounts                (14.3)     (13.7)    (27.9)      (24.5)
    Total Membership &
     Subscriptions:           14.7        9.3      32.3        21.1
   Expedia, Inc.             141.2      120.0     248.8       186.5
   Emerging Businesses        (3.5)      (1.3)     (6.1)       (2.1)
   Corporate Expense and
    other                    (91.2)     (74.5)   (170.8)     (164.3)
  Total operating income     172.6      109.3     303.7       150.0
   Total other income
    (expense), net           612.5       44.9     628.6        77.5
   Earnings from cont.
    operations before income
    taxes and min. int.      785.0      154.2     932.3       227.5
   Income tax expense       (304.3)     (59.4)   (376.0)      (88.2)
   Minority interest          (1.5)      (1.0)     (1.8)       (1.5)
   Earnings from continuing
    operations               479.2       93.8     554.4       137.8
   Gain on sale of Euvia, net
    of tax                    79.6          -      79.6           -
   Discontinued operations,
    net of tax                62.5      (20.6)     59.5       (23.0)
   Earnings before preferred
    dividends                621.4       73.2     693.6       114.7
   Preferred dividends        (3.3)      (3.3)     (6.5)       (6.5)
   Net earnings available to
    common shareholders     $618.1      $69.9    $687.1      $108.2

  Supplemental: Depreciation expense
   Retailing
    U.S.                     $10.3      $10.2     $20.5       $20.4
    International              1.9        2.5       4.3         5.1
    Total Retailing           12.2       12.7      24.8        25.5
   Services:
    Ticketing                  9.5        7.7      18.3        15.0
    Financial Services and
     Real Estate               1.5        0.9       2.9         1.8
    Teleservices               3.7        4.6       7.5         9.4
    Home Services              0.2          -       0.4           -
    Total Services            15.0       13.2      29.1        26.2
   Media and Advertising       0.9        1.1       2.1         2.0
   Membership &
    Subscriptions:
    Vacations                  1.7        2.1       3.5         4.4
    Personals                  1.9        3.3       4.8         6.6
    Discounts                  1.2        0.9       2.3         1.8
    Total Membership &
     Subscriptions:            4.7        6.3      10.6        12.8
   Expedia, Inc.               9.1        7.6      17.6        14.8
   Emerging Businesses         0.1        0.0       0.1         0.0
   Corporate Expense and
    other                      1.8        1.3       3.6         2.6
   Total depreciation
    expense                  $43.8      $42.3     $88.0       $83.9


                     DEFINITIONS OF NON-GAAP MEASURES

Operating Income Before Amortization is defined as operating income excluding: (1) amortization of non-cash distribution, marketing and compensation expense, (2) amortization of intangibles and goodwill impairment, if applicable, (3) pro forma adjustments for significant acquisitions, if applicable, and (4) one-time items, if applicable. 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 payments to partners, 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: (1) amortization of non-cash distribution, marketing and compensation 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) one-time items, net of related tax, and minority interest, if applicable and (6) discontinued operations, net of tax. 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 shares relating to restricted stock/share units ("RSU") 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 passive former 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, investments to fund Retailing International unconsolidated operations and preferred dividends paid by IAC. In addition, Free Cash Flow includes tax distributions on the VUE common and preferred interests upon receipt of the distributions by IAC. For purposes of Free Cash Flow, we also include changes in warehouse loans payable in Financial Services and Real Estate due to the close connection that exists with changes in loans held by sale which are included in cash provided by operations. 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.

We endeavor to compensate for the limitations of the non-GAAP measures presented by also providing the comparable GAAP measures, GAAP financial statements, and descriptions of the reconciling items and adjustments, to derive the non-GAAP measures. For IAC's Principles of Financial Reporting, a detailed explanation of why we believe these non-GAAP measures are useful to investors and management, please refer to IAC's website at http://www.iac.com/investors.htm.

                            OTHER INFORMATION

  CONFERENCE CALL

IAC will audiocast its conference call with investors and analysts discussing the company's Q2 financial results and certain forward-looking information on Tuesday, August 2, 2005, at 10:00 a.m. Eastern Time (ET). The live audiocast is open to the public at http://www.iac.com/investors.htm.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

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

This press release contains "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, pending transactions 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 the forward-looking statements included in this report for a variety of reasons, including, among others: adverse 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, the ability of IAC to expand successfully in international markets, the successful completion of pending corporate transactions and the integration of acquired businesses, and the integrity, security and redundancy of the systems and networks of IAC and its businesses. 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, the forward-looking statements discussed in this press release 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 is not under any obligation and does not intend to publicly update or review any of these forward-looking statements contained in this press release, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

ADDITIONAL INFORMATION ABOUT THE SPIN-OFF

As previously announced, IAC intends to spin-off its travel-related businesses into a separate publicly-traded company. In connection with the proposed spin-off, IAC has filed a proxy statement/prospectus with the SEC. Stockholders of IAC are urged to read the proxy statement/prospectus, because it contains important information about IAC, the proposed spin-off transaction and related matters. Investors and security holders can obtain free copies of the proxy statement/prospectus by contacting Investor Relations, IAC/InterActiveCorp, Carnegie Hall Tower, 152 W. 57th Street, 42nd Floor, New York, NY 10019 (Telephone: (212) 314-7400). Investors and security holders can also obtain free copies of the proxy statement/prospectus and other documents filed by IAC and Expedia with the SEC in connection with the proposed spin-off at the SEC's web site at http://www.sec.gov/. In addition to the proxy statement, IAC files annual, quarterly and current reports, proxy statements and other information with the SEC, each of which should be available at the SEC's web site at http://www.sec.gov/. You may also read and copy any reports, statements and other information filed by IAC at the SEC public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1- 800-SEC-0330 for further information.

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/

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

   IAC Corporate Communications
   Deborah Roth / Andrea Riggs
   (212) 314-7254 / 7280

SOURCE: IAC/InterActiveCorp

CONTACT: Roger Clark or Eoin Ryan, both of IAC Investor Relations,
+1-212-314-7400, or Deborah Roth, +1-212-314-7254, or Andrea Riggs,
+1-212-314-7280, both of IAC Corporate Communications

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

button Scroll Up