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EX-31.2 - EXHIBIT 31.2 - Actua Corp | c04118exv31w2.htm |
EX-32.2 - EXHIBIT 32.2 - Actua Corp | c04118exv32w2.htm |
EX-31.1 - EXHIBIT 31.1 - Actua Corp | c04118exv31w1.htm |
EX-32.1 - EXHIBIT 32.1 - Actua Corp | c04118exv32w1.htm |
EX-10.1 - EXHIBIT 10.1 - Actua Corp | c04118exv10w1.htm |
EX-10.2 - EXHIBIT 10.2 - Actua Corp | c04118exv10w2.htm |
EX-10.3 - EXHIBIT 10.3 - Actua Corp | c04118exv10w3.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2010.
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 Number 001-16249
INTERNET CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
23-2996071 (I.R.S. Employer Identification Number) |
|
690 Lee Road, Suite 310, Wayne, PA (Address of principal executive offices) |
19087 (Zip Code) |
(610) 727-6900
(Registrants telephone number, including area code)
(Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check One):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number of shares of the Companys Common Stock, $0.001 par value per share, outstanding as of
August 2, 2010 was 36,444,195 shares.
INTERNET CAPITAL GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTERLY REPORT ON FORM 10-Q
INDEX
ITEM | PAGE NO. | |||||||
PART I FINANCIAL INFORMATION |
||||||||
6 | ||||||||
7 | ||||||||
8 | ||||||||
9 | ||||||||
34 | ||||||||
45 | ||||||||
46 | ||||||||
PART II OTHER INFORMATION |
||||||||
47 | ||||||||
48 | ||||||||
49 | ||||||||
49 | ||||||||
49 | ||||||||
49 | ||||||||
50 | ||||||||
51 | ||||||||
Exhibit 10.1 | ||||||||
Exhibit 10.2 | ||||||||
Exhibit 10.3 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
Although we refer in this Quarterly Report on Form 10-Q (this Report) to companies in which we
have acquired a convertible debt or an equity ownership interest as our partner companies and
indicate that we have a partnership with these companies, we do not act as an agent or legal
representative for any of our partner companies, we do not have the power or authority to legally
bind any of our partner companies, and we do not have the types of liabilities in relation to our
partner companies that a general partner of a partnership would have.
Our Internet website address is www.icg.com. Unless this Report explicitly states otherwise,
neither the information on our website, nor the information on the website of any of our partner
companies, is incorporated by reference into this Report.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
all amendments to those reports filed by us with the U.S. Securities and Exchange Commission (the
SEC) pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), are accessible free of charge through our website as soon as reasonably
practicable after we electronically file those documents with, or otherwise furnish them to, the
SEC.
The public may read and copy any of the reports that are filed with the SEC at the SECs Public
Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
an Internet website (www.sec.gov) that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.
2
Table of Contents
Forward-Looking Statements
Forward-looking statements made with respect to our financial condition, results of operations and
business in this Report, and those made from time to time by us through our senior management, are
made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on our current expectations and projections about
future events but are subject to known and unknown risks, uncertainties and assumptions about us
and our partner companies that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements.
Factors that could cause our actual results, levels of activity, performance or achievements to
differ materially from those anticipated in forward-looking statements include, but are not limited
to:
| economic conditions generally; |
||
| capital spending by our partner companies customers; |
||
| our partner companies collective ability to compete successfully against their
respective competitors; |
||
| rapid developments in the respective markets in which our partner companies operate and
our partner companies collective ability to respond to such changes in a timely and
effective manner; |
||
| our ability to deploy capital effectively and on acceptable terms; |
||
| our ability to maximize value in connection with divestitures; |
||
| our ability to retain key personnel; and |
||
| our ability to have continued access to capital and to manage capital resources
effectively. |
In some cases, you can identify forward-looking statements by terminology such as may, will,
should, could, would, expect, plan, anticipate, believe, estimate, continue or
the negative of such terms or other similar expressions. All forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements included in this Report. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events
discussed in this Report might not occur. For a more detailed discussion of some of the foregoing
risks and uncertainties, see Item 1A Risk Factors in our Annual Report on Form 10-K for the
year ended December 31, 2009, as well as other reports and registration statements filed by us with
the SEC.
Our Partner Companies
The results of operations of our partner companies are reported within two segments: the core
reporting segment and the venture (formerly other holdings) reporting segment. The core
reporting segment includes those partner companies accounted for under the consolidation and equity
methods in which ICG owns a principal controlling equity voting interest (54% on average as of June
30, 2010) and in which ICGs management takes a very active role in providing strategic direction
and management assistance. We expect to devote relatively large initial amounts of capital to
acquire our core partner companies. The venture reporting segment includes partner companies to
which we generally devote less capital than we do to our core companies and, therefore, in which we
hold relatively smaller ownership stakes than we do in our core companies (28% on average as of
June 30, 2010) and have less influence over their strategic direction and management decisions than
we do over those of our core companies.
3
Table of Contents
At June 30, 2010, our consolidated core partner companies consisted of:
GovDelivery Holdings, Inc. (GovDelivery)
GovDelivery is a provider of government-to-citizen communication solutions. GovDeliverys digital
subscription management software as a service (SaaS) platform enables government organizations to
provide citizens with access to relevant information by delivering new information through e-mail,
mobile text alerts, RSS and social media channels from U.S. and U.K. government entities at the
national, state and local levels.
ICG Commerce Holdings, Inc. (ICG Commerce)
ICG Commerce is a procurement services provider delivering total procurement cost savings through a
combination of deep expertise and hosted technology. ICG Commerce provides a comprehensive range
of solutions to help companies identify savings through sourcing, realize savings through
implementation of purchase-to-pay automation and drive continuous improvements through ongoing
category management.
Investor Force Holdings, Inc. (InvestorForce)
InvestorForce is a financial software company specializing in the development of online
applications for the financial services industry. InvestorForce provides pension consultants and
other financial intermediaries with a Web-based enterprise platform that integrates data management
with robust analytic and reporting capabilities in support of their institutional and other
clients. InvestorForces applications provide investment consultants with the ability to conduct
real-time analysis and research into client, manager and market movement and to produce timely,
automated client reports.
At June 30, 2010, our equity method core partner companies consisted of:
Channel Intelligence, Inc. (Channel Intelligence)
Channel Intelligence is a data solutions company that provides innovative suites of services for
manufacturers, retailers and publishers that help consumers work with retailers to find and buy
products, whether they start at retailer sites, manufacturer sites or destination shopping sites,
through the use of Channel Intelligences patented optimization technology and data solutions.
Freeborders, Inc. (Freeborders)
Freeborders is a provider of technology solutions and outsourcing from China. Freeborders provides
industry expertise to North American and European companies specializing in financial services,
technology, retail/consumer goods, manufacturing and transportation and logistics. Freeborders
offerings help companies seeking cost-effective technology solutions.
Metastorm Inc. (Metastorm)
Metastorm is a software and service provider of enterprise architecture modeling, business process
analysis and business process management software for commercial enterprises and federal and state
government organizations. Metastorms comprehensive suite of software products enables customers
to understand, analyze, automate and continually improve their business processes.
4
Table of Contents
StarCite, Inc. (StarCite)
StarCite provides a comprehensive suite of software applications and services to the meeting and
events industry. StarCite helps drive efficiencies and cost savings to both corporate buyers and
suppliers. Corporate, association and third-party meeting buyers rely on StarCites enterprise
meeting solutions for workflow, procurement, supply chain management, spend analysis and attendee
management. Thousands of industry suppliers rely on the StarCite online marketplace, supplier
marketing programs and enabling technologies to increase meeting revenues. StarCites
international division represents destination management companies and other premier international
travel suppliers.
WhiteFence, Inc. (WhiteFence)
WhiteFence is a Web services provider used by household consumers to compare and purchase essential
home services, such as electricity, natural gas, telephone and cable/satellite television.
WhiteFence reaches customers directly through company-owned websites and through its network of
exclusive channel partners that integrate the Web services applications into their own business
processes and websites.
At June 30, 2010, our venture partner companies consisted of:
Acquirgy, Inc. (Acquirgy)
Acquirgy specializes in Search Engine Marketing (SEM) and Direct Response Television (DRTV)
services and provides comprehensive account services, as well as creative and production expertise
with integrated multichannel software platforms. SEM services include outsourced paid search
management, SEM Performance Consulting (SEMpcTM) for clients managing search internally
and search engine optimization. DRTV services include comprehensive script-to-screen DRTV
creative, production and media services.
ClickEquations, Inc. (f/k/a Commerce360, Inc.) (ClickEquations)
ClickEquations is a software-based search marketing company that improves paid and organic search
campaign performance for its clients, which include Internet Retailer 500 and Fortune 100
companies. Its proprietary technology uses advanced mathematics and statistical analysis to
optimize campaigns across the entire search chain and deliver improved campaign efficiency and
performance.
GoIndustry-DoveBid plc (GoIndustry) (LSE.AIM:GOI)
GoIndustry is a leader in auction sales and valuations of used industrial machinery and equipment.
GoIndustry combines traditional asset sales experience with innovative e-commerce technology and
advanced direct marketing to service the needs of multi-national corporations, insolvency
practitioners, dealers and asset-based lenders around the world.
SeaPass Solutions Inc. (SeaPass)
SeaPass develops and markets processing solutions that enable insurance carriers, agents and
brokers to transmit and receive data in real time by leveraging existing systems to interact
automatically. The companys technology allows access to information in real time, which increases
efficiency across all lines of the insurance business.
5
Table of Contents
PART I FINANCIAL INFORMATION
ITEM 1. | Financial Statements |
INTERNET CAPITAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(in thousands, except per share data) | ||||||||
Assets |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 80,757 | $ | 55,481 | ||||
Restricted cash |
54 | 47 | ||||||
Accounts receivable, net of allowance ($599-2010; $590-2009) |
21,306 | 19,411 | ||||||
Deferred tax assets |
8,114 | 8,147 | ||||||
Income tax receivable |
6,422 | 11,071 | ||||||
Prepaid expenses and other current assets |
1,947 | 2,183 | ||||||
Total current assets |
118,600 | 96,340 | ||||||
Marketable securities |
9,333 | 73,512 | ||||||
Hedges of marketable securities |
185 | | ||||||
Fixed assets, net of accumulated depreciation and amortization
($13,365-2010; $12,086-2009) |
4,989 | 4,177 | ||||||
Ownership interests in partner companies |
87,201 | 97,777 | ||||||
Goodwill |
20,588 | 20,588 | ||||||
Intangibles, net |
15,612 | 15,940 | ||||||
Deferred tax assets |
19,371 | 20,724 | ||||||
Other assets, net |
1,046 | 1,029 | ||||||
Total Assets |
$ | 276,925 | $ | 330,087 | ||||
Liabilities |
||||||||
Current Liabilities |
||||||||
Current maturities of long-term debt |
$ | 641 | $ | 381 | ||||
Accounts payable |
1,939 | 1,656 | ||||||
Accrued expenses |
2,657 | 4,464 | ||||||
Accrued compensation and benefits |
9,167 | 12,227 | ||||||
Deferred revenue |
8,255 | 5,912 | ||||||
Total current liabilities |
22,659 | 24,640 | ||||||
Long-term debt) |
806 | 645 | ||||||
Hedges of marketable securities |
| 547 | ||||||
Deferred revenue |
| 83 | ||||||
Other |
923 | 1,010 | ||||||
Total Liabilities |
24,388 | 26,925 | ||||||
Equity |
||||||||
Internet Capital Group, Inc.s Stockholders Equity |
||||||||
Preferred Stock, $0.01 par value; 10,000 shares authorized, none issued or
outstanding |
| | ||||||
Common Stock, $0.001 par value; 2,000,000 shares authorized, 38,864 (2010)
and 38,796 (2009) issued |
39 | 39 | ||||||
Additional paid-in capital |
3,547,532 | 3,573,347 | ||||||
Treasury Stock, at cost, 2,440 (2010) and 2,440 (2009) shares |
(12,031 | ) | (12,031 | ) | ||||
Accumulated deficit |
(3,307,356 | ) | (3,351,888 | ) | ||||
Accumulated other comprehensive income |
9,033 | 71,198 | ||||||
Total Internet Capital Group, Inc.s Stockholders Equity |
237,217 | 280,665 | ||||||
Noncontrolling Interest |
15,320 | 22,497 | ||||||
Total Equity |
252,537 | 303,162 | ||||||
Total Liabilities and Equity |
$ | 276,925 | $ | 330,087 | ||||
See accompanying Notes to Consolidated Financial Statements.
6
Table of Contents
INTERNET CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Revenues |
$ | 27,377 | $ | 22,077 | $ | 53,671 | $ | 43,729 | ||||||||
Operating expenses |
||||||||||||||||
Cost of revenue |
17,892 | 14,598 | 34,824 | 27,803 | ||||||||||||
Selling, general and administrative |
11,011 | 9,158 | 21,730 | 18,374 | ||||||||||||
Research and development |
2,645 | 2,592 | 5,069 | 5,240 | ||||||||||||
Amortization of intangible assets |
364 | 77 | 728 | 154 | ||||||||||||
Impairment related and other |
96 | 3,790 | 168 | 3,820 | ||||||||||||
Total operating expenses |
32,008 | 30,215 | 62,519 | 55,391 | ||||||||||||
(4,631 | ) | (8,138 | ) | (8,848 | ) | (11,662 | ) | |||||||||
Other income (loss), net |
24,627 | 3,246 | 64,923 | 999 | ||||||||||||
Interest income |
138 | 98 | 199 | 240 | ||||||||||||
Interest expense |
(25 | ) | (73 | ) | (69 | ) | (157 | ) | ||||||||
Income (loss) before income taxes, equity loss and noncontrolling interest |
20,109 | (4,867 | ) | 56,205 | (10,580 | ) | ||||||||||
Income tax (expense) benefit |
411 | (421 | ) | (205 | ) | (368 | ) | |||||||||
Equity loss |
(4,580 | ) | (2,924 | ) | (10,915 | ) | (7,877 | ) | ||||||||
Net income (loss) |
15,940 | (8,212 | ) | 45,085 | (18,825 | ) | ||||||||||
Less: Net income attributable to the noncontrolling interest |
179 | 337 | 553 | 729 | ||||||||||||
Net income (loss) attributable to Internet Capital Group, Inc. |
$ | 15,761 | $ | (8,549 | ) | $ | 44,532 | $ | (19,554 | ) | ||||||
Basic income (loss) per share: |
||||||||||||||||
Net income (loss) attributable to Internet Capital Group, Inc. |
$ | 0.43 | $ | (0.23 | ) | $ | 1.23 | $ | (0.53 | ) | ||||||
Shares used in computation of basic income (loss) per share |
36,346 | 36,666 | 36,326 | 36,671 | ||||||||||||
Diluted income (loss) per share: |
||||||||||||||||
Net income (loss) attributable to Internet Capital Group, Inc. |
$ | 0.43 | $ | (0.23 | ) | $ | 1.22 | $ | (0.53 | ) | ||||||
Shares used in computation of diluted income (loss) per share |
37,074 | 36,666 | 36,518 | 36,671 | ||||||||||||
See accompanying Notes to Consolidated Financial Statements.
7
Table of Contents
INTERNET CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
(in thousands) | ||||||||
Operating Activities |
||||||||
Net income (loss) |
$ | 45,085 | $ | (18,825 | ) | |||
Adjustments to reconcile net loss to cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
1,895 | 948 | ||||||
Impairment related and other |
168 | 3,820 | ||||||
Equity-based compensation |
1,703 | 2,595 | ||||||
Equity loss |
10,915 | 7,877 | ||||||
Other (income) loss |
(64,913 | ) | (1,053 | ) | ||||
Deferred income taxes |
1,386 | | ||||||
Changes in assets and liabilities, net of effect of acquisitions: |
||||||||
Accounts receivable, net |
(2,039 | ) | 1,657 | |||||
Tax receivable |
4,649 | | ||||||
Prepaid expenses and other assets |
225 | 765 | ||||||
Accounts payable |
283 | (204 | ) | |||||
Accrued expenses |
(1,982 | ) | (1,756 | ) | ||||
Accrued compensation and benefits |
(3,129 | ) | (1,481 | ) | ||||
Deferred revenue |
2,261 | (1,844 | ) | |||||
Other liabilities |
(79 | ) | (18 | ) | ||||
Cash flows provided by (used in) operating activities |
(3,572 | ) | (7,519 | ) | ||||
Investing Activities |
||||||||
Capital expenditures, net |
(1,815 | ) | (1,755 | ) | ||||
Advanced deposits for acquisition of fixed assets |
26 | (205 | ) | |||||
Change in restricted cash |
(7 | ) | 7 | |||||
Proceeds from sales of marketable securities |
64,866 | 604 | ||||||
Proceeds from sales of partner company ownership interests |
1,836 | 2,177 | ||||||
Acquisitions of ownership interests in partner companies |
(434 | ) | (5,545 | ) | ||||
Cash flows provided by (used in) investing activities |
64,472 | (4,717 | ) | |||||
Financing Activities |
||||||||
Acquisition
of noncontrolling interest in subsidiary equity |
(35,253 | ) | | |||||
Long-term debt and capital lease obligations, net |
(147 | ) | (87 | ) | ||||
Purchase of treasury stock |
| (370 | ) | |||||
Other financing activities |
6 | (67 | ) | |||||
Cash flows provided by (used in) financing activities |
(35,394 | ) | (524 | ) | ||||
Net increase (decrease) in Cash and Cash Equivalents |
25,506 | (12,760 | ) | |||||
Effect of exchange rates on cash |
(230 | ) | 427 | |||||
Cash and Cash Equivalents at beginning of period |
55,481 | 89,295 | ||||||
Cash and Cash Equivalents at the end of period |
$ | 80,757 | $ | 76,962 | ||||
Supplemental
noncash investing activities:
A capital lease obligation of $0.6 million was incurred when ICG
Commerce entered into a lease for computer software during 2010.
See accompanying Notes to Consolidated Financial Statements.
8
Table of Contents
INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
Description of the Company
Internet Capital Group, Inc. (the Company) acquires and builds SaaS, technology-enabled business
process outsourcing (BPO) and Internet marketing companies that improve the productivity and
efficiency of their business customers. Founded in 1996, the Company devotes its expertise and
capital to maximizing the success of these companies.
Although the Company refers to companies in which it has acquired a convertible debt or an equity
ownership interest as its partner companies and indicates that it has a partnership with these
companies, it does not act as an agent or legal representative for any of its partner companies, it
does not have the power or authority to legally bind any of its partner companies, and it does not
have the types of liabilities in relation to its partner companies that a general partner of a
partnership would have.
2. Significant Accounting Policies
Basis of Presentation
The accompanying Consolidated Financial Statements are unaudited and, in the opinion of management,
include all adjustments consisting only of normal and recurring adjustments necessary for a fair
presentation of the results for these interim periods. These Consolidated Financial Statements
should be read in connection with the Consolidated Financial Statements and notes thereto included
in the Companys Annual Report on Form 10-K for the year ended December 31, 2009. Results of
operations for the three-and six-month periods ended June 30, 2010 are not necessarily indicative
of the results of operations expected for the full year.
The Consolidated Financial Statements include the accounts of the Company and its wholly-owned
subsidiaries. The Consolidated Financial Statements also include the following majority-owned
subsidiaries for all or a portion of the periods indicated, each of which has been consolidated
since the date the Company acquired majority voting control (collectively, the Consolidated
Subsidiaries).
The Consolidated Balance Sheets include the financial position of GovDelivery, ICG Commerce and
Investor Force at June 30, 2010 and December 31, 2009.
The Consolidated Statements of Operations include the results of the following majority-owned
subsidiaries:
Three and Six Months Ended June 30, | ||
2010 | 2009 | |
GovDelivery (1) |
ICG Commerce | |
ICG Commerce |
InvestorForce | |
InvestorForce |
Vcommerce (2) |
(1) | On December 31, 2009, the Company acquired an 89% equity voting interest in
GovDelivery. Accordingly, GovDeliverys results have been included in the Companys
Consolidated Statement of Operations subsequent to that date. See Note 3, Ownership
Interests in Partner Companies, Goodwill and Intangibles, net. |
|
(2) | On August 28, 2009, substantially all of Vcommerces assets were sold to Channel
Intelligence. Accordingly, Vcommerce is not included in the Companys Consolidated
Financial Statements subsequent to that date. See Note 3, Ownership Interests in Partner
Companies, Goodwill and Intangibles, net. |
9
Table of Contents
INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2.
Significant Accounting Policies (Continued)
Principles of Accounting for Ownership Interests in Partner Companies
The various interests that the Company acquires in its partner companies are accounted for under
one of three methods: the consolidation method, the equity method and the cost method. The
applicable accounting method is generally determined based on the Companys voting interest in a
partner company.
Consolidation. Partner companies in which the Company directly or indirectly owns more than 50% of
the outstanding voting securities, and for which other stockholders do not possess the right to
affect significant management decisions, are generally accounted for under the consolidation method
of accounting. Under this method, a partner companys balance sheet and results of operations are
reflected within the Companys Consolidated Financial Statements, and all significant intercompany
accounts and transactions have been eliminated. Participation of other partner company
stockholders in the net assets and in the earnings or losses of a consolidated partner company is
reflected in the caption Noncontrolling Interest in the Companys Consolidated Balance Sheets and
Statements of Operations. Noncontrolling interest adjusts the Companys consolidated results of
operations to reflect only the Companys share of the earnings or losses of the consolidated
partner company. The results of operations and cash flows of a consolidated partner company are
generally included through the latest interim period in which the Company owned a greater than 50%
direct or indirect voting interest for the entire interim period or otherwise exercised control
over the partner company. Upon a reduction of the Companys ownership interest to below 50% of the
outstanding voting securities, the accounting method is generally adjusted to the equity or cost
method of accounting, as appropriate, for subsequent periods.
Equity Method. Partner companies that are not consolidated, but over which the Company exercises
significant influence, are accounted for under the equity method of accounting. Whether or not the
Company exercises significant influence with respect to a partner company depends on an evaluation
of several factors, including, among others, representation on the partner companys board of
directors and equity ownership level, which is generally between a 20% and a 50% interest in the
voting securities of the partner company, as well as voting rights associated with the Companys
holdings in common stock, preferred stock and other convertible instruments in the partner company.
Under the equity method of accounting, a partner companys accounts are not reflected within the
Companys Consolidated Balance Sheets and Statements of Operations. The Companys share of the
earnings or losses of the partner company, as well as any adjustments resulting from prior period
finalizations of equity income/losses, are reflected in the caption Equity loss in the Companys
Consolidated Statements of Operations. For the three and six months ended June 30, 2010, those
prior period finalizations are not material. The carrying values of the Companys equity method
partner companies are reflected in Ownership interests in partner companies in the Companys
Consolidated Balance Sheets.
When the Companys interest in an equity method partner company is reduced to zero, no further
losses are recorded in the Companys Consolidated Financial Statements, unless the Company has
guaranteed obligations of the partner company or has committed to additional funding. When the
partner company subsequently reports income, the Company will not record its share of such income
until it equals the amount of its share of losses not previously recognized.
Cost Method. Partner companies not accounted for under either the consolidation method or equity
method of accounting are accounted for under the cost method of accounting. The Companys share of
the earnings or losses of cost method companies is not included in the Companys Consolidated
Balance Sheets or Consolidated Statements of Operations. However, cost method partner company
impairment charges are recognized in the Companys Consolidated Statements of Operations. If
circumstances suggest that the value of the partner company has subsequently recovered, such
recovery is not recorded.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2.
Significant Accounting Policies (Continued)
When a cost method partner company qualifies for use of the equity method, the Companys interest
is adjusted retroactively for its share of the past results of its operations. Therefore, prior
losses could significantly decrease the Companys carrying value balance at the time of any such
retroactive adjustment.
The Company records its ownership interest in equity securities of partner companies accounted for
under the cost method at cost, unless these securities have readily determinable fair values based
on quoted market prices, in which case these interests are valued at fair value and classified as
marketable securities or some other classification in accordance with guidance for ownership
interests in debt and equity securities.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles (GAAP) requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from
these estimates. These estimates include evaluation of the Companys holdings in its partner
companies, holdings in marketable securities, asset impairment, revenue recognition, income taxes
and commitments and contingencies. These estimates and assumptions are based on managements best
judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical
experience and other factors, such as the current economic environment, that management believes to
be reasonable under the circumstances. Management adjusts such estimates and assumptions when
facts and circumstances dictate. Volatile equity markets and reductions in information technology
spending have combined to increase the uncertainty inherent in such estimates and assumptions. It
is reasonably possible that the Companys accounting estimates with respect to the useful life of
intangible assets and the ultimate recoverability of ownership interests in partner companies and
goodwill could change in the near term and that the effect of such changes on the Companys
financial statements could be material. The Company believes the recorded amount of ownership
interests in partner companies and goodwill is not impaired at June 30, 2010.
Ownership Interests in Partner Companies, Goodwill and Intangibles, net
The Company evaluates its equity method ownership interests in partner companies continuously to
determine whether an other than temporary decline in the value of a partner company exists and
should be recognized. The Company considers the achievement of business plan objectives and
milestones, the fair value of each ownership interest in the partner company relative to carrying
value, the financial condition and prospects of the partner company, and other relevant factors.
The business plan objectives and milestones the Company considers include, among others, those
related to financial performance, such as achievement of planned financial results or completion of
capital raising activities, and those that are not primarily financial in nature, such as obtaining
key business partnerships or the hiring of key employees. Impairment charges are determined by
comparing the estimated fair value of our ownership interest in a partner company with its carrying
value. Fair value is determined by using a combination of estimating the cash flows related to the
relevant asset, including estimated proceeds on disposition, and an analysis of market price
multiples of companies engaged in lines of business similar to the company being evaluated. For
any partner companies listed on a public stock exchange, the Company compares the stock price of
the partner company with its carrying value to determine whether impairment exists.
During the three months ended March 31, 2010 and 2009, the Company recorded impairment charges of $2.9
million and $0.5 million, respectively, due to declines in the fair value of the Companys equity
holdings in GoIndustry that the Company believes are other than temporary. These charges were
recorded as reductions to the Companys basis in GoIndustry during the relevant periods.
Accordingly, impairment charges of $2.9 million and $0.5 million are included in Equity loss on
the Companys Consolidated Statements of Operations for the six months ended June 30, 2010 and
2009, respectively.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2.
Significant Accounting Policies (Continued)
The Company tests goodwill for impairment annually during the fourth quarter of each year, or more
frequently as conditions warrant, and intangible assets when events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The Company is not aware of
any impairment indicators related to goodwill or intangible assets as of June 30, 2010. The
Company recorded $4.9 million of goodwill impairment charges associated with Vcommerce during the
year ended December 31, 2009. Of this amount, $3.8 million and $1.1 million were recorded during
the three months ended June 30, 2009 and the three months ended September 30, 2009, respectively,
and included in Impairment related and other on the Companys Consolidated Statement of
Operations in the respective period.
At June 30, 2010, the Companys carrying value of its ownership interests in partner companies
totaled $87.2 million, goodwill totaled $20.6 million and intangibles, net totaled $15.6 million.
At December 31, 2009, the Companys carrying value of its ownership interests in partner companies
totaled $97.8 million, goodwill totaled $20.6 million and intangibles, net totaled $15.9 million.
See Note 3, Ownership Interest in Partner Companies, Goodwill and Intangibles, net for additional
information regarding our ownership interests in partner companies, goodwill and net intangible
assets, as well as related impairment charges.
Revenue Recognition
During the three and six months ended June 30, 2010, the Companys consolidated revenues were
attributable to ICG Commerce, GovDelivery and InvestorForce. During the three and six months ended
June 30, 2009, the Companys consolidated revenues were attributable to ICG Commerce,
InvestorForce and Vcommerce.
ICG Commerce generates revenue from strategic sourcing and procurement outsourcing services.
Procurement outsourcing services generally include a combination of services and technology
designed to help companies achieve unit cost savings and process efficiencies. ICG Commerce earns
fees for implementation services, start-up services, content and category management (which may
include sourcing as described below), hosting fees, buying center management fees, and certain
transaction fees. ICG Commerce estimates the total contract value under these arrangements and
generally recognizes revenue under these arrangements, excluding transaction fees and gain-share
fees, on a straight-line basis over the term of the contract, which approximates the life of the
customer relationship. Additionally, performance-based fees are deferred until the contingency is
achieved or it is determined from existing data and past experience that the savings will be
achieved, and then generally recognized on a straight-line basis over the life of the contract,
which approximates the life of the customer relationship. Sourcing programs are engagements in
which ICG Commerce negotiates prices from certain suppliers on behalf of its customers in certain
categories in which ICG Commerce has sourcing expertise. Under sourcing programs, either the
customer pays a fixed-fee or a gain-share amount for use of the negotiated rates. In fixed-fee
sourcing arrangements, revenue is recognized on a proportional performance basis, provided that
there is no uncertainty as to ICG Commerces ability to fulfill its obligations under the contract
or other services that are to be rendered under the contract.
GovDelivery revenues generally consist of nonrefundable setup fees and monthly maintenance and
hosting fees. These fees are deferred and recognized as the services are performed, which is
typically over the service term. Costs related to performing set-up services are expensed as
incurred. Revenue from labor law posters are recognized upon delivery provided a purchase order
has been received, the price to the buyer is fixed or determinable and collectibility is reasonably
assured. Revenues from update and subscription services for labor law posters are deferred and
recognized ratably over the service term.
Investor Force generates revenue from license fees earned in connection with hosted services, setup
fees and support and maintenance fees. Hosted services primarily consist of data aggregation,
performance calculation, real-time analysis and automated production of performance reports for the
institutional investment community. Generally, a minimum quarterly base fee is charged for hosted
services. These minimum fees are recognized on a pro rata basis over the service term. As the
volume of client accounts increases, additional fees apply. These additional fees are recognized
in the period in which account volumes exceed the contract minimum. Set-up and support and maintenance fees are deferred and recognized
ratably over the service term.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2.
Significant Accounting Policies (Continued)
Vcommerce generated revenue from service fees earned in connection with the development and
operation of its clients e-commerce businesses. Service fee revenue primarily consisted of
transaction fees, implementation fees and professional services, as well as access and maintenance
fees. Vcommerce recognized revenue from services provided when the following revenue recognition
criteria were met: persuasive evidence of an arrangement existed, services had been rendered, the
fee was fixed or determinable and collectibility was reasonably assured. Generally, Vcommerce
recognized revenue related to implementation as well as access and maintenance services over the
term of the customer contract, and it recognized revenue from transaction fees and professional
services fees as services were rendered.
Concentration of Customer Base and Credit Risk
For the three months ended June 30, 2010, two customers of ICG Commerce, The Hertz Corporation
(Hertz) and Kimberly-Clark Corporation (Kimberly-Clark), each represented approximately 11% of
the Companys consolidated revenue. For the six months ended June 30, 2010, those customers each
represented approximately 11% of the Companys consolidated revenue. For the three months ended
June 30, 2009, Hertz and Kimberly-Clark represented approximately 14% and 13%, respectively, of the
Companys consolidated revenue. For the six months ended June 30, 2009, those customers each
represented approximately 14% of the Companys consolidated revenue. Accounts receivable from
Hertz and Kimberly-Clark as of June 30, 2010 were $1.8 million and $1.1 million, respectively.
Accounts receivable from Hertz and Kimberly-Clark as of December 31, 2009 were $1.7 million and
$1.5 million, respectively. The accounts receivable balances as of June 30, 2010 for these
customers included $0.5 million and $0.1 million, respectively, of unbilled accounts receivable.
The accounts receivable balances as of December 31, 2009 for these customers included $0.2 million
and $0.1 million, respectively, of unbilled accounts receivable.
Reclassifications
Certain amounts in the prior-year financial statements have been reclassified to conform with the
current presentation. The impact of these changes is not material and
did not affect net income (loss).
Recent Accounting Pronouncements
In February 2010, the FASB issued amended guidance that requires an SEC reporting company to
evaluate subsequent events through the date that the financial statements are issued, but no longer
requires the SEC reporting company to disclose the date through which subsequent events are
evaluated. This guidance became effective for the Company upon issuance and did not have a
significant impact on its consolidated financial statements.
In January 2010, the FASB issued amended guidance requiring additional fair value disclosures
related to inputs and valuation techniques used to measure fair value as well as disclosures about
significant transfers between levels in the hierarchy of fair value measurement. This guidance
became effective for the Company beginning on January 1, 2010 and did not have a significant impact
on its consolidated financial statements.
In October 2009, the FASB issued accounting guidance related to revenue recognition for
transactions with multiple deliverables, which impacts the determination of when the individual
deliverables included in a multiple-element arrangement may be treated as separate units of
accounting. This guidance is effective for the Company beginning on January 1, 2011. The Company
is currently evaluating the effect this guidance will have on its consolidated financial
statements.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2.
Significant Accounting Policies (Continued)
In October 2009, the FASB issued accounting guidance related to certain revenue arrangements that
include software elements, which amends the scope of pre-existing software revenue guidance. This
guidance is effective for the Company beginning on January 1, 2011. The Company is currently
evaluating the effect this guidance will have on its consolidated financial statements.
In June 2009, the FASB issued accounting guidance that requires former qualifying special-purpose
entities to be evaluated for consolidation, changes the approach to determining a variable
interest entitys primary beneficiary and revises the frequency with which reassessments of this
determination should be made, and requires additional disclosures related to these items. This
guidance became effective for the Company beginning on January 1, 2010 and did not have a
significant impact on its consolidated financial statements.
3. Ownership Interests in Partner Companies, Goodwill and Intangibles, net
The Companys ownership interests in partner companies accounted for under the equity method were
$87.2 million and $97.8 million as of June 30, 2010 and December 31, 2009, respectively. The
Company had no ownership interests in partner companies accounted for under the cost method that
are not public companies (marketable securities) as of June 30, 2010 and December 31, 2009.
The following table summarizes the Companys goodwill in consolidated partner companies:
(in thousands) | ||||
Goodwill as of December 31, 2009 |
$ | 20,588 | ||
Activity during the six months ended June 30, 2010 |
| |||
Goodwill as of June 30, 2010 |
$ | 20,588 | ||
As of June 30, 2010 and December 31, 2009, all of the Companys goodwill was allocated to the core
reporting segment.
The following table summarizes the Companys intangible assets (in thousands):
As of June 30, 2010 | ||||||||||||||||
Gross Carrying | Accumulated | Net Carrying | ||||||||||||||
Intangible Assets | Useful Life | Amount | Amortization | Amount | ||||||||||||
Customer relationships |
11 years | $ | 13,910 | $ | (632 | ) | $ | 13,278 | ||||||||
Trademarks/trade names |
11 years | 1,320 | (60 | ) | 1,260 | |||||||||||
Technology |
10 years | 710 | (36 | ) | 674 | |||||||||||
15,940 | (728 | ) | 15,212 | |||||||||||||
Other intellectual
property |
Indefinite | 400 | | 400 | ||||||||||||
$ | 16,340 | $ | (728 | ) | $ | 15,612 | ||||||||||
As of December 31, 2009 | ||||||||||||||||
Gross Carrying | Accumulated | Net Carrying | ||||||||||||||
Intangible Assets | Useful Life | Amount | Amortization | Amount | ||||||||||||
Customer relationships |
11 years | $ | 13,910 | $ | | $ | 13,910 | |||||||||
Trademarks/trade names |
11 years | 1,320 | | 1,320 | ||||||||||||
Technology |
10 years | 710 | | 710 | ||||||||||||
$ | 15,940 | $ | | $ | 15,940 | |||||||||||
Amortization expense for the three and six months ended June 30, 2010 was $0.4 million and
$0.7 million, respectively. Amortization expense for the three and six months ended June 30, 2009
was $0.1 million and $0.2 million, respectively. The Company amortizes intangible assets using the
straight-line method.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.
Ownership Interests in Partner Companies, Goodwill and Intangibles, net (Continued)
Remaining estimated amortization expense is as follows:
(in thousands) | ||||
2010 (remaining six months) |
$ | 728 | ||
2011 |
1,456 | |||
2012 |
1,456 | |||
2013 |
1,456 | |||
2014 |
1,456 | |||
Thereafter |
8,660 | |||
Remaining amortization expense |
$ | 15,212 | ||
Acquisitions
Consolidated Companies
On December 31, 2009, the Company acquired 89% of the equity of GovDelivery, which was accounted
for under the acquisition method. The Company allocated the purchase price to the assets and
the liabilities based upon their respective fair values at the date of acquisition, which were as
follows:
GovDelivery | ||||
(in thousands) | ||||
Net assets acquired: |
||||
Goodwill |
$ | 3,644 | ||
Customer lists (11-year life) |
13,910 | |||
Trademarks/trade names (11-year life) |
1,320 | |||
Technology (10-year life) |
710 | |||
Other net assets (liabilities) |
1,506 | |||
21,090 | ||||
Noncontrolling interest (1) |
(1,420 | ) | ||
$ | 19,670 | |||
(1) | The Company determined the noncontrolling interest of GovDelivery with consideration
of discounts for lack of control and lack of marketability. |
The Company completed its acquisition of GovDelivery on December 31, 2009. Therefore, results of GovDeliverys operations are not included
in the Companys Consolidated Statement of Operations for the six months ended June 30, 2009. Also, the Company acquired an
additional 12% voting equity interest in ICG Commerce on May 5, 2010. Accordingly, 76% of ICG Commerces results are included in the
Companys Consolidated Statement of Operations beginning on May 5, 2010, compared with 64% prior to that date. Revenue, net income (loss)
attributable to Internet Capital Group, Inc. and net income (loss) per diluted share attributable to Internet Capital Group, Inc.
would have been $53.7 million, $44.8 million and $1.23 per diluted share, respectively, for the six months ended June 30, 2010, had the
Company owned 76% of ICG Commerce for that entire period. Revenue, net income (loss) attributable to Internet Capital Group, Inc. and net
income (loss) per diluted share attributable to Internet Capital Group, Inc. would have been $24.1 million, $(8.7) million and $(0.24) per
diluted share, respectively, for the three months ended June 30, 2009, had the Company owned 89% and 76% of GovDelivery and ICG Commerce,
respectively, for that entire period. Revenue, net income (loss) attributable to Internet Capital Group, Inc. and net income (loss) per
diluted share attributable to Internet Capital Group, Inc. would have been $48.0 million, $(19.7) million and $(0.54) per diluted share,
respectively, for the six months ended June 30, 2009, had the Company owned 89% and 76% of GovDelivery and ICG Commerce, respectively, for
that entire period.
During the quarter ended June 30, 2010, the Company acquired an additional 12% equity voting
interest in ICG Commerce from an existing stockholder of ICG Commerce for aggregate cash
consideration of $35.3 million. As a result of this acquisition, which was consummated on May 5,
2010, the Company increased its voting ownership interest in ICG Commerce from 64% to 76%. This
increase in the Companys controlling interest in ICG Commerce resulted in a reduction to the
noncontrolling interest balance related to ICG Commerce to reflect the decrease in the
noncontrolling interest ownership. Accordingly, the Company recorded a decrease of $7.6 million to
Noncontrolling Interest and recorded the remaining
purchase price of $27.6 million as a decrease
to Additional paid-in capital on the Companys Consolidated Balance Sheets. See Note 9,
Equity for further
discussion of the effects of the changes in the Companys ownership interest in ICG Commerce on the
Companys equity.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.
Ownership Interests in Partner Companies, Goodwill and Intangibles, net (Continued)
On July 1, 2010, the Company acquired an additional equity voting interest in ICG Commerce pursuant
to a tender offer that the Company made to all of the stockholders of ICG Commerce other than ICG
Commerce employees and the holders of ICG Commerces Series F Preferred Stock. The aggregate cash
consideration paid for the additional equity voting interest, which represents approximately 5% of
ICG Commerce, was $14.4 million. As a result of this transaction, the Company increased its
ownership interest in ICG Commerce from 76% to 81%. The Company will account for this transaction
by recording additional reductions to the noncontrolling interest
balance related to ICG Commerce and Internet Capital Group, Inc.s additional paid-in
capital during the quarter ending September 30, 2010.
Dividends
Consolidated Companies
On August 4, 2010, ICG Commerce paid a cash dividend in the aggregate amount of $27.0 million on its Series E and E-1 Preferred Stock. The Company
received its share of this dividend, $25.4 million, on that date.
Impairments
Consolidated Companies
During the three months ended June 30, 2009, the Company concluded that the estimated value of
Vcommerce had declined. Accordingly, the Company performed its goodwill impairment testing as
described in Note 2, Significant Accounting Policies, and determined that an impairment of
goodwill of $3.8 million was required. This impairment charge is included in Impairment related
and other on the Companys Consolidated Statements of Operations for the three and six months
ended June 30, 2009.
Equity Method Companies
The following unaudited summarized financial information relates to the Companys partner companies
accounted for under the equity method of accounting as of June 30, 2010 and December 31, 2009.
This aggregate information has been compiled from the financial statements and capitalization
tables of the Companys individual equity method partner companies.
Balance Sheets (Unaudited) (1)
June 30, 2010 |
December 31, 2009 |
|||||||
(in thousands) | ||||||||
Cash, cash equivalents and short-term investments |
$ | 52,194 | $ | 71,961 | ||||
Other current assets |
58,353 | 59,943 | ||||||
Other non-current assets |
159,300 | 157,639 | ||||||
Total assets |
$ | 269,847 | $ | 289,543 | ||||
Current liabilities |
$ | 111,383 | $ | 121,352 | ||||
Non-current liabilities |
26,271 | 12,337 | ||||||
Long-term debt |
10,728 | 14,014 | ||||||
Stockholders equity |
121,465 | 141,840 | ||||||
Total liabilities and stockholders equity |
$ | 269,847 | $ | 289,543 | ||||
Total carrying value |
$ | 87,201 | $ | 97,777 | ||||
(1) | Includes Acquirgy (25%), Channel Intelligence (50%), ClickEquations (33%),
Freeborders (31%), GoIndustry (26%), Metastorm (33%), SeaPass (26%), StarCite (36%) and WhiteFence
(36%) for both periods presented. The Companys ownership interest in Channel Intelligence is
rounded up to 50%. The Company does not consolidate Channel Intelligence because it does not own a
majority interest in the partner company and because additional factors support that it does not
control the operations of Channel Intelligence. |
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.
Ownership Interests in Partner Companies, Goodwill and Intangibles, net (Continued)
At June 30, 2010, the Companys aggregate carrying value in equity method partner companies
exceeded the Companys share of net assets of these equity partner companies by $49.2 million. Of
this excess, $36.5 million has been allocated to goodwill, which is not amortized, and $12.7
million has been allocated to intangibles, which are generally amortized over a range of three to
seven years. Amortization expense associated with these intangibles was $0.7 million and $1.4
million for the three and six months ended June 30, 2010, respectively. Amortization expense
associated with these intangibles was $0.5 million and $0.9 million for the three and six months
ended June 30, 2009, respectively. This amortization expense is included in the line item
Amortization of intangible assets in the following table and in the line item Equity loss on the
Companys Consolidated Statements of Operations.
Results of Operations (Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 (1) | 2009 (2) | 2010 (1) | 2009 (2) | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Revenue |
$ | 58,357 | $ | 57,363 | $ | 115,509 | $ | 112,615 | ||||||||
Net income (loss) |
$ | (9,853 | ) | $ | (7,296 | ) | $ | (18,119 | ) | $ | (18,469 | ) | ||||
Equity loss excluding
impairments and amortization of
intangible assets |
$ | (3,882 | ) | $ | (2,429 | ) | $ | (6,596 | ) | $ | (6,385 | ) | ||||
Impairment charge of GoIndustry |
| | (2,914 | ) | (544 | ) | ||||||||||
Amortization of intangible assets |
(698 | ) | (495 | ) | (1,405 | ) | (948 | ) | ||||||||
Total equity loss |
$ | (4,580 | ) | $ | (2,924 | ) | $ | (10,915 | ) | $ | (7,877 | ) | ||||
(1) | Includes Acquirgy, Channel Intelligence, ClickEquations, Freeborders,
GoIndustry, Metastorm, SeaPass, StarCite and WhiteFence. |
|
(2) | Includes Channel Intelligence, ClickEquations, Freeborders, GoIndustry, Metastorm,
StarCite and White Fence. |
Other Equity Company Information
In January 2009, the Company purchased $1.4 million of convertible long-term notes from GoIndustry.
In September 2009, in conjunction with a financing transaction, these long-term notes were
converted to 569,526 shares of GoIndustry common stock, and the Company purchased an additional
638,888 shares of GoIndustry common stock for approximately $1.9 million. In February 2010,
GoIndustry issued shares of common stock as contingent consideration in connection with an
acquisition in February 2008. As a result of this issuance, the Companys ownership interest in
GoIndustry was reduced slightly. The reduction in the Companys ownership in GoIndustry was
accounted for as a disposition of shares and resulted in a dilution loss of $0.1 million during the
six months ended June 30, 2010, which was recorded in Other income (loss), net on the Companys
Consolidated Statements of Operations. After a 100-for-1 reverse stock split that occurred during
the three months ended June 30, 2010, the Company owns 2,546,743 shares of GoIndustry common stock,
which represents 26% of the outstanding shares as of June 30, 2010. Adjusting for the 100-for-1
reverse stock split, the Company owned 2,546,743 shares of GoIndustry common stock, or 26% of the
outstanding shares as of December 31, 2009, as compared to 1,338,328 shares of GoIndustry common
stock, or 29% of the outstanding shares, as of June 30, 2009. Given the Companys 26% ownership,
GoIndustry continues to be accounted for under the equity method.
During the six months ended June 30, 2010 and 2009, the Company determined that its equity holdings
in GoIndustry common stock experienced other-than-temporary declines in fair market value. As a
result, the Company recorded impairment charges of $2.9 million and $0.5 million during the six
months ended June 30, 2010 and 2009, respectively, to reduce the Companys carrying value to
GoIndustrys fair market value based on the fair value Level 1 observation, as defined in Note 5,
Financial Instruments. The carrying value of the Companys equity holdings in GoIndustry was
$2.5 million and $5.7 million as of June 30, 2010 and December 31, 2009, respectively.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.
Ownership Interests in Partner Companies, Goodwill and Intangibles, net (Continued)
During the three months ended June 30, 2010, the Company purchased $0.4 million of convertible
long-term notes from ClickEquations. This transaction did not change the Companys equity
ownership in ClickEquations.
In February 2009, the Company entered into certain arrangements to guarantee approximately $3.6
million of debt for StarCite. This amount, which had been placed in an escrow account at the time
of the arrangement, was classified as restricted cash as of
March 31, 2009. The
Company repaid the underlying debt in full in May 2009, and received additional ownership
interest in StarCite. Accordingly, the Companys ownership in
the partner company increased to
35% as of June 30, 2009 from 34% as of March 31, 2009. In
addition, the Company recorded a decrease to restricted cash by the amount
paid.
Escrow Information
On June 10, 2010, the Company received a distribution of $1.8 million of previously escrowed funds,
which was the final escrow release related to the sale of the Companys former partner company,
Marketron International, Inc. (Marketron). This distribution included $0.1 million of interest,
which is recorded in Interest income on the Companys Consolidated Statements of Operations. On
March 1, 2010, 46,751 shares of IntercontinentalExchange, Inc. (ICE) common stock were released
from escrow to the Company. These shares related to sale consideration that was set aside to
satisfy potential purchase price adjustments and/or potential indemnity claims in connection with
the sale of Creditex Group, Inc. (Creditex) to ICE on August 29, 2008. The Company recorded a
gain of $5.0 million related to the release of these shares from escrow based on the closing stock
price of ICEs common stock on March 1, 2010. On May 5, 2010, the Company received 305 shares of
ICE common stock in connection with the resolution of an outstanding indemnity claim. Based on the closing price of
ICEs common stock on May 5, 2010, the Company recorded a gain of less than $0.1 million during the
three months ended June 30, 2010 as a result of such receipt. The gains related to these escrow distributions are recorded in
Other income (loss), net on the Companys Consolidated Statements of Operations. Immediately
following each receipt of the ICE shares from escrow, the Company sold the shares for proceeds of
less than $0.1 million and $5.2 million during the three and six months ended June 30, 2010,
respectively. The Company recognized an incremental gain of $0.1 million during the three months
ended March 31, 2010, which was also recorded in Other income (loss), net on the Companys
Consolidated Statements of Operations for the six months ended June 30, 2010.
As of June 30, 2010, the Company had 13,069 outstanding shares of ICE common stock, valued at $1.5
million based on the June 30, 2010 closing stock price of ICEs common stock, remaining in escrow.
Additionally, the Company had outstanding aggregate cash proceeds, subject to indemnity claims, of
$1.2 million associated with escrowed proceeds from sales of former equity method partner
companies. The release of additional escrowed proceeds, if any, to the Company would result in
additional gains at the time the Company is entitled to such proceeds, the amount is fixed or
determinable and realization is assured, which events are anticipated to occur at various times
through August 2012.
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Marketable Securities and Related Derivatives
Marketable securities represent the Companys holdings in publicly-traded equity securities
accounted for as available-for-sale securities. At June 30, 2010, the Company held a
noncontrolling interest in Blackboard, Inc. (Blackboard), which is traded on the NASDAQ Global
Market (NASDAQ: BBBB). The cost, unrealized holding gains/(losses), and fair value of marketable
securities at June 30, 2010 and December 31, 2009 were as follows:
Blackboard | Unrealized | |||||||||||||||
Common Shares | Holding | |||||||||||||||
Owned | Cost | Gains/(Losses) | Fair Value | |||||||||||||
(in thousands, except shares) | ||||||||||||||||
June 30, 2010 |
250,000 | $ | 362 | $ | 8,971 | $ | 9,333 | |||||||||
December 31, 2009 |
1,619,571 | $ | 2,342 | $ | 71,170 | $ | 73,512 | |||||||||
The amounts reflected as the Companys cost for Blackboard include the carrying value on the
date the partner company converted to marketable securities and the value of warrants exercised.
The table above does not reflect the Companys holdings of ICE common stock, which were both
obtained and sold during the three and six months ended June 30, 2010. See Note 3, Ownership
Interests in Partner Companies, Goodwill and Intangibles, net.
During the three and six months ended June 30, 2010, the Company sold 581,866 shares and 1,369,571
shares, respectively, of Blackboard common stock at average prices per share of $40.97 and $43.76,
respectively. The Company received total proceeds of $23.8 million and $57.9 million during the
three and six months ended June 30, 2010, respectively, and recognized a gain on the sale of these
securities in the amount of $23.0 million and $59.9 million in those respective periods. These
gains are included in Other income (loss), net on the Companys Consolidated Statements of
Operations. Subsequent to June 30, 2010, the Company sold 121,587 shares of Blackboard common
stock at an average price of $40.17 per share. The Company received total proceeds of $4.9 million
and will record a gain on the sale of these securities in the amount of $4.7 million during the
three months ended September 30, 2010.
As of the time of the filing of this Report, the Company holds
128,413 shares of Blackboard common stock.
As of June 30, 2010, the Company managed its exposure to and benefits from price fluctuations of Blackboard common stock
by using derivative securities or hedges. Although these instruments were derivative securities,
their economic risks were similar to, and managed on the same basis as, the risks associated with
the Blackboard shares the Company holds. As of June 30, 2010, the Company was party to cashless
collar contracts with expiration dates between September 15, 2010 and October 15, 2010 to hedge
250,000 shares, its total holdings of Blackboard common stock, at weighted average minimum and
maximum prices per share of $29.82 and $67.31, respectively. During the six months ended June 30,
2010, the Company incurred costs of $0.2 million to terminate three cashless collar contracts
related to a total of 375,000 shares and recorded a loss of this amount, which is included in
Other income (loss), net on the Companys Consolidated Statements of Operations. Additionally,
two cashless collar contracts related to a total of 375,000 shares of Blackboard common stock
matured during the six months ended June 30, 2010. Since Blackboards stock price on the maturity
date was within the weighted average minimum and maximum prices per share, the value of the matured
hedges were zero and there was no gain or loss associated with the maturity of these contracts.
Subsequent to June 30, 2010, the Company terminated the remaining two cashless collar contracts
related to a total of 250,000 shares of Blackboard common stock.
19
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Marketable Securities and Related Derivatives (Continued)
In accordance with applicable accounting rules, the cashless collar contracts are marked to market
through earnings each period. The mark-to-market impact is reflected in Other income (loss), net
for the appropriate period on the Companys Consolidated Statements of Operations as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Unrealized gain
(loss) on
mark-to-market of
hedges |
$ | 30 | $ | 894 | $ | 732 | $ | (2,557 | ) |
The income or loss is primarily driven by the change in the closing price of Blackboard common
stock from the beginning of the quarter to the end of the quarter. The mark-to-market impact was
generally an expense if Blackboards stock price rose, or income if Blackboards stock price
declined, during the relevant quarter. The price per share is reflected in the table below as
reported by the NASDAQ Global Market:
Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Mar 31, | Jun 30, | ||||||||||||||||||||||
2008 | 2009 | 2009 | 2009 | 2009 | 2010 | 2010 | ||||||||||||||||||||||
Blackboard closing stock price |
$ | 26.23 | $ | 31.74 | $ | 28.86 | $ | 37.78 | $ | 45.39 | $ | 41.66 | $ | 37.33 |
The fair value of these instruments was an asset of $0.2 million at June 30, 2010 and a liability
of $0.5 million at December 31, 2009, and is included in Hedges of marketable securities on the
Companys Consolidated Balance Sheets for each period. See Note 5, Financial Instruments.
5. Financial Instruments
Derivative Financial Instruments
The Company utilizes derivative financial instruments, primarily forward exchange contracts and, as of June 30, 2010, Blackboard security hedges,
to manage its exposure to and benefits from foreign currency risk and price fluctuations of Blackboard common stock, respectively.
During the three and six months ended June 30, 2010, ICG Commerce utilized put options to mitigate the risk of currency fluctuations at
ICG Commerces operations in the United Kingdom and Europe. The net mark-to-market adjustments recognized by ICG Commerce are detailed
in the below table and represent the premiums paid for the options by ICG Commerce, as well as the change in value of the options related
to the fluctuation of exchange rates during the respective period. The cashless collar contracts related to Blackboard common stock are
discussed in Note 4, Marketable Securities and Related Derivatives. These adjustments were recognized in Other income (loss), net,
on the Companys Consolidated Statements of Operations.
The following table presents the classifications and fair values of our derivative instruments as
of June 30, 2010 and December 31, 2009:
Consolidated Balance Sheets | ||||||||||
June 30, | December 31, | |||||||||
Derivative | Classification | 2010 | 2009 | |||||||
(in thousands) | ||||||||||
Cashless collar contracts |
Hedges of marketable securities | $ | 185 | $ | (547 | ) | ||||
Foreign exchange put option |
Other assets, net | $ | 77 | $ | |
The following table presents the mark-to-market impact on earnings resulting from our hedging
activities for the periods ended June 30, 2010 and 2009:
Consolidated Statements of Operations | ||||||||||||||||||||
Three months ended | Six months ended | |||||||||||||||||||
Derivatives | Classification | June 30, | June 30, | |||||||||||||||||
(in thousands) | ||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Cashless collar contracts |
Other income (loss), net | $ | 30 | $ | 894 | $ | 732 | $ | (2,557 | ) | ||||||||||
Foreign exchange put option |
Other income (loss), net | $ | 64 | $ | (28 | ) | $ | 16 | $ | (28 | ) |
20
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5.
Financial Instruments (Continued)
Fair Value Measurements
Fair value is the price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. There are
three levels of inputs that may be used to measure fair value; they are as follows:
Level 1 Observable inputs such as quoted market prices for identical assets and liabilities in
active public markets.
Level 2 Observable inputs other than Level 1 prices based on quoted prices in markets with
insufficient volume or infrequent transactions, or valuations in which all significant inputs are
observable for substantially the full term of the asset or liability.
Level 3 Unobservable inputs to the valuation techniques that are significant to the fair value of
the asset or liability.
The fair values of the Companys financial assets measured at fair value on a recurring basis were
as follows:
Balance at | ||||||||||||||||
June 30, | ||||||||||||||||
2010 | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Cash equivalents (money market accounts) |
$ | 72,524 | $ | 72,524 | $ | | $ | | ||||||||
Marketable securities (see Note 4) |
9,333 | 9,333 | | | ||||||||||||
Hedges of marketable securities (see Note 5) |
185 | | 185 | (1) | | |||||||||||
Hedges of foreign currency risk (see Note 5) |
77 | | 77 | (1) | | |||||||||||
$ | 82,119 | $ | 81,857 | $ | 262 | $ | | |||||||||
Balance at | ||||||||||||||||
December 31, | ||||||||||||||||
2009 | Level 1 | Level 2 | Level 3 | |||||||||||||
(in thousands) | ||||||||||||||||
Cash equivalents (money market accounts) |
$ | 49,972 | $ | 49,972 | $ | | $ | | ||||||||
Marketable securities (see Note 4) |
73,512 | 73,512 | | | ||||||||||||
Hedges of marketable securities (see Note 5) |
(547 | ) | | (547 | ) (1) | | ||||||||||
$ | 122,937 | $ | 123,484 | $ | (547 | ) | $ | | ||||||||
(1) | At June 30, 2010, the
Companys respective counterparties under these arrangements provided the Company
with quarterly statements of the market values of these instruments based on significant inputs
that are observable or can be derived principally from, or corroborated by, observable market data
for substantially the full term of the relevant asset or liability. |
6. Debt
Long-Term Debt
The Companys long-term debt of $1.4 million and $1.0 million as of June 30, 2010 and December 31,
2009, respectively, relates to its consolidated partner companies in the respective periods. The
long-term debt as of June 30, 2010 is due as follows: $0.6 million is classified as current and is
due within one year, and the remaining $0.8 million is due through 2014. The long-term debt as of
December 31, 2009 was due as follows: $0.4 million was classified as current and was due within
one year, and the remaining $0.6 million was due through 2013.
21
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6.
Debt (Continued)
Loan and Credit Agreements
On December 18, 2009, the Company entered into an amended and restated loan agreement with Comerica
Bank (the Loan Agreement) that provides for the issuance of letters of credit of up to $10.0
million, subject to a cash-secured borrowing base as defined by the Loan Agreement. The Loan
Agreement expires on December 17, 2010 and replaces the Letter of Credit Agreement, as amended,
between the same parties, which expired on December 12, 2009. Issuance fees of 0.50% per annum of
the face amount of each letter of credit will be paid to Comerica Bank subsequent to issuance. The
Loan Agreement is also subject to a 0.25% per annum unused commitment fee payable to the bank on a
quarterly basis. No amounts were outstanding under these agreements at June 30, 2010 or December
31, 2009.
On May 8, 2008, the Company entered into a series of loan agreements with Credit Suisse Capital
LLC. Pursuant to these agreements, the Company could, from time to time, borrow funds secured by the
cashless collar contracts that the Company previously entered into with respect to its
shares of Blackboard common stock. The loans bore interest, which was payable quarterly in arrears,
at the three-month U.S. dollar LIBOR rate, computed on the basis of a 30-day month and a 360-day
year. This interest rate reset on the first day of each calendar quarter. The maturity of each
of the loans corresponded with the expiration of the underlying cashless collar contract.
Accordingly, the maturity dates of the loans ranged from March 15, 2010 to October 15, 2010.
The maximum borrowing capacity under each of the loan agreements equaled the present value of the
minimum value of the underlying cashless collar contract, computed using the three month U.S.
dollar LIBOR rate. The Company did not draw any amounts under the
loan agreements. Subsequent to June 30, 2010, the Company terminated the remaining
cashless collar contracts, which were set to mature by October 15, 2010. Accordingly, these loan
agreements were also terminated subsequent to June 30, 2010.
In August 2008, ICG Commerce and a number of its wholly-owned subsidiaries entered into a loan agreement with PNC Bank, pursuant to which
ICG Commerce and such subsidiaries were able to borrow up to $10.0 million under a revolving line of credit. The original line of credit
matured on December 31, 2009 and was subsequently extended to December 31, 2010. On August 3, 2010, the original line of credit was
replaced with a new revolving line of credit that provided for, among other things, an increased $15.0 million total available borrowing
amount and a new maturity date of August 2, 2013. Also on August 3, 2010, ICG Commerce and the other borrowing companies under the line
of credit received a term loan from PNC Bank in the amount of $20.0 million. ICG Commerce paid a nonrefundable $0.2 million commitment
fee to PNC Bank upon the consummation of the new line of credit and term loan.
Both the new line of credit and the term loan are secured by a first priority lien on the assets of the borrowing companies. Interest on
any outstanding amounts under the line of credit and/or the term loan is computed at a rate to be selected by ICG Commerce from the following
three options: (1) the highest of PNC Banks prime rate, the sum of the Federal Funds Open Rates plus 0.5% and the sum of the daily LIBOR
rate plus 1.0%, (2) a fixed LIBOR rate, as determined two business days prior to a specified period, plus a margin ranging from 1.75% to
2.5%, depending on the then-current debt-to-EBITDA ratio of the borrowing companies and (3) the daily LIBOR rate, plus a margin ranging
from 1.75% to 2.5%, depending on the then-current debt-to-EBITDA ratio of the borrowing companies. ICG Commerce has initially selected
option (2) with respect to $10.0 million and option (3) with respect to the remaining $10.0 million that it has borrowed under the term
loan. Any outstanding principal and interest under the line of credit will become due and payable periodically through August 2, 2013.
The principal under the term loan is payable in $0.3 million monthly installments through August 1, 2015, and any outstanding interest
under the term loan will become due and payable periodically through August 1, 2015. Both the line of credit and the term loan are subject
to a number of financial and other covenants that are specified in the loan documents. The line of credit provides for the issuance by the
bank of up to $5.0 million of letters of credit, subject to specified fees and other terms. The line of credit is also subject to a 0.25%
per annum unused commitment fee that is payable to the bank quarterly.
There were no amounts (including letters of credit) outstanding under the original line of credit as of June 30, 2010 or
December 31, 2009. Additionally, there were no amounts (including letters of credit) outstanding under the new line of credit as of the
time of the filing of this Report. The proceeds from the term loan (which was entered into following the quarter ended June 30, 2010)
were used to fund a cash dividend paid to holders of ICG Commerce Series E and E-1 Preferred Stock, including ICG, on August 4, 2010.
22
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Segment Information
The Companys reportable segments consist of two reporting segments, the core segment and the
venture segment. All of the Companys partner companies are included in either the core or
venture segment, while companies with respect to which the Companys equity interests have been
designated as marketable securities are considered corporate assets. At June 30, 2010, the core
segment includes the results of the Companys consolidated partner companies, records the Companys
share of earnings and losses of certain partner companies accounted for under the equity method of
accounting and captures the Companys basis in the assets of its core segment partner companies.
At June 30, 2010, the venture segment records the Companys share of earnings and losses of certain
partner companies accounted for under the equity method of accounting and captures the Companys
basis in the assets of its venture segment partner companies.
The core reporting segment includes those consolidated and equity method partner companies in which
ICG owns a principal controlling equity voting interest (54% on average as of June 30, 2010) and in
which ICGs management takes a very active role in providing strategic direction and management
assistance. The Company expects to devote relatively large initial amounts of capital to acquire
core partner companies. The venture reporting segment includes partner companies in which the
Company generally devotes less capital than it does to its core companies and, therefore, in which
it holds relatively smaller ownership stakes than it does in its core companies (28% on average as
of June 30, 2010) and has less influence over their strategic direction and management decisions
than it does over those of its core companies.
Approximately 8% of the Companys consolidated revenues for both the three and six months ended
June 30, 2010 relate to sales generated in the United Kingdom. Approximately 10% of the Companys
consolidated revenues for both the three and six months ended June 30, 2009 relate to sales
generated in the United Kingdom. The remaining consolidated revenues for the three and six months
ended June 30, 2010 and 2009 primarily relate to sales generated in the United States. As of June
30, 2010 and December 31, 2009, the Companys assets were located primarily in the United States.
23
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7.
Segment Information (Continued)
The following summarizes selected information related to the Companys segments for the respective
periods. All significant intersegment activity has been eliminated. Assets are owned or allocated
assets used by each reporting segment.
Segment Information | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Total | Reconciling Items | Consolidated | ||||||||||||||||||||||
Core | Venture | Segment | Corporate | Other(1) | Results | |||||||||||||||||||
Three Months Ended
June 30, 2010 |
||||||||||||||||||||||||
Revenues |
$ | 27,377 | $ | | $ | 27,377 | $ | | $ | | $ | 27,377 | ||||||||||||
Net income (loss)
attributable to
Internet Capital
Group, Inc. |
$ | (3,977 | ) | $ | (1,289 | ) | $ | (5,266 | ) | $ | (4,667 | ) | $ | 25,694 | $ | 15,761 | ||||||||
Three Months Ended
June 30, 2009 |
||||||||||||||||||||||||
Revenues |
$ | 22,077 | $ | | $ | 22,077 | $ | | $ | | $ | 22,077 | ||||||||||||
Net income (loss)
attributable to
Internet Capital
Group, Inc. |
$ | (1,725 | ) | $ | (635 | ) | $ | (2,360 | ) | $ | (4,215 | ) | $ | (1,974 | ) | $ | (8,549 | ) | ||||||
Six Months Ended
June 30, 2010 |
||||||||||||||||||||||||
Revenues |
$ | 53,671 | $ | | $ | 53,671 | $ | | $ | | $ | 53,671 | ||||||||||||
Net income (loss)
attributable to
Internet Capital
Group, Inc. |
$ | (6,906 | ) | $ | (2,468 | ) | $ | (9,374 | ) | $ | (9,139 | ) | $ | 63,045 | $ | 44,532 | ||||||||
Six Months Ended
June 30, 2009 |
||||||||||||||||||||||||
Revenues |
$ | 43,729 | $ | | $ | 43,729 | $ | | $ | | $ | 43,729 | ||||||||||||
Net income (loss)
attributable to
Internet Capital
Group, Inc. |
$ | (4,298 | ) | $ | (1,760 | ) | $ | (6,058 | ) | $ | (8,691 | ) | $ | (4,805 | ) | $ | (19,554 | ) |
(1) | Components of Other |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Corporate
other income (loss) (Note 11) |
$ | 24,762 | $ | 2,113 | $ | 65,401 | $ | 218 | ||||||||
Noncontrolling interest |
(179 | ) | (337 | ) | (553 | ) | (729 | ) | ||||||||
Impairment of Vcommerce (Core) (Note 3) |
| (3,750 | ) | | (3,750 | ) | ||||||||||
Impairment of GoIndustry (Venture)
(Note 3) |
| | (2,914 | ) | (544 | ) | ||||||||||
Corporate income tax benefit |
1,111 | | 1,111 | | ||||||||||||
$ | 25,694 | $ | (1,974 | ) | $ | 63,045 | $ | (4,805 | ) | |||||||
Total | Consolidated | |||||||||||||||||||||||
Core | Venture | Segment | Corporate | Other | Results | |||||||||||||||||||
Assets as of: |
||||||||||||||||||||||||
June 30, 2010 |
$ | 186,835 | $ | 16,830 | $ | 203,665 | $ | 73,260 | $ | | $ | 276,925 | ||||||||||||
Assets as of: |
||||||||||||||||||||||||
December 31, 2009 |
$ | 192,786 | $ | 21,832 | $ | 214,618 | $ | 115,469 | $ | | $ | 330,087 |
24
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Parent Company Financial Information
Parent company financial information is provided to present the financial position and results of
operations of the Company and its wholly-owned subsidiaries as if the partner companies accounted
for under the consolidation method of accounting were accounted for under the equity method of
accounting for all applicable periods presented. The Companys share of the consolidated partner
companies losses is included in Equity loss in the Parent Company Statements of Operations for
all periods presented based on the Companys ownership percentage in each period. The carrying
value of the consolidated companies as of June 30, 2010 and December 31, 2009 is included in
Ownership interests in partner companies in the Parent Company Balance Sheets set forth below.
Parent Company Balance Sheets
As of June 30, 2010 | As of December 31, 2009 | |||||||
(unaudited) (in thousands) |
||||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 55,854 | $ | 29,443 | ||||
Income tax receivable |
6,314 | 11,071 | ||||||
Other current assets |
256 | 562 | ||||||
Current assets |
62,424 | 41,076 | ||||||
Ownership interests in partner companies |
167,344 | 170,498 | ||||||
Marketable securities |
9,333 | 73,512 | ||||||
Hedges of marketable securities |
185 | | ||||||
Intangible assets |
400 | | ||||||
Other |
918 | 881 | ||||||
Total assets |
$ | 240,604 | $ | 285,967 | ||||
Liabilities and stockholders equity |
||||||||
Current liabilities |
$ | 3,131 | $ | 4,433 | ||||
Hedges of marketable securities |
| 547 | ||||||
Non-current liabilities |
300 | 350 | ||||||
Stockholders equity |
237,173 | 280,637 | ||||||
Total liabilities and stockholders equity |
$ | 240,604 | $ | 285,967 | ||||
Parent Company Statements of Operations
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Revenues |
$ | | $ | | $ | | $ | | ||||||||
Operating expenses |
||||||||||||||||
General and administrative |
4,797 | 4,305 | 9,321 | 8,905 | ||||||||||||
Impairment related and other |
| 3,750 | | 3,750 | ||||||||||||
Total operating expenses |
4,797 | 8,055 | 9,321 | 12,655 | ||||||||||||
(4,797 | ) | (8,055 | ) | (9,321 | ) | (12,655 | ) | |||||||||
Other income (loss), net |
24,762 | 2,113 | 65,401 | 218 | ||||||||||||
Interest income (expense), net |
130 | 90 | 182 | 214 | ||||||||||||
Income (loss) before income taxes and equity loss |
20,095 | (5,852 | ) | 56,262 | (12,223 | ) | ||||||||||
Equity loss |
(5,445 | ) | (2,697 | ) | (12,841 | ) | (7,331 | ) | ||||||||
Income tax benefit (expense) |
1,111 | | 1,111 | | ||||||||||||
Net income (loss) |
$ | 15,761 | $ | (8,549 | ) | $ | 44,532 | $ | (19,554 | ) | ||||||
25
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8.
Parent Company Financial Information (Continued)
Parent Company Statements of Cash Flows
Six Months Ended June 30, |
||||||||
2010 | 2009 | |||||||
(unaudited) (in thousands) |
||||||||
Operating Activities |
||||||||
Net income (loss) |
$ | 44,532 | $ | (19,554 | ) | |||
Adjustments to reconcile net loss to cash used in operating activities: |
||||||||
Depreciation and amortization |
31 | 55 | ||||||
Equity-based compensation |
1,330 | 2,226 | ||||||
Equity loss |
12,841 | 7,331 | ||||||
Other (income) loss |
(65,390 | ) | (218 | ) | ||||
Impairment related and other |
| 3,750 | ||||||
Changes in assets and liabilities, net of effect of acquisitions: |
||||||||
Income tax receivable |
4,757 | | ||||||
Prepaid expenses and other assets |
306 | 737 | ||||||
Accounts payable |
2 | (5 | ) | |||||
Accrued expenses |
(628 | ) | 162 | |||||
Accrued compensation and benefits |
(744 | ) | (1,481 | ) | ||||
Other liabilities |
(50 | ) | (50 | ) | ||||
Cash provided by (used in) operating activities |
(3,013 | ) | (7,047 | ) | ||||
Investing Activities |
||||||||
Capital expenditures, net |
(441 | ) | (7 | ) | ||||
Proceeds from sales of marketable securities |
64,866 | 604 | ||||||
Proceeds from sales of ownership interests in partner companies |
1,836 | 2,177 | ||||||
Acquisitions of ownership interests in partner companies, net |
(1,584 | ) | (10,045 | ) | ||||
Cash provided by (used in) investing activities |
64,677 | (7,271 | ) | |||||
Financing Activities |
||||||||
Acquisition
of noncontrolling interest in subsidiary equity |
(35,253 | ) | | |||||
Purchase of treasury stock |
| (370 | ) | |||||
Cash provided by (used in) financing activities |
(35,253 | ) | (370 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
26,411 | (14,688 | ) | |||||
Cash and cash equivalents at beginning of period |
29,443 | 73,208 | ||||||
Cash and cash equivalents at end of period |
$ | 55,854 | $ | 58,520 | ||||
Parent Company Dividend Receipt
On
August 4, 2010, the Company received
a cash dividend of $25.4 million from ICG Commerce.
26
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Equity
The following details the activity related to equity attributable to
Internet Capital Group, Inc., equity
attributable to the noncontrolling interest and total equity for the six months ended June 30,
2010, including the effects of the changes in the Companys ownership interest in ICG Commerce on
the Companys equity.
Six months ended June 30, 2010 | ||||||||||||
Internet | ||||||||||||
Capital Group, | ||||||||||||
Inc.s | ||||||||||||
Stockholders | Noncontrolling | Total | ||||||||||
Equity | Interest | Equity | ||||||||||
Balance at December 31, 2009 |
$ | 280,665 | $ | 22,497 | $ | 303,162 | ||||||
Net income |
44,532 | 553 | 45,085 | |||||||||
Net reclassification adjustment and unrealized
depreciation in marketable securities |
(62,199 | ) | | (62,199 | ) | |||||||
Net equity-based compensation plans activity |
1,261 | | 1,261 | |||||||||
Net impact of ICG Commerce equity transaction May 5, 2010 |
(27,621 | ) | (7,632 | ) | (35,253 | ) | ||||||
Net impact of partner company equity transactions other |
579 | (98 | ) | 481 | ||||||||
Balance at June 30, 2010 |
$ | 237,217 | $ | 15,320 | $ | 252,537 | ||||||
As discussed in Note 3, Ownership Interests in Partner Companies, Goodwill and Intangibles,
net, the Companys acquisition of an additional 12% equity voting interest in ICG Commerce during
the three months ended June 30, 2010 resulted in a reduction to both the noncontrolling interest
balance related to ICG Commerce and the additional paid-in capital of Internet Capital Group, Inc.s
Stockholders Equity of $7.6 million and
$27.6 million, respectively. This activity is reflected in
Net impact of ICG Commerce equity transaction May 5,
2010 in the above table.
Also as discussed in Note 3, Ownership Interests in Partner Companies, Goodwill and Intangibles,
net, the Company acquired an additional 5% equity voting interest in ICG Commerce on July 1, 2010.
This transaction will result in a reduction to both the noncontrolling interest balance related to
ICG Commerce and Internet Capital Group, Inc.s additional paid-in capital for the three months
ended September 30, 2010.
10. Equity-Based Compensation
Equity-based compensation for the three and six months ended June 30, 2010 and 2009 is primarily
included in Selling, general and administrative on the Companys Consolidated Statements of
Operations for the relevant periods. The following table provides additional information related
to the Companys equity-based compensation:
Weighted | ||||||||||||||||||||||||
Average Years | ||||||||||||||||||||||||
Unrecognized | Remaining of | |||||||||||||||||||||||
Equity-Based | Equity-Based | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | Compensation | Compensation | |||||||||||||||||||||
June 30, | June 30, | at June 30, | Expense at | |||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | June 30, 2010 | |||||||||||||||||||
(in thousands, except weighted average years) | ||||||||||||||||||||||||
SARs(1) |
$ | 529 | $ | 993 | $ | 1,043 | $ | 1,986 | $ | 6,354 | 3.4 | |||||||||||||
Stock Options |
| | | 3 | 1 | 2.5 | ||||||||||||||||||
Restricted Stock |
38 | 18 | 76 | 36 | 349 | 3.1 | ||||||||||||||||||
DSUs(2) |
51 | 36 | 97 | 101 | 141 | 0.7 | ||||||||||||||||||
Equity-Based Compensation |
$ | 618 | $ | 1,047 | $ | 1,216 | $ | 2,126 | $ | 6,845 | ||||||||||||||
Equity-Based
Compensation for
Consolidated Partner
Companies |
234 | 150 | 373 | 369 | 1,290 | 3.1 | ||||||||||||||||||
Equity-Based Compensation |
$ | 852 | $ | 1,197 | $ | 1,589 | $ | 2,495 | $ | 8,135 | ||||||||||||||
(1) | Stock Appreciation Rights (SARs) |
|
(2) | Deferred Stock Units (DSUs) |
27
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10.
Equity-Based Compensation (Continued)
SARs
SARs represent the right of the holder to receive, upon exercise of each SAR, shares of Common
Stock equal to the amount by which the fair market value of a share of common stock on the date of
exercise of the SAR exceeds the base price of the SAR. During the three months ended June 30,
2010, the Company granted 25,000 SARs to a non-management director at a weighted-average base price
of $8.76 per share and a weighted-average fair value of $4.69 per share. During the six months
ended June 30, 2010, the Company granted 1,406,940 SARs to employees and non-employee directors at
a weighted-average base price of $6.79 per share and a weighted-average fair value of $3.96 per
share. There were no SAR grants during the three or six months ended June 30, 2009. During the
three and six months ended June 30, 2010, 55,000 SARs were exercised. There were no SARs exercised
in the three or six months ended June 30, 2009. There were 5,322,310 and 3,970,370 SARs
outstanding at June 30, 2010 and December 31, 2009, respectively. The aggregate intrinsic values of
the SARs outstanding at June 30, 2010 and December, 31, 2009 were $2.1 million and $0, respectively.
SARs Fair Value Assumptions
The following assumptions were used to determine the fair value of SARs granted to employees by the
Company:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2010 | 2009 | 2010 | 2009 | |||||
Expected volatility |
60% | | 60% | | ||||
Average expected life of SAR (in years) |
5.25 | | 2.75-6.25 | | ||||
Risk-free interest rate |
2.12% | | 1.55-2.92% | | ||||
Dividend yield |
0.0% | | 0.0% | |
The Company estimates the grant date fair value of SARs using the Black-Scholes option-pricing
model, which requires the input of highly subjective assumptions. These assumptions include
estimating the expected life of the award and the estimated volatility of our stock price over the
expected term. Expected volatility is based on historical volatility of our Common Stock over the
period commensurate with the expected term of the award. The expected term calculation for SARs
granted is based on an average of the SAR vest term and the life of the award. The risk-free
interest rate is based on the U.S. Treasury yield in effect at the time of grant for an instrument
with a maturity that is commensurate with the expected term of the award. Changes in these
assumptions, the estimated forfeitures and the requisite service period can materially affect the
amount of equity-based compensation recognized in the Companys Consolidated Statements of
Operations.
28
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10.
Equity-Based Compensation (Continued)
Stock Options
The fair value of each stock option is estimated on the grant date using the Black-Scholes
option-pricing model. Stock options generally vest over four years. During the three and six
months ended June 30, 2010, 23,678 and 25,626 stock options expired, respectively. There were no
stock options granted during the three and six months ended June 30, 2010. During the six months
ended June 30, 2009, the Company granted 250 stock options to employees at a weighted-average base
price of $4.30 per share and a weighted-average fair value of $2.47 per share. There were 503,778
and 529,404 stock options outstanding as of June 30, 2010 and December 31, 2009, respectively.
Restricted Stock
During the six months ended June 30, 2010, the Company granted 25,000 shares of restricted stock to
certain employees, which vest over four years. These restricted stock awards were valued at $0.2
million. There were no restricted stock awards granted during the three and six months ended June
30, 2009. During the three and six months ended June 30, 2010 and 2009, 2,500 shares of restricted
stock vested. There were 57,025 and 34,525 restricted stock awards outstanding at June 30, 2010
and December 31, 2009, respectively.
DSUs
During the six months ended June 30, 2010, the Company issued 36,000 DSUs to the Companys
non-management directors under the Non-Management Director Compensation Plan that will vest in the
first quarter of 2011. These DSUs were valued at $0.2 million. During the three and six months
ended June 30, 2010, 4,500 DSUs were forfeited, and compensation cost related to the total number
of DSUs expected to vest was reduced by less than $0.1 million. During the six months ended June
30, 2009, the Company issued 36,000 DSUs to the Companys non-management directors under the
Non-management Director Compensation Plan that vested during the six months ended June 30, 2010.
These DSUs were valued at $0.1 million.
During the three and six months ended June 30, 2010, the Company issued 7,452 DSUs and 14,816 DSUs,
respectively, to the Companys non-management directors. During the three and six months ended
June 30, 2009, the Company issued 11,728 DSUs and 20,531 DSUs, respectively, to the Companys
non-management directors. These DSUs were issued in lieu of cash payable to those directors for
services provided to the Companys Board of Directors and its committees and vested immediately.
The expense of $0.1 million for each of the three and six months ended June 30, 2010, and the
expense of $0.1 million for each of the three and six months ended June 30, 2009, associated with the
quarterly grants for service is included in Selling, general and administrative on the Companys
Consolidated Statements of Operations but is not included in the Equity-Based Compensation table
above.
29
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Other Income (Loss)
Other Income (Loss), net
Other income (loss), net consists of the effect of transactions and other events relating to the
Companys ownership interests in its partner companies and its operations in general.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Realized gains on marketable securities, net of hedge
termination costs (Note 4) |
$ | 22,962 | $ | | $ | 57,797 | $ | 174 | ||||||||
Unrealized gain (loss) on mark-to-market of hedges (Note 4) |
30 | 894 | 732 | (2,557 | ) | |||||||||||
Gain on sale of Creditex (Note 3) |
36 | | 5,089 | 430 | ||||||||||||
Gains on sales/distributions of ownership interests in
partner companies |
1,734 | 1,219 | 1,836 | 2,177 | ||||||||||||
Dilution loss on GoIndustry (Note 3) |
| | (67 | ) | | |||||||||||
Other |
| | 14 | (6 | ) | |||||||||||
24,762 | 2,113 | 65,401 | 218 | |||||||||||||
Total other income (loss) for consolidated partner companies |
(135 | ) | 1,133 | (478 | ) | 781 | ||||||||||
$ | 24,627 | $ | 3,246 | $ | 64,923 | $ | 999 | |||||||||
During the three and six months ended June 30, 2010, the Company recorded gains of $1.7
million and $1.8 million, respectively, related to distributions of various ownership interests in
former partner companies, primarily the escrow release related to Marketron discussed in Note 3,
Ownership Interests in Partner Companies, Goodwill and Intangibles, net. During the three and
six months ended June 30, 2009, the Company recorded gains of $1.2 million and $2.2 million,
respectively, related to the distributions of various ownership interests, including the release of
$1.2 million of escrowed proceeds related to Marketron. These gains are included in Gains on
sales/distributions of ownership interests in partner companies in the above table.
During the three and six months ended June 30, 2010, ICG Commerce recorded foreign currency losses
of $0.2 million and $0.4 million, respectively, related to changes in exchange rates associated
with its operations in the United Kingdom and Europe. ICG Commerce recorded foreign currency gains
of $1.1 million and $0.8 million during the three and six months ended June 30, 2009, respectively.
These foreign currency gains and losses comprise the majority of the other income (loss) for the
Companys consolidated partner companies included in the above table.
12. Income Taxes
The Company, InvestorForce and GovDelivery join in filing a consolidated federal income tax return.
As a result of a change in ownership of the Company under Internal Revenue Code Section 382 that
occurred in 2004, its net operating loss carryforwards, capital loss carryforwards and certain
other deferred tax assets are subject to an annual limitation. The annual limitation on the
utilization of these carryforwards is approximately $14.5 million. This annual limitation can be
carried forward if it is not used. The Company did not use the limitation in 2009; therefore, the
amount available for 2010 is $29.0 million. Together, excluding the results for the six months
ended June 30, 2010, the Company and InvestorForce have $217.8 million available for these
carryforwards. These losses expire in varying amounts between 2010 and 2023. Additionally, the
Company and InvestorForce have $25.4 million of net operating loss carryforwards and $3.0 million
of capital loss carryforwards that are not subject to the Section 382 annual limitation. The net
operating losses expire between 2026 and 2029 and the capital losses expire in 2014.
30
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12.
Income Taxes (Continued)
GovDelivery has approximately $2.8 million of net operating loss carryforwards. The Companys
acquisition of GovDelivery in 2009 constituted a change in ownership under Internal Revenue Code
Section 382. As a result, GovDeliverys net operating losses are limited to approximately $1.0
million per year plus any recognized built-in gains. GovDeliverys net deferred tax liability
after acquisition accounting of $4.8 million reduced the Companys valuation allowance.
A valuation allowance has been provided for the Companys net deferred tax assets as the Company
believes, after evaluating all positive and negative evidence, both historical and prospective,
that it is more likely than not that these benefits will not be realized.
The Company recorded a tax benefit of $1.2 million for the three months ended June 30, 2010. This
benefit is attributable to $0.7 million of interest related to a portion of the tax receivable that
was paid by the Internal Revenue Service during the three months ended June 30, 2010, as well as a
provision to return adjustment of $0.5 million to reflect the actual net operating loss carry back
related to the 2009 tax year.
As of December 31, 2009, the Company was entitled to aggregate income tax refunds of $11.1 million,
primarily related to the completion of the Internal Revenue Services audits of the Companys
federal income tax returns for the years 2005 through 2007, as well as new legislation that
expanded the ability of businesses to carry back net operating losses. During the three months
ended June 30, 2010, the Company received $5.2 million of this refund. The Companys income tax
receivable as of June 30, 2010 was $6.4 million; the
Company expects to receive this payment during 2010.
ICG Commerce files its own consolidated federal income tax return, separate from the Company. Due
to ICG Commerces prior equity transactions, it experienced a change in ownership under Internal
Revenue Code Section 382 in 2003. As a result, its net operating loss carryforwards are subject to
an annual limitation. Based on an Internal Revenue Code Section 382 study completed in early 2010,
and excluding ICG Commerces results for the six months ended June 30, 2010, approximately $74.0
million of net operating loss carryforwards are expected to be available to ICG Commerce between
December 31, 2009 and December 31, 2023. The annual limitation ICG Commerce has on the utilization
of its net operating losses is $3.1 million per year. The amount available in 2010 is $34.1
million.
ICG Commerce maintains a valuation allowance for its state net operating losses and its capital
loss carryovers. The valuation allowance on the state net operating loss deferred tax assets is
necessary due to the expectation that most will expire unused due to the timing and the amount of
taxable income apportioned to these states on a separate company basis. A valuation allowance for
the deferred tax asset associated with the capital loss carryovers is appropriate because ICG
Commerce does not expect to generate any capital gains before the losses expire.
ICG Commerce recorded tax expense of $0.8 million and $1.4 million for the three and six months
ended June 30, 2010, respectively, representing an effective tax
rate of 35.94%. This rate differs from the federal rate of 35% due to foreign and state taxes.
As discussed in Note 3, Ownership Interest in Partner Companies, Goodwill and Intangibles, net,
in July 2010 the Company acquired an additional equity interest in ICG Commerce. As a result of
this acquisition, ICG Commerce will join the Companys consolidated federal tax return.
31
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Net Income (Loss) per Share
The calculations of net income (loss) per share were:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Basic and Diluted: |
||||||||||||||||
Net income (loss) attributable to Internet Capital Group, Inc. |
$ | 15,761 | $ | (8,549 | ) | $ | 44,532 | $ | (19,554 | ) | ||||||
Basic: |
||||||||||||||||
Net income (loss) attributable to Internet Capital Group, Inc.
per share |
$ | 0.43 | $ | (0.23 | ) | $ | 1.23 | $ | (0.53 | ) | ||||||
Diluted: |
||||||||||||||||
Net income (loss) attributable to Internet Capital Group, Inc.
per share |
$ | 0.43 | $ | (0.23 | ) | $ | 1.22 | $ | (0.53 | ) | ||||||
Shares used in computation of basic income (loss) per share |
36,346 | 36,666 | 36,326 | 36,671 | ||||||||||||
Stock options |
65 | | 25 | | ||||||||||||
Restricted stock |
18 | | 5 | | ||||||||||||
DSUs |
15 | | 4 | | ||||||||||||
SARs |
630 | | 158 | | ||||||||||||
Shares used in the computation of diluted income (loss) per share |
37,074 | 36,666 | 36,518 | 36,671 | ||||||||||||
The following dilutive securities were not included in the computation of diluted net loss per
share because their effect would have been anti-dilutive:
Weighted Average | ||||||||
Shares | Price Per Share | |||||||
Three Months Ended June 30, 2010 |
||||||||
SARs |
2,067,790 | $ | 7.51 | |||||
Stock options |
210,821 | $ | 42.36 | |||||
Restricted stock |
7,500 | $ | | |||||
Deferred stock units |
| $ | | |||||
Six Months Ended June 30, 2010 |
||||||||
SARs |
2,067,790 | $ | 7.51 | |||||
Stock options |
210,821 | $ | 42.36 | |||||
Restricted stock |
7,500 | $ | | |||||
Deferred stock units |
| $ | | |||||
Three Months Ended June 30, 2009 |
||||||||
SARs |
3,870,370 | $ | 7.65 | |||||
Stock options |
569,454 | $ | 34.56 | |||||
Restricted stock |
14,800 | $ | | |||||
Deferred stock units |
36,000 | $ | | |||||
Six Months Ended June 30, 2009 |
||||||||
SARs |
3,870,370 | $ | 7.65 | |||||
Stock options |
569,454 | $ | 34.56 | |||||
Restricted stock |
14,800 | $ | | |||||
Deferred stock units |
36,000 | $ | |
32
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INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Comprehensive Income (Loss)
Comprehensive income (loss) is the change in equity of a business enterprise during a period
resulting from transactions and other events and circumstances from non-owner sources. Excluding
net loss, the Companys primary source of comprehensive loss is net unrealized holding gains
(losses) related to its marketable securities. The following table summarizes the components of
comprehensive loss:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Net income (loss) |
$ | 15,940 | $ | (8,212 | ) | $ | 45,085 | $ | (18,825 | ) | ||||||
Other comprehensive income (loss): |
||||||||||||||||
Unrealized holding gains
(losses) in marketable
securities |
(1,512 | ) | (6,299 | ) | (4,213 | ) | 5,925 | |||||||||
Reclassification
adjustments/realized net gains
on marketable securities |
(22,970 | ) | | (57,987 | ) | (174 | ) | |||||||||
Other accumulated other
comprehensive income (loss) |
(3 | ) | (103 | ) | 35 | (88 | ) | |||||||||
Comprehensive income (loss) |
(8,545 | ) | (14,614 | ) | (17,080 | ) | (13,162 | ) | ||||||||
Less: Comprehensive income
attributable to the
noncontrolling interest |
200 | 234 | 537 | 641 | ||||||||||||
Comprehensive income (loss)
attributable to Internet Capital
Group, Inc. |
$ | (8,745 | ) | $ | (14,848 | ) | $ | (17,617 | ) | $ | (13,803 | ) | ||||
15. Share Repurchase Program
In accordance with the Companys share repurchase program, the Company may repurchase, from time to
time, up to $25.0 million of shares of Common Stock in the open market, in privately negotiated
transactions or pursuant to trading plans meeting the requirements of Rule 10b5-1 under the
Exchange Act. Since commencement of this program, the Company has repurchased a total of 2,440,400
shares of Common Stock at an average purchase price of $4.89 per share. The Company did not make
any repurchases of Common Stock during the six months ended June 30, 2010. The Company repurchased
a total of 92,242 shares of Common Stock at an average purchase price of $3.97 per share during the
six months ended June 30, 2009. All repurchases are reflected in Treasury stock, at cost as a
reduction of Stockholders Equity on the Companys Consolidated Balance Sheets in the relevant
period.
33
Table of Contents
ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Introduction
The following Managements Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these forward-looking statements as a result of certain
factors, including those set forth elsewhere in this Report and the risks discussed in our other
SEC filings. The following discussion should be read in conjunction with our Consolidated Financial
Statements and related Notes thereto included in this Report.
Although we refer in this Report to companies in which we have acquired a convertible debt or an
equity ownership interest as our partner companies and indicate that we have a partnership with
these companies, we do not act as an agent or legal representative for any of our partner
companies, we do not have the power or authority to legally bind any of our partner companies, and
we do not have the types of liabilities in relation to our partner companies that a general partner
of a partnership would have.
The Consolidated Financial Statements include the consolidated accounts of Internet Capital Group,
Inc., a company incorporated in Delaware, and its subsidiaries, both wholly-owned and consolidated
(Internet Capital Group, Inc. and all such subsidiaries are hereinafter referred to as we, us,
our, ICG, the Company or Internet Capital Group), and have been prepared in accordance with
U.S. generally accepted accounting principles (GAAP).
Executive Summary
We focus on acquiring and building SaaS, technology-enabled BPO and Internet marketing companies
that improve the productivity and efficiency of their business customers. We call these companies
our partner companies. As of June 30, 2010 and the date of this Report, we hold ownership
interests in 12 companies that we consider our partner companies. Additionally, from time to time
we hold marketable securities in other companies, which, including amounts held in escrow, as of
June 30, 2010 and the date of this Report, consist of Blackboard common stock and ICE common stock.
The results of operations of our partner companies are reported within two segments: the core
reporting segment and the venture reporting segment. The core reporting segment includes those
consolidated and equity method partner companies in which ICG owns a principal controlling equity
voting interest (54% on average as of June 30, 2010) and in which ICGs management takes a very
active role in providing strategic direction and management assistance. We expect to devote
relatively large initial amounts of capital to acquire our core partner companies. The venture
reporting segment includes partner companies in which we generally devote less capital than we do
to our core companies and, therefore, in which we hold relatively smaller ownership stakes than we
do in our core companies (24% on average as of June 30, 2010) and have less influence over their
strategic direction and management decisions than we do over those of our core companies.
The various interests that we acquire in our partner companies are accounted for under one of three
accounting methods: the consolidation method, the equity method and the cost method. The
applicable accounting method is generally determined based on our voting interest in a partner
company. Generally, if we own more than 50% of the outstanding voting securities of a partner
company, and other stockholders do not possess the right to affect the significant operational
management decisions of that partner company, the partner companys accounts are reflected within
our Consolidated Financial Statements. Generally, if we own between 20% and 50% of the outstanding
voting securities of a partner company, that partner companys accounts are not reflected within
our Consolidated Financial Statements, but our share of the earnings or losses of the partner
company is reflected in the caption Equity loss in our Consolidated Statements of Operations.
Partner companies not accounted for under either the consolidation or the equity method of
accounting are accounted for under the cost method of accounting. Under this method, our share of
the earnings or losses of these companies is not included in our Consolidated Statements of
Operations.
34
Table of Contents
Because we own significant interests in SaaS, technology-enabled BPO and Internet marketing
companies, many of which have generated net losses, we have experienced, and expect to continue to
experience, significant volatility in our quarterly results. While many of our partner companies
have consistently reported losses, we have recorded net income in certain periods and experienced
significant volatility from period-to-period due to infrequently occurring transactions and other
events relating to our ownership interests in partner companies. These transactions and events are
described in more detail in our Notes to Consolidated Financial Statements included hereto and
include dispositions of, changes to and impairment of our partner company ownership interests and
dispositions of our holdings of marketable securities.
Liquidity and Capital Resources
The following table summarizes our and our consolidated subsidiaries cash and cash equivalents,
restricted cash, and marketable securities as of June 30, 2010 and December 31, 2009:
June 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
Consolidated | Consolidated | |||||||||||||||||||||||
Corporate | Subsidiaries | Total | Corporate | Subsidiaries | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Cash and cash equivalents |
$ | 55,854 | $ | 24,903 | $ | 80,757 | $ | 29,443 | $ | 26,038 | $ | 55,481 | ||||||||||||
Restricted cash |
| 54 | 54 | | 47 | 47 | ||||||||||||||||||
$ | 55,854 | $ | 24,957 | $ | 80,811 | $ | 29,443 | $ | 26,085 | $ | 55,528 | |||||||||||||
Marketable securities (1) |
$ | 9,518 | $ | | $ | 9,518 | $ | 72,965 | $ | | $ | 72,965 |
(1) | Includes a contributing asset of $0.2 million and an offsetting liability of $0.5 million at June 30, 2010
and December 31, 2009, respectively, related to derivative instruments associated with the Companys
marketable securities. |
Subsequent to June 30, 2010, the Company acquired additional shares of
capital stock of ICG Commerce. The aggregate cash consideration paid for these shares, which
represents approximately 5% of ICG Commerce, was $14.4 million. The Company acquired the
additional ICG Commerce shares pursuant to a tender offer that the Company made to all of the
stockholders of ICG Commerce other than ICG Commerce employees and the holders of ICG Commerces
Series F Preferred Stock. If this acquisition had occurred immediately prior to the end of the
quarter ended June 30, 2010, our and our consolidated subsidiaries total cash and cash equivalents
at June 30, 2010 would have been $66.4 million.
On
August 4, 2010, ICG Commerce paid a $27.0 million cash
dividend on its Series E and E-1 Preferred Stock of which ICG
received its share, $25.4
million. ICG Commerce funded this dividend through the use of existing cash and
borrowing pursuant to a $20.0 million term loan that it entered into with PNC Bank on August 3,
2010.
We believe existing cash and cash equivalents, cash flow from operations, proceeds from the
potential sales of all or a portion of our interests in certain marketable securities and partner
companies, borrowings and equity issuances to be sufficient to fund our and our consolidated
subsidiaries cash requirements for the foreseeable future, including any future commitments to
partner companies, debt obligations and general operating requirements. As of the date of this
filing, we were not obligated for any material funding and guarantee commitments to existing
partner companies. We will continue to evaluate acquisition opportunities and may acquire
additional ownership interests in new and existing partner companies during 2010; however, such
acquisitions will generally be made at our discretion.
Our consolidated working capital increased $24.2 million from December 31, 2009 to June 30, 2010,
primarily due to an increase in cash related to sales of Blackboard common stock.
35
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Summary of Statements of Cash Flows
Six Months Ended June 30, |
||||||||
2010 | 2009 | |||||||
(in thousands) | ||||||||
Cash provided by (used in) operating activities |
$ | (3,572 | ) | $ | (7,519 | ) | ||
Cash provided by (used in) investing activities |
$ | 64,472 | $ | (4,717 | ) | |||
Cash provided by (used in) financing activities |
$ | (35,394 | ) | $ | (524 | ) |
Cash used in operating activities during the six months ended June 30, 2010
decreased $3.9 million, from $7.5 million during the six
months ended June 30, 2009 to $3.6 million during the six months
ended June 30, 2010. Cash used in operating activities for the six months ended June 30, 2010 is
the result of net income of $45.1 million, equity loss of $10.9 million, depreciation and
amortization of $1.9 million, equity-based compensation of $1.7 million, a change in deferred tax
assets of $1.4 million and a net change in working capital components of $0.3 million, offset by
other income of $64.9 million. Cash used in operating activities for the six months ended June 30,
2009 was comprised of $18.8 million of net loss, other income of $1.1 million, and a net change in
working capital components of $2.8 million, offset by equity loss of $7.9 million,
impairment-related charges of $3.8 million, equity-based compensation charges of $2.6 million and
depreciation and amortization of $0.9 million.
The change from cash used in investing activities of $4.7 million for the six months ended June 30,
2009 to cash provided by investing activities of $64.5 million for the six months ended June 30,
2010, was related primarily to an increase in proceeds from the sales of marketable securities from the six months ended June 30, 2009 to the six months ended
June 30, 2010.
The increase in cash used in financing activities from $0.5 million for the six months ended June
30, 2009 to $35.4 million for the six months ended June 30,
2010 is primarily the result of the acquisition of an additional 12%
equity voting interest in ICG Commerce during 2010. Additionally, the
Company did not repurchase any common stock during the six months
ended June 30, 2010, compared with stock repurchases of $0.4 million
during the six months ended June 30, 2009.
We and our consolidated subsidiaries are involved in various claims and legal actions arising in
the ordinary course of business. We do not expect the ultimate liability with respect to these
actions to materially affect our financial position or cash flows.
Contractual Cash Obligations and Commercial Commitments
We had no material changes to contractual cash obligations and commercial commitments for the six
months ended June 30, 2010.
Off-Balance Sheet Arrangements
We are not involved in any off-balance sheet arrangements that have or are reasonably likely to
have a material future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Our Partner Companies
As of June 30, 2010, we owned interests in 12 partner companies that are categorized below based on
segment and method of accounting.
CORE PARTNER COMPANIES (% Voting Interest) | ||||
Consolidated | Equity | Cost | ||
GovDelivery (89%) |
Channel Intelligence (50%)(1) | (none) | ||
ICG Commerce (76%) |
Freeborders (31%) | |||
InvestorForce (80%) |
Metastorm (33%) | |||
StarCite (36%) | ||||
WhiteFence (36%) |
VENTURE COMPANIES (% Voting Interest) | ||||
Consolidated | Equity | Cost | ||
(none) |
Acquirgy (25%) | (none) | ||
ClickEquations (33%) | ||||
GoIndustry (26%)(2) | ||||
SeaPass (26%) |
(1) | Our ownership percentage is rounded up to 50%. We do not
consolidate Channel Intelligence because we do not own a
majority interest in the partner company and because factors
support that we do not exert control over Channel
Intelligence. See Note 3, Ownership Interests in Partner
Companies, Goodwill and Intangibles, net, to our
Consolidated Financial Statements. |
|
(2) | As of June 30, 2010 and August 2, 2010, we owned 2,546,743
shares, or approximately 26% of the voting securities, of
GoIndustry. GoIndustrys common stock is traded on the AIM
market of the London Stock Exchange under ticker symbol GOI.
See Note 3 Ownership Interests in Partner Companies and
Goodwill to our Consolidated Financial Statements. |
During the quarter ended June 30, 2010, we acquired an additional 12% equity voting interest
in ICG Commerce from an existing stockholder of ICG Commerce (the Selling Stockholder) for
aggregate cash consideration of $35.3 million. As a result of this acquisition, we increased our
voting ownership interest in ICG Commerce from 64% to 76%.
Subsequent to June 30, 2010, we acquired additional shares of capital stock of
ICG Commerce. The aggregate cash consideration paid for these shares, which represent
approximately 5% of ICG Commerce, was $14.4 million. We acquired the additional ICG Commerce
shares pursuant to a tender offer that we made to all of the stockholders of ICG Commerce other
than ICG Commerce employees and the holders of ICG Commerces Series F Preferred Stock. As a
result of this transaction, which was consummated on May 5,
2010, we increased our ownership
interest in ICG Commerce from 76% to 81%.
Certain of our officers and directors directly or indirectly owned shares of ICG Commerce that we
acquired from the Selling Stockholder of ICG Commerce or through the tender offer. The aggregate
proceeds received by these individuals represent approximately 4% of the aggregate proceeds paid in
these transactions.
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Results of Operations
The following table summarizes the unaudited selected financial information related to our
segments. Each segment includes the results of our consolidated partner companies and records our
share of the earnings and losses of partner companies accounted for under the equity method of
accounting. The partner companies included within the segments are consistent between periods with
the exception of partner company acquisitions and dispositions that occurred during 2009. Core
segment results for the three and six months ended June 30, 2010 include GovDelivery, which was
acquired on December 31, 2009. Additionally, the venture segment for the three and six months
ended June 30, 2010 includes results from Acquirgy and SeaPass, which were acquired during the
second half of 2009. The core segment for the three and six months ended June 30, 2009 includes
Vcommerce, which was a consolidated subsidary from May 2008 through August 2009. The method of
accounting for any particular partner company may change based on our ownership interest.
Corporate expenses represent the general and administrative expenses of our business operations,
which include supporting the partner companies and operating as a public company. The Total
Segment net loss does not include items such as gains on the disposition of partner company
ownership interests and marketable securities holdings and impairment charges associated with
partner companies, which are reflected in Other reconciling items in the information that
follows.
Segment Information | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Total | Reconciling Items | Consolidated | ||||||||||||||||||||||
Core | Venture | Segment | Corporate | Other | Results | |||||||||||||||||||
Three Months Ended
June 30, 2010 |
||||||||||||||||||||||||
Revenues |
$ | 27,377 | $ | | $ | 27,377 | $ | | $ | | $ | 27,377 | ||||||||||||
Net income (loss) attributable to
Internet Capital Group, Inc. |
$ | (3,977 | ) | $ | (1,289 | ) | $ | (5,266 | ) | $ | (4,667 | ) | $ | 25,694 | $ | 15,761 | ||||||||
Three Months Ended
June 30, 2009 |
||||||||||||||||||||||||
Revenues |
$ | 22,077 | $ | | $ | 22,077 | $ | | $ | | $ | 22,077 | ||||||||||||
Net income (loss) attributable to
Internet Capital Group, Inc. |
$ | (1,725 | ) | $ | (635 | ) | $ | (2,360 | ) | $ | (4,215 | ) | $ | (1,974 | ) | $ | (8,549 | ) | ||||||
Six Months Ended
June 30, 2010 |
||||||||||||||||||||||||
Revenues |
$ | 53,671 | $ | | $ | 53,671 | $ | | $ | | $ | 53,671 | ||||||||||||
Net income (loss) attributable to
Internet Capital Group, Inc. |
$ | (6,906 | ) | $ | (2,468 | ) | $ | (9,374 | ) | $ | (9,139 | ) | $ | 63,045 | $ | 44,532 | ||||||||
Six Months Ended
June 30, 2009 |
||||||||||||||||||||||||
Revenues |
$ | 43,729 | $ | | $ | 43,729 | $ | | $ | | $ | 43,729 | ||||||||||||
Net income (loss) attributable to
Internet Capital Group, Inc. |
$ | (4,298 | ) | $ | (1,760 | ) | $ | (6,058 | ) | $ | (8,691 | ) | $ | (4,805 | ) | $ | (19,554 | ) |
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For the Three and Six Months Ended June 30, 2010 and 2009
Results
of Operations Core Partner Companies
The following presentation includes the results of our consolidated core partner companies and our
share of the results of our equity method core partner companies.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Selected data: |
||||||||||||||||
Revenues |
$ | 27,377 | $ | 22,077 | $ | 53,671 | $ | 43,729 | ||||||||
Cost of revenue |
(17,892 | ) | (14,598 | ) | (34,824 | ) | (27,803 | ) | ||||||||
Selling,
general and administrative |
(6,214 | ) | (4,853 | ) | (12,409 | ) | (9,469 | ) | ||||||||
Research and development |
(2,645 | ) | (2,592 | ) | (5,069 | ) | (5,240 | ) | ||||||||
Amortization of intangible assets |
(364 | ) | (77 | ) | (728 | ) | (154 | ) | ||||||||
Impairment related and other |
(96 | ) | (40 | ) | (168 | ) | (70 | ) | ||||||||
Operating expenses |
(27,211 | ) | (22,160 | ) | (53,198 | ) | (42,736 | ) | ||||||||
Interest and other |
(152 | ) | 1,068 | (530 | ) | 650 | ||||||||||
Income tax (expenses) benefit |
(700 | ) | (421 | ) | (1,316 | ) | (368 | ) | ||||||||
Equity loss |
(3,291 | ) | (2,289 | ) | (5,533 | ) | (5,573 | ) | ||||||||
Net loss |
$ | (3,977 | ) | $ | (1,725 | ) | $ | (6,906 | ) | $ | (4,298 | ) | ||||
Revenue
Revenue increased $5.3 million, from $22.1 million in the three months ended June 30, 2009 to $27.4
million in the three months ended June 30, 2010. This revenue increase was primarily driven by a
21% increase in revenues at ICG Commerce for the three months ended June 30, 2010 from the
comparable period in 2009, as well as a 56% increase in revenues at InvestorForce for the three
months ended June 30, 2010 compared to the comparable 2009 period. These increases relate to
new customers and increased revenues from existing customers at these partner companies. Revenues
related to GovDelivery in the three months ended June 30, 2010
were 47% higher than the
revenues reported by Vcommerce for the three months ended June 30, 2009.
Revenue increased $10.0 million, from $43.7 million for the six months ended June 30, 2009 to $53.7
million for the six months ended June 30, 2010. Similar to the three-month periods ended June 30,
2010 and 2009, revenues increased 21% and 54% at ICG Commerce and Investor Force, respectively, due
to new customers and increased business with existing customers. Additionally, revenues related to
GovDelivery during the six months ended June 30, 2010 were 24% higher than those reported by
Vcommerce for the comparable 2009 period.
Operating Expenses
Operating expenses increased $5.0 million, from $22.2 million in the three months ended June 30,
2009 to $27.2 million in the three months ended June 30, 2010. This primarily relates to an
increase in the cost of revenues and selling, general and administrative expenses. These costs at
ICG Commerce increased 19% from the 2009 period primarily due in part to an increase in headcount
needed to service new customers and an increase in professional service fees in the three months
ended June 30, 2010. In addition, operating expenses at GovDelivery for the three months ended
June 30, 2010 were 57% higher than operating expense incurred by Vcommerce during the three months
ended June 30, 2009.
Operating expenses for the six months ended June 30, 2010 of $53.2 million represent a $10.5
million increase from operating expenses of $42.7 million reported for the six months ended June
30, 2009. The increase for the six month period also relates to increased cost of revenues and
selling, general and
administrative expenses, primarily at ICG Commerce, as well as the fact that GovDelivery operating
costs were 49% higher than those of Vcommerce in the comparable period.
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Equity Loss
A portion of our net results from our core partner companies is derived from those partner
companies in which we hold a substantial minority ownership interest. Our share of the income or
losses of these companies is recorded in our Consolidated Statement of Operations under Equity
loss.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Selected data: |
||||||||||||||||
Total revenues |
$ | 43,805 | $ | 46,604 | $ | 88,550 | $ | 92,785 | ||||||||
Total net loss |
$ | (7,568 | ) | $ | (4,738 | ) | $ | (12,204 | ) | $ | (12,655 | ) | ||||
Our share of total net loss |
$ | (2,760 | ) | $ | (1,794 | ) | $ | (4,462 | ) | $ | (4,625 | ) | ||||
Amortization of intangible assets |
(531 | ) | (495 | ) | (1,071 | ) | (948 | ) | ||||||||
Equity loss |
$ | (3,291 | ) | $ | (2,289 | ) | $ | (5,533 | ) | $ | (5,573 | ) | ||||
Aggregate revenue from our core partner companies accounted for under the equity method of
accounting decreased $2.8 million and $4.2 million during the three and six months ended June 30,
2010, respectively, from the comparable periods of 2009, primarily due to decreases in revenue at
Freeborders, Metastorm, StarCite and WhiteFence. The reduction in revenues at Metastorm during the
three months ended June 30, 2010 from the comparable 2009 period relates primarily to the impact of
foreign currency fluctuation in the current period. Aggregate net
loss and, accordingly, our share of total net loss increased during the three
months ended June 30, 2010 from the corresponding 2009 period, due in part to an increase in
expenses driven by the expansion of product development at Channel Intelligence and accelerated
timing of sales and marketing efforts at Metastorm, as well as the aforementioned decrease in
revenues. However, aggregate net loss and our share of total net loss
decreased slightly in the six months ended June 30, 2010 from the
corresponding 2009 period due to effective cost reductions at our
core partner companies during the three months ended March 31, 2010.
Results
of Operations Venture Partner Companies
The following presentation includes our share of the results of our equity method venture partner
companies. There are currently no consolidated partner companies that we consider to be part of
our venture reporting segment. Accordingly, our share of the results of our venture partner
companies is recorded in our Consolidated Statements of Operations under Equity loss.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Selected data: |
||||||||||||||||
Our share of total net loss |
$ | (1,122 | ) | $ | (635 | ) | $ | (2,134 | ) | $ | (1,760 | ) | ||||
Amortization
of intangible assets |
(167 | ) | | (334 | ) | | ||||||||||
Equity loss |
$ | (1,289 | ) | $ | (635 | ) | $ | (2,468 | ) | $ | (1,760 | ) | ||||
Equity income (loss) for the three and six months ended June 30, 2010 relates primarily to our
share of Acquirgys, ClickEquationsand SeaPass results. We acquired both Acquirgy and SeaPass
subsequent to June 30, 2009. Equity income (loss) for the three and six months ended June 30, 2009
relates to our share of GoIndustrys and ClickEquations results.
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Results of Operations Reconciling Items
Corporate
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
General and administrative |
$ | (4,797 | ) | $ | (4,305 | ) | $ | (9,321 | ) | $ | (8,905 | ) | ||||
Interest income (expense), net |
130 | 90 | 182 | 214 | ||||||||||||
Net loss |
$ | (4,667 | ) | $ | (4,215 | ) | $ | (9,139 | ) | $ | (8,691 | ) | ||||
General and Administrative
Our general and administrative expenses increased $0.5 million, from $4.3 million for the three
months ended June 30, 2009 to $4.8 million for the three months ended June 30, 2010, and $0.4
million from $8.9 million for the six months ended June 30, 2009 to $9.3 million for the six months
ended June 30, 2010. These increases are primarily related to increases in employee-related
expenses of $0.6 million and $1.2 million in the three and six months ended June 30, 2010,
respectively, partially due to an increase in headcount, and increases in outside services of $0.3
million and $0.1 million in the three and six months ended June 30, 2010, respectively, and offset
by decreases in equity-based compensation of $0.4 million and $0.9 million in the three and six
months ended June 30, 2010, respectively, from the comparable 2009 periods.
Interest Income/Expense
The
interest income (expense), net, was generally consistent between periods due to similar cash
balances and economic conditions in both periods.
Other
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Corporate other income (loss) |
$ | 24,762 | $ | 2,113 | $ | 65,401 | $ | 218 | ||||||||
Noncontrolling interest |
(179 | ) | (337 | ) | (553 | ) | (729 | ) | ||||||||
Impairment of GoIndustry
(Venture) |
| | (2,914 | ) | (544 | ) | ||||||||||
Impairment of Vcommerce (Core) |
| (3,750 | ) | | (3,750 | ) | ||||||||||
Corporate income tax benefit |
1,111 | | 1,111 | | ||||||||||||
Net income (loss) |
$ | 25,694 | $ | (1,974 | ) | $ | 63,045 | $ | (4,805 | ) | ||||||
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Corporate Other Income (Loss), Net
Corporate
other income for the three months ended June 30, 2010 of
$24.8 million is primarily comprised of a
$23.0 million gain on the sale of marketable securities, primarily Blackboard common stock, and a
$1.7 million gain related to the receipt of escrowed proceeds from the sale of Marketron.
Corporate other income for the three months ended June 30, 2009 of $2.1 million was the result of
the receipt of $1.2 million of escrowed proceeds from the sale of Marketron and a gain of $0.9
million related to an increase in the value of our Blackboard hedges during the period.
Corporate other income in the six months ended June 30, 2010 of $65.4 million was the result of a
$58.0 million gain on the sale of marketable securities, a $6.9 million gain related to
distributions of ownership interests in partner companies and a gain of $0.7 million related to an
increase in the value of our Blackboard hedges during the period, offset by a loss of $0.2 million
related to the termination of two Blackboard hedges during the period. Corporate other income of
$0.2 million during the six months ended June 30, 2009 relates to a $2.6 million gain from sales of
partner companies and $0.2 million of realized gain on the sale of ICE common stock, partially
offset by a $2.6 million loss related to a decrease in the fair value of our Blackboard hedges during
the period.
Impairments
We recorded $2.9 million and $0.5 million of impairment charges related to our basis in GoIndustry
during the six months ended June 30, 2010 and 2009, respectively, related to decreases in the fair
market value of our equity holdings in GoIndustry. Additionally, during the three months ended
June 30, 2009, the Company concluded that the estimated fair value of Vcommerce had declined.
Accordingly, the Company performed its goodwill impairment testing and determined that an
impairment of goodwill of $3.8 million was required, which was recorded during the three months
ended June 30, 2009.
Corporate income taxes
ICG recorded a tax benefit of $1.1 million for the three months ended June 30, 2010. This
benefit is attributable to $0.7 million of interest related to a portion of the tax receivable that
was paid by the Internal Revenue Service during the three months ended June 30, 2010, as well as a
provision to return adjustment of $0.4 million to reflect the actual net operating loss carryback
related to the 2009 tax year.
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Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with GAAP. The
preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to our interests in our partner companies, marketable securities, revenues, income taxes
and commitments and contingencies. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities. Actual
results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies are important to the presentation of our
financial statements and require the most difficult, subjective and complex judgments.
Valuation of Goodwill, Intangible Assets and Ownership Interests in Partner Companies
We test goodwill for impairment annually, or more frequently as conditions warrant, and intangible
assets when events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Additionally, we perform ongoing business reviews to evaluate our ownership
interests in partner companies accounted for under the equity and cost methods of accounting to
determine whether an other than temporary decline in the value of a partner company should be
recognized. We use quantitative and qualitative measures to assess the need to record impairment
losses on goodwill, intangible assets and ownership interests in our partner companies when
impairment indicators are present. Where impairment indicators are present, we determine the
amount of the impairment charge as the excess of the carrying value over the fair value. We
determine fair value using a combination of the discounted cash flow methodology, which is based
upon converting expected future cash flows to present value, and the market approach, which
includes analysis of market price multiples of companies engaged in lines of business similar to
the company being evaluated. The market price multiples are selected and applied to the company
based on relative performance, future prospects and risk profile of the company in comparison to
the guideline companies. Significant assumptions relating to future operating results must be made
when estimating the future cash flows associated with these companies. Significant assumptions
relating to the achievement of business plan objectives and milestones must be made when evaluating
whether impairment indicators are present. Should unforeseen events occur or should operating
trends change significantly, additional impairment losses could occur.
Revenue Recognition
ICG Commerce may assume all or a part of a customers procurement function as part of sourcing
arrangements. Typically, in these engagements, ICG Commerce is paid a fixed fee agreed upon in
advance and/or a fee based on a percentage of the amount spent by its customers respective
purchasing departments in the specified areas ICG Commerce manages. Additionally, in some cases,
ICG Commerce has the opportunity to earn additional fees based on the level of savings achieved for
customers. ICG Commerce recognizes revenue and any additional fees as earned, which is typically
over the life of the customer contract, which approximates the life of the customer relationship.
GovDelivery revenues generally consist of nonrefundable setup fees and monthly maintenance and
hosting fees. These fees are deferred and recognized as the services are performed, which is
typically over the service term. Costs related to performing setup services are expensed as
incurred. Revenue from labor law posters are recognized upon delivery provided a purchase order
has been received, the price to the buyer is fixed or determinable and collectibility is reasonably
assured. Revenues from update and subscription services for labor law posters are deferred and
recognized ratably over the service term.
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Investor Force generates revenue from license fees earned in connection with hosted services, setup
fees and support and maintenance fees. Hosted services primarily consist of data aggregation,
performance calculation, real-time analysis and automated production of performance reports for the
institutional investment community. Generally, a minimum quarterly base fee is charged for hosted
services. These minimum fees are recognized on a pro rata basis over the service term. As the
volume of client accounts increases, additional fees apply. These additional fees are recognized
in the period in which account volumes exceed the contract minimum. Setup and support and
maintenance fees are deferred and recognized ratably over the service term.
Vcommerce was a consolidated company from May 2008, when our ownership stake increased to 53%,
through August 2009, at which time it sold substantially all of its assets and liabilities.
Vcommerce generated revenue from service fees earned by it in connection with the development and
operation of its clients e-commerce businesses. Service fee revenue primarily consisted of
transaction fees, implementation fees and professional services fees, as well as access and
maintenance fees. Vcommerce recognized revenue from services provided in accordance with general
revenue recognition criteria either over the term of the customer contract or as services were
rendered, depending on the type of revenue.
Equity Income/Loss
We record our share of our partner companies net income/loss, which is accounted for under the
equity method of accounting as equity income/loss. Since we do not control these companies, this
equity income/loss is based on unaudited results of operations of our partner companies and may
require adjustment in the future when the audits of our partner companies are complete. The
compilation and review of these results of operations require significant judgment and estimates by
management.
Deferred Income Taxes
We record a valuation allowance to reduce our net deferred tax assets to an amount that is more
likely than not to be realized. We consider future taxable income and prudent and feasible tax
planning strategies in determining the need for a valuation allowance. In the event that we
determine that we would not be able to realize all or part of our net deferred tax assets, an
adjustment to the deferred tax assets is charged to earnings in the period such determination is
made. Likewise, if we later determine that it is more likely than not that the net deferred tax
assets would be realized, the previously provided valuation allowance would be reversed.
Commitments and Contingencies
From time to time, we are a defendant or plaintiff in various legal actions that arise in the
normal course of business. From time to time, we are also a guarantor of various third-party
obligations and commitments. We are required to assess the likelihood of any adverse judgments or
outcomes to these matters, as well as potential ranges of probable losses. A determination of the
amount of reserves required for these contingencies, if any, which would be charged to earnings, is
made after careful analysis of each individual matter. The required reserves may change in the
future due to new developments in each matter or changes in circumstances, such as a change in
settlement strategy. Changes in required reserves could increase or decrease our earnings in the
period the changes are made.
Fair Value Measurements
Fair value is the price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. There are
three levels of inputs that may be used to measure fair value. Our marketable securities are
reported at fair value on our Consolidated Balance Sheets based on quoted prices in active markets
for identical or comparable assets.
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Recent Accounting Pronouncements
In October 2009, the FASB issued accounting guidance related to revenue recognition for
transactions with multiple deliverables, which impacts the determination of when the individual
deliverables included in a multiple-element arrangement may be treated as separate units of
accounting. This guidance becomes effective for us on January 1, 2011. We are currently
evaluating the effect this guidance will have on our consolidated financial statements.
In October 2009, the FASB issued accounting guidance related to certain revenue arrangements that
include software elements, which amends the scope of pre-existing software revenue guidance. This
guidance becomes effective for us on January 1, 2011. We are currently evaluating the effect this
guidance will have on our consolidated financial statements.
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk |
We are exposed to equity price risks on the marketable portion of our equity securities. Our
public holdings at June 30, 2010 include equity positions in companies in sectors that have
experienced significant historical volatility in their stock prices. A 20% adverse change in
equity prices, based on a sensitivity analysis of the closing prices
of our public holdings as of June 30, 2010, and
considering the remaining 128,413 shares of Blackboard common stock
held by the Company as of the time of the filing of
this Report, would result in a decrease of approximately $1.5 million in the fair value of our
public holdings.
ICG Commerce conducts a portion of its business in foreign currencies, primarily those of European
countries and may utilize derivative financial instruments, specifically fair value hedges, to
manage foreign currency risks. In accordance with GAAP, gains and losses related to fair value
hedges are recognized in income along with adjustments of carrying amounts of the hedged items.
Therefore, its put option is marked to market, and unrealized gains and losses are included in
current period net income. These options provide a predetermined rate of exchange at the time the
option is purchased and allows ICG Commerce to minimize the risk of currency fluctuations. In
determining the use of its put option, ICG Commerce considers the amount of sales and purchases
made in local currencies, the type of currency and the costs associated with the contracts. During
the three months ended June 30, 2010, ICG Commerce purchased a put option to mitigate the risk of
currency fluctuations at ICG Commerces operations in the United Kingdom. This option is net
settled quarterly, resulting in an immaterial gain for the current quarter.
Cash and cash equivalents, accounts receivable and accounts payable are carried at cost, which
approximates fair value due to the short-term maturity of these instruments. Marketable securities
are carried at fair value.
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ITEM 4. | Controls and Procedures |
Controls and Procedures
Managements Quarterly Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period
covered in this Report. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of the end of the period covered in this Report, our
disclosure controls and procedures have been designed and are effective to provide reasonable
assurance that information required to be disclosed in our periodic SEC reports is recorded,
processed, summarized and reported within the time periods specified in the relevant SEC rules and
forms and is accumulated and communicated to management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding require disclosure.
Inherent Limitations on Effectiveness of Controls
The design of any system of control is based upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated
objectives under all future events, no matter how remote, that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures
may not deteriorate. Because of their inherent limitations, systems of control may not prevent or
detect all misstatements. Accordingly, even effective systems of control can provide only
reasonable assurance of achieving their control objectives.
Changes in Internal Controls
There were no changes in our internal control over financial reporting that occurred during the
quarter covered by this Report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. | Legal Proceedings |
In May and June 2001, certain of the Companys present directors, along with the Company, certain
of its former directors, certain of its present and former officers and its underwriters, were
named as defendants in nine class action complaints filed in the United States District Court for
the Southern District of New York. The plaintiffs and the putative classes they seek to represent
include present and former stockholders of the Company. The complaints generally allege violations
of Sections 11 and 12 of the Securities Act of 1933, as amended (the Securities Act), and
Rule 10b-5 promulgated under the Exchange Act, based on, among other things, the dissemination of
statements allegedly containing material misstatements and/or omissions concerning the commissions
received by the underwriters of the initial public offering and follow-on public offering of the
Company as well as failure to disclose the existence of purported agreements by the underwriters
with some of the purchasers in these offerings to buy additional shares of the Companys stock
subsequently in the open market at pre-determined prices above the initial offering prices. The
plaintiffs seek for themselves and the alleged class members an award of damages and litigation
costs and expenses. The claims in these cases have been consolidated for pre-trial purposes
(together with claims against other issuers and underwriters) before one judge in the Southern
District of New York federal court. In April 2002, a consolidated, amended complaint was filed
against these defendants which generally alleges the same violations and also refers to alleged
misstatements or omissions that relate to the recommendations regarding the Companys stock by
analysts employed by the underwriters. In June and July 2002, defendants, including the Company
defendants, filed motions to dismiss plaintiffs complaints on numerous grounds. The Companys
motion was denied in its entirety in an opinion dated February 19, 2003. In July 2003, a committee
of the Companys Board of Directors approved a proposed settlement with the plaintiffs in this
matter, which was preliminarily approved by the District Court overseeing the litigation in
February 2005. A final fairness hearing on the settlement was held on April 24, 2006. On December
5, 2006, however, the Second Circuit Court of Appeals reversed the certification of plaintiff
classes in six actions related to other issuers that had been designated as test cases with respect
to the non-settling defendants in those matters (the Focus Cases) and made other rulings that
drew into question the legal viability of the claims in the Focus Cases. The Court of Appeals
later rejected the plaintiffs request that it reconsider that decision. As a result, on June 25,
2007, the District Court approved a stipulation and order terminating the proposed settlement.
While the Court of Appeals decision did not automatically apply to the case against the Company,
the defendants moved for, and the Court granted, an order that would apply the decision to all
cases, including the consolidated action against the Company. On August 14, 2007, the plaintiffs
filed an amended master complaint containing allegations purportedly common to all defendants in
all actions and filed amended complaints containing specific allegations against the six issuer
defendants in the Focus Cases. In addition, on September 27, 2007, the plaintiffs again moved to
certify classes in each of the Focus Cases. The defendants in the Focus Cases moved to dismiss the
amended complaints. Rulings on both the motion to certify the Focus Cases as class actions and to
dismiss those cases remain outstanding. The District Court has approved a stipulation extending the
time within which the plaintiffs must file amended pleadings containing specific allegations
against the other issuer defendants, including the Company, and the time within
which those
defendants must move, answer or otherwise respond to those specific allegations.
On April 2, 2009, the plaintiffs filed a motion for preliminary approval of a proposed global
settlement of all claims asserted in the coordinated class action securities litigation on behalf
of the class plaintiffs in the respective actions against the various issuer and underwriter
defendants, including all claims asserted against the Company. The motion further seeks
certification of settlement classes as to each action against the defendants, including the
Company. The Company has assented to the proposed settlement, which does not require any monetary
contribution from the Company and would be funded by various underwriter defendants and
the defendants insurers. On June 10, 2009, the District Court granted preliminary approval of the
proposed settlement and of the form of notice of the proposed settlement to be provided to members
of the proposed settlement class. The District Court scheduled a hearing for September 10, 2009 to
determine whether to approve the proposed settlement.
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The final hearing was held on September 10, 2009. On October 5, 2009, the District Court granted
final approval of the proposed global settlement, subject to the rights of the parties to appeal
the settlement within 30 days of such approval. Pursuant to the terms of the approved settlement,
the Company is not required to make any monetary contribution to fund the required settlement
payments, which are being funded by various underwriter defendants and the defendants insurers.
On or about October 23, 2009, three members of the settlement class who had been shareholders of an
issuer other than the Company filed a petition seeking leave to appeal the District Courts final
approval to the Second Circuit Court of Appeals on an interlocutory basis. No judicial ruling or
action has been taken on the motion. On or before November 6, 2009, three notices of appeal were
filed with respect to the District Courts order granting final approval of the global settlement.
On December 14, 2009, the District Court entered a final judgment approving and giving effect to
the global settlement as it related to the consolidated actions against the Company. The final
judgment created a settlement class of plaintiffs comprised of persons who purchased or otherwise
acquired the common stock and call options of the Company during the period of August 4, 1999
through December 6, 2000, provided for the distribution of settlement proceeds to the members of
the class and approval of attorneys fees to class counsel consistent with the terms of the global
settlement, barred prosecution of all settled claims by members of the class and their
representatives, released the defendants and other protected persons from such claims and dismissed
all claims against the Company and other defendants in the consolidated amended action with
prejudice.
The appeals referenced in the November 6, 2009 notices of appeal have been docketed in the Court of
Appeals for the Second Circuit. By order dated April 7, 2010, the District Court directed that the
appealing class members identify the specific class, by company, to which they purport to belong.
The District Courts order further directed the clerk of the court to enter the appealing class
members notices of appeal only in those cases as to which the appealing class members identify
themselves as members of the class certified. No such notice of appeal has been entered in the
action against the Company. Separately, on June 17, 2010, the District Court entered an order
requiring the appellants to post a bond in the amount of $25,000, jointly and severally, as a
condition of pursuing their appeals from the October 5, 2009 order approving the global settlement.
The bond has been posted and a briefing schedule with respect to the
appeals has been set, with the objecting appellants brief due no
later than October 6, 2010 and answering briefs due no later than
February 3, 2011. The distribution of settlement proceeds is
currently being held in abeyance.
ITEM 1A. | Risk Factors |
In addition to the other information set forth in this Report, you should carefully consider the
factors discussed in Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended
December 31, 2009, which could materially affect our business, financial condition or future
results. The risks described in our Annual Report on Form 10-K are not the only risks facing us.
Additional risks and uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial condition and/or operating
results. There have been no material changes with respect to the Companys risk factors previously
disclosed in its Annual Report on Form 10-K for the year ended December 31, 2009.
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ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Issuer Purchases of Equity Securities
In 2008, the Company announced the approval by its Board of Directors of a share repurchase program
under which the Company could repurchase, from time to time, up to $25.0 million of shares of its
Common Stock in the open market, in privately negotiated transactions or pursuant to trading plans
meeting the requirements of Rule 10b5-1 under the Exchange Act. The table below contains
information relating to the repurchases of Company Common Stock that occurred from commencement of
this program through the date of the filing of this Report.
Total Number | Approximate | |||||||||||||||
of Shares | Dollar Value | |||||||||||||||
Purchased as | That May Yet | |||||||||||||||
Total Number | Average | Part of Publicly | Be Purchased | |||||||||||||
of Shares | Price Paid | Announced | Under the | |||||||||||||
Monthly Period | Purchased(1) | per Share(2) | Program(1) | Program | ||||||||||||
Repurchased as of
12/31/09 |
2,440,400 | $ | 4.89 | 2,440,400 | $13.1 million | |||||||||||
1/1/10 to 1/31/10 |
0 | | 0 | $13.1 million | ||||||||||||
2/1/10 to 2/28/10 |
0 | | 0 | $13.1 million | ||||||||||||
3/1/10 to 3/31/10 |
0 | | 0 | $13.1 million | ||||||||||||
4/1/10 to 4/30/10 |
0 | | 0 | $13.1 million | ||||||||||||
5/1/10 to 5/31/10 |
0 | | 0 | $13.1 million | ||||||||||||
6/1/10 to 6/30/10 |
0 | | 0 | $13.1 million | ||||||||||||
7/1/10 to 7/31/10 |
0 | | 0 | $13.1 million | ||||||||||||
8/1/10 to 8/5/10 |
0 | | 0 | $13.1 million | ||||||||||||
Total |
2,440,400 | $ | 4.89 | 2,440,400 | $13.1 million | |||||||||||
(1) | All shares purchased in open market transactions. |
|
(2) | Average price paid per share excludes commissions. |
ITEM 3. | Defaults Upon Senior Securities |
None.
ITEM 4. | (Removed and Reserved) |
ITEM 5. | Other Information |
None.
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ITEM 6. | Exhibits |
Exhibit Index
Exhibit Number | Document | |||
10.1 | Letter Agreement, dated as of August 3, 2010, by and among PNC
Bank, National Association, ICG Commerce, Inc., ICG Commerce Investments, LLC, ICG Commerce International, LLC and ICG Commerce
Holdings, Inc. |
|||
10.2 | Term Note, dated as of August 3, 2010, by ICG Commerce,
Inc., ICG Commerce Investments, LLC, ICG Commerce International, LLC and ICG Commerce Holdings, Inc. in favor of PNC Bank,
National Association. |
|||
10.3 | Committed Line of Credit Note, dated as of August 3, 2010,
by ICG Commerce, Inc., ICG Commerce Investments, LLC, ICG Commerce International, LLC and ICG Commerce Holdings, Inc. in favor
of PNC Bank, National Association. |
|||
11.1 | Statement Regarding Computation of Per Share Earnings
(included herein at Note 13 Net Income (Loss) per Share
to the Consolidated Financial Statements). |
|||
31.1 | Certification of Chief Executive Officer required by
Section 302 of the Sarbanes-Oxley Act of 2002, as amended. |
|||
31.2 | Certification of Chief Financial Officer required by
Section 302 of the Sarbanes-Oxley Act of 2002, as amended. |
|||
32.1 | Certification of the Chief Executive Officer required by
Section 906 of the Sarbanes-Oxley Act of 2002, as amended. |
|||
32.2 | Certification of the Chief Financial Officer required by
Section 906 of the Sarbanes-Oxley Act of 2002, as amended. |
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SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the Company has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 5, 2010 | INTERNET CAPITAL GROUP, INC. |
|||
By: | /s/ R. Kirk Morgan | |||
Name: | R. Kirk Morgan | |||
Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |
|||
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