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IAC Reports Q4 Results

Wednesday, February 8, 2006 - 00:15

IAC/InterActiveCorp (NASDAQ: IACI) reported Q4 2005 results today.

                                 SUMMARY RESULTS
                    $ in millions (except per share amounts)

                          Q4 2005   Q4 2004 Growth  FY 2005   FY 2004 Growth
       Revenue           $1,792.3  $1,235.2   45%  $5,753.7  $4,188.3   37%

       Operating Income
        Before
        Amortization       $276.4    $165.8   67%    $668.3    $421.6   59%
       Adjusted Net
        Income             $180.1    $157.9   14%    $472.4    $370.7   27%
       Adjusted EPS         $0.52     $0.41   24%     $1.33     $0.99   34%

       Operating Income
        (Loss)             $200.1    $(84.3)    NM   $344.2    $(20.2)   NM
       Net Income (Loss)   $113.1    $(45.9)    NM   $868.2    $151.8  472%
       GAAP Diluted EPS     $0.33    $(0.13)    NM    $2.46     $0.41  502%

       See reconciliation of GAAP to non-GAAP measures beginning on page 14.

  Overall Highlights
  *  IAC delivered record results in Q4, with strong growth from most of the
     company's established and earlier stage businesses, as well as
     contributions from recently acquired businesses.
  *  Operating Income Before Amortization margins increased by 200 basis
     points in Q4 versus the prior year period.
  *  IAC generated $702 million in Free Cash Flow during 2005, while net
     cash used in operating activities attributable to continuing operations
     of $72 million was adversely impacted primarily by tax payments related
     to the sale of our interests in VUE of $863 million, which is excluded
     from Free Cash Flow. (Please see page 14.)
  *  IAC repurchased 15.2 million shares of its common stock between October
     1, 2005 and January 5, 2006, at an average price of $26.48, completing
     its prior authorization. IAC also announced that its Board of Directors
     authorized IAC to repurchase up to an additional 42 million shares of
     common stock.  (Please see page 9.)
  *  The comparison of Q4 and full year operating income and net income with
     the prior year period is affected by a goodwill impairment charge in Q4
     2004. Full year 2005 net income benefited from gains from the sale of
     Euvia and VUE interests. (Please see page 8.)

  Q4 Sector Highlights
  *  Retailing growth benefited from the inclusion of Cornerstone Brands,
     reflecting the company's efforts to diversify and add depth to the
     sector's offering through multiple channels, as well as strong online
     demand.  HSN's revenue increased modestly, with its profits growing
     slightly faster, versus the year-ago period.
  *  Services results were led by a 24% increase in worldwide ticket sales
     in Ticketing and significant growth at LendingTree, particularly from
     closing loans in its own name.
  *  Media & Advertising results were led by the inclusion of Ask Jeeves,
     whose share of U.S. search queries was 6.3% in December, up 20% over
     the prior year period, growing fastest among the major search engines
     on a percentage basis, and down 1% from a seasonally strong September
     (source: comScore). Citysearch completed its first year of
     profitability and substantially grew unique users.
  *  Membership & Subscriptions growth was driven by a 21% increase in paid
     subscribers in Personals and improved results in Vacations. Performance
     in Discounts was disappointing during its seasonally important fourth
     quarter.
  *  IAC's new Emerging Businesses include Pronto, a first-of-its kind
     desktop shopping comparison service, and Programming, which will
     encompass the company's initiatives in the development, acquisition and
     distribution of multi-platform content.


                              SECTOR RESULTS

  Sector results for the fourth quarter ended December 31 were as follows
  ($ in millions):

                                         Q4 2005     Q4 2004     Growth
  REVENUE
    Retailing                             $940.9      $660.3        42%
    Services                               475.5       326.4        46%
    Media & Advertising                    109.5         9.9      1011%
    Membership & Subscriptions             261.8       242.4         8%
    Emerging Businesses                     10.3         4.7       121%
    Other                                   (5.6)       (8.4)       33%
    Total                               $1,792.3    $1,235.2        45%


  OPERATING INCOME BEFORE AMORTIZATION
    Retailing                             $110.3       $73.9        49%
    Services                                83.8        48.4        73%
    Media & Advertising                     20.3        (2.0)       NM
    Membership & Subscriptions              89.9        79.9        13%
    Emerging Businesses                     (4.1)        0.7        NM
    Corporate and other                    (23.9)      (35.2)       32%
    Total                                 $276.4      $165.8        67%


  OPERATING INCOME (LOSS)
    Retailing                              $94.5       $60.4        57%
    Services                                67.6      (154.5)       NM
    Media & Advertising                      7.7        (2.1)       NM
    Membership & Subscriptions              81.1        69.9        16%
    Emerging Businesses                     (4.3)       (2.8)      -55%
    Corporate and other                    (46.5)      (55.2)       16%
    Total                                 $200.1      $(84.3)       NM

Please see discussion of financial and operating results beginning on page 3, and reconciliations to the comparable GAAP measures and further segment detail beginning on page 14.

              DISCUSSION OF FINANCIAL AND OPERATING RESULTS

  RETAILING

                                            Q4 2005      Q4 2004      Growth
  Revenue                                          $ in millions
      U.S.                                   $841.6       $562.9        50%
      International                            99.3         97.5         2%
                                             $940.9       $660.3        42%
  Operating Income Before Amortization
      U.S.                                   $104.3        $68.4        53%
      International                             6.0          5.6         7%
                                             $110.3        $73.9        49%
  Operating Income
      U.S.                                    $88.9        $55.1        61%
      International                             5.6          5.2         8%
                                              $94.5        $60.4        57%

U.S. Retailing growth was driven primarily by the inclusion of Cornerstone Brands, which was acquired in April 2005 and accordingly is not reflected in the prior year results, as well as strong online demand. HSN overall experienced modest revenue growth, with higher sales in Ready-to-Wear, Home Fashions and Home Hard Goods but slightly lower sales in Jewelry. HSN's average price point increased by 4% over the prior year period on steady unit volume, which was partially offset by a higher average return rate due to product mix shifts. Although still in an early stage of integration, the sale of Cornerstone products through HSN channels nearly doubled from the third quarter.

U.S. Retailing profit margins improved slightly versus the year-ago period. Operating efficiencies were partially offset by the inclusion of Cornerstone (catalogs have relatively higher operating expenses) as well as gross margin declines at HSN resulting primarily from increased shipping and handling promotions.

International Retailing revenue grew by 2%, or 11% excluding the impact of foreign exchange, due to an increase in online sales and growth in Household and Cosmetics, partially offset by higher return rates. Profits also benefited from lower depreciation expense. In addition, the prior year reflects a settlement received related to a receivable that had been previously written off.

  SERVICES

                                           Q4 2005      Q4 2004     Growth
  Revenue                                           $ in millions
      Ticketing                             $253.5       $188.9        34%
      Lending                                101.0         45.3       123%
      Real Estate                             14.6         12.2        19%
      Teleservices                            95.9         75.0        28%
      Home Services                           10.5          5.0       109%
                                            $475.5       $326.4        46%
  Operating Income Before Amortization
      Ticketing                              $59.1        $38.3        54%
      Lending                                 13.9          7.4        87%
      Real Estate                             (2.9)        (1.2)     -131%
      Teleservices                            11.6          3.8       207%
      Home Services                            2.1          0.1      2873%
                                             $83.8        $48.4        73%
  Operating Income (Loss)
      Ticketing                              $51.8        $31.6        64%
      Lending                                  8.7          1.1       717%
      Real Estate                             (5.6)        (3.7)      -51%
      Teleservices                            11.6       (181.0)        NM
      Home Services                            1.2         (2.5)        NM
                                             $67.6      $(154.5)        NM

Services results were driven by strong concert and sporting event sales in Ticketing and significant growth at LendingTree, particularly from closing loans in its own name.

Ticketing results were driven by a 24% increase in worldwide ticket sales and 6% higher average revenue per ticket in part due to a higher mix of live music and sporting events. Domestic revenue increased 31%, due to higher ticket volumes and higher average revenue per ticket. International revenue grew by 43%, or 49% excluding the impact of foreign exchange, due primarily to the purchase of the remaining interest in the Australian joint venture (April 2005) and higher ticket sales in Canada and the United Kingdom. International acquisitions represented 15% of Ticketing's overall revenue growth. Profit margin growth was attributable to operational leverage resulting from increased ticket volumes, increased average revenue per ticket, and sales distribution efficiencies, partially offset by an increase in domestic ticket royalties.

Lending revenue benefited from a 23% increase in loan closings (in dollars) on a 50% increase in transmitted QFs, and to a greater extent, the sale into the secondary market of loans LendingTree has closed in its own name. Refinance mortgages performed strongly and increased as a percentage of revenue from the prior year. Revenue from home equity loans grew strongly over the prior year period, while home purchase loan revenue showed a more modest increase. Revenue growth was also driven by price increases on the LendingTree exchange during 2005. Operating Income Before Amortization was impacted by an accrual related to an adverse legal judgment, partially offset by lower marketing expenses as a percentage of revenue. Operating income benefited from decreased amortization of intangibles related to acquisitions.

Prior to Q4 2005, certain direct origination and other processing costs associated with loans sold had been reported as operating expenses. These costs are now reported as a reduction to revenue beginning in Q4 2005, and have been reclassified in earlier periods to conform to the new presentation. There is no impact from this change to 2004 results, nor does it impact Operating Income Before Amortization or operating income for any period. The effect of this reclassification on a quarterly basis is presented as follows:

  Lending                                              2005
                                           Q1      Q2       Q3       Q4
                                                 ($ in millions)

  Revenue, as originally reported        $94.0   $115.5   $142.8   $101.0
  Reclassification                       (22.0)   (30.1)   (33.4)       -
  Revenue, as reclassified               $72.0    $85.4   $109.4   $101.0

  Operating Income Before Amortization,
   as originally reported                $15.3    $20.9    $30.6    $13.9
  Reclassification                           -        -        -        -
  Operating Income Before Amortization,
   as reclassified                       $15.3    $20.9    $30.6    $13.9

  Operating income, as originally
   reported                               $5.8    $15.6    $25.3     $8.7
  Reclassification                           -        -        -        -
  Operating income, as reclassified       $5.8    $15.6    $25.3     $8.7

Real Estate revenue growth primarily reflects a full quarter contribution of iNest, which was purchased on October 28, 2004. Excluding iNest, Real Estate revenue grew modestly despite higher marketing expenses reflecting in part the early stage development of products and strategies. Profits from iNest were more than offset by the higher marketing spending and startup costs in connection with the company's anticipated launch of a brokerage business.

Teleservices results improved significantly versus a weak year-ago period due to higher revenue from both new and existing clients. Profits expanded from increased volume as global contact centers, including those added earlier in the year, became more optimally utilized. Additionally, results were favorably impacted by adjustments to certain benefit accruals in 2005. Operating income in the prior year period was adversely impacted by a goodwill impairment charge of $184.8 million.

Home Services benefited from increased customer service requests and a greater number of service providers in a seasonally weak quarter.

  MEDIA & ADVERTISING

  Media & Advertising:
                                            Q4 2005     Q4 2004      Growth
                                                     $ in millions
  Revenue                                    $109.5        $9.9       1011%
  Operating Income Before Amortization        $20.3       $(2.0)         NM
  Operating Income (Loss)                      $7.7       $(2.1)         NM

Media & Advertising results were driven primarily by the inclusion of Ask Jeeves which was acquired in July 2005, and accordingly is not reflected in the prior year results. Ask Jeeves increased its share of U.S. search queries by 20% over the prior year period to 6.3% in December, but decreased slightly from 6.4% in a seasonally strong September 2005 (source: comScore). Completing its first year of profitability, Citysearch benefited from a substantial increase in unique users.

Ask Jeeves increased revenue by 9% as compared to its prior year period, largely attributable to search query growth in North America, partially offset by declines in the United Kingdom. Revenue was also impacted by a decrease in revenue per query due in part to traffic mix and the reduced monetization initiatives that began in August. Non-search advertising revenue also decreased. Profit margins at Ask Jeeves declined due to increased marketing expense and higher revenue share payments to third-party traffic sources. The company expects to make increased investments in 2006 to help drive higher market share over the long-term.

  MEMBERSHIP & SUBSCRIPTIONS

                                            Q4 2005      Q4 2004     Growth
  Revenue                                            $ in millions
      Vacations                               $63.9        $60.1         6%
      Personals                                68.2         50.9        34%
      Discounts                               130.5        132.0        -1%
      Intra-sector Elimination                 (0.7)        (0.7)        2%
                                             $261.8       $242.4         8%
  Operating Income Before Amortization
      Vacations                               $25.3        $20.2        25%
      Personals                                15.4          7.2       113%
      Discounts                                49.3         52.5        -6%
                                              $89.9        $79.9        13%
  Operating Income
      Vacations                               $19.0        $13.9        37%
      Personals                                14.4          5.4       165%
      Discounts                                47.7         50.7        -6%
                                              $81.1        $69.9        16%

Membership & Subscriptions growth was led by record revenue in Personals and improved performance in Vacations. Discounts had disappointing results as its fundraising business struggled in its seasonally strongest quarter.

Vacations revenue growth was driven by a 5% increase in members and 7% growth in confirmations. Margins and profit growth were largely attributable to improved operating leverage in its call centers, enabled in part by an increase in online confirmations versus the prior year period.

Personals revenue growth was driven by a 21% increase in worldwide paid subscribers and higher package prices implemented in early 2005. International paid subscribers grew by 14% due to expansion in several markets, most notably Scandinavia, the United Kingdom and Latin America. Revenue and profit growth benefited from the increased marketing spending in the first half of 2005 relative to the first half of 2004. Profit growth in the quarter also benefited from improved operating leverage, offset in part by higher marketing spending. Furthermore, results in the prior year period were impacted by expenses associated with the elimination of certain non-core products.

Discounts results were impacted by disappointing local coupon book sales through schools and community groups. This impact was partially offset by higher online and direct sales due to increased advertising and promotional efforts.

OTHER ITEMS

Q4 Operating Income Before Amortization was also impacted by a 32% decrease in corporate and other expense to $23.9 million, primarily due to lower professional fees and the impact, in the prior year period, of intercompany eliminations related to discontinued operations.

The comparison of Q4 operating income with the prior year period was further impacted by a $185 million impairment charge related to Teleservices goodwill in Q4 2004, partially offset by higher amortization of intangibles and non-cash compensation primarily due to the acquisitions of Cornerstone and Ask Jeeves.

The comparison of Q4 other income is adversely impacted by $13.2 million in foreign exchange gains in the prior year period, lower interest income due to IAC's sale of its interests in VUE in June 2005, and a $4.8 million loss in Q4 2005 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 Jeeves notes and the exercise of certain IAC warrants. These declines were partially offset by an increase in the equity income of unconsolidated affiliates of HSN International.

Q4 net income growth was impacted by the above items, as well as the decreased contribution of discontinued operations primarily due to the inclusion of Expedia in the prior year period. Discontinued operations in the year-ago period also include a $33 million impairment charge related to TVTS.

Full year 2005 net income was favorably impacted by after-tax gains from the sale of IAC's interests in VUE and the sale of Euvia of $322.1 million and $70.2 million, respectively, partially offset by lower interest income on the VUE securities. Net income was also impacted by a $62.8 million tax benefit recognized within discontinued operations related to the write-off of the Company's investment in TVTS in the second quarter of 2005.

The effective tax rates for continuing operations and adjusted net income were 39% and 37% in Q4 2005, respectively. The effective tax rates were higher than the statutory rate of 35% due principally to state taxes. In addition, continuing operations was unfavorably impacted by non-deductible non-cash amortization. In Q4 2004, IAC recorded a tax provision on continuing operations which represented an effective tax rate of 65%. This tax provision was recorded despite a loss from continuing operations and is higher than the statutory rate due principally to the impairment of goodwill that is not deductible for tax purposes and state taxes, partially offset by the utilization of foreign tax credits. In Q4 2004, the effective tax rate for adjusted net income was 25%, which is lower than the federal statutory rate due principally to the utilization of foreign tax credits, partially offset by state taxes.

LIQUIDITY AND CAPITAL RESOURCES

During 2005, $1.8 billion in cash was used to fund common share repurchases, including 14.3 million common shares at an average price of $26.34 during Q4. Additionally, in connection with the sale of its interests in VUE in June 2005, IAC received 28.3 million IAC common shares (adjusted for the reverse stock split) as part of the consideration. Also, 13.1 million shares of preferred stock were put to and redeemed by IAC for $656 million in cash in connection with the spin-off. On November 15, 2005, the Company's obligation under the 1998 Senior Notes matured, and the principal amount at maturity of $360.8 million was paid.

As of December 31, 2005, IAC had approximately $2.6 billion in cash, restricted cash and marketable securities, $1.3 billion in debt and, excluding $362 million in LendingTree Loans debt that is non-recourse to IAC, $1.6 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 /     As of
               Shares  Conversion    2/3/06        Dilution at:

  Share Price                        $27.83   $30.00  $35.00  $40.00  $45.00

  Absolute Shares
   as of
   2/3/06 (1)   320.1                 320.1    320.1   320.1   320.1   320.1

  RSUs and
   Other          6.7                   6.7      6.7     6.7     6.7     6.7
  Options        31.1    $19.90         8.3      8.7     9.6    10.3    10.8
  Warrants       35.1    $27.88         5.0      5.4     7.8    10.3    13.0
  Convertible
   Notes          1.7    $14.82         1.7      1.7     1.7     1.7     1.7

  Total Treasury
   Method
   Dilution                            21.7     22.6    25.8    29.0    32.2
    % Dilution                         6.3%     6.6%    7.5%    8.3%    9.1%
  Total Treasury
   Method
   Diluted
   Shares
   Outstanding                        341.8    342.7   346.0   349.1   352.3

  (1) Includes 2.6 million shares issued in connection with the conversion
      of $68.2 million convertible notes between 1/1/06 and 2/3/06.

IAC today announced that its Board of Directors has authorized it to repurchase up to 42 million shares of its outstanding common stock. Under the new authorization, IAC may purchase shares over an indefinite period of time in the open market, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price, and future outlook.

                            OPERATING METRICS

                                            Q4 2005     Q4 2004     Growth
  RETAILING

  Retailing - U.S.
    Units shipped (mm)                         15.5        11.7       32%
    Gross profit %                            38.8%       36.6%
    Return rate                               17.1%       15.8%
    Average price point                      $59.79      $52.10       15%
    Internet %                      (a)         26%         18%
    HSN total homes - end of period (mm)       89.3        85.7        4%
    Catalogs mailed (mm)                      110.3        18.3      502%


  SERVICES

  Ticketing
    Number of tickets sold (mm)                31.9        25.7       24%
    Gross value of tickets sold (mm)         $1,715      $1,288       33%

  Lending
    Transmitted QFs (000s)          (b)       775.6       518.4       50%
    Closings - units (000s)         (c)        71.9        64.4       12%
    Closings - dollars ($mm)        (c)      $9,213      $7,483       23%

  Real Estate
    Closings - units (000s)                     3.2         3.3       -1%
    Closings - dollars ($mm)                   $798        $778        2%

  MEDIA & ADVERTISING

  Ask Jeeves Revenue by traffic source
   (pro forma)
    Proprietary                               64.8%       66.3%
    Network                                   35.2%       33.7%


  MEMBERSHIP & SUBSCRIPTIONS

  Vacations
    Members (000s)                            1,782       1,696        5%
    Confirmations (000s)                        193         181        7%
    Share of confirmations online               22%         19%

  Personals
    Paid Subscribers (000s)                 1,189.4       982.8       21%


  (a) Internet demand as a percent of total Retailing - U.S. demand
      excluding Liquidations and Services.
  (b) Customer "Qualification Forms" (QFs) transmitted to at least one
      exchange lender (including LendingTree Loans) plus QFs transmitted to
      at least one GetSmart lender.
  (c) 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     Twelve Months Ended
                                   December 31,           December 31,
                                 2005       2004        2005        2004

  Product sales               $1,080,167   $795,855  $3,295,899  $2,469,151
  Service revenue                712,152    439,332   2,457,772   1,719,128
    Net revenue                1,792,319  1,235,187   5,753,671   4,188,279
  Cost of sales-product sales    626,821    463,463   1,979,131   1,487,618
  Cost of sales-service
   revenue                       317,256    227,244   1,149,040     908,630
    Gross profit                 848,242    544,480   2,625,500   1,792,031

  Selling and marketing
   expense                       298,084    160,999     948,762     575,754
  General and administrative
   expense                       178,238    137,645     666,044     493,663
  Other operating expense         35,266     23,994     122,851      87,254
  Amortization of non-cash
   compensation expense           23,759     22,565     137,537      70,326
  Amortization of cable
   distribution fees              19,218     16,153      70,401      69,232
  Amortization of non-cash
   distribution and marketing
   expense                           -            1         -         1,302
  Amortization of intangibles     52,578     42,752     186,511     185,388
  Depreciation expense            41,024     39,925     149,165     144,576
  Goodwill impairment                -      184,780         -       184,780
       Operating income (loss)   200,075    (84,334)    344,229     (20,244)

  Other income (expense):
    Interest income               17,428     48,669     132,503     183,106
    Interest expense             (17,355)   (22,209)    (69,073)    (81,292)
    Gain on sale of VUE              -          -       523,487         -
    Equity in the income of VUE      -        4,895      21,960      16,188
    Equity in the income of
     unconsolidated affiliates
     and other                     4,826     21,059      38,579      34,534
  Total other income, net          4,899     52,414     647,456     152,536

  Earnings (loss) from
   continuing operations
   before income taxes and
   minority interest             204,974    (31,920)    991,685     132,292
    Income tax expense           (79,417)   (20,657)   (391,069)    (74,266)
    Minority interest in income
     of consolidated
     subsidiaries                   (278)    (1,474)     (2,229)     (3,159)
  Earnings (loss) from
   continuing operations         125,279    (54,051)    598,387      54,867
    Gain on sale of Euvia, net
     of tax                       (9,496)       -        70,152         -
    Income (loss) from
     discontinued operations,
     net of tax                   (2,716)    11,448     207,611     109,994
  Earnings (loss) before
   preferred dividends           113,067    (42,603)    876,150     164,861
  Preferred dividends             -          (3,264)     (7,938)    (13,053)
  Net earnings (loss)
   available to common
   shareholders                 $113,067   $(45,867)   $868,212    $151,808

  Earnings (loss) per share
     Basic earnings (loss)
      per share from
      continuing operations        $0.39     $(0.17)      $1.79       $0.12
     Diluted earnings (loss)
      per share from
      continuing operations        $0.37     $(0.17)      $1.68       $0.11

     Basic earnings (loss)
      per share                    $0.35     $(0.13)      $2.64       $0.44
     Diluted earnings (loss)
      per share                    $0.33     $(0.13)      $2.46       $0.41


  IAC CONSOLIDATED BALANCE SHEET
  (unaudited; $ in thousands)

                                              December 31,      December 31,
                                                  2005              2004
                                   ASSETS
   CURRENT ASSETS
   Cash and cash equivalents                    $987,080          $999,698
   Restricted cash and cash equivalents           93,561            41,377
   Marketable securities                       1,488,058         2,409,745
   Accounts and notes receivable, net            487,968           353,579
   Loans available for sale, net                 372,512           206,256
   Inventories, net                              337,186           240,917
   Deferred income taxes                          66,672           107,220
   Other current assets                          154,453           440,028
   Current assets of discontinued
    operations                                     6,038           316,947
   Total current assets                        3,993,528         5,115,767

   Property, plant and equipment, net            567,408           427,257

   Goodwill                                    7,351,700         5,361,825
   Intangible assets, net                      1,558,188         1,054,302
   Long-term investments                         122,313         1,469,020
   Preferred interest exchangeable for
    common stock                                     -           1,428,530
   Other non-current assets                      324,158           172,696
   Non-current assets of discontinued
    operations                                       470         7,369,468
   TOTAL ASSETS                              $13,917,765       $22,398,865

                   LIABILITIES AND SHAREHOLDERS' EQUITY
   CURRENT LIABILITIES
   Current maturities of long-term
    obligations and short-term
    borrowings                                  $375,276          $562,953
   Accounts payable, trade                       327,147           259,510
   Accounts payable, client accounts             269,344           176,921
   Deferred revenue                              123,267            99,258
   Income tax payable                            517,016            56,672
   Other accrued liabilities                     601,009           426,268
   Liabilities held for sale                         -             295,773
   Current liabilities of discontinued
    operations                                    19,938         1,015,083
   Total current liabilities                   2,232,997         2,892,438

   Long-term obligations, net of
    current maturities                           959,410           796,715
   Other long-term liabilities                   222,558           101,332
   Non-current liabilities of
    discontinued operations                          928           423,521
   Deferred income taxes                       1,265,530         2,130,386
   Common stock exchangeable for
    preferred interest                                 -         1,428,530
   Minority interest                               5,514            20,639


   SHAREHOLDERS' EQUITY
   Preferred stock                                     -               131
   Common stock                                      399             3,485
   Class B convertible common stock                   32               323
   Additional paid-in capital                 14,341,668        14,062,605
   Retained earnings                             128,076         2,428,760
   Accumulated other comprehensive
    income                                        26,073            81,051
   Treasury stock                             (5,260,422)       (1,966,053)
   Note receivable from key executive
    for common stock issuance                     (4,998)           (4,998)
   Total shareholders' equity                  9,230,828        14,605,304
   TOTAL LIABILITIES AND SHAREHOLDERS'
    EQUITY                                   $13,917,765       $22,398,865


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

                                            Twelve Months Ended December 31,
                                                 2005              2004
  Cash flows from operating activities
   attributable to continuing
   operations:
  Earnings before preferred dividends           $876,150          $164,861
  Less: discontinued operations, net of tax     (277,763)         (109,994)
  Earnings from continuing operations            598,387            54,867
  Adjustments to reconcile earnings
   from continuing operations to net
   cash (used in) provided by operating
   activities attributable to continuing
   operations:
    Depreciation and amortization of
     intangibles                                 335,676           329,964
    Goodwill impairment                             -              184,780
    Amortization of non-cash compensation
     expense                                     137,537            70,326
    Amortization of cable distribution fees       70,401            69,232
    Amortization of non-cash distribution
     and marketing expense                           -               1,302
    Deferred income taxes                     (1,068,829)          (10,585)
    Gain on sale of VUE                         (523,487)              -
    Equity in income of unconsolidated
     affiliates, including VUE, net of
     dividends                                   (44,346)          (31,867)
    Non-cash interest income                     (17,573)          (41,703)
    Minority interest in income of
     consolidated subsidiaries                     2,229             3,159
    Increase in cable distribution fees          (24,011)          (20,093)
  Changes in current assets and liabilities:
    Accounts and notes receivable                (60,562)          (33,455)
    Loans available for sale                    (166,256)          (24,243)
    Inventories                                    1,816           (23,019)
    Prepaids and other assets                    (34,139)           (5,713)
    Accounts payable and accrued liabilities     606,566           (78,365)
    Deferred revenue                              33,557            28,487
    Funds collected by Ticketmaster on
     behalf of clients, net                       70,889            15,335
    Other, net                                     9,849            15,247
  Net cash (used in) provided by
   operating activities attributable to
   continuing operations                         (72,296)          503,656
  Cash flows from investing activities
   attributable to continuing operations:
    Acquisitions, net of cash acquired          (693,388)         (234,743)
    Capital expenditures                        (241,469)         (167,790)
    Purchase of marketable securities         (2,158,694)       (3,368,128)
    Proceeds from sale of marketable
     securities                                3,124,145         2,647,501
    (Increase) decrease in long-term
     investments and notes receivable            (32,363)           13,284
    Proceeds from sale of VUE                  1,882,291               -
    Proceeds from sale of Euvia                  183,016               -
    Other, net                                    21,934             7,839
  Net cash provided by (used in)
   investing activities attributable to
   continuing operations                       2,085,472        (1,102,037)
  Cash flows from financing activities
   attributable to continuing operations:
    Borrowings                                    80,000               -
    Increase in warehouse loans payable          162,839            25,201
    Principal payments on long-term
     obligations                                (400,200)           (1,479)
    Purchase of treasury stock                (1,848,258)         (430,295)
    Issuance of common stock, net of
     withholding taxes for stock options         (19,887)          147,283
    Redemption of preferred stock               (655,727)              -
    Preferred dividends                           (9,569)          (13,053)
    Other, net                                   (14,528)            8,689
  Net cash used in financing activities
   attributable to continuing activities      (2,705,330)         (263,654)
  Total cash used in continuing
   operations                                   (692,154)         (862,035)
  Net cash provided by operating
   activities attributable to
   discontinued operations                       753,658           736,692
  Net cash (used in) provided by
   investing activities attributable to
   discontinued operations                        (1,236)          350,395
  Net cash (used in) provided by
   financing activities attributable to
   discontinued operations                       (45,738)            5,639
  Total cash provided by discontinued
   operations                                    706,684         1,092,726
  Effect of exchange rate changes on
   cash and cash equivalents                     (27,148)            9,390
  Net (decrease) increase in cash and
   cash equivalents                              (12,618)          240,081
  Cash and cash equivalents at
   beginning of period                           999,698           759,617
  Cash and cash equivalents at end of
   period                                       $987,080          $999,698



               RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

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

                                            Twelve Months Ended December 31,
                                                  2005             2004
  Net cash (used in) provided by
   operating activities attributable to
   continuing operations                         $(72.3)          $503.7
    Increase in warehouse loans payable           162.8             25.2
    Capital expenditures                         (241.5)          (167.8)
    Tax payments related to the sale of
     VUE interests                                862.6               -
    Preferred dividends paid                       (9.6)           (13.1)
  Free Cash Flow                                 $702.1           $348.0

For the twelve months ended December 31, 2005, consolidated Free Cash Flow increased by $354 million due primarily to higher earnings, lower cash taxes paid (other than the taxes paid on the VUE gain), and an increase in Ticketing client cash, partially offset by higher capital expenditures. Free Cash Flow includes an increase in warehouse loans payable in Lending, which is offset by an increase in loans held for sale. IAC excludes cash tax payments related to the sale of its interests in VUE in the determination of Free Cash Flow because the proceeds on the sale are excluded from cash provided by operating activities and therefore are not in Free Cash Flow. Ticketing client cash contributed $70.9 million to the change in operating cash flows, versus $15.3 million in the prior year, mostly due to Ticketing's domestic operations and in part due to the purchase by Ticketing of the remaining interest in its Australian joint venture (April 2005).

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

                                     Three Months Ended  Twelve Months Ended
                                         December 31,        December 31,
                                        2005      2004      2005      2004

  Diluted earnings (loss) per share     $0.33    $(0.13)    $2.46     $0.41
  GAAP diluted weighted average
   shares outstanding                 344,004   347,246   356,618   371,211
  Net earnings (loss) available to
   common shareholders               $113,067  $(45,867) $868,212  $151,808
  Amortization of non-cash
   compensation                        23,759    22,565   137,537    70,326
  Amortization of non-cash
   distribution and marketing
   expense                                -           1       -       1,302
  Amortization of intangibles          52,578    42,752   186,511   185,388
  Goodwill impairment                     -     184,780       -     184,780
  Equity in the income of VUE             -      (4,895)  (21,960)  (16,188)
  Net other (income) expense related
   to fair value adjustment on
   derivatives                          4,826       -      (4,574)      -
  Gain on sale of VUE                     -         -    (523,487)      -
  Gain on sale of Euvia, net of tax     9,496       -     (70,152)      -
  Discontinued operations, net of
   tax                                  2,716   (11,448) (207,611) (109,994)
  Impact of income taxes and
   minority interest                  (27,071)  (33,282)  106,743   (96,720)
  Interest on convertible notes           767       -       1,179       -
  Preferred dividends                     -       3,264       -         -
  Adjusted Net Income                $180,138  $157,870  $472,398  $370,702

  Adjusted EPS weighted average
   shares outstanding                 349,530   380,528   355,961   374,761

  Adjusted EPS                          $0.52     $0.41     $1.33     $0.99

  GAAP Basic weighted average shares
   outstanding                        320,654   347,246   329,459   347,989
    Options, warrants and restricted
     stock, treasury method            19,077       -      19,367    23,222
    Conversion of convertible
     preferred and convertible notes
     (if applicable)                    4,273       -       7,792       -
  GAAP Diluted weighted average
   shares outstanding                 344,004   347,246   356,618   371,211

    Pro forma adjustments                 -         -         -         -
    Options, warrants and RS, treasury
     method not included in diluted
     shares above                         -      19,335       -         -
    Impact of restricted shares and
     convertible preferred and notes
     (if applicable), net               5,526    13,947      (657)    3,550
  Adjusted EPS shares outstanding     349,530   380,528   355,961   374,761

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 Q4 AND YTD
  (unaudited; $ in millions; rounding differences may occur)

                                     Three Months Ended  Twelve Months Ended
                                         December 31,        December 31,
                                        2005      2004      2005      2004
  Revenue
   Retailing:
    U.S.                               $841.6    $562.9  $2,671.0  $1,905.9
    International                        99.3      97.5     379.9     342.0
    Total Retailing                     940.9     660.3   3,050.9   2,247.9
   Services:
    Ticketing                           253.5     188.9     950.2     768.2
    Lending                             101.0      45.3     367.8     159.3
    Real Estate                          14.6      12.2      57.6      30.4
    Teleservices                         95.9      75.0     337.4     293.9
    Home Services                        10.5       5.0      41.0       6.9
    Total Services                      475.5     326.4   1,753.9   1,258.8
   Media & Advertising                  109.5       9.9     213.5      30.5
   Membership & Subscriptions:
    Vacations                            63.9      60.1     272.8     256.8
    Personals                            68.2      50.9     249.5     198.0
    Discounts                           130.5     132.0     219.0     217.9
    Intra-sector elimination             (0.7)     (0.7)     (1.5)     (1.3)
    Total Membership &
     Subscriptions                      261.8     242.4     739.8     671.5
   Emerging Businesses                   10.3       4.7      29.9       6.6
   Other                                 (5.6)     (8.4)    (34.2)    (27.0)
  Total Revenue                      $1,792.3  $1,235.2  $5,753.7  $4,188.3

  Operating Income Before Amortization
   Retailing:
    U.S.                               $104.3     $68.4    $276.6    $194.7
    International                         6.0       5.6       5.8       4.3
    Total Retailing                     110.3      73.9     282.3     199.0
  Services:
    Ticketing                            59.1      38.3     218.7     164.3
    Lending                              13.9       7.4      80.6      26.1
    Real Estate                          (2.9)     (1.2)    (16.7)     (4.6)
    Teleservices                         11.6       3.8      22.6      17.1
    Home Services                         2.1       0.1      11.2       0.3
    Total Services                       83.8      48.4     316.5     203.1
    Media & Advertising                  20.3      (2.0)     30.5     (13.3)
   Membership & Subscriptions:
    Vacations                            25.3      20.2     110.7      90.2
    Personals                            15.4       7.2      47.9      27.6
    Discounts                            49.3      52.5      17.5      22.0
    Total Membership & Subscriptions     89.9      79.9     176.2     139.8
   Emerging Businesses                   (4.1)      0.7     (12.7)     (1.1)
   Corporate Expense and other          (23.9)    (35.2)   (124.4)   (105.9)
  Total Operating Income Before
   Amortization                        $276.4    $165.8    $668.3    $421.6

  Amortization of Non-Cash Items
   Retailing:
    U.S.                                $15.5     $13.2     $59.9     $52.9
    International                         0.3       0.3       1.3       1.3
    Total Retailing                      15.8      13.6      61.2      54.2
   Services:
    Ticketing                             7.3       6.8      28.7      26.4
    Lending                               5.2       6.4      25.4      21.7
    Real Estate                           2.8       2.5      12.8       7.3
    Teleservices                          -       184.8       -       184.8
    Home Services                         0.9       2.5       2.3       2.5
    Total Services                       16.3     202.9      69.3     242.7
    Media & Advertising                  12.6       0.2      22.8      33.8
   Membership & Subscriptions:
    Vacations                             6.3       6.3      25.2      25.2
    Personals                             1.0       1.8       3.8       8.7
    Discounts                             1.6       1.8       6.4       8.0
    Total Membership & Subscriptions      8.8       9.9      35.4      41.9
   Emerging Businesses                    0.2       3.4       0.6       3.9
   Corporate Expense and other           22.7      20.1     134.8      65.2
  Total amortization of non-cash
   items                                $76.3    $250.1    $324.0    $441.8


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

                                        Three Months Ended   Twelve Months
                                           December 31,   Ended December 31,
                                          2005     2004     2005     2004
  Operating Income (Loss)
   Retailing
    U.S.                                  $88.9    $55.1   $216.7   $141.7
    International                           5.6      5.2      4.5      3.0
    Total Retailing                        94.5     60.4    221.1    144.7
   Services:
    Ticketing                              51.8     31.6    189.9    137.9
    Lending                                 8.7      1.1     55.3      4.4
    Real Estate                            (5.6)    (3.7)   (29.5)   (12.0)
    Teleservices                           11.6   (181.0)    22.6   (167.7)
    Home Services                           1.2     (2.5)     8.9     (2.2)
    Total Services                         67.6   (154.5)   247.2    (39.6)
    Media and Advertising                   7.7     (2.1)     7.7    (47.1)
   Membership & Subscriptions:
    Vacations                              19.0     13.9     85.5     65.0
    Personals                              14.4      5.4     44.1     18.8
    Discounts                              47.7     50.7     11.2     14.0
   Total Membership & Subscriptions        81.1     69.9    140.8     97.9
   Emerging Businesses                     (4.3)    (2.8)   (13.3)    (5.0)
    Corporate Expense and other           (46.5)   (55.2)  (259.3)  (171.2)
  Total operating income (loss)           200.1    (84.3)   344.2    (20.2)
   Total other income, net                  4.9     52.4    647.5    152.5
   Earnings (loss) from cont. operations
    before income taxes and min. int.     205.0    (31.9)   991.7    132.3
   Income tax expense                     (79.4)   (20.7)  (391.1)   (74.3)
   Minority interest                       (0.3)    (1.5)    (2.2)    (3.2)
   Earnings (loss) from continuing
    operations                            125.3    (54.1)   598.4     54.9
   Gain on sale of Euvia, net of tax       (9.5)     -       70.2      -
   Discontinued operations, net of tax     (2.7)    11.4    207.6    110.0
   Earnings (loss) before preferred
    dividends                             113.1    (42.6)   876.2    164.9
   Preferred dividends                     (0.0)    (3.3)    (7.9)   (13.1)
   Net earnings (loss) available to
    common shareholders                  $113.1   $(45.9)  $868.2   $151.8

  Supplemental: Depreciation expense
   Retailing
    U.S.                                  $10.5    $11.4    $40.9    $42.2
    International                           1.2      2.6      6.7     10.3
    Total Retailing                        11.7     14.0     47.6     52.5
   Services:
    Ticketing                               9.2      9.7     36.7     33.4
    Lending                                 1.6      0.6      5.5      2.7
    Real Estate                             0.4      0.3      1.2      0.9
    Teleservices                            3.8      4.0     15.2     17.7
    Home Services                           0.3      0.1      1.0      0.2
    Total Services                         15.4     14.8     59.6     54.8
   Media and Advertising                    6.3      1.3     13.2      4.1
   Membership & Subscriptions:
    Vacations                               2.1      2.1      7.4      8.5
    Personals                               1.8      4.8      8.2     14.8
    Discounts                               1.3      1.1      4.8      3.7
    Total Membership & Subscriptions        5.1      8.0     20.3     27.0
   Emerging Businesses                      0.2      0.1      0.4      0.2
   Corporate Expense and other              2.4      1.7      8.0      5.9
  Total depreciation expense              $41.0    $39.9   $149.2   $144.6


                     DEFINITIONS OF NON-GAAP MEASURES

Operating Income Before Amortization is defined as operating income excluding: (1) amortization of non-cash compensation, distribution and marketing 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 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 and minority interest, (1) amortization of non-cash compensation, distribution and 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 Jeeves 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 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 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.

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, an explanation of why we believe these non-GAAP measures are useful to investors and management, please refer to IAC's website at www.iac.com/investors.htm.

                            OTHER INFORMATION

  CONFERENCE CALL

IAC will audiocast its conference call with investors and analysts discussing the company's Q4 financial results and certain forward-looking information on Wednesday, February 8, 2006, at 11:00 a.m. Eastern Time (ET). The live audiocast is open to the public at www.iac.com/investors.htm.

  ADDITIONAL INFORMATION
  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 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 press release 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, 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, 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 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/

  Contact Us

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

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

  IAC/InterActiveCorp
  152 West 57th Street, 42nd Floor New York, NY 10019  212.314.7300
  Fax 212.314.7309  http://iac.com/

SOURCE: IAC/InterActiveCorp

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

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

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