SEC Comment Letter for Match Group, Inc. (MTCH) (CIK 0000891103) (MTCH) — Apr 5, 2007
Match Group, Inc. (MTCH) (CIK 0000891103)
Date: April 5, 2007 · CIK: 0000891103 · Accession: 0000000000-07-016894
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-20570
Letter
Mail Stop 3561 A p r i l 5 , 2 0 0 7 Via Fax & U.S. Mail Mr. Thomas J. McInerney Executive Vice President and Chief Financial Officer 152 West 57th Street New York, New York 10019
Re: IAC/INTERACTIVECORP Form 10-K for the year ended December 31, 2006 Filed March 1, 2007 File No. 000-20570
Dear Mr. McInerney:
We have reviewed your filing and have the following comments. Unless otherwise indicated, we think you should revi se your document in future filings in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revisi on is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Af ter reviewing this information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Please respond to confirm that such comments will be complied with, or, if certain of the comments are deemed inappropr iate, advise the staff of your reason. Your response should be submitted in electronic form, under the label “corresp” with a copy to the staff. Please respond w ithin ten (10) business days.
Form 10-K for the year ended December 31, 2006
Management’s Discussion and Analysis
- Results of Operations for the Years Ended December 31, 2006, 2005 and 2004, page 39
Mr. Thomas J. McInerney IAC/INTERACTIVECORP April 5, 2007 Page 2
1. Please expand your discussion of sel ling and marketing, and general and administrative expenses in future filings to quantify and discuss the significant cost components within th ese broad categories, such as licensing fees, product costs, product development costs, mark eting costs, compensation and any other significant components that would enab le readers to understand your business better. For example, you state that sell ing and marketing expense increased in 2006 due to the inclusion of IAC Search & Media and Cornerstone brands, and increases in marketing spending at Lending and Personals, but you do not quantify these changes or provide the actua l cost figures necessary to put these changes in proper context. Also, please quantify factors such as price, mix, and volume changes that affect the changes in revenue in year over year comparison. Additionally, quantify the factors that affect Operating Income Before Amortization in your discussion of re sults of operations by segment.
2. In future filings, please discuss and analy ze revenue and cost of sales (rather than gross profit) separately for each segment. Because margins are impacted by both revenue and cost of sales, we believe a se parate discussion of cost of sales results would be beneficial.
– Critical Accounting Policies and Estimates, page 62
3. In light of the significant balance of accounts receivable and disclosure in Note 2 that the allowance for doubtful accounts is a significant estimate, please consider revising your disclosure of critical acc ounting policies and estimates in future filings to include a discussion of your accounting for accounts receivable, specifically the allowance for doubtful accounts.
Consolidated Financial Statements
Consolidated Statement of Operations, page 69
4. We note that cost of sales for both products and services does not appear to include depreciation expense. In future filings, please revise to present cost of sales as “cost of sales (exclusive of de preciation shown separately below)" on the face of the statements of operations to avoid placing undue emphasis on "cash flow." See Staff Accounting Bulletin Topic 11B.
Mr. Thomas J. McInerney IAC/INTERACTIVECORP April 5, 2007 Page 3
Consolidated Balance Sheets, page 71
5. We note your balance of other accrued liabiliti es is 28% of total current liabilities. In your notes to the financ ial statements in future filings, please separately disclose any amounts greater than 5% of current liabilities.
Consolidated Statements of Shareholders’ Equity, page 72
6. We note your disclosure that you recorded a $17.8 million reduction to the amount distributed to Expedia shareholders in 2006 due to a re duced tax liability, and the amount is included in the statemen t of shareholders’ equity as an increase to additional paid-in capital. Please provide us specific details as to the nature and terms of this transaction. Also, tell us how you accounted for the transaction and explain in detail why you believe the treatment used was appropriate.
Notes to the Financial Statements
Note 2. Summary of Significant Accounting Policies - Revenue Recognition, page 77
7. We note your disclosure that revenue from Retailing is recorded when products are shipped. Please tell us, and disclose in your notes to the financial statements in future filings, the point at which the tit le of the product passes to the customer. Also, please indicate in your response and revised disclosure, the shipping terms of the products and why you believe it is appropriate to recognize revenue at the time of shipment.
8. Tell us and disclose in future filings the “estimated economic life” or period over which ServiceMagic’s activation revenue is being recognized as revenue. As part of your response, please explain how you determined the expected economic life of your new network members.
- Advertising, page 83
9. We note your disclosure that catalog cost s are capitalized on a catalog by catalog basis and are amortized over the expected period of future benefits. Please tell us and revise future filings to disclose the periods over which your capitalized catalog costs are being amortized to expense. As part of your response, you should also explain why you believe the period you are using is appropriate. Also, in future filings, please disclose th e amount of advertising costs reported as an asset for each balance sheet presented. See paragraph 49 of SOP 93-7.
Mr. Thomas J. McInerney IAC/INTERACTIVECORP April 5, 2007 Page 4
– Amortization of Non-Cash Marketing, page 83
10. We note your disclosure that amortizati on of non-cash marketing consists of non- cash advertising secured from Universal Television as part of the transaction pursuant to which VUE was created, and the subsequent transaction by which IAC sold its partnership in terests in VUE. We also note from Note 14 that you received $115 million worth of advertisi ng time to be provided by NBC Universal over a three-year period. In light of the fa ct that the sale of your interest in VUE occurred on June 7, 2005, please tell us if there was any non-cash marketing amortization recorded during the period June 8, 2005 through December 31, 2005. If so, please tell us where the amount is recorded on the statement of operations. If there was no expense recognized during 2005, please explain why.
Note 4. Adoption of SFAS No.123R and Stock-Based Compensation, page 89
11. We note the disclosure indicating that in connection with the Spin-off, all outstanding share-based instruments of the Company were modified and the Company recorded a pre-tax modification charge of $67.0 million related to the treatment of vested stock options. Please ex plain in further detail the nature and terms of the modifications that were made to the Company’s share-based instruments in connection w ith the Spin-off transacti on. Also, please explain how the amount of the $67 million modification charge recognized in connection with the spin-off transaction was calculated or determined.
Note 5. Goodwill and Intangible Assets, page 95
12. We note from your table of changes in the carrying amount of goodwill that there was a deduction of $187 million during 2006 in the Media & Advertising segment. Please explain to us, and disclose in future filings, the nature of this deduction. If the deductions relate to pur chase price adjustments related to recent acquisitions, please explain the facts and circumstances that resulted in the purchase price adjustments.
Note 10. Discontinued Operations, page 110
13. We note your disclosure that duri ng the fourth quarter of 2006, iBuy was classified as held for sale. Please tell us why the assets and liabilities of iBuy have not been separately presented as he ld for sale on the face of the balance sheet at December 31, 2006 or disclosed in Note 10. See paragraph 46 of SFAS No. 144.
Mr. Thomas J. McInerney IAC/INTERACTIVECORP April 5, 2007 Page 5
Note 13. Shareholders’ Equity, page 115
14. Please consider revising the notes to your fi nancial statements in future filings to include a rollforward analysis of the ac tivity involving your stock warrants during the various periods presented. This analys is should be presented in a level of detail consistent with that provided for your outstanding stock options in Note 4 and should show the activity involving warrants granted, exercised and forfeited and expired during the various periods pr esented in your financial statements.
Note 14. Equity Investments In Unconsolidated Affiliates, page 118
15. We note that you account for your 3.17% inve stment in Points (Canada) using the equity method of accounting. Please tell us why you believe it is appropriate to use the equity method of accounting for your ownership interest in Points, including why you believe you have the abil ity to exercise significant influence over the operating and financial matters of the inve stee. As part of your response, please tell us how much of the equity in income of unconsolidated affiliates recorded on the statement of operati ons for the year ended December 31, 2006 relates to your interest in Points.
Note 15. Long-Term Obligations an d Short-Term Borrowings, page 120
16. We note your disclosure that LendingTree Loans is required to maintain various financial and other covenants under the term s of the committed lines of credit. In future filings, please disclose the nature of these restrictive covenants. See paragraphs 18-19 of SFAS No. 5.
Note 18. Contingencies, page 125
17. We note from Item 3 that you have several pending litigation matters. Please tell us if you have any amounts accrued for thes e litigation matters. If no accrual has been recorded, or if an e xposure to loss exists in ex cess of the amount accrued, the following disclosures should be made in your notes to the financial statements in future filings, when there is at least a reasonable possibility that a loss or an additional loss may have been incurred: The nature of the contingency An estimate of the possible loss or range of loss, or a statement that such an estimate cannot be made See paragraph 10 of SFAS No. 5. In addition, in future filings, please provide an assessment regarding the potential impact of your pending litigation on your financial statements as a whole (i.e., with regards to your fi nancial condition and liquidity, in addition to y our results of operations).
Mr. Thomas J. McInerney IAC/INTERACTIVECORP April 5, 2007 Page 6
********
We urge all persons who are responsi ble for the accuracy an d adequacy of the disclosure in the filing to be certain that the filing includes all in formation required under the Securities Exchange Act of 1934 and th at they have provided all information investors require for an informed invest ment decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
You may contact Claire Erlanger at (202) 551-3301 if you have questions regarding comments on the financia l statements and related matte rs. Please contact me at (202) 551-3813 with any other questions.
Sincerely,
Linda Cvrkel
Branch Chief
Show Raw Text
Mail Stop 3561
A p r i l 5 , 2 0 0 7
Via Fax & U.S. Mail
Mr. Thomas J. McInerney
Executive Vice President and Chief Financial Officer
152 West 57th Street
New York, New York 10019
Re: IAC/INTERACTIVECORP
Form 10-K for the year ended December 31, 2006
Filed March 1, 2007
File No. 000-20570
Dear Mr. McInerney:
We have reviewed your filing and have the following comments. Unless
otherwise indicated, we think you should revi se your document in future filings in
response to these comments. If you disagree, we will consider your explanation as to
why our comment is inapplicable or a revisi on is unnecessary. Please be as detailed as
necessary in your explanation. In some of our comments, we may ask you to provide us
with information so we may better understand your disclosure. Af ter reviewing this
information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Please respond to confirm that such comments will be complied with, or, if
certain of the comments are deemed inappropr iate, advise the staff of your reason. Your
response should be submitted in electronic form, under the label “corresp” with a copy to the staff. Please respond w ithin ten (10) business days.
Form 10-K for the year ended December 31, 2006
Management’s Discussion and Analysis
- Results of Operations for the Years Ended December 31, 2006, 2005 and 2004, page 39
Mr. Thomas J. McInerney
IAC/INTERACTIVECORP
April 5, 2007 Page 2
1. Please expand your discussion of sel ling and marketing, and general and
administrative expenses in future filings to quantify and discuss the significant
cost components within th ese broad categories, such as licensing fees, product
costs, product development costs, mark eting costs, compensation and any other
significant components that would enab le readers to understand your business
better. For example, you state that sell ing and marketing expense increased in
2006 due to the inclusion of IAC Search & Media and Cornerstone brands, and
increases in marketing spending at Lending and Personals, but you do not
quantify these changes or provide the actua l cost figures necessary to put these
changes in proper context. Also, please quantify factors such as price, mix, and
volume changes that affect the changes in revenue in year over year comparison.
Additionally, quantify the factors that affect Operating Income Before Amortization in your discussion of re sults of operations by segment.
2. In future filings, please discuss and analy ze revenue and cost of sales (rather than
gross profit) separately for each segment. Because margins are impacted by both revenue and cost of sales, we believe a se parate discussion of cost of sales results
would be beneficial.
– Critical Accounting Policies and Estimates, page 62
3. In light of the significant balance of accounts receivable and disclosure in Note 2 that the allowance for doubtful accounts is a significant estimate, please consider
revising your disclosure of critical acc ounting policies and estimates in future
filings to include a discussion of your accounting for accounts receivable,
specifically the allowance for doubtful accounts.
Consolidated Financial Statements
Consolidated Statement of Operations, page 69
4. We note that cost of sales for both products and services does not appear to include depreciation expense. In future filings, please revise to present cost of
sales as “cost of sales (exclusive of de preciation shown separately below)" on the
face of the statements of operations to avoid placing undue emphasis on "cash
flow." See Staff Accounting Bulletin Topic 11B.
Mr. Thomas J. McInerney
IAC/INTERACTIVECORP
April 5, 2007 Page 3
Consolidated Balance Sheets, page 71
5. We note your balance of other accrued liabiliti es is 28% of total current liabilities.
In your notes to the financ ial statements in future filings, please separately
disclose any amounts greater than 5% of current liabilities.
Consolidated Statements of Shareholders’ Equity, page 72
6. We note your disclosure that you recorded a $17.8 million reduction to the
amount distributed to Expedia shareholders in 2006 due to a re duced tax liability,
and the amount is included in the statemen t of shareholders’ equity as an increase
to additional paid-in capital. Please provide us specific details as to the nature and terms of this transaction. Also, tell us how you accounted for the transaction and explain in detail why you believe the treatment used was appropriate.
Notes to the Financial Statements
Note 2. Summary of Significant Accounting Policies
- Revenue Recognition, page 77
7. We note your disclosure that revenue from Retailing is recorded when products
are shipped. Please tell us, and disclose in your notes to the financial statements
in future filings, the point at which the tit le of the product passes to the customer.
Also, please indicate in your response and revised disclosure, the shipping terms
of the products and why you believe it is appropriate to recognize revenue at the
time of shipment.
8. Tell us and disclose in future filings the “estimated economic life” or period over
which ServiceMagic’s activation revenue is being recognized as revenue. As part
of your response, please explain how you determined the expected economic life of your new network members.
- Advertising, page 83
9. We note your disclosure that catalog cost s are capitalized on a catalog by catalog
basis and are amortized over the expected period of future benefits. Please tell us and revise future filings to disclose the periods over which your capitalized catalog costs are being amortized to expense. As part of your response, you should also explain why you believe the period you are using is appropriate.
Also, in future filings, please disclose th e amount of advertising costs reported as
an asset for each balance sheet presented. See paragraph 49 of SOP 93-7.
Mr. Thomas J. McInerney
IAC/INTERACTIVECORP
April 5, 2007 Page 4
– Amortization of Non-Cash Marketing, page 83
10. We note your disclosure that amortizati on of non-cash marketing consists of non-
cash advertising secured from Universal Television as part of the transaction
pursuant to which VUE was created, and the subsequent transaction by which
IAC sold its partnership in terests in VUE. We also note from Note 14 that you
received $115 million worth of advertisi ng time to be provided by NBC Universal
over a three-year period. In light of the fa ct that the sale of your interest in VUE
occurred on June 7, 2005, please tell us if there was any non-cash marketing
amortization recorded during the period June 8, 2005 through December 31, 2005. If so, please tell us where the amount is recorded on the statement of operations.
If there was no expense recognized during 2005, please explain why.
Note 4. Adoption of SFAS No.123R and Stock-Based Compensation, page 89
11. We note the disclosure indicating that in connection with the Spin-off, all outstanding share-based instruments of the Company were modified and the
Company recorded a pre-tax modification charge of $67.0 million related to the
treatment of vested stock options. Please ex plain in further detail the nature and
terms of the modifications that were made to the Company’s share-based
instruments in connection w ith the Spin-off transacti on. Also, please explain how
the amount of the $67 million modification charge recognized in connection with
the spin-off transaction was calculated or determined.
Note 5. Goodwill and Intangible Assets, page 95
12. We note from your table of changes in the carrying amount of goodwill that there
was a deduction of $187 million during 2006 in the Media & Advertising segment. Please explain to us, and disclose in future filings, the nature of this deduction. If the deductions relate to pur chase price adjustments related to recent
acquisitions, please explain the facts and circumstances that resulted in the
purchase price adjustments.
Note 10. Discontinued Operations, page 110
13. We note your disclosure that duri ng the fourth quarter of 2006, iBuy was
classified as held for sale. Please tell us why the assets and liabilities of iBuy
have not been separately presented as he ld for sale on the face of the balance
sheet at December 31, 2006 or disclosed in Note 10. See paragraph 46 of SFAS
No. 144.
Mr. Thomas J. McInerney
IAC/INTERACTIVECORP
April 5, 2007 Page 5
Note 13. Shareholders’ Equity, page 115
14. Please consider revising the notes to your fi nancial statements in future filings to
include a rollforward analysis of the ac tivity involving your stock warrants during
the various periods presented. This analys is should be presented in a level of
detail consistent with that provided for your outstanding stock options in Note 4
and should show the activity involving warrants granted, exercised and forfeited
and expired during the various periods pr esented in your financial statements.
Note 14. Equity Investments In Unconsolidated Affiliates, page 118
15. We note that you account for your 3.17% inve stment in Points (Canada) using the
equity method of accounting. Please tell us why you believe it is appropriate to use the equity method of accounting for your ownership interest in Points, including why you believe you have the abil ity to exercise significant influence
over the operating and financial matters of the inve stee. As part of your response,
please tell us how much of the equity in income of unconsolidated affiliates
recorded on the statement of operati ons for the year ended December 31, 2006
relates to your interest in Points.
Note 15. Long-Term Obligations an d Short-Term Borrowings, page 120
16. We note your disclosure that LendingTree Loans is required to maintain various
financial and other covenants under the term s of the committed lines of credit. In
future filings, please disclose the nature of these restrictive covenants. See paragraphs 18-19 of SFAS No. 5.
Note 18. Contingencies, page 125
17. We note from Item 3 that you have several pending litigation matters. Please tell us if you have any amounts accrued for thes e litigation matters. If no accrual has
been recorded, or if an e xposure to loss exists in ex cess of the amount accrued,
the following disclosures should be made in your notes to the financial statements
in future filings, when there is at least a reasonable possibility that a loss or an
additional loss may have been incurred:
The nature of the contingency
An estimate of the possible loss or range of loss, or a statement that such an estimate cannot be made
See paragraph 10 of SFAS No. 5. In addition, in future filings, please provide an
assessment regarding the potential impact of your pending litigation on your
financial statements as a whole (i.e., with regards to your fi nancial condition and
liquidity, in addition to y our results of operations).
Mr. Thomas J. McInerney
IAC/INTERACTIVECORP
April 5, 2007 Page 6
********
We urge all persons who are responsi ble for the accuracy an d adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the
filing;
staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
You may contact Claire Erlanger at (202) 551-3301 if you have questions
regarding comments on the financia l statements and related matte rs. Please contact me at
(202) 551-3813 with any other questions.
Sincerely,
Linda Cvrkel
Branch Chief