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Exhibit 99.2


HSN, Inc. and Subsidiaries

Combined Statements of Operations

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 666,705   $ 681,506   $ 680,763   $ 879,268  
Cost of sales (exclusive of depreciation shown separately below)     418,706     421,474     424,468     555,400  
   
 
 
 
 
  Gross margin     247,999     260,032     256,295     323,868  
Selling and marketing expense     136,453     153,556     139,066     166,836  
General and administrative expense     53,966     51,074     52,222     54,693  
Production and programming expense     14,880     13,867     13,630     16,674  
Amortization of non-cash marketing     —     450     3,992     —  
Amortization of intangibles     4,085     2,701     2,197     3,698  
Depreciation     8,468     8,621     8,760     8,514  
   
 
 
 
 
  Operating income     30,147     29,763     36,428     73,453  
Other income (expense):                          
  Interest income     69     120     36     27  
  Other expense     (108 )   (148 )   —     —  
   
 
 
 
 
Total other (expense) income, net     (39 )   (28 )   36     27  
   
 
 
 
 
Earnings from continuing operations before income taxes     30,108     29,735     36,464     73,480  
Income tax provision     (11,456 )   (11,315 )   (13,874 )   (27,909 )
   
 
 
 
 
Earnings from continuing operations     18,652     18,420     22,590     45,571  
Gain (loss) on sale of discontinued operations, net of tax     —     34,795     (4,223 )   —  
(Loss) income from discontinued operations, net of tax     (1,566 )   21,391     (1,711 )   10,885  
   
 
 
 
 
Net income   $ 17,086   $ 74,606   $ 16,656   $ 56,456  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
231
 
$
249
 
$
190
 
$
267
 
  Selling and marketing expense     253     272     209     291  
  General and administrative expense     2,549     2,698     2,073     2,869  
  Production and programming expense     2     2     3     2  
   
 
 
 
 
Total non-cash compensation expense   $ 3,035   $ 3,221   $ 2,475   $ 3,429  
   
 
 
 
 

1


HSN, Inc. and Subsidiaries

Combined Statements of Operations (Continued)

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Six Months
Ended
June 30
   Nine Months
Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 666,705   $ 1,348,211   $ 2,028,974   $ 2,908,242  
Cost of sales (exclusive of depreciation shown separately below)     418,706     840,180     1,264,648     1,820,048  
   
 
 
 
 
  Gross margin     247,999     508,031     764,326     1,088,194  
Selling and marketing expense     136,453     290,009     429,075     595,911  
General and administrative expense     53,966     105,040     157,262     211,955  
Production and programming expense     14,880     28,747     42,377     59,051  
Amortization of non-cash marketing     —     450     4,442     4,442  
Amortization of intangibles     4,085     6,786     8,983     12,681  
Depreciation     8,468     17,089     25,849     34,363  
   
 
 
 
 
  Operating income     30,147     59,910     96,338     169,791  
Other income (expense):                          
  Interest income     69     189     225     252  
  Other expense     (108 )   (256 )   (256 )   (256 )
   
 
 
 
 
Total other expense, net     (39 )   (67 )   (31 )   (4 )
   
 
 
 
 
Earnings from continuing operations before income taxes     30,108     59,843     96,307     169,787  
Income tax provision     (11,456 )   (22,771 )   (36,645 )   (64,554 )
   
 
 
 
 
Earnings from continuing operations     18,652     37,072     59,662     105,233  
Gain on sale of discontinued operations, net of tax     —     34,795     30,572     30,572  
(Loss) income from discontinued operations, net of tax     (1,566 )   19,825     18,114     28,999  
   
 
 
 
 
Net income   $ 17,086   $ 91,692   $ 108,348   $ 164,804  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
231
 
$
480
 
$
670
 
$
937
 
  Selling and marketing expense     253     525     734     1,025  
  General and administrative expense     2,549     5,247     7,320     10,189  
  Production and programming expense     2     4     7     9  
   
 
 
 
 
Total non-cash compensation expense   $ 3,035   $ 6,256   $ 8,731   $ 12,160  
   
 
 
 
 

2


HSN, Inc. and Subsidiaries

Combined Statements of Operations

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 665,587   $ 682,349   $ 671,753   $ 858,265  
Cost of sales (exclusive of depreciation shown separately below)     410,741     410,870     413,563     530,029  
   
 
 
 
 
  Gross margin     254,846     271,479     258,190     328,236  
Selling and marketing expense     131,771     148,890     135,761     168,575  
General and administrative expense     44,222     45,192     45,936     50,911  
Production and programming expense     14,547     13,971     13,783     14,499  
Amortization of intangibles     15,355     8,557     5,156     5,156  
Depreciation     10,281     9,816     8,830     8,346  
   
 
 
 
 
  Operating income     38,670     45,053     48,724     80,749  
Other income (expense):                          
  Interest income     148     148     104     186  
  Other expense     (163 )   (310 )   (253 )   (314 )
   
 
 
 
 
Total other expense, net     (15 )   (162 )   (149 )   (128 )
   
 
 
 
 
Earnings from continuing operations before income taxes     38,655     44,891     48,575     80,621  
Income tax provision     (14,392 )   (16,715 )   (18,086 )   (30,017 )
   
 
 
 
 
Earnings from continuing operations     24,263     28,176     30,489     50,604  
Income (loss) from discontinued operations, net of tax     469     (7,934 )   (3,963 )   713  
   
 
 
 
 
Net income   $ 24,732   $ 20,242   $ 26,526   $ 51,317  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
109
 
$
302
 
$
107
 
$
237
 
  Selling and marketing expense     410     330     117     260  
  General and administrative expense     2,692     3,311     1,252     2,612  
  Production and programming expense     —     3     1     3  
   
 
 
 
 
Total non-cash compensation expense   $ 3,211   $ 3,946   $ 1,477   $ 3,112  
   
 
 
 
 

3

 


HSN, Inc. and Subsidiaries

Combined Statements of Operations (Continued)

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Six Months Ended
June 30
   Nine Months Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 665,587   $ 1,347,936   $ 2,019,689   $ 2,877,954  
Cost of sales (exclusive of depreciation shown separately below)     410,741     821,611     1,235,174     1,765,203  
   
 
 
 
 
  Gross margin     254,846     526,325     784,515     1,112,751  
Selling and marketing expense     131,771     280,661     416,422     584,997  
General and administrative expense     44,222     89,414     135,350     186,261  
Production and programming expense     14,547     28,518     42,301     56,800  
Amortization of intangibles     15,355     23,912     29,068     34,224  
Depreciation     10,281     20,097     28,927     37,273  
   
 
 
 
 
  Operating income     38,670     83,723     132,447     213,196  
Other income (expense):                          
  Interest income     148     296     400     586  
  Other expense     (163 )   (473 )   (726 )   (1,040 )
   
 
 
 
 
Total other expense, net     (15 )   (177 )   (326 )   (454 )
   
 
 
 
 
Earnings from continuing operations before income taxes     38,655     83,546     132,121     212,742  
Income tax provision     (14,392 )   (31,107 )   (49,193 )   (79,210 )
   
 
 
 
 
Earnings from continuing operations     24,263     52,439     82,928     133,532  
Income (loss) from discontinued operations, net of tax     469     (7,465 )   (11,428 )   (10,715 )
   
 
 
 
 
Net income   $ 24,732   $ 44,974   $ 71,500   $ 122,817  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
109
 
$
411
 
$
518
 
$
755
 
  Selling and marketing expense     410     740     857     1,117  
  General and administrative expense     2,692     6,003     7,255     9,867  
  Production and programming expense     —     3     4     7  
   
 
 
 
 
Total non-cash compensation expense   $ 3,211   $ 7,157   $ 8,634   $ 11,746  
   
 
 
 
 

4


Interval Leisure Group, Inc. and Subsidiaries

Consolidated Statements of Operations

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 86,433   $ 85,885   $ 96,019   $ 92,070  
Cost of sales (exclusive of depreciation shown separately below)     18,944     22,508     30,266     29,081  
   
 
 
 
 
  Gross profit     67,489     63,377     65,753     62,989  
Selling and marketing expense     11,662     11,413     11,580     11,180  
General and administrative expense     15,805     17,260     19,021     19,827  
Amortization of intangibles     6,305     6,305     7,851     6,418  
Depreciation     1,888     1,965     2,247     2,315  
   
 
 
 
 
  Operating income     31,829     26,434     25,054     23,249  
Other income (expense):                          
  Interest income     2,641     2,637     2,416     2,651  
  Interest expense     (46 )   (70 )   (49 )   (40 )
  Other (expense) income     (113 )   (736 )   233     10  
   
 
 
 
 
Total other income, net     2,482     1,831     2,600     2,621  
   
 
 
 
 
Earnings before income taxes and minority interest     34,311     28,265     27,654     25,870  
Income tax provision     (13,162 )   (10,843 )   (11,103 )   (9,924 )
Minority interest in income of consolidated subsidiaries     —     (3 )   (5 )   (4 )
   
 
 
 
 
Net income   $ 21,149   $ 17,419   $ 16,546   $ 15,942  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of sales
 
$
29
 
$
78
 
$
67
 
$
108
 
  Selling and marketing expense     32     85     74     117  
  General and administrative expense     304     829     744     1,162  
   
 
 
 
 
Total non-cash compensation expense   $ 365   $ 992   $ 885   $ 1,387  
   
 
 
 
 

5

Interval Leisure Group, Inc. and Subsidiaries

Consolidated Statements of Operations (Continued)

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Six Months
Ended
June 30
   Nine Months
Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 86,433   $ 172,318   $ 268,337   $ 360,407  
Cost of sales (exclusive of depreciation shown separately below)     18,944     41,452     71,718     100,799  
   
 
 
 
 
  Gross profit     67,489     130,866     196,619     259,608  
Selling and marketing expense     11,662     23,075     34,655     45,835  
General and administrative expense     15,805     33,065     52,086     71,913  
Amortization of intangibles     6,305     12,610     20,461     26,879  
Depreciation     1,888     3,853     6,100     8,415  
   
 
 
 
 
  Operating income     31,829     58,263     83,317     106,566  
Other income (expense):                          
  Interest income     2,641     5,278     7,694     10,345  
  Interest expense     (46 )   (116 )   (165 )   (205 )
  Other expense     (113 )   (849 )   (616 )   (606 )
   
 
 
 
 
Total other income, net     2,482     4,313     6,913     9,534  
   
 
 
 
 
Earnings before income taxes and minority interest     34,311     62,576     90,230     116,100  
Income tax provision     (13,162 )   (24,005 )   (35,108 )   (45,032 )
Minority interest in income of consolidated subsidiaries     —     (3 )   (8 )   (12 )
   
 
 
 
 
Net income   $ 21,149   $ 38,568   $ 55,114   $ 71,056  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of sales
 
$
29
 
$
107
 
$
174
 
$
282
 
  Selling and marketing expense     32     117     191     308  
  General and administrative expense     304     1,133     1,877     3,039  
   
 
 
 
 
Total non-cash compensation expense   $ 365   $ 1,357   $ 2,242   $ 3,629  
   
 
 
 
 

6


Interval Leisure Group, Inc. and Subsidiaries

Consolidated Statements of Operations

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 78,676   $ 71,377   $ 70,359   $ 68,234  
Cost of sales (exclusive of depreciation shown separately below)     17,457     17,096     16,349     15,391  
   
 
 
 
 
  Gross profit     61,219     54,281     54,010     52,843  
Selling and marketing expense     11,191     10,539     10,313     9,592  
General and administrative expense     15,500     16,331     15,553     14,154  
Amortization of intangibles     6,305     6,305     6,305     6,305  
Depreciation     2,044     1,933     1,926     1,929  
   
 
 
 
 
  Operating income     26,179     19,173     19,913     20,863  
Other income (expense):                          
  Interest income     1,790     2,235     2,361     2,528  
  Interest expense     (102 )   (120 )   (75 )   (60 )
  Other (expense) income     (134 )   674     (831 )   (483 )
   
 
 
 
 
Total other income, net     1,554     2,789     1,455     1,985  
   
 
 
 
 
Earnings before income taxes     27,733     21,962     21,368     22,848  
Income tax provision     (10,492 )   (8,706 )   (8,075 )   (8,595 )
   
 
 
 
 
Net income   $ 17,241   $ 13,256   $ 13,293   $ 14,253  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of sales
 
$
80
 
$
57
 
$
38
 
$
50
 
  Selling and marketing expense     52     62     41     55  
  General and administrative expense     1,327     601     396     527  
   
 
 
 
 
Total non-cash compensation expense   $ 1,459   $ 720   $ 475   $ 632  
   
 
 
 
 

7

Interval Leisure Group, Inc. and Subsidiaries

Consolidated Statements of Operations (Continued)

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Six Months
Ended
June 30
   Nine Months
Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 78,676   $ 150,053   $ 220,412   $ 288,646  
Cost of sales (exclusive of depreciation shown separately below)     17,457     34,553     50,902     66,293  
   
 
 
 
 
  Gross profit     61,219     115,500     169,510     222,353  
Selling and marketing expense     11,191     21,730     32,043     41,635  
General and administrative expense     15,500     31,831     47,384     61,538  
Amortization of intangibles     6,305     12,610     18,915     25,220  
Depreciation     2,044     3,977     5,903     7,832  
   
 
 
 
 
  Operating income     26,179     45,352     65,265     86,128  
Other income (expense):                          
  Interest income     1,790     4,025     6,386     8,914  
  Interest expense     (102 )   (222 )   (297 )   (357 )
  Other (expense) income     (134 )   540     (291 )   (774 )
   
 
 
 
 
Total other income, net     1,554     4,343     5,798     7,783  
   
 
 
 
 
Earnings before income taxes     27,733     49,695     71,063     93,911  
Income tax provision     (10,492 )   (19,198 )   (27,273 )   (35,868 )
   
 
 
 
 
Net income   $ 17,241   $ 30,497   $ 43,790   $ 58,043  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of sales
 
$
80
 
$
137
 
$
175
 
$
225
 
  Selling and marketing expense     52     114     155     210  
  General and administrative expense     1,327     1,928     2,324     2,851  
   
 
 
 
 
Total non-cash compensation expense   $ 1,459   $ 2,179   $ 2,654   $ 3,286  
   
 
 
 
 

8


Ticketmaster and Subsidiaries

Combined Statements of Operations

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 303,577   $ 293,416   $ 292,466   $ 351,018  
Cost of sales (exclusive of depreciation shown separately below)     184,784     183,860     181,186     216,708  
   
 
 
 
 
  Gross profit     118,793     109,556     111,280     134,310  
Selling and marketing expense     7,073     8,158     8,560     19,696  
General and administrative expense     34,258     39,892     39,108     36,220  
Amortization of intangibles     6,853     6,667     6,081     6,599  
Depreciation     9,121     9,471     9,495     10,371  
   
 
 
 
 
  Operating income     61,488     45,368     48,036     61,424  
Other income (expense):                          
  Interest income     5,378     8,499     8,533     10,655  
  Interest expense     (266 )   (133 )   (242 )   (362 )
  Equity in income of uncombined affiliates     865     960     1,196     3,280  
  Other income (expense)     83     (208 )   230     1,015  
   
 
 
 
 
Total other income, net     6,060     9,118     9,717     14,588  
   
 
 
 
 
Earnings before income taxes and minority interest     67,548     54,486     57,753     76,012  
Income tax provision     (24,637 )   (19,873 )   (18,671 )   (25,826 )
Minority interest in losses of combined subsidiaries     14     191     1,459     895  
   
 
 
 
 
Net income   $ 42,925   $ 34,804   $ 40,541   $ 51,081  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
148
 
$
242
 
$
211
 
$
199
 
  Selling and marketing expense     163     265     230     218  
  General and administrative expense     1,568     2,556     4,082     2,690  
   
 
 
 
 
Total non-cash compensation expense   $ 1,879   $ 3,063   $ 4,523   $ 3,107  
   
 
 
 
 

9


Ticketmaster and Subsidiaries

Combined Statements of Operations (Continued)

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Six Months
Ended
June 30
   Nine Months
Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 303,577   $ 596,993   $ 889,459   $ 1,240,477  
Cost of sales (exclusive of depreciation shown separately below)     184,784     368,644     549,830     766,538  
   
 
 
 
 
  Gross profit     118,793     228,349     339,629     473,939  
Selling and marketing expense     7,073     15,231     23,791     43,487  
General and administrative expense     34,258     74,150     113,258     149,478  
Amortization of intangibles     6,853     13,520     19,601     26,200  
Depreciation     9,121     18,592     28,087     38,458  
   
 
 
 
 
  Operating income     61,488     106,856     154,892     216,316  
Other income (expense):                          
  Interest income     5,378     13,877     22,410     33,065  
  Interest expense     (266 )   (399 )   (641 )   (1,003 )
  Equity in income of uncombined affiliates     865     1,825     3,021     6,301  
  Other income (expense)     83     (125 )   105     1,120  
   
 
 
 
 
Total other income, net     6,060     15,178     24,895     39,483  
   
 
 
 
 
Earnings before income taxes and minority interest     67,548     122,034     179,787     255,799  
Income tax provision     (24,637 )   (44,510 )   (63,181 )   (89,007 )
Minority interest in losses of combined subsidiaries     14     205     1,664     2,559  
   
 
 
 
 
Net income   $ 42,925   $ 77,729   $ 118,270   $ 169,351  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
148
 
$
390
 
$
601
 
$
800
 
  Selling and marketing expense     163     428     658     876  
  General and administrative expense     1,568     4,124     8,206     10,896  
   
 
 
 
 
Total non-cash compensation expense   $ 1,879   $ 4,942   $ 9,465   $ 12,572  
   
 
 
 
 

10


Ticketmaster and Subsidiaries

Combined Statements of Operations

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 240,722   $ 287,595   $ 258,497   $ 275,858  
Cost of sales (exclusive of depreciation shown separately below)     140,932     171,998     158,384     165,838  
   
 
 
 
 
  Gross profit     99,790     115,597     100,113     110,020  
Selling and marketing expense     4,247     5,116     5,091     5,669  
General and administrative expense     21,737     29,450     34,136     32,994  
Amortization of intangibles     6,898     7,036     6,571     6,604  
Depreciation     8,765     8,780     8,782     8,753  
   
 
 
 
 
  Operating income     58,143     65,215     45,533     56,000  
Other income (expense):                          
  Interest income     4,230     7,621     9,236     12,895  
  Interest expense     (44 )   (75 )   (67 )   (116 )
  Equity in income of uncombined affiliates     872     612     835     678  
  Other income     412     70     61     439  
   
 
 
 
 
Total other income, net     5,470     8,228     10,065     13,896  
   
 
 
 
 
Earnings before income taxes and minority interest     63,613     73,443     55,598     69,896  
Income tax provision     (23,977 )   (27,682 )   (20,921 )   (13,387 )
Minority interest in losses of combined subsidiaries     —     —     29     89  
   
 
 
 
 
Net income   $ 39,636   $ 45,761   $ 34,706   $ 56,598  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
149
 
$
63
 
$
269
 
$
173
 
  Selling and marketing expense     92     70     294     190  
  General and administrative expense     1,206     667     2,836     1,830  
   
 
 
 
 
Total non-cash compensation expense   $ 1,447   $ 800   $ 3,399   $ 2,193  
   
 
 
 
 

11


Ticketmaster and Subsidiaries

Combined Statements of Operations (Continued)

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Six Months
Ended
June 30
   Nine Months
Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 240,722   $ 528,317   $ 786,814   $ 1,062,672  
Cost of sales (exclusive of depreciation shown separately below)     140,932     312,930     471,314     637,152  
   
 
 
 
 
  Gross profit     99,790     215,387     315,500     425,520  
Selling and marketing expense     4,247     9,363     14,454     20,123  
General and administrative expense     21,737     51,187     85,323     118,317  
Amortization of intangibles     6,898     13,934     20,505     27,109  
Depreciation     8,765     17,545     26,327     35,080  
   
 
 
 
 
  Operating income     58,143     123,358     168,891     224,891  
Other income (expense):                          
  Interest income     4,230     11,851     21,087     33,982  
  Interest expense     (44 )   (119 )   (186 )   (302 )
  Equity in income of uncombined affiliates     872     1,484     2,319     2,997  
  Other income     412     482     543     982  
   
 
 
 
 
Total other income, net     5,470     13,698     23,763     37,659  
   
 
 
 
 
Earnings before income taxes and minority interest     63,613     137,056     192,654     262,550  
Income tax provision     (23,977 )   (51,659 )   (72,580 )   (85,967 )
Minority interest in losses of combined subsidiaries     —     —     29     118  
   
 
 
 
 
Net income   $ 39,636   $ 85,397   $ 120,103   $ 176,701  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the combined statements of operations:
 
 
Cost of sales
 
$
149
 
$
212
 
$
481
 
$
654
 
  Selling and marketing expense     92     162     456     646  
  General and administrative expense     1,206     1,873     4,709     6,539  
   
 
 
 
 
Total non-cash compensation expense   $ 1,447   $ 2,247   $ 5,646   $ 7,839  
   
 
 
 
 

12

Tree.com, Inc. and Subsidiaries

Consolidated Statements of Operations

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 109,999   $ 110,639   $ 74,953   $ 50,787  
Cost of revenue (exclusive of depreciation shown separately below)     20,496     20,942     18,279     13,397  
   
 
 
 
 
  Gross margin     89,503     89,697     56,674     37,390  
Selling and marketing expense     56,478     56,852     43,755     30,527  
General and administrative expense     30,046     27,514     23,166     18,518  
Product development     4,270     3,896     3,844     2,981  
Proceeds from a legal settlement     —     —     (15,000 )   —  
Amortization of intangibles     4,274     6,013     3,993     20,189  
Restructuring expense     —     4,598     6,401     11,868  
Depreciation     2,839     2,580     2,431     2,208  
Goodwill impairment     —     —     —     459,463  
   
 
 
 
 
  Operating loss     (8,404 )   (11,756 )   (11,916 )   (508,364 )
Other income (expense):                          
  Interest income     70     207     368     526  
  Interest expense     (280 )   (241 )   (236 )   (229 )
  Other income     1     —     13     —  
   
 
 
 
 
Total other (expense) income, net     (209 )   (34 )   145     297  
   
 
 
 
 
Loss before income taxes     (8,613 )   (11,790 )   (11,771 )   (508,067 )
Income tax benefit (provision)     3,490     4,298     5,478     (23,427 )
   
 
 
 
 
Net loss   $ (5,123 ) $ (7,492 ) $ (6,293 ) $ (531,494 )
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of revenue
 
$
79
 
$
97
 
$
85
 
$
(13
)
  Selling and marketing expense     85     107     93     (13 )
  General and administrative expense     956     1,153     295     (1 )
  Product development     1     1     —     —  
   
 
 
 
 
Total non-cash compensation expense   $ 1,121   $ 1,358   $ 473   $ (27 )
   
 
 
 
 

13

Tree.com, Inc. and Subsidiaries

Consolidated Statements of Operations (Continued)

Year Ended December 31, 2007

(In thousands)

 
   Quarter Ended
March 31
   Six Months
Ended
June 30
   Nine Months
Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 109,999   $ 220,638   $ 295,591   $ 346,378  
Cost of revenue (exclusive of depreciation shown separately below)     20,496     41,438     59,717     73,114  
   
 
 
 
 
  Gross margin     89,503     179,200     235,874     273,264  
Selling and marketing expense     56,478     113,330     157,085     187,612  
General and administrative expense     30,046     57,560     80,726     99,244  
Product development     4,270     8,166     12,010     14,991  
Proceeds from a legal settlement     —     —     (15,000 )   (15,000 )
Amortization of intangibles     4,274     10,287     14,280     34,469  
Restructuring expense     —     4,598     10,999     22,867  
Depreciation     2,839     5,419     7,850     10,058  
Goodwill impairment     —     —     —     459,463  
   
 
 
 
 
  Operating loss     (8,404 )   (20,160 )   (32,076 )   (540,440 )
Other income (expense):                          
  Interest income     70     277     645     1,171  
  Interest expense     (280 )   (521 )   (757 )   (986 )
  Other income     1     1     14     14  
   
 
 
 
 
Total other expense, net     (209 )   (243 )   (98 )   199  
   
 
 
 
 
Loss before income taxes     (8,613 )   (20,403 )   (32,174 )   (540,241 )
Income tax benefit (provision)     3,490     7,788     13,266     (10,161 )
   
 
 
 
 
Net loss   $ (5,123 ) $ (12,615 ) $ (18,908 ) $ (550,402 )
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of revenue
 
$
79
 
$
176
 
$
261
 
$
248
 
  Selling and marketing expense     85     192     285     272  
  General and administrative expense     956     2,109     2,404     2,403  
  Product development     1     2     2     2  
   
 
 
 
 
Total non-cash compensation expense   $ 1,121   $ 2,479   $ 2,952   $ 2,925  
   
 
 
 
 

14


Tree.com, Inc. and Subsidiaries

Consolidated Statements of Operations

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Quarter Ended
June 30
   Quarter Ended
September 30
   Quarter Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (unaudited)
  
Revenue   $ 122,658   $ 120,747   $ 120,230   $ 112,843  
Cost of revenue (exclusive of depreciation shown separately below)     17,909     18,837     19,386     17,085  
   
 
 
 
 
  Gross margin     104,749     101,910     100,844     95,758  
Selling and marketing expense     60,293     58,094     52,473     48,050  
General and administrative expense     28,920     28,711     30,560     31,093  
Product development     3,890     3,547     3,879     3,852  
Amortization of intangibles     7,266     7,284     5,157     4,311  
Depreciation     3,458     2,819     2,964     2,469  
   
 
 
 
 
  Operating income     922     1,455     5,811     5,983  
Other income (expense):                          
  Interest income     107     89     136     975  
  Interest expense     (419 )   (388 )   (378 )   (371 )
  Other income (expense)     —     9     (212 )   (4 )
   
 
 
 
 
Total other (expense) income, net     (312 )   (290 )   (454 )   600  
   
 
 
 
 
Earnings before income taxes     610     1,165     5,357     6,583  
Income tax provision     (224 )   (419 )   (2,117 )   (2,262 )
   
 
 
 
 
Net income   $ 386   $ 746   $ 3,240   $ 4,321  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of revenue
 
$
54
 
$
71
 
$
72
 
$
66
 
  Selling and marketing expense     59     79     78     73  
  General and administrative expense     (1,059 )   741     989     932  
  Product development     20     —     1     1  
   
 
 
 
 
Total non-cash compensation expense   $ (926 ) $ 891   $ 1,140   $ 1,072  
   
 
 
 
 

15


Tree.com, Inc. and Subsidiaries

Consolidated Statements of Operations (Continued)

Year Ended December 31, 2006

(In thousands)

 
   Quarter Ended
March 31
   Six Months
Ended
June 30
   Nine Months
Ended
September 30
   Year Ended
December 31
  
 
   (unaudited)
   (unaudited)
   (unaudited)
   (audited)
  
Revenue   $ 122,658   $ 243,405   $ 363,635   $ 476,478  
Cost of revenue (exclusive of depreciation shown separately below)     17,909     36,746     56,132     73,217  
   
 
 
 
 
  Gross margin     104,749     206,659     307,503     403,261  
Selling and marketing expense     60,293     118,387     170,860     218,910  
General and administrative expense     28,920     57,631     88,191     119,284  
Product development     3,890     7,437     11,316     15,168  
Amortization of intangibles     7,266     14,550     19,707     24,018  
Depreciation     3,458     6,277     9,241     11,710  
   
 
 
 
 
  Operating income     922     2,377     8,188     14,171  
Other income (expense):                          
  Interest income     107     196     332     1,307  
  Interest expense     (419 )   (807 )   (1,185 )   (1,556 )
  Other income (expense)     —     9     (203 )   (207 )
   
 
 
 
 
Total other expense, net     (312 )   (602 )   (1,056 )   (456 )
   
 
 
 
 
Earnings before income taxes     610     1,775     7,132     13,715  
Income tax provision     (224 )   (643 )   (2,760 )   (5,022 )
   
 
 
 
 
Net income   $ 386   $ 1,132   $ 4,372   $ 8,693  
   
 
 
 
 

Non-cash compensation expense is included in the following line items in the consolidated statements of operations:
 
 
Cost of revenue
 
$
54
 
$
125
 
$
197
 
$
263
 
  Selling and marketing expense     59     138     216     289  
  General and administrative expense     (1,059 )   (318 )   671     1,603  
  Product development     20     20     21     22  
   
 
 
 
 
Total non-cash compensation expense   $ (926 ) $ (35 ) $ 1,105   $ 2,177  
   
 
 
 
 

16



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