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As filed with the Securities and Exchange Commission on May 10, 2004

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2004

or

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                              

Commission File No. 0-20570

INTERACTIVECORP
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)		   59-2712887
(I.R.S. Employer
Identification No.)

152 West 57th Street, New York, New York 10019
(Address of Registrant's principal executive offices)

(212) 314-7300
(Registrant's telephone number, including area code)

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        As of April 26, 2004, the following shares of the Registrant's common stock were outstanding:

Common Stock, including 403,020 shares of restricted stock   636,738,128
Class B Common Stock   64,629,996
   
Total outstanding Common Stock   701,368,124
   

        The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of April 26, 2004 was $16,815,480,017. For the purpose of the foregoing calculation only, all directors and executive officers of the Registrant are assumed to be affiliates of the Registrant.


PART I FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

INTERACTIVECORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 
   Three Months Ended
March 31,
  
 
   2004
   2003
  
 
   (In thousands)

  
Service revenue   $ 856,492   $ 855,335  
Product sales     614,245     531,399  
   
 
 
Net revenue     1,470,737     1,386,734  

Cost of sales—service revenue
 
 
329,478
 
 
467,510
 
Cost of sales—product sales     366,940     319,372  
   
 
 
Gross profit     774,319     599,852  

Selling and marketing
 
 
309,420
 
 
189,353
 
General and administrative     174,384     153,255  
Other operating costs     32,637     25,807  
Cable distribution fees     17,764     15,326  
Amortization of non-cash distribution and marketing expense     6,339     10,489  
Amortization of non-cash compensation expense     68,968     10,211  
Amortization of intangibles     79,717     52,156  
Depreciation     42,511     42,162  
Merger costs     —     2,096  
   
 
 
Operating income     42,579     98,997  

Other income (expense):
 
 
 
 
 
 
 
  Interest income     45,409     39,830  
  Interest expense     (20,755 )   (24,278 )
  Equity in losses of VUE     (352 )   (243,276 )
  Equity in income (losses) in unconsolidated subsidiaries and other expenses     7,528     (1,879 )
   
 
 
Total other income (expense), net     31,830     (229,603 )

Earnings (loss) from continuing operations before income taxes and minority interest
 
 
74,409
 
 
(130,606
)
  Income tax benefit (expense)     (29,223 )   54,174  
  Minority interest     (1,396 )   (25,727 )
   
 
 
Earnings (loss) from continuing operations     43,790     (102,159 )
 
Discontinued operations, net of tax
 
 
(2,263
)
 
(4,637
)
   
 
 
Earnings (loss) before preferred dividend     41,527     (106,796 )
 
Preferred dividend
 
 
(3,264
)
 
(3,264
)
   
 
 
Net income (loss) available to common shareholders   $ 38,263   $ (110,060 )
   
 
 

Income (loss) per share:
 
 
 
 
 
 
 
  Basic earnings (loss) per share from continuing operations   $ 0.06   $ (0.22 )
  Diluted earnings (loss) per share from continuing operations   $ 0.05   $ (0.22 )
 
Basic earnings (loss) per share
 
$
0.05
 
$
(0.23
)
  Diluted earnings (loss) per share   $ 0.05   $ (0.23 )

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

2


INTERACTIVECORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 
   March 31, 2004
   December 31, 2003
  
 
   (unaudited)

   (audited)

  
 
   (In thousands)

  
ASSETS              

CURRENT ASSETS:
 
 
 
 
 
 
 
  Cash and cash equivalents   $ 1,491,169   $ 899,062  
  Restricted cash equivalents     26,128     31,356  
  Marketable securities     2,431,917     2,419,735  
  Accounts and notes receivable, net of allowance of $30,535 and $30,999, respectively     458,282     429,424  
  Inventories, net     216,746     215,995  
  Deferred tax assets     62,357     65,071  
  Other current assets     246,437     154,333  
   
 
 
Total current assets     4,933,036     4,214,976  

PROPERTY, PLANT AND EQUIPMENT:
 
 
 
 
 
 
 
  Computer and broadcast equipment     713,357     686,899  
  Buildings and leasehold improvements     152,912     155,212  
  Furniture and other equipment     151,171     154,378  
  Land     21,155     21,172  
  Projects in progress     29,338     30,962  
   
 
 
      1,067,933     1,048,623  
  Less: accumulated depreciation and amortization     (608,919 )   (575,446 )
   
 
 
Total property, plant and equipment     459,014     473,177  

OTHER ASSETS:
 
 
 
 
 
 
 
  Goodwill     11,262,861     11,291,768  
  Intangible assets, net     2,472,654     2,513,889  
  Long-term investments     1,447,711     1,426,502  
  Preferred interest exchangeable for common stock     1,428,530     1,428,530  
  Cable distribution fees, net     124,659     128,971  
  Note receivables and advances, net of current portion     15,648     14,507  
  Deferred charges and other     98,884     93,928  
  Non-current assets of discontinued operations     339     340  
   
 
 
TOTAL ASSETS   $ 22,243,336   $ 21,586,588  
   
 
 

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

3


INTERACTIVECORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 
   March 31, 2004
   December 31, 2003
  
 
   (unaudited)

   (audited)

  
 
   (In thousands)

  
LIABILITIES AND SHAREHOLDERS' EQUITY              

CURRENT LIABILITIES:
 
 
 
 
 
 
 
Current maturities of long-term obligations   $ 2,970   $ 2,850  
Accounts payable, trade     749,426     687,977  
Accounts payable, client accounts     243,938     142,002  
Cable distribution fees payable     41,964     39,142  
Deferred merchant bookings     619,015     218,822  
Deferred revenue     107,327     180,229  
Income tax payable     97,780     96,817  
Other accrued liabilities     431,185     494,280  
Current liabilities of discontinued operations     13,362     16,062  
   
 
 
Total current liabilities     2,306,967     1,878,181  

Long-Term Obligations, net of current maturities
 
 
1,134,322
 
 
1,120,097
 
Other long-term liabilities     81,098     67,981  
Deferred income taxes     2,599,557     2,565,415  
Common stock exchangeable for preferred interest     1,428,530     1,428,530  
Minority interest     108,409     110,799  

SHAREHOLDERS' EQUITY:
 
 
 
 
 
 
 
Preferred stock—$.01 par value; authorized 100,000,000 shares; issued and outstanding 13,118,182     131     131  
Common stock—$.01 par value; authorized 1,600,000,000 shares; issued 683,665,753 and 679,006,913 shares respectively, and outstanding 635,644,533 and 631,022,816 shares, respectively, including 405,334 and 452,035 of restricted stock, respectively     6,352     6,305  
Class B convertible common stock—$.01 par value; authorized 400,000,000 shares; issued and outstanding 64,629,996     646     646  
Additional paid-in capital     13,759,762     13,634,926  
Retained earnings     2,315,215     2,276,952  
Accumulated other comprehensive income     43,500     36,896  
Treasury stock—48,021,220 and 47,984,097 shares, respectively     (1,536,155 )   (1,535,273 )
Note receivable from key executive for common stock issuance     (4,998 )   (4,998 )
   
 
 
Total shareholders' equity     14,584,453     14,415,585  
   
 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 22,243,336   $ 21,586,588  
   
 
 

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

4


INTERACTIVECORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

 
    
   Convertible
Preferred Stock
    
    
   Class B Convertible
Common Stock
    
    
    
    
    
  
 
    
   Common Stock
    
    
    
    
   Note Receivable
From Key Executive
for Common Stock
Issuance
  
 
    
   Addit. Paid-in
Capital
   Retained
Earnings
   Accum.
Other Comp
Income
   Treasury
Stock
  
 
   Total
   $
   Shares
   $
   Shares
   $
   Shares
  
 
   (In thousands)

  
Balance as of December 31, 2003   $ 14,415,585   $ 131   13,118   $ 6,305   631,023   $ 646   64,630   $ 13,634,926   $ 2,276,952   $ 36,896   $ (1,535,273 ) $ (4,998 )
  Comprehensive income:                                                                    
    Net income for the three months ended March 31, 2004     41,527     —   —     —   —     —   —     —     41,527     —     —     —  
    Increase in unrealized gains in available for sale securities     2,655     —   —     —   —     —   —     —     —     2,655     —     —  
    Foreign currency translation     3,594     —   —     —   —     —   —     —     —     3,594     —     —  
    Net gain on derivative contracts     355     —   —     —   —     —   —     —     —     355     —     —  
   
                                                             
  Comprehensive income     48,131                                                              
   
                                                             
Issuance of common stock upon exercise of stock option, restricted stock, and other     46,930     —   —     47   4,658     —   —     46,883     —     —     —     —  
Income tax benefit related to stock options exercised, restricted stock, and other     11,744     —   —     —   —     —   —     11,744     —     —     —     —  
Dividend on preferred stock     (3,264 )   —   —     —   —     —   —     —     (3,264 )   —     —     —  
Amortization of non-cash compensation     66,209     —   —     —   —     —   —     66,209     —     —     —     —  
Purchase of treasury stock     (882 )   —   —     —   (37 )   —   —     —     —     —     (882 )   —  
   
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of March 31, 2004   $ 14,584,453   $ 131   13,118   $ 6,352   635,644   $ 646   64,630   $ 13,759,762   $ 2,315,215   $ 43,500   $ (1,536,155 ) $ (4,998 )
   
 
 
 
 
 
 
 
 
 
 
 
 

        Accumulated other comprehensive income is comprised of unrealized gains on available for sale securities of $3,100 and $445 at March 31, 2004 and December 31, 2003, respectively, foreign currency translation adjustments of $40,485 and $36,891 at March 31, 2004 and December 31, 2003, respectively, and net losses from derivative contracts of $(85) and $(440) at March 31, 2004 and December 31, 2003.

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

5


INTERACTIVECORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
   Three Months Ended March 31,
  
 
   2004
   2003
  
 
   (in thousands)

  
Cash flows from operating activities:              
  Earnings (loss) from continuing operations   $ 43,790   $ (102,159 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
  Depreciation and amortization     122,228     94,318  
  Amortization of non-cash distribution and marketing     6,339     10,489  
  Amortization of non-cash compensation expense     68,968     10,211  
  Amortization of cable distribution fees     17,764     15,326  
  Amortization of deferred financing costs     161     541  
  Deferred income taxes     (26,819 )   (52,202 )
  Loss on retirement of bonds     —     1,446  
  Equity in (income) losses of unconsolidated subsidiaries, including VUE     (2,460 )   243,419  
  Non-cash interest income     (9,952 )   (8,673 )
  Minority interest     1,396     25,727  
  Increase in cable distribution fees     (12,106 )   (9,367 )
Changes in current assets and liabilities:              
  Accounts receivable and notes     (32,515 )   (17,515 )
  Inventories     (6,275 )   17,708  
  Prepaids and other assets     (58,598 )   (19,429 )
  Accounts payable and accrued liabilities     60,732     73,318  
  Deferred revenue     (64,390 )   57,329  
  Deferred merchant bookings     400,194     120,854  
  Funds collected by Ticketmaster on behalf of clients, net     81,972     22,571  
  Other, net     3,622     (8,257 )
   
 
 
Net cash provided by operating activities     594,051     475,655  

Cash flows from investing activities:
 
 
 
 
 
 
 
  Acquisitions net of cash acquired     (4,729 )   (366,887 )
  Capital expenditures     (34,390 )   (33,738 )
  Increase in long-term investments and notes receivable     (805 )   (93 )
  Purchase of marketable securities     (1,344,834 )   (1,883,334 )
  Proceeds of marketable securities     1,334,757     1,066,088  
  Other, net     9,221     2,116  
   
 
 
Net cash used in investing activities     (40,780 )   (1,215,848 )

Cash flows from financing activities:
 
 
 
 
 
 
 
  Principal payments on long-term obligations     (532 )   (10,087 )
  Purchase of treasury stock by IAC and subsidiaries     (882 )   (24,854 )
  Repurchase of 1998 Senior Notes     —     (98,776 )
  Proceeds from subsidiary stock, including stock options     —     14,032  
  Proceeds from issuance of common stock     40,834     26,893  
  Preferred dividends     (3,264 )   (3,264 )
  Other, net     10,472     (8,193 )
   
 
 
Net cash provided by (used in) financing activities     46,628     (104,249 )

Net Cash Used In Discontinued Operations
 
 
(5,292
)
 
(79,010
)
Effect of exchange rate changes on cash and cash equivalents     (2,500 )   1,811  
   
 
 
Net Increase (Decrease) In Cash and Cash Equivalents     592,107     (921,641 )
Cash and cash equivalents at beginning of period     899,062     1,998,114  
   
 
 
Cash and Cash Equivalents at End of Period   $ 1,491,169   $ 1,076,473  
   
 
 

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

6


INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATION

        InterActiveCorp is a leading, multi-brand interactive commerce company committed to harnessing the power of interactivity to make people's lives easier, everywhere and every day. IAC operates a diversified portfolio of specialized and global brands in the travel, home shopping, ticketing, personals, local and media services, financial services and real estate, and teleservices industries. IAC enables billions of dollars of consumer-direct transactions for products and services via the Internet, television and telephone. InterActiveCorp is referred to herein as either IAC or the Company.

        IAC consists of the following segments: