UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-K/A
Amendment No. 1
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For Fiscal Year Ended December 31, 2010.
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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
ICG GROUP, INC.
(formerly known as Internet Capital Group, Inc.)
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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23-2996071 |
(State or Other Jurisdiction of
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(I.R.S. Employer |
Incorporation or Organization)
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Identification Number) |
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690 Lee Road, Suite 310, Wayne, PA
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19087 |
(Address of Principal Executive Offices)
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(Zip Code) |
(610) 727-6900
(Registrants telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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The NASDAQ Stock Market LLC |
Common stock, par value $.001 per share
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(The NASDAQ Global Select Market) |
(Title of Each Class)
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(Name of Each Exchange on Which Registered) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act. Yes o No þ
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 Website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ
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 the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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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 aggregate market value of the 36,060,616 shares of Common Stock held by non-affiliates of
the registrant as of March 9, 2011 was $274.1 million, based upon the closing price of $7.60 on the
NASDAQ Global Market on June 30, 2010. (For this computation, the registrant has excluded the
market value of all shares of its Common Stock held by its executive officers and directors; such
exclusion shall not be deemed to constitute an admission that any such person is an affiliate of
the Registrant.)
As of March 9, 2011, there were 37,080,276 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement to be filed with the U.S. Securities and
Exchange Commission (the SEC) relative to the Companys 2010 Annual Meeting of Stockholders (the
Definitive Proxy Statement) are incorporated by reference into Part III of this Report.
EXPLANATORY NOTE REGARDING THIS FORM 10-K/A
On June 20, 2011, Internet Capital Group, Inc. amended its Restated Certificate of Incorporation to
change its corporate name to ICG Group, Inc.
In accordance with Exchange Act Rule 12b-15, ICG Group, Inc. (the Registrant) is filing this
Amendment No. 1 to its Annual Report on Form 10-K for the year ended December 31, 2010, which was
initially filed with the Securities and Exchange Commission on March 16, 2011 (the Original
Filing), to include audited financial statements of GoIndustry-DoveBid plc (GoIndustry), a
subsidiary of the Registrant accounted for under the equity method, with respect to the years ended
December 31, 2010, 2009 and 2008 that were not available at the time of the Original Filing, along
with related materials.
This Amendment No. 1 amends Part IV, Item 15, Exhibits and Financial Statement Schedules, to
reflect (1) the inclusion of the consolidated financial statements of GoIndustry as Exhibit 99.3
hereto, (2) the inclusion of the Consent of Baker Tilly UK Audit LLP regarding the consolidated
financial statements of GoIndustry as Exhibit 23.4 hereto, (3) the inclusion of the Third Amendment
of Restated Certificate of Incorporation of the Company as
Exhibit 3.1.4 hereto, (4) the replacement and/or supplement of a
number of the other exhibits hereto to reflect certain minor
modifications, including in connection with the Registrants recent
name change and (5) the
inclusion of updated certifications from the Registrants principal executive officer and principal
financial officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as
amended. This Amendment No. 1 also amends references to the Registrant in all Items in the Original
Filing from Internet Capital Group, Inc. to ICG Group, Inc. This Form 10-K/A restates the Original
Filing in its entirety by presenting these amended items.
Except for the amended information referred to above, this Form 10-K/A continues to describe
conditions as of the date of the Original Filing, and the Registrant has not modified or updated
any other disclosures presented in the Original Filing. Accordingly, except as specifically
referenced herein, this Amendment No. 1 does not restate the Registrants financial statements
previously filed in the Original Filing, does not reflect events occurring after the filing of the
Original Filing and does not modify or update those disclosures in the Original Filing affected by
subsequent events. Information not affected by this Amendment No. 1 is unchanged and reflects the
disclosures made at the time of the Original Filing on March 16, 2011.
ICG GROUP, INC.
FORM 10-K/A
DECEMBER 31, 2010
INDEX
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Forward-Looking Statements
Forward-looking statements made with respect to our financial condition, results of operations and
business in this Annual Report on Form 10-K/A (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, factors discussed elsewhere in this Report and include, among other things:
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economic conditions generally; |
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capital spending by our partner companies customers; |
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our partner companies collective ability to compete successfully against their
respective competitors; |
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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; |
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our and our partner companies collective ability to retain key personnel; |
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our ability to deploy capital effectively and on acceptable terms; |
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our ability to maximize value in connection with divestitures; and |
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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.
1
PART I
Although we refer in this Report to companies in which we have acquired a convertible debt interest
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.
Overview
ICG Group, Inc. (f/k/a Internet Capital Group, Inc.) (referred to in this Report as ICG, the Company, we, our, or
us) was formed on March 4, 1996 and is headquartered in Wayne, Pennsylvania. Since our
inception, we have focused on acquiring and building Internet software and services companies that
improve the productivity and efficiency of their business customers. We call these companies our
partner companies.
As of December 31, 2010, we held ownership interests in 12 companies that we considered our partner
companies. Following the sale of Metastorm Inc. on February 17, 2011, we now hold ownership
interests in 11 partner companies. The results of operations of our partner companies are reported
in two segments: the core reporting segment and the venture reporting segment. Our core
reporting segment includes the partner companies in which our management takes a very active role
in providing strategic direction and management assistance. We own majority controlling equity
positions in (and therefore consolidate the financial results of) three of these core companies,
which we call our consolidated core companies. We generally own substantial minority equity positions
(i.e., the largest equity positions) in our other core companies, which we call our equity core
companies. We expect to devote relatively large initial amounts of capital to acquire stakes in
core companies, particularly consolidated core companies, since any such acquisition would entail
the deployment of cash and/or the issuance of ICG stock to purchase of a large equity stake in a target with relatively strong financial
characteristics and growth potential.
Our 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. As a result, we generally have less influence over the
strategic direction and management decisions of our venture companies than we do over those of our
core companies.
In recent years, we have adopted, announced and worked to implement a shift in our business
strategy, which calls for us to devote an increasing proportion of our acquisition capital towards,
and to own an increasing proportion of our partner company interests in the form of, consolidated
core companies. We believe that this refined business strategy will provide us with many of the
benefits enjoyed by traditional operating companies, such as (1) firmer control by us over the
operations and strategic decisions of our partner companies, (2) increased access by us to the cash
of our partner companies (i.e., through cash dividends at those companies) and (3) increased
transparency for our investors and prospective investors in our financial reports.
For information regarding the results of operations of our reporting segments, as well as their
respective contributions to our consolidated results of operations, see Item 7Managements
Discussion and Analysis of Financial Condition and Results of Operations and Item 8Financial
Statements and Supplementary Data, including Note 10, Segment Information, to our Consolidated
Financial Statements; that information is incorporated herein by reference.
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In todays hypercompetitive business environment, businesses of all sizes are, by necessity,
seeking increased productivity and efficiency through software and services that streamline,
automate or otherwise improve their business processes. As we saw during the global economic
downturn in recent years, businesses will rely increasingly on these solutions in times of both
economic growth and economic decline. We believe that these factors create a compelling
opportunity for companies that are able to
deliver Internet-based software solutions and other services that expand their customers access to
new and existing customers and suppliers, increase their customers efficiency, reduce their
customers costs and/or allow their customers to focus on their core competencies and outsource
their non-core, non-strategic processes. In some cases, this outsourcing will be to
technology-assisted labor-based firms that provide deep expertise, and, in other cases, this
outsourcing will be to technology-intensive firms that provide platforms to automate functions.
We feel that the expertise we have developed in connection with our fourteen-year active
involvement with Internet software and services companies allows us to identify companies in that
space that are positioned to succeed and to accelerate the growth of those companies. We intend to
continue to expand our network of partner companies and allocate our financial and human resources
to partner companies that we believe have significant long-term value potential. In particular, we
seek to acquire interests in software-as-a-service (SaaS), technology-enabled business process
outsourcing (BPO) and Internet marketing companies, which offer solutions that:
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automate complex workflow processes, with focus on the white space between companies; |
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are comprehensive, meaning that they include software, content data and transaction
capabilities (with content being a long-term differentiator); |
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have the ability to generate recurring revenue streams and allow their providers to
retain fixed costs; |
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are delivered to clients through long-term relationships; and |
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have the potential to evolve into ecosystems. |
After we identify a potential partner company, we negotiate the acquisition of an equity stake in
that company, typically seeking a majority controlling equity position in the company and a
corresponding control of a majority of the seats on the companys board of directors. We place an
extremely high value on quality, motivated management teams and, accordingly, seek to structure
acquisitions to permit the members of a partner companys management team and other key personnel
to retain meaningful individual equity stakes in the company. During our negotiations with
potential partner companies, we emphasize the value of our network and resources and our focus on
long-term value, which we believe give us a competitive advantage over other potential funding
sources when we seek to acquire partner companies.
Our long-term focus on the software and services markets (particularly SaaS, technology-enabled BPO
and Internet marketing companies), together with the collective business knowledge base of our
partner companies, our management team and our directors, constitute a critical asset that we share
with our partner companies. Once we acquire an interest in a partner company, we establish an
active role in the development and growth of the company, providing both strategic guidance and
operational support. We provide strategic guidance to our partner companies relating to, among
other things, market positioning, business model and product development, strategic capital
expenditures, mergers and acquisitions and exit opportunities. Additionally, we provide
operational support to help our partner companies manage day-to-day business and operational issues
and implement best practices in the areas of finance, sales and marketing, business development,
human resources and legal services. Once a company joins our partner company network, our
collective expertise is leveraged to help position that company to produce high-margin, recurring
and predictable earnings and generate long-term value that we believe can ultimately be captured
for our stockholders through our continued ownership, an initial public offering, or a strategic
sale.
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Our Partner Companies
At December 31, 2010, our consolidated core companies consisted of:
GovDelivery Holdings, Inc. (GovDelivery)
GovDelivery is a provider of government-to-citizen communication solutions. GovDeliverys digital
subscription management 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 December 31, 2010, our equity core 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.
On February 17, 2011, the sale of Metastorm was consummated. Accordingly, the results of Metastorm have been
removed from our core segment reporting and are included as a reconciling item in Dispositions in
Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations and
Item 8Financial Statements and Supplementary Data, Note 10, Segment Information, to our
Consolidated Financial Statements.
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StarCite, Inc. (StarCite)
StarCite provides a comprehensive suite of software applications and services to the meeting and
events industry, driving 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 revenue. 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 December 31, 2010, our venture companies consisted of:
Acquirgy, Inc. (Acquirgy)
Acquirgy specializes in direct response marketing services and technology that provides customers a
wide range of direct marketing products and services to help market their products and services on
the Internet and through traditional media channels such as television, radio, and print
advertising.
ClickEquations, 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 information accessed in real time, which increases
efficiency across all lines of the insurance business.
Concentration of Customer Base and Credit Risk
In each of the years ended December 31, 2010 and 2009, two customers of ICG Commerce, which is a
consolidated core company, accounted for more than 10% of our consolidated revenue. The Hertz
Corporation and Kimberly-Clark Corporation represented approximately 11% and 10%, respectively, of
our consolidated revenue for the year ended December 31, 2010. These customers each represented
13% of our consolidated revenue for the year ended December 31, 2009. Accounts receivable,
including unbilled amounts, from the Hertz Corporation and Kimberly-Clark Corporation as of
December 31, 2010 were $2.7 million and $1.1 million, respectively. Accounts receivable, including
unbilled amounts, from
The Hertz Corporation and Kimberly-Clark Corporation as of December 31, 2009 were $1.7 million and
$1.5 million, respectively.
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Competition Facing Our Partner Companies
Competition for information technology and Internet products and services is intense. As the
market for e-commerce continues to grow, we expect that competition will continue to intensify.
Barriers to entry are minimal, and competitors can offer products and services at a relatively low
cost. Our partner companies compete with established information systems and management consulting
firms, as well as with online providers and other distribution channels, for shares of their
customers purchasing budgets for information technology and consulting services.
Many companies offer information technology solutions and other solutions that compete with our
partner companies. We expect that additional companies will offer competing solutions in the
future. Furthermore, our partner companies competitors may develop information technology and
Internet products or other services that are superior to, or have greater market acceptance than,
the solutions offered by our partner companies. Many of our partner companies competitors have
greater brand recognition and greater financial, marketing and other resources than our partner
companies. This may place our partner companies at a disadvantage in responding to their
competitors pricing strategies, technological advances, advertising campaigns, strategic
partnerships and other initiatives. If our partner companies are unable to compete successfully
against their competitors, our partner companies may fail.
We may compete with our partner companies to acquire interests in software and services companies,
and our partner companies may compete with each other for these opportunities. This competition
may deter companies from partnering with us and may limit our business opportunities.
Employees
Corporate headcount at ICG as of March 1, 2011 was 26. Headcount at our consolidated partner
companies as of March 1, 2011 was 747.
Financial Information About Geographic Areas
Financial information regarding geographic areas is contained in the notes to our Consolidated
Financial Statements. See Note 10, Segment Information, in Item 8Financial Statements and
Supplementary Data.
Availability of Reports and Other Information
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 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 100 F Street, N.E., Washington, D.C. 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.
6
Our business involves a number of risks, some of which are beyond our control. You should
carefully consider each of the risks and uncertainties we describe below and all of the other
information in this Report before deciding to invest in our Common Stock. The risks and
uncertainties we describe below are not the only ones we face. Additional risks and uncertainties
about which we currently do not know or that we currently believe to be immaterial may also
adversely affect our business, financial condition or operating results.
Numerous external forces, including ongoing weak economic conditions, have negatively affected our
and our partner companies respective businesses, results of operations and financial condition in recent years,
and future weak economic conditions could result in additional declines in our revenue and
operating results.
Numerous external forces, including the state of global financial markets and general economic
conditions, lack of consumer confidence, lack of availability of credit, interest rate and currency
rate fluctuations and national and international political circumstances (including wars and
terrorist acts) have negatively affected our and our partner companies respective businesses,
results of operations and financial condition in recent years, and they may do so in the future.
Our and our partner companies businesses also may be negatively impacted by ongoing weak economic
conditions affecting the banking system, financial markets and financial institutions, which have
resulted in a tightening in the credit markets, a low level of liquidity in many financial markets
and extreme volatility in credit and equity markets in recent years. Since these conditions (and
the length of time or severity with which they may persist) are often difficult to anticipate, our
and our partner companies respective operating results for a particular period are difficult to
predict and, therefore, prior results are not necessarily indicative of expected results in future
periods. In response to adverse financial conditions, many customers and potential customers of
our partner companies may forgo, delay or reduce technology and other purchases. In connection
with these conditions, our partner companies may experience reductions in the sales of their
products and services, extended sales cycles, difficulties in collecting (or the inability to
collect) accounts receivable, slower adoption of new technologies, increased price competition and
difficulties in obtaining (or the inability to obtain) financing. Volatility in the financial
markets and overall economic uncertainty increase the risk that the value of our partner companies
and our other assets will be impaired and that the value to be captured in the future in connection
with the disposition of our partner companies will be significantly lower than we initially
expected.
If our partner companies are unable to attract new customers or retain customers, including certain
significant customers, our and our partner companies respective businesses, results of operations
and financial conditions could be negatively affected.
Our partner companies may not be able to attract or retain customers due to a variety of reasons,
including increased competition, the unwillingness of customers and potential customers to spend
money on products and services during periods of economic turmoil and uncertainty, insolvency and
the unavailability of credit. If our partner companies are unable to attract new customers or
retain existing customers, our and our partner companies respective businesses, results of
operations and financial conditions could be negatively affected.
During the year ended December 31, 2010, two customers of ICG Commerce, The Hertz Corporation and
Kimberly-Clark Corporation, represented approximately 11% and 10%, respectively, of our
consolidated revenue. For the year ended December 31, 2009, these two customers each represented
approximately 13% of our consolidated revenue. If any of our partner companies are not able to
retain significant customers, those partner companies and their and our respective businesses,
results of operations and financial positions could be negatively affected.
7
The inability of our partner companies customers to pay their obligations to them in a timely
manner, or at all, could have an adverse effect on our partner companies.
The financial resources of our partner companies customers may have been weakened by the recent
economic downturn. As a result, these customers may have inadequate financial resources to meet
all of their obligations to our partner companies and may not make payments in a timely manner or
at all. Additionally, if our partner companies customers do not have adequate financial
resources, they may attempt to terminate or renegotiate existing contracts with our partner
companies and may refrain from purchasing additional products and services from our partner
companies. These factors may cause our partner companies results of operations and financial
condition to be adversely affected.
If we are not able to deploy capital effectively and on acceptable terms, we may not be able to
execute our business strategy.
Our strategy includes effectively deploying capital by acquiring interests in new partner
companies. We may not be able to identify attractive acquisition candidates that fit our strategy
of acquiring majority stakes in companies. Even if we are able to identify suitable acquisition
candidates, we may not be able to acquire interests in those companies due to an inability to reach
mutually acceptable financial or other terms with those companies or due to competition from other
potential acquirers that may have greater resources, brand name recognition, industry contacts or
flexibility of structure than we do. The turmoil in the global economy in recent years has caused
significant fluctuations in the valuations of companies. Uncertainty regarding the extent to which
valuations of companies that fit our acquisition criteria will continue to fluctuate may affect our
ability to accurately value potential acquisition candidates. If we are unable to effectively
deploy capital to partner companies on acceptable terms, we may not be able to execute on our
strategy, and our business may be adversely impacted.
Our partner companies may not be able to compete successfully.
If our partner companies are unable to compete successfully against their competitors, our partner
companies may fail. Competition for Internet software and services is intense and is expected to
intensify continually. Our partner companies competitors may develop products or services that
are superior to, or have greater market acceptance than, the solutions offered by our partner
companies. Many of our partner companies competitors have greater brand recognition and greater
financial, marketing and other resources than our partner companies. This may place our partner
companies at a disadvantage in responding to their competitors pricing strategies, technological
advances, marketing campaigns, strategic partnerships and other initiatives.
The Internet software and services industry is characterized by evolving industry standards,
coupled with frequent and related new service and product introductions and enhancements. The
development of new service and product introductions and enhancements in response to evolving
industry standards requires significant time and resources, and our partner companies may not be
able to adapt quickly enough and/or in a cost-effective manner to these changes, and our partner
companies failure to do so could adversely affect our partner companies businesses, financial
condition and results of operations.
We may compete with some of our partner companies, and our partner companies may compete with each
other, which could deter companies from partnering with us and may limit future business
opportunities.
We may compete with our partner companies to acquire interests in new partner companies, and our
partner companies may compete with each other for business opportunities. This competition may
deter potential acquisition targets from partnering with us and may limit our business
opportunities.
8
Our operations and growth and those of our partner companies could be impaired by limitations on our
and/or their ability to raise capital or borrow money on favorable terms.
We and our partner companies may need to raise additional capital or borrow money in order to
sustain operations or to grow. If we or our partner companies are unable to raise capital or
obtain credit on favorable terms, our ability and the ability of our partner companies to operate
and grow may be impaired. This may require us or our partner companies to take other actions, such
as borrowing money on terms that may be unfavorable, or divesting of assets prematurely to raise
capital. If we or our partner companies need capital and are unable to raise it, then we or they
may need to limit or cease operations.
Adverse changes in economic conditions and reduced information technology spending may adversely
impact our business.
Our and our partner companies respective businesses depend on the overall demand for information
technology, and in particular for Internet software and services that improve the productivity of
our customers businesses. In addition, the acquisition of our partner companies Internet
software and services is often discretionary and may require customers to make significant initial
contributions of capital and other resources. During the recent global financial crisis, business
spending on technology infrastructure decreased dramatically. Continued weak economic conditions
or, even if general economic conditions improve, a reduction in information technology spending,
could adversely impact our business and the businesses of our partner companies in a number of ways
that negatively impact our operating results and financial condition.
Acquisitions by our partner companies could result in operating difficulties, dilution and other
harmful consequences.
As part of their growth strategies, our partner companies have and may continue to strategically
acquire other companies, business and technologies. The process of integrating an acquired
company, business or technology involves numerous risks, including difficulties in the integration
of the operations, technologies, services and products of the acquired company or business and the
diversion of managements attention from other business concerns. Although we and our partner
companies will endeavor to evaluate the risks inherent in any particular acquisition transaction,
there can be no assurance that we or our partner companies will properly ascertain all such risks.
In addition, acquisitions may result in the incurrence of substantial additional indebtedness and
other expenses for our partner companies; they may also result in potentially dilutive issuances of
a partner companys equity securities. Accordingly, difficulties encountered with acquisitions may
have a material adverse effect on our or our partner companies businesses, financial condition and
results of operations.
Our evolving business strategy, which calls for us to deploy an increasing proportion of our
acquisition capital towards, and to own an increasing proportion of our partner company interests
in the form of, consolidated core companies, may subject us to additional risks.
Under our evolving business strategy, our goal is to deploy an increasing proportion of our
acquisition capital towards, and to own an increasing proportion of our partner company interests
in the form of, consolidated core companies. Executing against this strategy could require us to
deploy a larger amount of cash and/or issue shares of our stock to acquire individual partner
companies than we have in the recent past, as the acquisition of a consolidated core company would
be in the form of a relatively large equity stake, the valuation of which would, most likely,
reflect the target companys strong financial characteristics and growth potential (as we would
generally seek such characteristics and growth potential in any consolidated core company that we
would acquire), as well as, in many cases, a so-called control premium. Deploying larger amounts
of capital to acquire individual partner companies could lead to a depletion of our available cash
and could require us to borrow money, issue stock or otherwise raise additional capital, which we
may not be able to do on favorable terms or at all. In addition, acquiring larger stakes in
predominantly consolidated core companies could result in us owning a larger portion of our assets
in the form of fewer partner companies, the financial results of which would be consolidated with
ours. This could, accordingly, increase the impact that
the poor performance, decline in value and/or failure of an individual partner company could have
on our financial results and our business.
9
We may not be able to execute on our stated business strategy, which could adversely affect our
business and our stock price.
We have, in recent years, adopted, announced to our investors and potential investors and worked to
implement a shift in our business strategy. This strategic evolution is intended to result in an
increasing proportion of our acquisition capital being deployed towards, and an increasing
proportion of our partner company interests being owned in the form of, consolidated core
companies, ultimately leading to (1) firmer control over the operations and strategic decisions of
our partner companies, (2) increased access to the cash of our partner companies (i.e., through
cash distributions from those companies primarily in the form of
dividends) and (3) increased transparency for our investors and
prospective investors in our financial reports. We may be unable to execute on this strategy due
to, among other things, our inability to find suitable targets in which to acquire equity stakes at
attractive valuations and otherwise on attractive terms, our inability to finance the acquisition
of additional consolidated core companies or to continue to finance the operations of our existing
consolidated core companies (either with existing cash or through borrowing or other capital
raising), and the failure of our consolidated core companies to generate cash. Many of these
results could be driven by factors beyond our control, such as weak credit markets or volatile
market conditions. If we are unable to execute against our strategy or otherwise unable to achieve
the intended benefits of our strategy, our stock price and our business could be adversely
affected.
Our inability to maintain or be able to increase our ownership stakes in partner companies with
significant growth opportunities could negatively impact our ability to execute our strategy.
One of our strategies is to maintain and increase our ownership in those partner companies that we
believe have major growth opportunities such that we would have consolidated stakes in those
companies. We may not be able to achieve this goal because of limited resources and/or the
unwillingness of such companies and/or the stockholders of such companies to enter into a
transaction that would result in an increase in our ownership stake. Moreover, certain
transactional growth opportunities, such as mergers, acquisitions and consolidations, may arise
with respect to any of these partner companies that would result in potentially dilutive issuances
of such partner companies equity securities. In the event that any of these select partner
companies enters into such a transaction, with or without our support, we may have a decreased
ability to direct the policies and affairs of the partner company or the surviving entity following
the consummation of the transaction.
If we do not participate in follow-on financings at our partner companies, our stakes in such
companies will be diluted, which could materially reduce the value of those stakes.
From time to time our partner companies raise capital by issuing and selling additional convertible
debt and/or equity securities. We generally have preemptive rights to participate in these
follow-on rounds of financing; however, we may elect not to participate in such rounds or may be
required to waive our preemptive rights in whole or in part so that outside investors can
participate. If we do not participate in a follow-on round of a partner company, our ownership
interest in that company will be diluted. Additionally, in connection with new rounds of
financing, our partner companies may issue preferred stock with liquidation preferences that are
senior to existing preferred stock and common stock. If we do not participate in a follow-on round
at a partner company, our ownership stake will decrease and our rights to receive proceeds in
connection with the sale of that partner company will be diminished, which could result in a
material reduction in the value of our stake in that partner company. Moreover, in the event that
we pay a control premium in connection with our acquisition of a majority stake in a partner
company, we would not be able to command a similar premium upon the disposition of that stake if,
through dilutive events, the stake becomes a minority interest.
10
We may have to buy, sell or retain assets when we would otherwise choose not to buy, sell or retain
in order to avoid registration under the Investment Company Act, which would adversely impact our
business strategy.
Under the Investment Company Act of 1940, as amended (the Investment Company Act), a company is
considered to be an investment company if, among other things, it is primarily engaged in the
business of investing, reinvesting, owning, holding or trading in securities. It is not feasible
for us to be regulated as an investment company because the Investment Company Act rules are
inconsistent with our strategy of actively managing, operating and promoting collaboration among
our network of partner companies. On August 23, 1999, the SEC granted our request for an exemption
under Section 3(b)(2) of the Investment Company Act, declaring us to be primarily engaged in a
business other than that of investing, reinvesting, owning, holding or trading in securities. This
exemptive order reduces, but does not eliminate, the risk that we may have to take action to avoid
registration as an investment company. For example, we might be considered to be in violation of
our exemptive order if more than a certain percentage of our total assets consist of, or more than
certain percentages of our income/loss and revenue over the most recently completed four quarters
is derived from, ownership interests in companies that we do not primarily control. Because we do
not have primary control of many of our partner companies, changes in the value of our interests in
such partner companies and the income/loss and revenue attributable to such partner companies could
subject us to regulation under the Investment Company Act unless we take precautionary steps. For
example, we may retain interests in partner companies we would otherwise want to sell, and we may
sell stakes in non-controlled partner companies that we would otherwise want to retain. In order
to ensure that the requisite percentage of our total assets relates to partner companies that we
primarily control, we may participate in follow-on financings at our controlled partner companies
and refrain from participating in such financings at our non-controlled partner companies. In
addition, we may have to acquire additional income or loss generating majority-owned or controlled
interests that we might not otherwise have acquired and may not be able to acquire
non-controlling interests in companies that we would otherwise want to acquire.
Our partner companies could make financial or other business decisions that are not in our best
interests or that we do not agree with, which could impair the value of our partner company
interests.
Although we generally seek to acquire a controlling equity interest and participate in the
management of our partner companies, we may not acquire or maintain a controlling interest in each
partner company. If we lack control or share control in a partner company we may not be able to
control significant financial or other business decisions of that partner company, including whether
to sell that company or engage in an initial public offering at that company. Management or other stockholders of a partner company could have economic or business
interests or objectives that are different from ours or disagree with our advice regarding
financial or operating decisions, which could impair the value of our interest, prevent us from
monetizing our interest at a time or at a price that is favorable to us or negatively affect our
operating results. Additionally, our inability to prevent dilution of our ownership interests in a
partner company or our inability to otherwise have a controlling influence over the management and
operations of a partner company could have an adverse impact on our status under the Investment
Company Act.
We may not be able to extract cash from those partner companies that achieve profitability and may
need to continue to rely on existing cash, liquidity events and additional capital raises to fund
our operations.
We currently rely on existing cash, partner company liquidity events, partner company dividends and
the issuance and sale of additional securities in order to fund our operations. One of our goals
is to help our partner companies achieve profitability so that we can access their cash flow.
Moreover, we are focusing on acquiring majority voting stakes in an increasing number of partner
companies in part so that we have increased access to the cash flow of our partner companies,
particularly through dividends. However, even if certain of our partner companies do meet that
goal, we may not be able to access cash generated by such partner companies to fund our operations
due to a number of factors, including the needs of such companies to reinvest in their own
businesses and our inability to control the significant business or
financial decisions of such companies. Our inability to access the cash of our partner companies
could have a negative impact on our operations.
11
We may be unable to obtain maximum value in connection with the divesture of partner company and
marketable security interests.
From time to time, we may divest interests in partner companies or marketable securities to
generate cash or for strategic reasons. The timing of such divestures, particularly with respect
to our privately-held partner companies, may not be within our control. If we need to divest
partner company interests quickly to satisfy immediate cash requirements or to avoid registration
as an investment company under the Investment Company Act, we may be forced to sell our assets
prior to canvassing the market or at a time when market conditions valuations are unfavorable. We
also may not be able to identify buyers for certain of our assets, particularly given the
difficulty that potential acquirers may currently face in obtaining financing. Furthermore, in
connection with the sale of a private partner company, we may not receive the full amount of
proceeds to which we would otherwise be entitled under such companys certificate of incorporation
if additional payments to management and/or other stockholders are made to secure the approval
and/or execution of such transaction. We may be unable to sell our interests in publicly-traded
companies at then-quoted market prices, if at all, because low trading volumes of these companies
may limit our ability to sell a significant amount of such companies stock in the open market.
Registration and other requirements under applicable securities laws may also adversely affect our
ability to dispose of our interests on a timely basis. Based on the foregoing factors, when we
divest of an interest in a partner company or a marketable security, we may not receive maximum
value for that asset and the realizable value of our interest in such asset may ultimately be lower
than the carrying value currently reflected in our consolidated financial statements and/or the
expectations our investors or securities analysts.
In addition, the market for initial public offerings has experienced significant weakness in recent
years in connection with recent market volatility. If this market is weak, we may not be able to
capture stockholder value by taking our partner companies public.
Our accounting estimates with respect to the ultimate recoverability of our basis in our partner
companies could change materially in the near term.
Our accounting estimates with respect to the ultimate recoverability of our carrying basis,
including goodwill, in our partner companies could change in the near term, and the effect of those
changes on our consolidated financial statements could be significant. During the years ended
December 31, 2010, 2009 and 2008 we recorded impairment charges of $2.9 million, $5.4 million and
$23.2 million, respectively. It is possible that a significant write-down or write-off of our
carrying basis in our partner companies, including goodwill, may be required in the future, or that
a significant loss will be recorded in the future upon the sale of one or more partner companies.
Any write-down or write-off of this type could cause a decline in the price of our Common Stock.
Our stock price has been volatile in the past and may continue to be volatile in the future.
Our stock price has historically been volatile. This volatility may continue in the future,
particularly in light of the uncertainty about global economic conditions in recent years.
The following factors, among others, may add to our Common Stock prices volatility:
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general economic conditions, such as a recession or interest rate or currency rate
fluctuations; |
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the reluctance of enterprises to increase spending on new products or services; |
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actual or anticipated variations in our quarterly results and those of our partner
companies; |
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changes in the market valuations of our partner companies and other similar
companies; |
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conditions or trends related to Internet software and services companies; |
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changes in our financial estimates and those of our partner companies by securities
analysts; |
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new products or services offered by us, our partner companies and their
competitors; |
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announcements by our partner companies and their competitors of technological
innovations; |
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announcements by us, our partner companies or our competitors of significant
acquisitions, strategic partnerships or joint ventures; |
12
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additional sales or repurchases of our securities; and |
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additions to or departures of our key personnel or the key personnel of our partner
companies. |
Many of these factors are beyond our control. Any of these factors may decrease the price
of our Common Stock.
Fluctuations in our quarterly results may adversely affect our stock price.
We expect that our quarterly results will fluctuate significantly due to many factors, including:
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the acquisition of interests in partner companies; |
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the operating results of our partner companies; |
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sales of our ownership interests in our partner companies, which could cause us to
recognize gains or losses under applicable accounting rules; |
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significant fluctuations in the financial results of Internet software and services
companies generally; |
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changes in estimated quarterly equity losses or income; |
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changes in our methods of accounting for our partner company interests, which may
result from changes in our ownership percentages of our partner companies; |
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the pace of development or a decline in growth of the Internet software and
services markets; and |
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competition for the goods and services offered by our partner companies. |
If our operating results in one or more quarters do not meet securities analysts or investors
expectations, the price of our Common Stock could decrease.
Fluctuations in the price of the common stock of our publicly-traded holdings may affect the price
of our Common Stock.
Currently, excluding the publicly-traded common stock of ICE being held in escrow to which we may
be entitled, we hold stock of GoIndustry, which is a publicly-traded entity on the AIM market of
the London Stock Exchange. Fluctuations in the price of the common stock of GoIndustry or any
other publicly-traded holdings we may hold from time to time may affect the price of our Common
Stock. The price of this publicly-traded companys common stock has been highly volatile. As of
December 31, 2010, the market value of our interest in GoIndustry was $3.5 million, based upon a
$1.38 per share closing price for GoIndustry. The results of operations and, accordingly, the
price of the stock of GoIndustry may be adversely affected by the occurrence of the risk factors
contained in this Report. In addition, the results of operations and common stock price of
GoIndustry may be adversely affected by the risk factors set forth in GoIndustrys submissions on
the AIM market of the London Stock Exchange, which are publicly available at
www.londonstockexchange.com.
We have had a general history of operating losses and expect continued operating losses in the
foreseeable future.
We have had significant operating losses and, excluding the effect of any future non-operating
gains, such as from the sale of interests in partner companies, we expect to continue incurring
operating losses in the future. As a result, we may not have sufficient resources to expand or
maintain our operations in the future. We can give no assurances as to when or whether we will
achieve profitability, and if we ever have profits, we may not be able to sustain them.
13
Certain of our partner companies have a limited operating history and may never be profitable.
Certain of our partner companies have limited operating histories. As a result, they have only
short operating histories to aid in assessing future prospects. Additionally, certain of our
partner companies have significant historical losses and may never be profitable. Many of our
partner companies have incurred substantial costs to develop and market their products and expand
operations, have incurred net losses and cannot fund their cash needs from operations. Operating
expenses of these companies could increase in the foreseeable future as they continue to develop
products, increase sales and marketing efforts and expand operations.
The loss of our or our partner companies executive officers or other key personnel, or our or our
partner companies inability to attract additional key personnel, could disrupt our business and
operations.
If one or more of our executive officers or key personnel, or our partner companies key personnel, were unable or unwilling to continue in their present positions, or if
we or our partner companies were unable to hire qualified personnel, our business and operations
could be disrupted and our operating results and financial condition could be seriously harmed.
Our partner companies success depends on the integrity of their systems and infrastructure.
Interruptions in their information systems may adversely affect their businesses.
To succeed, our partner companies systems and infrastructure must perform well on a consistent
basis. From time to time, our partner companies may experience occasional system interruptions
that make some or all of their systems or data unavailable or prevent them from providing services,
which could adversely affect their businesses. Moreover, as traffic to their various websites and
the related number of uses and customers increase and the number products and services that they
introduce continues to grow, they will need to upgrade their systems, infrastructure and
technologies generally to facilitate this growth. If our partner companies do not do so or if they
experience inefficiencies and/or operational failures in connection with current or future
upgrades, third parties with which they do business may not be able to access their services on an
intermittent or prolonged basis and the quality of experience that users and customers encounter
with their products and services generally could diminish. The occurrence of any of these events
could adversely affect their businesses, financial condition and results of operations.
We and our partner companies may be subject to litigation proceedings or government regulation that
could harm our respective businesses.
We and our partner companies may be subject to legal claims involving stockholder, consumer,
competition and other matters. Litigation is subject to inherent uncertainties, and unfavorable
rulings could occur. An unfavorable ruling could include monetary damages or, in cases for which
injunctive relief is sought, an injunction prohibiting one of our partner companies from performing
a critical activity, such as selling its software and services. If we or one of our partner
companies were to receive an unfavorable ruling in a litigation matter, our and our partner
companies respective businesses, financial condition and results of operations could be materially
harmed. Even if legal claims brought against us or our partner companies are without merit,
defending lawsuits may be time-consuming and expensive and may divert our or our partner companies
management attention from other business concerns.
Our partner companies software and services offerings are subject to government regulation
domestically and internationally in many areas, including regulation of the Internet regarding user
privacy, telecommunications, data protection and online content. The application of these laws and
regulations to our partner companies businesses is often unclear and sometimes may conflict.
Compliance with these regulations may involve significant costs or require changes in business
practices that result in reduced revenue. Noncompliance could result in monetary penalties being
imposed on our partner companies or orders that our partner companies cease performing a critical
activity, such as selling their software and services.
14
We have implemented certain anti-takeover provisions that could make it more difficult for a third
party to acquire us.
Provisions of our amended certificate of incorporation and bylaws, including supermajority voting
requirements and the inability of our stockholders to call stockholder meetings or act by written
consent, as well as provisions of Delaware law, could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders. Our amended certificate of
incorporation provides that our board of directors may issue preferred stock without stockholder
approval and also provides for a staggered board of directors. We are subject to the provisions of
Section 203 of the Delaware General Corporation Law, which restricts certain business combinations
with interested stockholders. The combination of these provisions may inhibit a non-negotiated
merger or other business combination.
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ITEM 1B. |
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Unresolved Staff Comments |
None.
The location and general description of our properties as of March 1, 2011 are as follows:
Corporate Offices
Our corporate headquarters are located at 690 Lee Road, Suite 310 in an office facility located in
Wayne, Pennsylvania, where we lease approximately 11,000 square feet.
Consolidated Core Company Properties
Our consolidated core companies lease approximately 137,990 square feet of office, administrative,
sales and marketing, operations and data center space, principally in Georgia, Minnesota, New York,
Pennsylvania, Texas and Washington, D.C. in the United States, and administrative office space in
Brazil, China, Czech Republic, India and the United Kingdom.
15
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ITEM 3. |
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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.
16
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 was posted and a briefing schedule with respect to the appeals was set. The distribution
of settlement proceeds is currently being held in abeyance.
Since September 2010, four of the six individuals or groups that filed appeals from the class
settlement have dropped their appeals, leaving two, a pro se appeal by James Hayes and an appeal
filed by Theodore Bechtold, an attorney filing on his own behalf. Each filed opening briefs
challenging the settlement and/or class certification on a variety of grounds. Responsive briefs
from the appellees were due to be filed by December 17, 2010. On December 8, 2010, however, the
plaintiff-appellees (class counsel defending the class settlement) moved to dismiss the Bechtold
appeal on a variety of technical grounds. That motion is still pending before the Court of Appeals
for the Second Circuit. Its filing suspended the date by which the responsive briefs in both
appeals were to be filed. Accordingly, completion of briefing on the two remaining appeals will
await resolution of the motion to dismiss Mr. Bechtolds appeal.
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ITEM 4. |
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(Removed and Reserved) |
17
PART II
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ITEM 5. |
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Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Market Information. Our Common Stock is currently traded on the NASDAQ Global Select Market under
the symbol ICGE. The price range per share reflected in the table below is the highest and
lowest sale price for our Common Stock as reported by the NASDAQ Global Market* during each
quarterly period of our two most recent fiscal years.
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2009 |
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2010 |
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Quarterly Ended |
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March 31 |
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June 30 |
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Sept. 30 |
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Dec. 31 |
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March 31 |
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June 30 |
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Sept. 30 |
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Dec. 31 |
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High |
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$ |
5.95 |
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$ |
6.85 |
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$ |
8.62 |
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$ |
8.43 |
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$ |
8.69 |
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$ |
11.11 |
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$ |
11.50 |
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$ |
14.27 |
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Low |
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$ |
3.25 |
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$ |
3.85 |
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$ |
6.17 |
|
|
$ |
5.76 |
|
|
$ |
6.12 |
|
|
$ |
7.55 |
|
|
$ |
7.20 |
|
|
$ |
10.60 |
|
|
|
|
* |
|
Effective January 1, 2011, our Common Stock began trading on the NASDAQ Global Select Market. |
Holders. As of March 1, 2011, there were approximately 734 holders of record of our Common Stock;
there is a much larger number of beneficial owners of our Common Stock.
Dividends. We have never declared or paid cash dividends on our capital stock, and we do not
intend to pay cash dividends in the foreseeable future. We plan to retain any earnings for use in
the operation of our business and to fund future growth.
Stock Performance Graph. The following graph presents a comparison of the performance of our
Common Stock with that of the NASDAQ Composite Index and the Goldman Sachs Technology Internet
Index from December 31, 2005 to December 31, 2010. The graph shall not be deemed filed for
purchases of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that
section, and shall not be deemed to be incorporated by reference into any filing of the Company
under the Securities Act or the Exchange Act.
COMPARISON OF CUMULATIVE TOTAL RETURN** SINCE DECEMBER 31, 2005
AMONG ICG GROUP, INC. (f/k/a INTERNET CAPITAL GROUP, INC.),
THE NASDAQ COMPOSITE INDEX AND THE GSTI INTERNET INDEX
|
|
|
** |
|
$100 invested at closing prices on December 31, 2005 in our Common Stock or in a stock index,
including reinvestment of dividends. |
18
Issuer Purchases of Equity Securities
In 2008, we adopted a share repurchase program under which we may repurchase, from time to time, up
to $25.0 million of shares of our 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 our Common Stock
that occurred under the share repurchase program through the date of the filing of this Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
|
Value That May Yet |
|
|
|
|
|
|
|
|
|
|
|
Part of Publicly |
|
|
Be Purchased |
|
|
|
Total Number of |
|
|
Average Price Paid |
|
|
Announced |
|
|
Under the |
|
Period |
|
Shares Purchased(1) |
|
|
per Share(2) |
|
|
Program(1) |
|
|
Program |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchased during
the year ended
12/31/08 |
|
|
1,948,158 |
|
|
$ |
4.75 |
|
|
|
1,948,158 |
|
|
$15.7 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchased during
the year ended
12/31/09 |
|
|
492,242 |
|
|
$ |
5.45 |
|
|
|
492,242 |
|
|
$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 8/31/10 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$13.1 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/1/10 to 9/30/10 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$13.1 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/1/10 to 10/31/10 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$13.1 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/1/10 to 11/30/10 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$13.1 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/1/10 to 12/31/10 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$13.1 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/11 to 1/31/11 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$13.1 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/1/11 to 2/28/11 |
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
$13.1 million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/11 to 3/16/11 |
|
|
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. |
19
|
|
|
ITEM 6. |
|
Selected Financial Data |
The following table summarizes certain selected historical consolidated financial information that
has been derived from our audited Consolidated Financial Statements for each of the years ended
December 31, 2010, 2009, 2008, 2007 and 2006. The financial information may not be indicative of
our future performance. The information set forth below should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of Operations and our
Consolidated Financial Statements and the related Notes thereto included in this Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006(1) |
|
|
|
(in thousands, except per share data) |
|
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
115,710 |
|
|
$ |
90,252 |
|
|
$ |
71,181 |
|
|
$ |
52,923 |
|
|
$ |
64,749 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
71,050 |
|
|
|
56,920 |
|
|
|
46,400 |
|
|
|
39,523 |
|
|
|
42,439 |
|
Selling, general and administrative |
|
|
42,206 |
|
|
|
34,578 |
|
|
|
36,165 |
|
|
|
32,781 |
|
|
|
42,108 |
|
Research and development |
|
|
10,644 |
|
|
|
9,015 |
|
|
|
10,212 |
|
|
|
6,033 |
|
|
|
8,755 |
|
Amortization of intangible assets |
|
|
1,357 |
|
|
|
205 |
|
|
|
205 |
|
|
|
129 |
|
|
|
1,695 |
|
Impairment related and other |
|
|
1,182 |
|
|
|
5,192 |
|
|
|
9,847 |
|
|
|
59 |
|
|
|
178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
126,439 |
|
|
|
105,910 |
|
|
|
102,829 |
|
|
|
78,525 |
|
|
|
95,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(10,729 |
) |
|
|
(15,658 |
) |
|
|
(31,648 |
) |
|
|
(25,602 |
) |
|
|
(30,426 |
) |
Other income (loss), net |
|
|
74,147 |
|
|
|
16,578 |
|
|
|
43,225 |
|
|
|
6,830 |
|
|
|
34,605 |
|
Interest income (expense), net |
|
|
(36 |
) |
|
|
230 |
|
|
|
1,516 |
|
|
|
5,062 |
|
|
|
7,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes and
equity loss |
|
|
63,382 |
|
|
|
1,150 |
|
|
|
13,093 |
|
|
|
(13,710 |
) |
|
|
11,524 |
|
Income tax benefit (expense) |
|
|
(254 |
) |
|
|
39,510 |
|
|
|
(357 |
) |
|
|
3,992 |
|
|
|
40 |
|
Equity loss |
|
|
(16,022 |
) |
|
|
(12,131 |
) |
|
|
(33,702 |
) |
|
|
(14,416 |
) |
|
|
(5,461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
47,106 |
|
|
|
28,529 |
|
|
|
(20,966 |
) |
|
|
(24,134 |
) |
|
|
6,103 |
|
Income (loss) on discontinued operations |
|
|
802 |
|
|
|
|
|
|
|
|
|
|
|
995 |
|
|
|
8,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
47,908 |
|
|
|
28,529 |
|
|
|
(20,966 |
) |
|
|
(23,139 |
) |
|
|
14,392 |
|
Less: Net income (loss) attributable to non-controlling interest |
|
|
1,319 |
|
|
|
12,995 |
|
|
|
1,960 |
|
|
|
468 |
|
|
|
(1,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG Group, Inc. |
|
$ |
46,589 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
|
$ |
(23,607 |
) |
|
$ |
15,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Income (loss) Per Share Attributable to
ICG Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
1.26 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
$ |
(0.64 |
) |
|
$ |
0.20 |
|
Income (loss) on discontinued operations |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share |
|
$ |
1.28 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
$ |
(0.62 |
) |
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic income (loss) per share |
|
|
36,427 |
|
|
|
36,660 |
|
|
|
38,106 |
|
|
|
37,916 |
|
|
|
37,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Income (loss) Per Share Attributable to
ICG Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
1.24 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
$ |
(0.64 |
) |
|
$ |
0.19 |
|
Income (loss) on discontinued operations |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share |
|
$ |
1.26 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
$ |
(0.62 |
) |
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of diluted income (loss) per share |
|
|
37,064 |
|
|
|
36,705 |
|
|
|
38,106 |
|
|
|
37,916 |
|
|
|
38,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and short-term investments |
|
$ |
92,639 |
|
|
$ |
55,528 |
|
|
$ |
89,527 |
|
|
$ |
82,031 |
|
|
$ |
120,808 |
|
Working capital |
|
$ |
97,150 |
|
|
$ |
73,122 |
|
|
$ |
83,285 |
|
|
$ |
78,749 |
|
|
$ |
78,939 |
|
Total assets |
|
$ |
280,989 |
|
|
$ |
330,087 |
|
|
$ |
285,580 |
|
|
$ |
332,431 |
|
|
$ |
354,427 |
|
Other long-term debt, net of current portion |
|
$ |
15,458 |
|
|
$ |
645 |
|
|
$ |
3,916 |
|
|
$ |
191 |
|
|
$ |
544 |
|
Senior convertible notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
26,590 |
|
Total ICG Group, Inc.s stockholders equity |
|
$ |
223,807 |
|
|
$ |
280,665 |
|
|
$ |
247,509 |
|
|
$ |
304,658 |
|
|
$ |
298,538 |
|
|
|
|
(1) |
|
The selected financial data for 2006 is not comparable to the other periods presented due to the adoption of the
transitional provisions of Accounting Standards Codification (ASC) section 470, subsection 20, Debt with Conversion and
Other Options. The adoption of this guidance resulted in the revision of the loss on the repurchase of Senior convertible
notes included in Other income (loss) on our Consolidated Statements of Operations for the year ended December 31, 2007,
as well as a reclassification between Additional paid-in capital and Accumulated deficit on our Consolidated Balance
Sheets in subsequent periods. |
20
|
|
|
ITEM 7. |
|
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 audited Consolidated
Financial Statements and the 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 ICG Group,
Inc. (f/k/a Internet Capital Group, Inc.), a company incorporated in Delaware, and its subsidiaries, both wholly-owned and consolidated
(ICG Group, Inc. and all such subsidiaries are collectively hereinafter referred to as
ICG, the Company, we, our, or us,), 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 December 31, 2010, we held ownership interests in 12 companies that
we considered our partner companies. On February 17, 2011,
Metastorm, an equity core company, was
sold, resulting in ownership interests in 11 partner companies as of the date of this Report. The
results of operations of our partner companies are reported in two segments: the core reporting
segment and the venture reporting segment. Our core reporting segment includes the partner
companies in which our management takes a very active role in providing strategic direction and
management assistance. We own majority controlling equity positions in (and therefore consolidate
the financial results of) three of these core companies, which we call our consolidated core
companies. We own substantial minority equity positions (i.e., the largest equity positions) in
our other core companies, which we call our equity core companies. We expect to devote
relatively large initial amounts of capital to acquire stakes in core companies, particularly
consolidated core companies, since any such acquisition would entail the deployment of cash and/or issuance of
ICG stock to purchase of a large
equity stake in a target with relatively strong financial characteristics and growth potential.
Our 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. As a result, we generally have less influence over the
strategic direction and management decisions of our venture companies 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.
21
Because we own significant interests in a number of partner companies that are in different stages
of profitability, we have experienced, and expect to continue to experience, significant volatility
in our 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, marketable securities and certain long-term debt as of December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
Corporate |
|
|
Subsidiaries |
|
|
Total |
|
|
Corporate |
|
|
Subsidiaries |
|
|
Total |
|
|
|
(in thousands) |
|
Cash and cash equivalents |
|
$ |
72,915 |
|
|
$ |
19,523 |
|
|
$ |
92,438 |
|
|
$ |
29,443 |
|
|
$ |
26,038 |
|
|
$ |
55,481 |
|
Restricted cash |
|
|
|
|
|
|
201 |
|
|
|
201 |
|
|
|
|
|
|
|
47 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
72,915 |
|
|
$ |
19,724 |
|
|
$ |
92,639 |
|
|
$ |
29,443 |
|
|
$ |
26,085 |
|
|
$ |
55,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
72,965 |
|
|
$ |
|
|
|
$ |
72,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICG Commerce term loan due August 2015 |
|
$ |
|
|
|
$ |
(18,667 |
) |
|
$ |
(18,667 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
(1) |
|
Includes an offsetting liability of $0.5 million at December 31, 2009 related to derivative instruments associated with our marketable securities. |
On
February 17, 2011, the sale of Metastorm, an equity core company, to Open Text Corporation (Open
Text) was consummated. Our portion of the sale proceeds consisted of $53.0 million; $51.3 million
of these proceeds were received upon the closing of the transaction, and the remainder has been
placed in escrow in connection with a customary indemnification holdback. If this sale had
occurred immediately prior to the end of the year ended December 31, 2010, our and our consolidated
subsidiaries total cash and cash equivalents at December 31, 2010 would have been $144.0 million.
We believe existing cash and cash equivalents, proceeds from the potential sales of all or a
portion of our interests in certain partner companies and equity issuances to be sufficient to fund
our cash requirements for the foreseeable future, including any future commitments to partner
companies, debt obligations and general operations 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 in the next twelve months; however, such
acquisitions will generally be made at our discretion.
GovDelivery, ICG Commerce and InvestorForce have funded their operations through a combination of
cash flow from operations and borrowings. GovDelivery and ICG Commerce expect that their existing
cash balances and cash flow from operations will be sufficient to fund their respective operations,
including the payment of debt obligations, for the foreseeable future. InvestorForce is expected
to require additional borrowings, primarily from ICG, to fund its operations through 2011.
In 2010, our consolidated working capital increased from $73.1 million as of December 31, 2009 to
$97.2 million as of December 31, 2010, an increase of $24.1 million. This increase to working
capital was primarily due to sales of marketable securities, proceeds of ICG Commerces new $20.0
million term loan, and an increase in customer receivables at our consolidated subsidiaries,
partially offset by decreases in our income tax receivable and increases in current maturities of
long-term debt related to ICG Commerces term loan, core consolidated company deferred revenue,
particularly at GovDelivery, and accrued compensation and
benefits.
22
Summary of Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Cash provided by (used in) operating activities |
|
$ |
1,169 |
|
|
$ |
(8,979 |
) |
|
$ |
(12,385 |
) |
Cash provided by (used in) investing activities |
|
$ |
69,793 |
|
|
$ |
(22,245 |
) |
|
$ |
28,964 |
|
Cash used in financing activities |
|
$ |
(34,476 |
) |
|
$ |
(2,935 |
) |
|
$ |
(8,593 |
) |
The change from cash used in operating activities of $(9.0) million in 2009 to cash provided by
operating activities of $1.2 million in 2010 was primarily related to the receipt of part of the
income tax receivable that was outstanding at December 31, 2009 and an increase in deferred revenue
during 2010, as well as a large increase in deferred income taxes during 2009 that did not recur in
2010, partially offset by an increase in other income in 2010.
The $3.4 million decrease in cash used in operating activities from 2008 to 2009 was primarily due
to the increase to net income of $15.5 million in 2009 compared to net loss of $(22.9) million in
2008, a decrease in other income (loss) of $26.7 million and an increase in income attributable to
the noncontrolling interest of $11.0 million from 2008 to 2009. These items were partially offset
by a deferred tax benefit recorded in 2009 and a reduction in equity loss from 2008 to 2009 of
$28.9 million and $21.6 million, respectively. Additionally, net changes in working capital
components decreased $14.6 million from 2008 to 2009, primarily driven by income tax receivables of
$10.6 million in 2009.
The change from cash used in investing activities of $(22.2) million in 2009 to cash provided by
investing activities of $69.8 million in 2010 was primarily related to proceeds received from the
sale of marketable securities in 2010. The change from cash provided by investing activities in
2008 to cash used in investing activities in 2009 was primarily related to decreased proceeds of
$38.6 million from sales of marketable securities from 2008 to 2009, as well as an $11.2 million
increase in acquisitions of ownership interests in partner companies during that period.
The increase in cash used in financing activities from 2009 to 2010 was primarily due to the
acquisition of an additional 17% ownership interest in ICG Commerce, partially offset by proceeds
of ICG Commerces new $20.0 million term loan. The decrease in cash used in financing activities
from 2008 to 2009 primarily relates to a $6.6 million decrease in our Common Stock repurchases
under the share repurchase program discussed in the subsection entitled, Issuer Purchases of
Equity Securities, in Item 5Market For Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
From time to time, we and our consolidated subsidiaries are involved in various claims and legal
actions arising in the ordinary course of business. We do not expect any liability with respect to
these actions that would materially affect our financial position or cash flows.
Contractual Cash Obligations and Commercial Commitments
The following table summarizes our and our consolidated subsidiaries contractual cash obligations
and commercial commitments as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
|
Less than |
|
|
1-3 |
|
|
3-5 |
|
|
More than |
|
|
|
Total |
|
|
1 year |
|
|
years |
|
|
years |
|
|
5 years |
|
|
|
(in thousands) |
|
Operating leases |
|
$ |
13,749 |
|
|
$ |
2,849 |
|
|
$ |
4,759 |
|
|
$ |
3,670 |
|
|
$ |
2,471 |
|
Capital leases |
|
|
503 |
|
|
|
279 |
|
|
|
223 |
|
|
|
1 |
|
|
|
|
|
ICG Commerce term loan |
|
|
18,667 |
|
|
|
4,000 |
|
|
|
8,000 |
|
|
|
6,667 |
|
|
|
|
|
Other debt |
|
|
911 |
|
|
|
344 |
|
|
|
567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
33,830 |
|
|
$ |
7,472 |
|
|
$ |
13,549 |
|
|
$ |
10,338 |
|
|
$ |
2,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
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, revenue
or expenses, results of operations, liquidity, capital expenditures or capital resources.
Our Partner Companies
As of December 31, 2010, we owned interests in 12 partner companies that are categorized below
based on segment and method of accounting.
|
|
|
|
|
CORE COMPANIES (%Ownership Interest) |
Consolidated |
|
Equity |
|
Cost |
GovDelivery (93%)
|
|
Channel Intelligence (50%)(1)
|
|
(none) |
ICG Commerce (80%)
|
|
Freeborders (31%) |
|
|
InvestorForce (76%)
|
|
Metastorm (33%)(2) |
|
|
|
|
StarCite (36%) |
|
|
|
|
WhiteFence (36%) |
|
|
|
|
|
|
|
VENTURE COMPANIES (%Ownership Interest) |
Consolidated |
|
Equity |
|
Cost |
(none)
|
|
Acquirgy (25%)
|
|
(none) |
|
|
ClickEquations (33%) |
|
|
|
|
GoIndustry (26%)(3) |
|
|
|
|
SeaPass (26%) |
|
|
|
|
|
(1) |
|
Our ownership percentage of 49.5% rounds up to 50%. We do not
consolidate Channel Intelligence because we do not own a majority
interest, and additional factors support that we do not exert
control over Channel Intelligence. See Note 5, Ownership
Interests in Partner Companies, to our Consolidated Financial
Statements. |
|
(2) |
|
On February 17, 2011, Metastorm was sold, and Metastorms results
will no longer be included in our financial results (i.e. our equity
loss) subsequent to that date. Throughout this Report, the
results of Metastorm have been removed from our core segment
results and reflected in the reconciling item, Dispositions. |
|
(3) |
|
As of December 31, 2010 and the date of this Report, 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 5, Ownership Interests in Partner Companies, to our
Consolidated Financial Statements. |
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 certain partner company acquisitions and dispositions. Core segment results
for the year ended December 31, 2010 include GovDelivery, which was acquired on December 31, 2009.
Core segment results for the years ended December 31, 2009 and 2008 include the results of
Vcommerce Corporation (Vcommerce) for the time it was a consolidated subsidiary, from May 2008
through August 2009. Additionally, Acquirgy and SeaPass, the partner companies in which we
acquired interests during 2009, are included in the venture segment from their respective
acquisition dates, July 31, 2009 and October 14, 2009. ClickEquations is included in the venture
segment beginning on March 7, 2008, at which time we acquired more than 20% of its voting
securities and began to record our share of the earnings and losses of ClickEquations under the
equity method of accounting. The method of accounting for any particular partner company may
change based on our ownership interest.
24
Dispositions are those partner companies that have been sold or ceased operations and are no
longer included in a segment for the periods presented. The Company considers dispositions to be
either the sale of a division, subsidiary or asset group of our consolidated partner companies,
typically classified as discontinued operations for accounting purposes, or the disposition of our
ownership interest in a core or venture company accounted for under the equity method of
accounting. The amounts presented as
Dispositions below represent a subsidiary of GovDelivery that was sold on August 31, 2010, as
well as Metastorm, which was sold on February 17, 2011. Corporate expenses represent the general
and administrative expenses of our business operations, which include supporting our partner
companies and operating as a public company. The measure of segment net loss reviewed by us does
not include items such as gains on the disposition of partner company ownership interests and
marketable securities holdings, income taxes 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 |
|
|
Dispositions |
|
|
Corporate |
|
|
Other |
|
|
Results |
|
For the Year Ended
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
115,710 |
|
|
$ |
|
|
|
$ |
115,710 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
115,710 |
|
Net income (loss)
attributable to
ICG
Group, Inc. |
|
$ |
(5,655 |
) |
|
$ |
(4,149 |
) |
|
$ |
(9,804 |
) |
|
$ |
(2,115 |
) |
|
$ |
(17,684 |
) |
|
$ |
76,192 |
|
|
$ |
46,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
90,252 |
|
|
$ |
|
|
|
$ |
90,252 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
90,252 |
|
Net income (loss)
attributable to
ICG
Group, Inc. |
|
$ |
28,503 |
|
|
$ |
(3,197 |
) |
|
$ |
25,306 |
|
|
$ |
(2,102 |
) |
|
$ |
(15,858 |
) |
|
$ |
8,188 |
|
|
$ |
15,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
71,181 |
|
|
$ |
|
|
|
$ |
71,181 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
71,181 |
|
Net income (loss)
attributable to
ICG
Group, Inc. |
|
$ |
(18,999 |
) |
|
$ |
(4,381 |
) |
|
$ |
(23,380 |
) |
|
$ |
(4,759 |
) |
|
$ |
(18,966 |
) |
|
$ |
24,179 |
|
|
$ |
(22,926 |
) |
For the Years Ended December 31, 2010, 2009 and 2008
Results of Operations Core Companies
The following presentation includes the results of our consolidated core companies and our share of
the results of our equity core companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Selected data: |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
115,710 |
|
|
$ |
90,252 |
|
|
$ |
71,181 |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
(71,050 |
) |
|
|
(56,920 |
) |
|
|
(46,400 |
) |
Selling, general and administrative |
|
|
(25,037 |
) |
|
|
(18,321 |
) |
|
|
(16,390 |
) |
Research and development |
|
|
(10,644 |
) |
|
|
(9,015 |
) |
|
|
(10,212 |
) |
Amortization of intangible assets |
|
|
(1,357 |
) |
|
|
(205 |
) |
|
|
(205 |
) |
Impairment related and other |
|
|
(386 |
) |
|
|
(316 |
) |
|
|
(789 |
) |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
(108,474 |
) |
|
|
(84,777 |
) |
|
|
(73,996 |
) |
Interest and other |
|
|
(677 |
) |
|
|
433 |
|
|
|
(1,139 |
) |
Income tax benefit (expense) |
|
|
(6,172 |
) |
|
|
28,883 |
|
|
|
(687 |
) |
Equity loss |
|
|
(6,042 |
) |
|
|
(6,288 |
) |
|
|
(14,358 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(5,655 |
) |
|
$ |
28,503 |
|
|
$ |
(18,999 |
) |
|
|
|
|
|
|
|
|
|
|
25
Revenue
Revenue increased from $90.3 million in 2009 to $115.7 million in 2010, an increase of $25.4
million, primarily due to continued growth at ICG Commerce. ICG Commerces revenue increased 24%
from 2009 to 2010 as a result of significant new customers, as well as an increase in revenue from
existing customers. Revenue also increased at InvestorForce, growing 55% from 2009 to 2010.
Revenue recognized by GovDelivery in 2010 was higher than that recorded by Vcommerce during the
eight months in 2009 that it was consolidated by the Company.
Revenue increased from $71.2 million in 2008 to $90.3 million in 2009, an increase of $19.1
million. The majority of this increase, $17.6 million, was attributable to revenue growth at ICG
Commerce, which increased 28% from 2008 to 2009 due to that Companys expanding customer base and the
continuation of long-term relationships. Increased revenue at InvestorForce in 2009 also
contributed to the annual increase in consolidated revenue, while revenue of Vcommerce from January
2009 through the date of its deconsolidation in August 2009 decreased slightly from the eight
months of revenue consolidated in 2008.
Operating Expenses
Operating expenses increased from $84.8 million in 2009 to $108.5 million in 2010, an increase of
$23.7 million. The increase primarily relates to increases in cost of revenue and selling, general
and administrative expenses. The most significant of these increases was a 24% increase in cost of
revenue at ICG Commerce related to increased headcount and other customer-related expenses, as well
as selling, general and administrative expenses incurred by GovDelivery during the year ended
December 31, 2010 that was 200% higher than the selling, general and administrative expenses
recognized by Vcommerce during the eight-month 2009 period that it was included in ICGs
consolidated results.
Operating expenses increased from $74.0 million in 2008 to $84.8 million in 2009, an increase of
$10.8 million. This increase was the result of increases in the cost of revenue and selling,
general and administrative expenses, primarily expenses related to an increase in headcount of
approximately 100 employees in 2009 needed to service new customers at ICG Commerce. An increase
in selling, general and administrative expenses at InvestorForce also contributed to the increase
in operating expenses from 2008 to 2009 and was related to the hiring of certain additional key
personnel in late 2008 and early 2009. The decrease in research and development costs from 2008 to
2009 was related to cost reduction efforts at Vcommerce in the first half of 2009.
Income Tax
Income tax expenses of $6.3 million at ICG Commerce for the year ended December 31, 2010
(which represents income tax expense before ICG Commerce became a
member of the Companys consolidated U.S. tax return group on
July 1, 2010)
was offset
by an income tax benefit of $0.1 million for a net operating loss carryback claim related to
InvestorForce. ICG Commerce recorded an income tax benefit of $28.9 million for the year ended
December 31, 2009 related to the reduction of a portion of ICG Commerces valuation allowance.
Based on ICG Commerces recent history of profitability and estimates of continued profitability,
ICG Commerce believes it is more likely than not that the majority of its available net deferred
tax assets will be realized.
26
Equity Loss
A portion of our net results from our core companies is derived from those partner companies in
which we hold a substantial noncontrolling ownership interest. Our share of the net income or net
losses of these partner companies is recorded in our Consolidated Statements of Operations under
Equity loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Selected data: |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
112,604 |
|
|
$ |
116,584 |
|
|
$ |
118,434 |
|
Total net loss |
|
$ |
(11,389 |
) |
|
$ |
(9,775 |
) |
|
$ |
(32,745 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of total net loss |
|
$ |
(4,379 |
) |
|
$ |
(4,659 |
) |
|
$ |
(13,304 |
) |
Amortization of intangible assets |
|
|
(1,663 |
) |
|
|
(1,629 |
) |
|
|
(1,054 |
) |
|
|
|
|
|
|
|
|
|
|
Equity loss |
|
$ |
(6,042 |
) |
|
$ |
(6,288 |
) |
|
$ |
(14,358 |
) |
|
|
|
|
|
|
|
|
|
|
Revenue at our equity core companies, excluding Metastorm, decreased from $116.6 million in 2009 to
$112.6 million in 2010, a decrease of $4.0 million. This decrease relates to decreases in revenue
at Freeborders, StarCite and WhiteFence, partially offset by an increase in revenue at Channel
Intelligence. Aggregate net loss increased from 2009 to 2010, which was primarily the result of a
decline in results at Channel Intelligence and Freeborders, partially offset by improved results at
StarCite, primarily due to workforce and program reductions and other cost-cutting initiatives.
Revenue
from our equity core companies, excluding Metastorm, decreased from $118.4 million in 2008 to
$116.6 million in 2009, a decrease of $1.8 million, primarily due to decreases in revenue at
StarCite and WhiteFence. These decreases were driven in large part by difficult macroeconomic
conditions that began in late 2008 and continued through 2009. Despite the decrease in aggregate
revenue, net results at each of our equity core companies improved from 2008 to 2009 due to
improved cost management and the absence of one-time charges recorded in 2008, resulting in a
decrease in aggregate net loss in 2009 compared to 2008 and a significant decrease in our share of
this aggregate net loss.
Results of Operations Venture Companies
The following presentation includes our share of the results of our venture 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 companies is recorded in our
Consolidated Statements of Operations under Equity loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Selected data: |
|
|
|
|
|
|
|
|
|
|
|
|
Our share of total net loss |
|
$ |
(3,481 |
) |
|
$ |
(3,020 |
) |
|
$ |
(4,381 |
) |
Amortization of intangible assets |
|
|
(668 |
) |
|
|
(177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity loss |
|
$ |
(4,149 |
) |
|
$ |
(3,197 |
) |
|
$ |
(4,381 |
) |
|
|
|
|
|
|
|
|
|
|
Equity loss related to our venture companies increased from 2009 to 2010, primarily as a result of
a full year of equity loss related to Acquirgy and SeaPass in 2010, which were acquired in July
2009 and October 2009, respectively. GoIndustry reported income for a portion of 2010; we did not
record our share of this income in our Consolidated Statements of Operations. We will not record
our share of any income reported by GoIndustry until such time as our share of income equals the
historical unrecorded losses associated with GoIndustry.
27
Equity loss related to our venture companies decreased from 2008 to 2009 due to the improvement of
GoIndustrys net results in 2009, partially offset by a full year of equity loss related to
ClickEquations in 2009 compared with ten months in 2008 and the acquisitions of Acquirgy and SeaPass
in 2009.
Results of Operations Reconciling Items
Dispositions
On August 31, 2010, GovDelivery completed the sale of one of its subsidiaries, GovDocs, Inc.
(GovDocs) to a former executive of GovDelivery for aggregate consideration of $1.8 million.
GovDocs had revenue and net income of $1.4 million and $0.2 million, respectively, from January 1,
2010 through August 31, 2010, which were included in our core segment. In addition the Company recognized a net gain on the sale of
GovDocs of $0.6 million. GovDocs revenue and operating results from that period have been separated from
continuing operations and its net results, along with the net gain on the sale of GovDocs, are presented
in the single line item, Income (loss) from discontinued operations, including gain on sale, on
our Consolidated Statements of Operations, as well as included in Dispositions in the Results of
Operations segment information table.
On February 17, 2011, the sale of Metastorm to Open Text was consummated. We recorded equity loss
related to our share of Metastorms results of $2.6 million, $1.6 million and $4.4 million for the
years ended December 31, 2010, 2009 and 2008. Additionally, we recorded $0.3 million, $0.5 million
and $0.4 million of ICGs intangible asset amortization related to Metastorm for the respective
periods. Although we considered Metastorm a core equity company, our share of Metastorms results
and the related ICG intangible asset amortization have been removed from the results of our core
segment and are included in Dispositions in the Results of Operations segment information table
above for all periods presented.
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
General and administrative |
|
$ |
(17,169 |
) |
|
$ |
(16,257 |
) |
|
$ |
(19,775 |
) |
Impairment related and other |
|
|
(796 |
) |
|
|
|
|
|
|
(794 |
) |
Interest income (expense), net |
|
|
281 |
|
|
|
399 |
|
|
|
1,603 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(17,684 |
) |
|
$ |
(15,858 |
) |
|
$ |
(18,966 |
) |
|
|
|
|
|
|
|
|
|
|
General and Administrative
Our general and administrative expenses increased $0.9 million from 2009 to 2010, due to an
increase in employee-related expenses of $1.7 million, partially offset by decreases in
equity-based compensation and other outside services of $0.5 million and $0.3 million,
respectively. Employee-related expenses were higher in 2010 than 2009, primarily
due to our 2009 performance plan. For 2009, we implemented a one-time reduction of the target
bonus under the performance plan
for certain employees.
The decrease of $3.5 million in general and administrative expenses from 2008 to 2009 is primarily
due to a decrease of $3.1 million in equity based compensation, coupled with decreases of $0.3
million in consulting fees, $0.2 million in financial reporting costs and $0.2 million in insurance
premiums, partially offset by an increase in employee-related expenses of $0.3 million, primarily
related to increased headcount.
Impairment-Related and Other
Our impairment-related and other expenses related to severance charges of $0.8 million in both 2010
and 2008, which were primarily related to cash payments.
28
Interest Income/Expense
Interest income decreased from $0.4 million in 2009 to $0.3 million in 2010, a decrease of $0.1
million, due to slightly lower average interest rate yields in 2010. The net decrease of $1.2
million in our interest income (expense) from 2008 to 2009 is attributable to the decrease in our
average cash balances compounded with decreases in interest rates.
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate other income (loss), net
(excluding impairments of cost method
partner companies) |
|
$ |
74,507 |
|
|
$ |
15,976 |
|
|
$ |
49,012 |
|
Impairments of cost method partner companies |
|
|
|
|
|
|
|
|
|
|
(4,735 |
) |
|
|
|
|
|
|
|
|
|
|
Other income (loss), net |
|
|
74,507 |
|
|
|
15,976 |
|
|
|
44,277 |
|
|
|
|
|
|
|
|
|
|
|
Impairment of carrying value of GoIndustry
(venture) (venture equity company) |
|
|
(2,914 |
) |
|
|
(544 |
) |
|
|
(10,204 |
) |
Impairment of goodwill related to Vcommerce
(core) (consolidated core company) |
|
|
|
|
|
|
(4,876 |
) |
|
|
(8,264 |
) |
Income tax benefit (expense) |
|
|
5,918 |
|
|
|
10,627 |
|
|
|
330 |
|
Noncontrolling interest |
|
|
(1,319 |
) |
|
|
(12,995 |
) |
|
|
(1,960 |
) |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
76,192 |
|
|
$ |
8,188 |
|
|
$ |
24,179 |
|
|
|
|
|
|
|
|
|
|
|
Corporate Other Income (Loss), Net
Corporate other income (loss), net for the year ended December 31, 2010 of $74.5 million was
comprised of a $67.0 million gain on the sale of marketable securities, primarily Blackboard Inc. (Blackboard) common stock
(including a loss of $0.2 million to terminate hedges on our Blackboard common
stock holdings in the period), a $7.0 million gain related to escrow releases and other
distributions related to prior ownership interests in partner companies and a $0.5 million gain
related to an increase in the value of our Blackboard hedges from December 31, 2009 through the
termination of these hedges in 2010.
Corporate other income (loss), net of $16.0 million in 2009 related primarily to a gain on the sale
of marketable securities of $21.3 million, coupled with gains totaling $2.6 million related to the
sale of interests in partner companies. These gains were offset by unrealized losses related to
the mark-to-market impact of our Blackboard hedges of $7.6 million and a $0.3 million net dilution
loss resulting from equity transactions at certain of our partner companies during 2009, which
affected our ownership in those partner companies.
Corporate other income (loss), net of $44.3 million in 2008 related primarily to the sale of
interests in partner companies of $38.0 million and unrealized gains related to the mark-to-market
impact of our Blackboard hedges of $10.2 million.
See Note 15, Other Income (Loss), to our Consolidated Financial Statements.
Impairment Charges
We recorded an impairment charge of $2.9 million in 2010 to our basis in GoIndustry related to a
decrease in the fair market value of our equity holdings in GoIndustry during the period.
We recorded impairment charges of $5.4 million in 2009. Of this amount, $4.9 million related to
the impairment of goodwill associated with Vcommerce, and the remaining $0.5 million was an
impairment charge related to our carrying value of GoIndustry.
29
We recorded impairment charges of $23.2 million in 2008. Of this amount, $8.3 million related to
the impairment of goodwill associated with our partner companies, and $14.9 million was a reduction
to our basis in partner companies accounted for under the cost and equity methods.
See Note 4, Goodwill and Intangibles, net, to our Consolidated Financial Statements.
Corporate Income Tax
ICG recorded a tax benefit of $1.1 million in 2010, which was 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 first half of 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. In addition, the
Company recorded an income tax benefit of $4.8 million in consolidation, in order to recognize the
effect of ICG Commerce joining the Companys U.S. income tax return filing as a result of the
Companys increased equity ownership in ICG Commerce.
The
income tax benefits recorded in 2009 and 2008 represent net operating
losses that have been carried back to
2005 as a result of newly-enacted legislation, as well as the results of the Internal Revenue
Services examination of the Companys federal income tax returns for the years 2005, 2006 and
2007.
See Note 16, Income Taxes, to our Consolidated Financial Statements.
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, revenue 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, revenue, 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.
30
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 a customer contract, which approximates the life of the relevant customer
relationship.
GovDelivery revenue generally consists of nonrefundable setup fees and monthly maintenance 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.
InvestorForce 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. Any 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, when it sold substantially all of its assets and liabilities. Vcommerce
generated revenue from service fees it earned in connection with the development and operations 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 the 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 would be 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.
31
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. Any marketable securities we hold
are reported at fair value on our Consolidated Balance Sheets based on quoted prices in active
markets for identical or comparable assets.
Recent Accounting Pronouncements
In December 2010, the Financial Accounting Standards Board (FASB) issued accounting guidance
related to the two-step approach for impairment testing of reporting units with zero or negative
carrying amounts. This guidance requires companies to consider adverse qualitative factors, in
addition to quantitative factors, in its assessment of whether the carrying amount of a reporting
unit exceeds its fair value if it is more likely than not that a goodwill impairment exists for a
reporting unit with a zero or negative carrying amount and to determine whether goodwill has been
impaired and calculate the amount of that impairment. This guidance is effective for us beginning
on January 1, 2011. We do not expect that this guidance will have a significant impact on our
consolidated financial statements.
In December 2010, the FASB issued accounting guidance related to reporting pro forma information
for business combinations in the footnotes of a companys financial statements, and requires that
entities presenting comparative financial statements should disclose pro forma revenue and earnings
of the combined entity as though the business combination(s) that occurred during the current year
had occurred as of the beginning of the comparable prior annual reporting period and carry forward
any related adjustments through the current reporting period. This guidance also expands the
supplemental pro forma disclosures to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business combination(s) included in
the reported pro forma revenue and earnings. This guidance is effective for us beginning on
January 1, 2011 and will be applied to any acquisitions that occur on or after that date. We do
not expect that this guidance will have a significant impact on our consolidated financial
statements.
In October 2009, the FASB issued accounting guidance for recognition of revenue arrangements 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 us beginning on January 1, 2011. We do not expect that this guidance will have a
significant impact 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 is effective for us beginning on January 1, 2011. We do not expect that this guidance
will have a significant impact on our consolidated financial statements.
32
|
|
|
ITEM 7A. |
|
Quantitative and Qualitative Disclosures About Market Risk |
ICG Commerce conducts a portion of its business in foreign currencies, primarily those of European
countries and, from time to time, 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 year ended December 31, 2010, ICG Commerce purchased a put option to
mitigate the risk of currency fluctuations at ICG Commerces operations in the United Kingdom.
This option was net settled each quarter and matured on December 31, 2010, resulting in an
immaterial loss in the period.
ICG Commerce is party to a term loan agreement with PNC Bank in the amount of $20.0 million, the
interest rate for which is computed based on certain fixed and variable indices. During the year
ended December 31, 2010, ICG Commerce entered into a rate swap transaction to minimize the risk of
interest rate fluctuations. This rate swap transaction net settles each month and matures on
August 1, 2015. ICG Commerce recognized an immaterial loss in the period related to this
instrument.
We are exposed to equity price risks on the marketable portion of our equity securities. Our
public holdings at December 31, 2010 include an equity position in GoIndustry, which has
experienced significant historical volatility in its stock prices. A 20% adverse change in equity
prices, based on a sensitivity analysis of our holdings in GoIndustry as of December 31, 2010,
would result in a decrease in the fair value of our public holdings of approximately $0.7 million.
Although a 20% adverse change in equity prices would cause the fair value of our holdings in
GoIndustry to decrease to $2.8 million, our carrying value of the Companys equity holdings in
GoIndustry was $2.3 million as of December 31, 2010. Accordingly, a 20% adverse change in equity
prices of our public holdings at December 31, 2010 would have no impact to our Consolidated Balance
Sheets or Consolidated Statements of Operations.
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, if any, are carried at fair value.
33
|
|
|
ITEM 8. |
|
Financial Statements and Supplementary Data |
The following Consolidated Financial Statements, and the related Notes thereto, of ICG
Group, Inc. and the Report of Independent Registered Public Accounting Firm are filed as a part of
this Report.
|
|
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|
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|
|
Page |
|
|
|
Number |
|
|
|
|
35 |
|
|
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|
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|
36 |
|
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|
|
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|
37 |
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|
38 |
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39 |
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40 |
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|
|
41 |
|
34
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
ICG Group, Inc. (formerly Internet Capital Group, Inc.):
We have audited the accompanying consolidated balance sheets of ICG Group, Inc.
(formerly Internet Capital Group, Inc.) and
subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated
statements of operations, changes in equity, comprehensive income (loss) and cash flows for each of
the years in the three-year period ended December 31, 2010. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of ICG Group, Inc.
(formerly Internet Capital Group, Inc.) and subsidiaries as of
December 31, 2010 and 2009, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2010, in conformity with U. S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), ICG Group, Inc.s (formerly Internet
Capital Group, Inc.s) internal control over financial reporting as
of December 31, 2010, based on criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated March 16, 2011 expressed an unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.
/s/ KPMG LLP
Philadelphia, Pennsylvania
March 16, 2011
35
ICG GROUP, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands, except per share data) |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
92,438 |
|
|
$ |
55,481 |
|
Restricted cash |
|
|
201 |
|
|
|
47 |
|
Accounts receivable, net of allowance ($716-2010; $590-2009) |
|
|
25,832 |
|
|
|
19,120 |
|
Deferred tax assets |
|
|
4,830 |
|
|
|
8,147 |
|
Income tax receivable |
|
|
6,314 |
|
|
|
11,071 |
|
Prepaid expenses and other current assets |
|
|
2,528 |
|
|
|
2,146 |
|
Assets of discontinued operations |
|
|
|
|
|
|
1,750 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
132,143 |
|
|
|
97,762 |
|
Marketable securities |
|
|
|
|
|
|
73,512 |
|
Fixed assets, net |
|
|
5,991 |
|
|
|
4,179 |
|
Ownership interests in partner companies |
|
|
83,829 |
|
|
|
97,777 |
|
Goodwill |
|
|
20,317 |
|
|
|
20,317 |
|
Intangibles, net |
|
|
13,832 |
|
|
|
14,789 |
|
Deferred tax assets |
|
|
22,973 |
|
|
|
20,724 |
|
Other assets, net |
|
|
1,904 |
|
|
|
1,027 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
280,989 |
|
|
$ |
330,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
4,623 |
|
|
$ |
381 |
|
Accounts payable |
|
|
1,973 |
|
|
|
1,590 |
|
Accrued expenses |
|
|
2,777 |
|
|
|
4,463 |
|
Accrued compensation and benefits |
|
|
15,327 |
|
|
|
12,218 |
|
Deferred revenue |
|
|
10,293 |
|
|
|
5,668 |
|
Liabilities of discontinued operations |
|
|
|
|
|
|
320 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
34,993 |
|
|
|
24,640 |
|
Long-term debt |
|
|
15,458 |
|
|
|
645 |
|
Deferred revenue |
|
|
60 |
|
|
|
83 |
|
Other liabilities |
|
|
867 |
|
|
|
1,010 |
|
Hedges of marketable securities |
|
|
|
|
|
|
547 |
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
51,378 |
|
|
|
26,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest (Note 18) |
|
|
1,182 |
|
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
ICG 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, 39,439
(2010) and 38,796 (2009) issued |
|
|
39 |
|
|
|
39 |
|
Additional paid-in capital |
|
|
3,541,044 |
|
|
|
3,573,347 |
|
Treasury stock, at cost, 2,440 shares (2010) and 2,440 shares (2009) |
|
|
(12,031 |
) |
|
|
(12,031 |
) |
Accumulated deficit |
|
|
(3,305,299 |
) |
|
|
(3,351,888 |
) |
Accumulated other comprehensive income |
|
|
54 |
|
|
|
71,198 |
|
|
|
|
|
|
|
|
Total ICG Group, Inc.s Stockholders Equity |
|
|
223,807 |
|
|
|
280,665 |
|
Noncontrolling Interest |
|
|
4,622 |
|
|
|
21,077 |
|
|
|
|
|
|
|
|
Total Equity |
|
|
228,429 |
|
|
|
301,742 |
|
|
|
|
|
|
|
|
Total Liabilities, Redeemable noncontrolling interest and
Equity |
|
$ |
280,989 |
|
|
$ |
330,087 |
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
36
ICG GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
115,710 |
|
|
$ |
90,252 |
|
|
$ |
71,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
71,050 |
|
|
|
56,920 |
|
|
|
46,400 |
|
Selling, general and administrative |
|
|
42,206 |
|
|
|
34,578 |
|
|
|
36,165 |
|
Research and development |
|
|
10,644 |
|
|
|
9,015 |
|
|
|
10,212 |
|
Amortization of intangible assets |
|
|
1,357 |
|
|
|
205 |
|
|
|
205 |
|
Impairment related and other |
|
|
1,182 |
|
|
|
5,192 |
|
|
|
9,847 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
126,439 |
|
|
|
105,910 |
|
|
|
102,829 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(10,729 |
) |
|
|
(15,658 |
) |
|
|
(31,648 |
) |
Other income (loss), net |
|
|
74,147 |
|
|
|
16,578 |
|
|
|
43,225 |
|
Interest income |
|
|
330 |
|
|
|
446 |
|
|
|
1,850 |
|
Interest expense |
|
|
(366 |
) |
|
|
(216 |
) |
|
|
(334 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
income taxes and equity loss |
|
|
63,382 |
|
|
|
1,150 |
|
|
|
13,093 |
|
Income tax benefit (expense) |
|
|
(254 |
) |
|
|
39,510 |
|
|
|
(357 |
) |
Equity loss |
|
|
(16,022 |
) |
|
|
(12,131 |
) |
|
|
(33,702 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
47,106 |
|
|
|
28,529 |
|
|
|
(20,966 |
) |
Income (loss) from discontinued operations,
including gain on sale |
|
|
802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
47,908 |
|
|
|
28,529 |
|
|
|
(20,966 |
) |
Less: Net income attributable to the
noncontrolling interest |
|
|
1,319 |
|
|
|
12,995 |
|
|
|
1,960 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG
Group, Inc. |
|
$ |
46,589 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to ICG Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations |
|
$ |
45,977 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
Net income (loss) from discontinued operations |
|
|
612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
46,589 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share attributable to
ICG Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
1.26 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
Income (loss) on discontinued operations |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
1.28 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic income (loss)
per share |
|
|
36,427 |
|
|
|
36,660 |
|
|
|
38,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share attributable
to ICG Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
1.24 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
Income (loss) on discontinued operations |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
1.26 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of diluted income (loss)
per share |
|
|
37,064 |
|
|
|
36,705 |
|
|
|
38,106 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
37
ICG GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICG Group, Inc. Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock, |
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Non- |
|
|
|
|
|
|
Common Stock |
|
|
at cost |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
controlling |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income |
|
|
Interest |
|
|
Total |
|
Balance as of December 31, 2007 |
|
|
38,651 |
|
|
$ |
39 |
|
|
|
|
|
|
$ |
|
|
|
$ |
3,564,268 |
|
|
$ |
(3,344,496 |
) |
|
$ |
84,847 |
|
|
$ |
5,143 |
|
|
$ |
309,801 |
|
Equity-based compensation expense related to
restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,577 |
|
Impact of partner company equity transactions (Note
5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(629 |
) |
|
|
|
|
|
|
|
|
|
|
331 |
|
|
|
(298 |
) |
Issuance of restricted stock |
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surrenders of restricted stock |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87 |
) |
Equity-based compensation related to stock
appreciation rights and stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,167 |
|
Exercise of stock appreciation rights, net of
surrenders |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
Issuance of deferred stock units to directors |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
616 |
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
(1,948 |
) |
|
|
(9,329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,329 |
) |
Noncontrolling owners share of AOCI of consolidated
subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117 |
|
|
|
(117 |
) |
|
|
|
|
2008 LP capital contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
Net unrealized depreciation in marketable securities
and reclassification adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,662 |
) |
|
|
|
|
|
|
(30,662 |
) |
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,926 |
) |
|
|
|
|
|
|
1,960 |
|
|
|
(20,966 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008 |
|
|
38,703 |
|
|
|
39 |
|
|
|
(1,948 |
) |
|
|
(9,329 |
) |
|
|
3,569,919 |
|
|
|
(3,367,422 |
) |
|
|
54,302 |
|
|
|
7,317 |
|
|
|
254,826 |
|
Equity-based compensation expense related to
restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256 |
|
Impact of partner company equity transactions (Note
5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331 |
|
|
|
|
|
|
|
|
|
|
|
695 |
|
|
|
1,026 |
|
Issuance of restricted stock |
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surrenders of restricted stock |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8 |
) |
Equity-based compensation related to stock
appreciation rights and stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,633 |
|
Issuance of deferred stock units to directors |
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202 |
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
(492 |
) |
|
|
(2,702 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,702 |
) |
Noncontrolling owners share of AOCI of consolidated
subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
70 |
|
|
|
|
|
2009 LP capital contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
Net unrealized depreciation in marketable securities
and reclassification adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,966 |
|
|
|
|
|
|
|
16,966 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,534 |
|
|
|
|
|
|
|
12,995 |
|
|
|
28,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009 |
|
|
38,796 |
|
|
|
39 |
|
|
|
(2,440 |
) |
|
|
(12,031 |
) |
|
|
3,573,347 |
|
|
|
(3,351,888 |
) |
|
|
71,198 |
|
|
|
21,077 |
|
|
|
301,742 |
|
Equity impact of incremental acquisitions of
consolidated subsidiaries (Note 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38,889 |
) |
|
|
|
|
|
|
27 |
|
|
|
(10,796 |
) |
|
|
(49,658 |
) |
Impact of redeemable noncontrolling interest
accretion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(197 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(197 |
) |
Equity-based compensation expense related to
restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
Impact of partner company equity transactions (Notes 3
and 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,092 |
|
|
|
|
|
|
|
|
|
|
|
(6,924 |
) |
|
|
(2,832 |
) |
Issuance of restricted stock |
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surrenders of restricted stock and deferred stock units |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29 |
) |
Equity-based compensation related to stock
appreciation rights and stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,038 |
|
Exercise of stock appreciation rights and stock
options, net of surrenders |
|
|
553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117 |
|
Issuance of deferred stock units to directors |
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416 |
|
Noncontrolling owners share of AOCI of consolidated
subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
1 |
|
|
|
|
|
Net unrealized depreciation in marketable securities
and reclassification adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71,170 |
) |
|
|
|
|
|
|
(71,170 |
) |
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,589 |
|
|
|
|
|
|
|
1,264 |
|
|
|
47,853 |
|
Other
activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010 |
|
|
39,439 |
|
|
$ |
39 |
|
|
|
(2,440 |
) |
|
$ |
(12,031 |
) |
|
$ |
3,541,044 |
|
|
$ |
(3,305,299 |
) |
|
$ |
54 |
|
|
$ |
4,622 |
|
|
$ |
228,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
38
ICG GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
47,908 |
|
|
$ |
28,529 |
|
|
$ |
(20,966 |
) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gains (losses) in marketable securities |
|
|
(4,055 |
) |
|
|
38,251 |
|
|
|
(30,028 |
) |
Reclassification adjustments/realized net
(gains) loss on marketable securities |
|
|
(67,115 |
) |
|
|
(21,285 |
) |
|
|
(634 |
) |
Other accumulated other comprehensive income (loss) |
|
|
26 |
|
|
|
(70 |
) |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
(23,236 |
) |
|
|
45,425 |
|
|
|
(51,511 |
) |
Less: Comprehensive income attributable to the
noncontrolling interest |
|
|
1,318 |
|
|
|
12,925 |
|
|
|
2,077 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to
ICG Group, Inc. |
|
$ |
(24,554 |
) |
|
$ |
32,500 |
|
|
$ |
(53,588 |
) |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Consolidated Financial Statements.
39
ICG GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Operating Activities continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
47,908 |
|
|
$ |
28,529 |
|
|
$ |
(20,966 |
) |
(Income) loss from discontinued operations |
|
|
(802 |
) |
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to cash provided by (used in)
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,927 |
|
|
|
1,747 |
|
|
|
1,858 |
|
Impairment related and other |
|
|
1,182 |
|
|
|
5,021 |
|
|
|
9,392 |
|
Equity-based compensation |
|
|
3,069 |
|
|
|
3,651 |
|
|
|
6,804 |
|
Equity loss |
|
|
16,022 |
|
|
|
12,131 |
|
|
|
33,702 |
|
Other (income) loss |
|
|
(74,147 |
) |
|
|
(16,578 |
) |
|
|
(43,225 |
) |
Deferred income taxes |
|
|
791 |
|
|
|
(28,871 |
) |
|
|
|
|
Changes in assets and liabilities, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(6,530 |
) |
|
|
(4,083 |
) |
|
|
(6,409 |
) |
Tax receivable |
|
|
4,757 |
|
|
|
(10,627 |
) |
|
|
(444 |
) |
Prepaid expenses and other assets |
|
|
(135 |
) |
|
|
(71 |
) |
|
|
4,130 |
|
Accounts payable |
|
|
421 |
|
|
|
(349 |
) |
|
|
618 |
|
Accrued expenses |
|
|
(1,816 |
) |
|
|
142 |
|
|
|
(671 |
) |
Accrued compensation and benefits |
|
|
2,469 |
|
|
|
1,842 |
|
|
|
831 |
|
Deferred revenue |
|
|
4,166 |
|
|
|
(1,472 |
) |
|
|
1,672 |
|
Other liabilities |
|
|
(113 |
) |
|
|
9 |
|
|
|
323 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) operating activities |
|
|
1,169 |
|
|
|
(8,979 |
) |
|
|
(12,385 |
) |
Investing Activities continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
|
(4,168 |
) |
|
|
(2,995 |
) |
|
|
(1,162 |
) |
Advanced deposits for acquisition of fixed assets |
|
|
(30 |
) |
|
|
274 |
|
|
|
(422 |
) |
Change in restricted cash |
|
|
(154 |
) |
|
|
172 |
|
|
|
(27 |
) |
Proceeds from sales of marketable securities |
|
|
74,383 |
|
|
|
21,625 |
|
|
|
60,233 |
|
Proceeds from sales of partner company ownership interests |
|
|
1,878 |
|
|
|
2,607 |
|
|
|
3,267 |
|
Acquisitions of ownership interests in partner companies |
|
|
(2,786 |
) |
|
|
(46,654 |
) |
|
|
(35,478 |
) |
Increase in cash due to consolidation of partner companies |
|
|
|
|
|
|
2,807 |
|
|
|
2,553 |
|
Decrease in cash due to sale of subsidiary assets |
|
|
|
|
|
|
(81 |
) |
|
|
|
|
Proceeds from sale of discontinued operations |
|
|
670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) investing activities |
|
|
69,793 |
|
|
|
(22,245 |
) |
|
|
28,964 |
|
Financing Activities continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of incremental 17% in ICG Commerce |
|
|
(49,658 |
) |
|
|
|
|
|
|
|
|
Borrowings of long-term debt |
|
|
21,062 |
|
|
|
|
|
|
|
1,500 |
|
Long-term debt repayments and capital lease obligations, net |
|
|
(2,575 |
) |
|
|
(150 |
) |
|
|
(696 |
) |
Line of credit repayments |
|
|
|
|
|
|
(115 |
) |
|
|
(68 |
) |
Purchase of treasury stock |
|
|
|
|
|
|
(2,702 |
) |
|
|
(9,329 |
) |
Payment of dividend by ICG Commerce |
|
|
(3,206 |
) |
|
|
|
|
|
|
|
|
Tax withholdings related to equity-based awards |
|
|
(1,777 |
) |
|
|
|
|
|
|
|
|
Exercises of stock options at parent |
|
|
1,894 |
|
|
|
|
|
|
|
|
|
Debt commitment fee |
|
|
(175 |
) |
|
|
|
|
|
|
|
|
Other financing activities |
|
|
(41 |
) |
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities |
|
|
(34,476 |
) |
|
|
(2,935 |
) |
|
|
(8,593 |
) |
Effect of exchange rates on cash |
|
|
(151 |
) |
|
|
345 |
|
|
|
(722 |
) |
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) operating activities |
|
|
633 |
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) investing activities |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents from
discontinued operations |
|
|
622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
36,957 |
|
|
|
(33,814 |
) |
|
|
7,264 |
|
Cash and cash equivalents at beginning of period |
|
|
55,481 |
|
|
|
89,295 |
|
|
|
82,031 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of period |
|
$ |
92,438 |
|
|
$ |
55,481 |
|
|
$ |
89,295 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
40
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
Description of the Company
ICG
Group, Inc. (f/k/a Internet Capital Group, Inc.) (the Company) acquires and builds SaaS, technology-enabled 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 Consolidated Financial Statements include the accounts of the Company and its wholly-owned and
wholly-controlled subsidiaries. The Consolidated Financial Statements also include the following
majority-owned subsidiaries for all or a portion of the periods presented, each of which has been
consolidated since the date the Company acquired majority voting control of that subsidiary.
The Consolidated Balance Sheets include the financial position of GovDelivery, ICG Commerce and
InvestorForce at December 31, 2010 and 2009.
The Consolidated Statements of Operations include the results of the following majority-owned
subsidiaries:
|
|
|
|
|
Year Ended December 31, |
2010 |
|
2009 |
|
2008 |
GovDelivery (1)
|
|
ICG Commerce
|
|
ICG Commerce |
ICG Commerce
|
|
InvestorForce
|
|
InvestorForce |
InvestorForce
|
|
Vcommerce (2)
|
|
Vcommerce (2) |
|
|
|
(1) |
|
On December 31, 2009, the Company acquired a controlling equity
ownership interest in GovDelivery. Accordingly, GovDeliverys results
have been included in the Companys Consolidated Statements of
Operations subsequent to that date. See Note 3, Acquisitions,
Discontinued Operations and ProForma Information. |
|
(2) |
|
On May 1, 2008, when the Companys ownership interest increased to 53%,
Vcommerce became a consolidated core company. Vcommerces results of
operations are included in the Companys Consolidated Statements of
Operations beginning May 1, 2008. 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 5, Ownership Interests in
Partner Companies. |
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.
41
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
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 operational 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 an equity method partner company, as well as voting rights associated with the
Companys holdings in common stock, preferred stock and other convertible instruments in that
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 Consolidated Statements of Operations. In 2010, those prior period
finalizations were 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 carrying value 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 the consolidation or the 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 Consolidated Balance Sheets or
Consolidated Statements of Operations. However, cost method partner company impairment charges are
recognized in the Consolidated Statements of Operations. If circumstances suggest that the value
of the partner company has subsequently recovered, such recovery is not recorded.
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.
42
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Use of Estimates
The preparation of financial statements in conformity with 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, which management believes to be reasonable under the
circumstances. Management adjusts such estimates and assumptions when facts and circumstances
dictate. In recent years, 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, goodwill and intangibles, net are not impaired at December 31,
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 (which, in the case of
any partner company listed on a public stock exchange, is the quoted stock price of the relevant
ownership interest) 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 the Companys 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.
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. At various times during the
years ended December 31, 2010, 2009 and 2008, the Company determined that impairment analyses were
warranted with respect to certain partner companies. As a result of these analyses, the Company
recorded impairment charges of $2.9 million, $5.4 million and $23.2 million during the years ended
December 31, 2010, 2009 and 2008, respectively. The Company performed its annual impairment test
during the fourth quarter of 2010 and concluded that the carrying value of its ownership interest
in partner companies, goodwill and net intangible assets did not require further impairment as of
December 31, 2010. See Note 4, Goodwill and Intangibles, net, and Note 5, Ownership Interests
in Partner Companies.
Revenue Recognition
During 2010, the Companys consolidated revenue was attributable to ICG Commerce, GovDelivery and
InvestorForce. During 2009 and 2008, the Companys consolidated revenue was attributable to ICG
Commerce, Vcommerce and InvestorForce.
43
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
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 revenue generally consists 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.
InvestorForce 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, InvestorForce charges its clients minimum quarterly
base fees 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 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.
Deferred Revenue
Deferred revenue consists primarily of payments received in advance of revenue being earned under
procurement sourcing arrangements and future implementation, professional services and transaction
fees.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original maturity of 90 days or less at
the time of purchase to be cash equivalents. Cash and cash equivalents at December 31, 2010 and
2009 were invested principally in money market accounts.
44
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Restricted Cash
The Company considers cash that is legally restricted and cash that is held as a compensating
balance for letter of credit arrangements as restricted cash. The Company had no long-term
restricted cash at December 31, 2010 or 2009.
Marketable Securities
Marketable securities are reported at fair value, based on quoted market prices, with the net
unrealized gain or loss reported as a component of Accumulated Other Comprehensive Income in
ICG Group, Inc.s Stockholders Equity on the Companys Consolidated Statements of
Changes in Equity.
Financial Instruments
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.
Research and Development
Research and development costs are charged to expense as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method, whereby deferred tax assets
and liabilities are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which the temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Net Income (Loss) Per Share
Basic net income (loss) per share (EPS) is computed using the weighted average number of common
shares outstanding during each period. Diluted EPS includes shares, unless anti-dilutive, that
would arise from the exercise of stock options and conversion of other convertible securities and
is adjusted, if applicable, for the effect on net income (loss) of such transactions. In 2010 and
2009, the Company included all quarters for purposes of the year to date net income included in the
diluted EPS calculation. Because the Company incurred losses for 2008, the effects of potentially
dilutive securities are not included, as they would be anti-dilutive. See Note 17, Net Income
(Loss) per Share.
Issuances of Stock by Partner Companies
The effects of any changes in the Companys equity ownership interest in a partner company
resulting from the issuance of additional equity interests by that partner company accounted for
under the consolidation or equity method of accounting are accounted for as a disposition of shares
by the Company. The difference between the carrying amount of the Companys ownership interest in
the partner company and the underlying net book value of the partner company after the issuance of
stock by the partner company is reflected as an equity transaction in the Companys Consolidated
Statements of Changes in Equity, or as a gain or loss in the Companys Consolidated Statements of
Operations.
45
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Escrowed Proceeds
When an interest in one of the Companys partner companies is sold, a portion of the sale
consideration may be held in escrow primarily to satisfy purchase price adjustments and/or
indemnity claims. The Company records escrow arrangements at the time the Company is entitled to
the escrow proceeds, the amount is fixed or determinable and realization is assured. At December
31, 2010, the Company has aggregate contingent gains of $2.7 million associated with these
outstanding escrows, which are scheduled to expire at various dates within the next two years,
subject to indemnity claims pursuant to the terms of the specific sale agreements.
Concentration of Customer Base and Credit Risk
For the year ended December 31, 2010, two customers of ICG Commerce, The Hertz Corporation and
Kimberly-Clark Corporation, represented approximately 11% and 10%, respectively, of ICGs
consolidated revenue. For the year ended December 31, 2009, these two customers each represented
approximately 13% of ICGs consolidated revenue. For the year ended December 31, 2008, these two
customers each represented approximately 17% of ICGs consolidated revenue. Accounts receivable
from The Hertz Corporation and Kimberly-Clark Corporation as of December 31, 2010 were $2.7 million
and $1.1 million, respectively. Accounts receivable from The Hertz Corporation and Kimberly-Clark
Corporation as of December 31, 2009 were $1.7 million and $1.5 million, respectively. The accounts
receivable balances as of December 31, 2010 for The Hertz Corporation and Kimberly-Clark
Corporation include $0.7 million and $0.1 million, respectively, of unbilled accounts receivable.
The accounts receivable balances as of December 31, 2009 for The Hertz Corporation and
Kimberly-Clark Corporation include $0.2 million and $0.1 million, respectively, of unbilled
accounts receivable.
Equity-Based Compensation
We recognize equity-based compensation expense in our Consolidated Financial Statements for all
share options and other equity-based arrangements that are expected to vest. Equity-based
compensation expense is measured at the date of grant, based on the fair value of the award, and is
recognized over the employees requisite service period.
Comprehensive Income (Loss)
The Company reports and displays comprehensive income (loss) and its components in the Consolidated
Statements of Comprehensive Income (loss). Comprehensive income (loss) is the change in equity of
a business enterprise during a period from non-owner sources. In addition to net income (loss),
the Companys sources of comprehensive income (loss) are from net unrealized appreciation on its
marketable securities and foreign currency translation adjustments. Reclassification adjustments
result from the recognition of gains or losses in net income that were included in comprehensive
income (loss) in prior periods.
Supplemental Cash Flow Disclosures
In 2010, 2009 and 2008, the Company paid interest of $0.3 million, $0.2 million and $0.3 million,
respectively. The Company made income tax payments of $0.5 million, $0.8 million and $0.6 million
in 2010, 2009 and 2008, respectively. In addition, the Company received income tax refunds of $5.3
million and $4.9 million in 2010 and 2008, respectively. A capital lease obligation of $0.6
million was incurred when ICG Commerce entered into a lease for computer software equipment during
2010.
46
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
Reclassifications
Certain amounts in the prior year
financial statements have been reclassified to conform to the current-year presentation. Redeemable
noncontrolling interest reported on the Companys Consolidated Balance Sheets of $1.4 million
as of December 31, 2009 was reclassified out of the line item Noncontrolling Interest on the
Companys Consolidated Balance Sheets to Redeemable noncontrolling interest as
compared to the Companys Form 10-K for the year ended December 31, 2009 filed on March 16, 2010.
See Note 18, Redeemable Noncontrolling Interest. The impact of the reclassifications
made to prior year amounts are not material and did not affect net income (loss).
Recent Accounting Pronouncements
In December 2010, the FASB issued accounting guidance related to the two-step approach for
impairment testing of reporting units with zero or negative carrying amounts. This guidance
requires companies to consider adverse qualitative factors, in addition to quantitative factors, in
its assessment of whether the carrying amount of a reporting unit exceeds its fair value if it is
more likely than not that a goodwill impairment exists for a reporting unit with a zero or negative
carrying amount, and to determine whether goodwill has been impaired and calculate the amount of
that impairment. This guidance is effective for the Company beginning on January 1, 2011 and is
not expected to have a significant impact on its consolidated financial statements.
In December 2010, the FASB issued accounting guidance related to reporting pro forma information
for business combinations in the footnotes of a companys financial statements, and requires that
entities presenting comparative financial statements should disclose pro forma revenue and earnings
of the combined entity as though the business combination(s) that occurred during the current year
had occurred as of the beginning of the comparable prior annual reporting period and carry forward
any related adjustments through the current reporting period. This guidance also expands the
supplemental pro forma disclosures to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the business combination(s) included in
the reported pro forma revenue and earnings. This guidance is effective for the Company beginning
on January 1, 2011 and will be applied to any acquisitions that occur on or after that date. The
Company does not expect that this guidance will 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 and is not
expected to have a significant impact on its 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 is effective for the Company beginning on January 1, 2011 and is not expected to have a
significant impact on its consolidated financial statements.
47
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (Continued)
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. Acquisitions, Discontinued Operations and Pro Forma Information
Acquisitions
On December 31, 2009, the Company acquired 89% of the equity of GovDelivery. The Company has
allocated the purchase price to the assets and the liabilities based upon their respective fair
values at the date of acquisition, which are as follows:
|
|
|
|
|
Net assets acquired: |
|
|
|
|
Goodwill (2) |
|
$ |
3,644 |
|
Customer lists (11 year life) (2) |
|
|
13,910 |
|
Trademarks/trade names (11 year life) |
|
|
1,320 |
|
Technology (10 year life) |
|
|
710 |
|
Other net assets (liabilities) |
|
|
1,506 |
|
|
|
|
|
|
|
|
21,090 |
|
Redeemable noncontrolling interest (1) (2) |
|
|
(1,420 |
) |
|
|
|
|
|
|
$ |
19,670 |
|
|
|
|
|
|
|
|
(1) |
|
The Company estimated the fair value of
the redeemable noncontrolling interest of
GovDelivery with consideration of
discounts for lack of control and lack of
marketability. See Note 18, Redeemable
Noncontrolling Interest. |
|
(2) |
|
On August 31, 2010, GovDelivery sold its GovDocs
subsidiary for aggregate consideration of $1,750. As a result of that transaction, the Company
recorded reductions to goodwill (from $3,644 to $3,373 see Note 4, Goodwill
and Intangibles, net), customer list intangible assets (from $13,910 to $12,759 see
Note 4, Goodwill and Intangibles, net) and redeemable noncontrolling interest
(from $1,420 to $941 see Note 18, Redeemable Noncontrolling Interest) that
had been established as part of the purchase price allocation for the acquisition of GovDelivery
on December 31, 2009. See subsection Discontinued Operations in this Note 3.
|
On May 5, 2010, the Company acquired an additional 12% equity ownership interest in ICG Commerce
from an existing stockholder of ICG Commerce for aggregate cash consideration of $35.3 million; the
transaction increased the Companys equity ownership interest in ICG Commerce from 64% to 76%. On
July 1, 2010, the Company acquired an additional 5% equity ownership interest in ICG Commerce for
aggregate cash consideration of $14.4 million through a tender offer that the Company made to ICG
Commerce stockholders; the tender transaction further increased the Companys equity ownership
interest in ICG Commerce to 81% as of the completion of that transaction.
Since the Company increased its equity ownership interest in ICG Commerce, there was a resultant
increase in the Companys controlling interest and a corresponding decrease in noncontrolling
interest ownership. Accordingly, the Company recorded a decrease during the year ended December
31, 2010 of $10.8 million to Noncontrolling Interest on the Companys Consolidated Balance
Sheets. The remaining purchase price of $38.9 million was recorded as a decrease to Additional
paid-in capital on the Companys Consolidated Balance Sheets for the year ended December 31, 2010.
48
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Acquisitions, Discontinued Operations and Pro Forma Information (Continued)
Discontinued Operations
On August 31, 2010, GovDelivery completed the sale of its GovDocs subsidiary to a former executive
of GovDelivery for aggregate consideration of $1.8 million, which consisted of a combination of
cash, a redemption of shares of GovDeliverys Series AA Preferred Stock and a secured promissory
note. GovDelivery received cash of $0.7 million, redeemed Series AA Preferred Stock valued at $0.8
million, and was the beneficiary of a promissory note in the amount of $0.3 million, which was paid
in 2011. This transaction resulted in a gain on the sale of GovDocs of $0.6 million, which is
included in Income (loss) from discontinued operations, including gain on sale for the year ended
December 31, 2010. This share redemption increased the Companys equity ownership interest in
GovDelivery from 89% to 93% as of August 31, 2010 and resulted in a $0.3 million decrease in the
Companys carrying value in GovDelivery and additional paid-in capital.
This amount is included in the line item Impact of partner company equity transactions on the
Companys Consolidated Statements of Changes in Equity. As part of the transaction, the Company
allocated goodwill and intangibles, net of accumulated amortization, of $0.3 million and $1.1
million, respectively, to the GovDocs business and has reclassified these amounts as Assets of
discontinued operations on its Consolidated Balance Sheets as of December 31, 2009. These assets
had been recorded by the Company as part of its acquisition accounting related to GovDelivery on
December 31, 2009. To the extent it relates to GovDocs, amortization expense associated with these
intangible assets of $0.1 million for the year ended December 31, 2010, as well as purchase price
adjustments related to deferred revenue of $0.2 million have been reclassified and are included in
Income (loss) from discontinued operations, including gain on sale for the year ended December
31, 2010.
Revenue from GovDocs related to the distribution of labor law posters and was recognized upon
delivery, provided a purchase order had been received, the price to the buyer was fixed or
determinable and collectibility was reasonably assured. Revenue from update and subscription
services for labor law posters was deferred and recognized ratably over the service term. GovDocs
had revenue of $1.4 million from January 1, 2010 through August 31, 2010. The Companys share of
GovDocs net income for that period was $0.2 million. The revenue and operating activities of
GovDocs have been removed from the line items in which they were reported in prior periods and the
related net income of $0.2 million is presented in the line item Income (loss) from discontinued
operations, including gain on sale on the Companys Consolidated Statements of Operations for the
year ended December 31, 2010. Additionally, the assets and liabilities reported in prior periods
related to GovDocs have been presented separately on the Companys Consolidated Balance Sheets as
of December 31, 2009. The results and financial position of GovDocs were reported within the
Companys core segment prior to the sale on August 31, 2010.
Pro Forma Information
The Company completed its acquisition of GovDelivery on December 31, 2009. Therefore, results of
GovDeliverys operations are not included in the Companys Consolidated Statements of Operations
for the years ended December 31, 2009 and 2008. Additionally, as noted above, GovDeliverys
redemption of shares of its Series AA Preferred Stock in connection with the sale of GovDocs on
August 31, 2010 increased the Companys equity ownership interest in GovDelivery to 93%.
The Company acquired an additional 12% equity ownership interest in ICG Commerce on May 5, 2010 and
an additional 5% equity ownership interest on July 1, 2010. Additionally, stock option exercises
at ICG Commerce that occurred during the year ended December 31, 2010 slightly reduced the
Companys equity ownership interest in ICG Commerce. As a result of these transactions, the
Companys equity ownership interest in ICG Commerce was 80% as of December 31, 2010. See Note 5,
Ownership Interests in Partner Companies.
Restricted stock awards granted at InvestorForce during the year ended December 31, 2010 reduced
the Companys equity ownership interest in InvestorForce from 81% to 76%. See Note 5, Ownership
Interests in Partner Companies.
49
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Acquisitions, Discontinued Operations and Pro Forma Information (Continued)
The following table details revenue, net income (loss) attributable to ICG Group, Inc.
and net income (loss) per diluted share attributable to ICG Group, Inc. in the
relative period, had the Company owned 80%, 93% and 76% of ICG Commerce, GovDelivery (excluding
GovDocs), and InvestorForce, respectively, for the years ended December 31, 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands, except for share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
115,710 |
|
|
$ |
97,283 |
|
|
$ |
76,200 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to
ICG
Group, Inc. |
|
$ |
46,317 |
|
|
$ |
20,317 |
|
|
$ |
(22,664 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
diluted share
attributable to
ICG
Group, Inc. |
|
$ |
1.25 |
|
|
$ |
0.55 |
|
|
$ |
(0.62 |
) |
|
|
|
|
|
|
|
|
|
|
4. Goodwill and Intangibles, net
The following table summarizes the activity related to the Companys goodwill:
|
|
|
|
|
Goodwill at December 31, 2008 |
|
$ |
26,658 |
|
Vcommerce activity (see subsection Impairments Consolidated Company) |
|
|
(9,714 |
) |
Increase due to acquisition of GovDelivery on December 31, 2009 |
|
|
3,373 |
|
|
|
|
|
Goodwill at December 31, 2009 |
|
|
20,317 |
|
Activity related to continuing operations for the year ended December 31, 2010 |
|
|
|
|
|
|
|
|
Goodwill at December 31, 2010 |
|
$ |
20,317 |
|
|
|
|
|
As of December 31, 2010 and 2009, all of the Companys goodwill was allocated to the core segment.
The Company recorded a reduction to goodwill as of December 31, 2009 of $0.3 million that was
attributable to GovDeliverys subsidiary, GovDocs, which was sold on August 31, 2010. See Note 3,
Acquisitions, Discontinued Operations and ProForma Information.
The following table summarizes the Companys intangible assets from continuing operations (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010 |
|
|
|
|
|
|
|
Gross Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Related to |
|
|
Accumulated |
|
|
Net Carrying |
|
Intangible Assets |
|
Useful Life |
|
|
Continuing Operations |
|
|
Amortization |
|
|
Amount |
|
Customer relationships |
|
11 years |
|
$ |
12,759 |
|
|
$ |
(1,166 |
) |
|
$ |
11,593 |
|
Trademarks/trade names |
|
11 years |
|
|
1,320 |
|
|
|
(120 |
) |
|
|
1,200 |
|
Technology |
|
10 years |
|
|
710 |
|
|
|
(71 |
) |
|
|
639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,789 |
|
|
|
(1,357 |
) |
|
|
13,432 |
|
Other intellectual property |
|
Indefinite |
|
|
400 |
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,189 |
|
|
$ |
(1,357 |
) |
|
$ |
13,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
|
|
|
|
Gross Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Related to |
|
|
Accumulated |
|
|
Net Carrying |
|
Intangible Assets |
|
Useful Life |
|
|
Continuing Operations |
|
|
Amortization |
|
|
Amount |
|
Customer relationships |
|
11 years |
|
$ |
12,759 |
|
|
$ |
|
|
|
$ |
12,759 |
|
Trademarks/trade names |
|
11 years |
|
|
1,320 |
|
|
|
|
|
|
|
1,320 |
|
Technology |
|
10 years |
|
|
710 |
|
|
|
|
|
|
|
710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,789 |
|
|
$ |
|
|
|
$ |
14,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Goodwill and Intangibles, net (Continued)
Amortization expense for intangible assets during the years ended December 31, 2010, 2009 and 2008
was $1.4 million, $0.2 million and $0.2 million, respectively. The Company amortizes intangibles
using the straight line method.
The Company recorded a reduction of $1.1 million to the customer relationship intangible asset as
of December 31, 2009 that was attributable to the sale of GovDocs on August 31, 2010. The Gross
Carrying Amount Related to Continuing Operations in the above table has been adjusted to reflect
this reduction. See Note 3, Acquisitions, Discontinued Operations and ProForma Information.
Remaining estimated amortization expense is as follows (in thousands):
|
|
|
|
|
2011 |
|
$ |
1,351 |
|
2012 |
|
$ |
1,351 |
|
2013 |
|
$ |
1,351 |
|
2014 |
|
$ |
1,351 |
|
2015 |
|
$ |
1,351 |
|
Thereafter |
|
$ |
6,677 |
|
|
|
|
|
Remaining amortization expense |
|
$ |
13,432 |
|
|
|
|
|
Impairments
The Company completed its annual impairment testing in the fourth quarter of each of 2010, 2009 and
2008. The Company also performs ongoing business reviews of its partner companies. The following
table reflects the amounts of impairments recorded and how the Company presents impairment charges
under the various methods of accounting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations |
|
Year ended December 31, |
|
|
|
Presentation |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Consolidation Method |
|
Impairment related and other |
|
$ |
|
|
|
$ |
4,876 |
|
|
$ |
8,264 |
|
Equity Method (Note 5) |
|
Equity loss |
|
|
2,914 |
|
|
|
544 |
|
|
|
10,204 |
|
Cost Method (Note 15) |
|
Other income (loss), net |
|
|
|
|
|
|
|
|
|
|
4,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,914 |
|
|
$ |
5,420 |
|
|
$ |
23,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments Consolidated Company
During 2009, as a result of certain triggering events, the Company concluded that the estimated
fair value of Vcommerce had declined. Accordingly, the Company performed its goodwill impairment
testing as described in Note 2, Significant Accounting Policies, and recorded a goodwill
impairment charge of $3.8 million during the three months ended June 30, 2009. Subsequent to
recording this impairment, in August 2009, Channel Intelligence acquired substantially all of the
assets and certain liabilities of Vcommerce. As a result of this transaction, the Company recorded
an additional impairment charge during the three months ended September 30, 2009 in the amount of
$1.1 million to eliminate the Companys remaining basis in Vcommerce, which has ceased operations.
The Company has no future obligation for Vcommerces liabilities and does not expect any material future
proceeds. Following the Channel Intelligence transaction, Vcommerces residual assets and
liabilities are immaterial and no longer included on the Companys Consolidated Balance Sheets,
which resulted in the elimination of the Companys remaining goodwill balance and intangible assets
related to Vcommerce of $4.8 million and $0.5 million, respectively.
The completion of the Companys annual impairment testing did not result in an impairment charge
related to the Companys consolidated partner companies as of December 31, 2010. The Companys fair value of its goodwill
substantially exceeds its carrying value.
51
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Ownership Interests in Partner Companies
Changes in Equity Ownership Interests Consolidated Companies
Exercises of outstanding stock options and other equity compensation awards at ICG Commerce during
2010 reduced the Companys equity ownership interest in ICG Commerce. This reduction was accounted
for as a disposition of shares, and, accordingly, the Company recorded an adjustment of $0.4
million as a decrease to the Companys carrying value of ICG Commerce and additional paid-in
capital in 2010. This activity is included in the line item, Impact of partner company equity
transactions in the Companys Consolidated Statements of Changes in Equity.
The Companys equity ownership interest in InvestorForce decreased during the year ended December
31, 2010 due to the issuance of restricted stock awards at InvestorForce. This decrease was
accounted for as a disposition of shares, and accordingly, the Company recorded an adjustment of
$0.7 million as an increase to the Companys carrying value of InvestorForce and additional paid-in
capital in 2010. This activity is included in the line item, Impact of partner company equity
transactions in the Companys Consolidated Statements of Changes in Equity.
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 $25.4 million, its share of the
dividend based on its ownership of the Series E and E-1 Preferred Stock; this amount was recorded
as a decrease in the Companys carrying value in ICG Commerce. This dividend, including the equity
adjustment to realign both the Companys carrying value in ICG Commerce and the noncontrolling
interest ownership that resulted from the disproportionate amounts received, resulted in an
increase of $3.5 million to the Companys additional paid-in capital and a decrease of $5.0 million
to the noncontrolling interest. These amounts are included in the line item, Impact of partner
company equity transactions in the Companys Consolidated Statements of Changes in Equity.
Subsequent to the payment of the dividend, ICG Commerce completed an equity recapitalization
whereby all of ICG Commerces preferred stock was converted into common stock. As a result of this
recapitalization, the Company is entitled to receive a ratable portion of any future
dividends paid to ICG Commerce stockholders.
On December 24, 2010, ICG Commerce paid a cash dividend in the aggregate amount of $8.0 million on
its common stock. The Company received $6.4 million, or 80%, of this dividend based on its
ownership of ICG Commerce common stock on the date on which the dividend was declared.
The remaining $1.6 million paid to the noncontrolling interest resulted in a decrease to the
noncontrolling interest and is reflected in the line item Impact of partner company equity
transactions in the Companys Consolidated Statements of Changes in Equity.
Equity Method Companies
The following unaudited summarized financial information relates to the Companys partner companies
accounted for under the equity method of accounting at December 31, 2010 and 2009. This aggregate
information has been compiled from the financial statements of the Companys equity core companies
and venture companies accounted for in accordance with the equity method of accounting.
52
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Ownership Interests in Partner Companies (Continued)
Balance Sheets (Unaudited) (1)
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
53,895 |
|
|
$ |
72,066 |
|
Other current assets |
|
|
62,145 |
|
|
|
59,963 |
|
Non-current assets |
|
|
148,257 |
|
|
|
157,639 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
264,297 |
|
|
$ |
289,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
118,260 |
|
|
$ |
122,199 |
|
Non-current liabilities |
|
|
14,415 |
|
|
|
12,812 |
|
Long-term debt |
|
|
16,174 |
|
|
|
13,969 |
|
Stockholders equity |
|
|
115,448 |
|
|
|
140,688 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
264,297 |
|
|
$ |
289,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total carrying value |
|
$ |
83,829 |
|
|
$ |
97,777 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes (ICG voting ownership): Acquirgy (25%), Channel
Intelligence (50%), ClickEquations (33%), Freeborders (31%),
GoIndustry (26%), Metastorm (33%), SeaPass (26%), StarCite
(36%) and WhiteFence (36%). |
As of December 31, 2010, the Companys aggregate carrying value in equity method partner companies
exceeded the Companys share of the net assets of these equity method partner companies by
approximately $47.9 million. Of this excess, $36.5 million is allocated to goodwill, which is not
amortized, and $11.4 million is allocated to intangibles, which are generally being amortized over
three to seven years. As of December 31, 2009, this excess was $54.1 million, $40.0 million of
which was allocated to goodwill, and $14.1 million of which was allocated to intangibles.
Amortization expense of $2.7 million, $2.3 million and $1.4 million associated with these
intangibles for the years ended December 31, 2010, 2009 and 2008, respectively, is included in the
table below in the line item Amortization of intangible assets and is included in Equity loss
on the Companys Consolidated Statements of Operations.
Results of Operations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 (1) |
|
|
2009 (2) |
|
|
2008 (3) |
|
|
|
(in thousands) |
|
Revenue |
|
$ |
243,091 |
|
|
$ |
229,196 |
|
|
$ |
243,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(29,531 |
) |
|
$ |
(26,680 |
) |
|
$ |
(57,943 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity income (loss) excluding
impairments and amortization of
intangible assets |
|
$ |
(10,452 |
) |
|
$ |
(9,321 |
) |
|
$ |
(22,086 |
) |
Impairment charge of GoIndustry |
|
|
(2,914 |
) |
|
|
(544 |
) |
|
|
(10,204 |
) |
Amortization of intangible assets |
|
|
(2,656 |
) |
|
|
(2,266 |
) |
|
|
(1,412 |
) |
|
|
|
|
|
|
|
|
|
|
Total equity income (loss) |
|
$ |
(16,022 |
) |
|
$ |
(12,131 |
) |
|
$ |
(33,702 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes Acquirgy, Channel Intelligence, ClickEquations, Freeborders, GoIndustry, Metastorm, SeaPass, StarCite and WhiteFence. |
|
(2) |
|
Includes Acquirgy (from date of acquisition), Channel Intelligence, ClickEquations, Freeborders, GoIndustry, Metastorm, SeaPass (from date of acquisition), StarCite and WhiteFence. |
|
(3) |
|
Includes Channel Intelligence, ClickEquations, Freeborders, GoIndustry, Metastorm, StarCite, Vcommerce (to date of consolidation) and WhiteFence. |
53
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Ownership Interests in Partner Companies (Continued)
Other Equity Company Information
During the years ended December 31, 2009 and 2008, the Company deployed a total of $3.3 million and
$10.5 million, respectively, in conjunction with financing transactions related to GoIndustry,
which is a publicly-traded company on the AIM market of the London Stock Exchange. Additionally,
the issuance of shares of common stock by GoIndustry during 2010 slightly reduced the Companys
equity interest in GoIndustry. These transactions resulted in a decrease in the Companys equity
ownership interest in GoIndustry from 31% to 26% during the three-year period ended December 31,
2010. Those reductions in the Companys equity interest in GoIndustry were accounted for as
dispositions of shares and resulted in dilution losses of $0.1 million, $0.4 million and $1.3
million during the years ended December 31, 2010, 2009 and 2008, respectively. The dilution loss of
$1.3 million in 2008 resulted in an equity transaction that was recorded as a decrease to
additional paid-in capital and is included in the line item Impact of partner company equity
transactions in the Companys Consolidated Statements of Changes in Equity. In accordance with
revised accounting guidance for equity method companies, the $0.1 million dilution loss in 2010 and
the $0.4 million dilution loss in 2009 were recorded in Other income (loss), net on the Companys
Consolidated Statements of Operations in the relevant periods. Adjusting for a 100-for-1 reverse
stock split that occurred during 2010, the Company owned 2,546,743 shares of GoIndustry common
stock as of December 31, 2010 and 2009, or 26% of the outstanding GoIndustry shares as of each of
those dates.
During each of the years ended December 31, 2010, 2009 and 2008, 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, $0.5 million and
$10.2 million during the years ended December 31, 2010, 2009 and 2008, respectively, to reduce the
Companys carrying value to GoIndustrys fair market value based on the fair value Level 1
observation, as defined in Note 7, Financial Instruments. These charges are included in Equity
loss on the Companys Consolidated Statements of Operations in the relevant periods. The carrying
value of the Companys equity holdings in GoIndustry was $2.3 million and $5.7 million as of
December 31, 2010 and 2009, respectively.
The fair value of the Companys equity holdings in GoIndustry
was $3.5 million and $5.9 million, based upon the per share closing
price for GoIndustrys common stock at December 31, 2010 and
2009, respectively.
During the year ended December 31, 2010, the Company acquired convertible long-term notes from
ClickEquations and WhiteFence in separate transactions, for the aggregate amount of $2.1 million.
These note acquisitions did not change the Companys equity ownership interests in those partner
companies.
During the year ended December 31, 2009, the Company participated in financing transactions related
to several other equity method partner companies. These transactions included the acquisition of a
25% equity interest in Acquirgy, a 26% equity interest in SeaPass, follow-on fundings for Channel
Intelligence, ClickEquations, and StarCite and the acquisition of convertible long-term notes and
warrants issued by WhiteFence. The total amount of funds deployed in these transactions was $23.2
million. The Company completed purchase price allocations for these equity-method acquisitions and
will amortize the resulting $6.7 million of definite-lived intangible assets over periods ranging
from three to ten years. The remaining purchase price is attributable to goodwill,
indefinite-lived intangible assets and additional net tangible assets.
In 2008, the Company increased its ownership interests in Channel Intelligence, ClickEquations,
Metastorm and StarCite through the Companys acquisition of outstanding equity securities and/or
participation in financing rounds. The total amount of these acquisitions was $24.2 million. The
purchase price allocations for these transactions resulted in the identification of intangible
assets of $6.2 million, which will be amortized over a period of three years. The remaining
purchase price is attributable to goodwill and net tangible assets.
In 2008, ClickEquations, which was previously accounted for under the cost method, became an equity
method company due to an increase in ownership resulting from the Companys participation in a
financing
round. Prior periods have not been restated to reflect prior equity losses from the original
acquisition of an interest in ClickEquations as that acquisition was immaterial.
54
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Ownership Interests in Partner Companies (Continued)
Subsequent to December 31, 2010, Metastorm was sold to Open Text. The Companys portion of the
proceeds was $53.0 million; $51.3 million of these proceeds were received at closing on February
17, 2011. The remainder was placed in escrow in connection with a customary indemnification
holdback. The Company expects to record a gain of $24.9 million during the three months ended
March 31, 2011 that will be included in Other income (loss) on the Companys Consolidated
Statements of Operations.
Other Partner Company Information
In 2008, Creditex Group, Inc. (Creditex), which was accounted for using the cost method, was
acquired by IntercontinentalExchange, Inc. (ICE). The Companys share of the merger
consideration was 737,471 shares of ICE common stock, which, based on the stocks August 29, 2008
closing price, were valued at approximately $64.9 million. At closing, 60,440 of these shares were
placed into escrow to satisfy potential indemnification claims. The Company recorded a gain of
$34.8 million on the sale of Creditex in 2008. Between August 29, 2008 and December 31, 2008, the
Company sold 677,031 shares of ICE common stock for cash proceeds of $60.2 million. The Company
recorded a gain on the ICE common stock sales of $0.6 million in 2008. In 2009, the Company
received an additional 7,549 shares of ICE common stock in connection with a post-merger
closing-related adjustment. The shares were valued based on the closing stock price of ICE common
stock on the date the shares were received, resulting in a gain recorded of $0.4 million in 2009.
The Company subsequently sold these additional shares of ICE common stock, and recorded a gain on
the sale of $0.2 million in 2009. In 2010, 47,056 shares of ICE common stock were released from
escrow, which, based on the stocks closing price on the dates these shares were released to the
Company, were valued at $5.1 million. The Company recorded a gain in 2010 for this amount. The
Company sold the newly-acquired 47,056 shares for approximately $5.2 million and, accordingly,
recorded an incremental gain of $0.1 million on the sale in 2010. Total gains related to these
transactions of $5.2 million, $0.6 million and $35.4 million are reflected in Other income (loss),
net on the Companys Consolidated Statement of Operations for the years ended December 31, 2010,
2009 and 2008, respectively. Of the remaining 13,069 outstanding shares of ICE common stock held
in escrow at December 31, 2010, up to 3,921 may be released to the Company pending the resolution
of outstanding indemnity claims, and, subject to certain potential tax-related indemnity claims,
9,148 shares are scheduled to be released to the Company in 2012.
Additionally, during 2010, 2009 and 2008, the Company received $1.9 million, $2.2 million and $3.3
million, respectively, of escrow releases in connection with the disposition of various other
partner companies, primarily Marketron International, Inc., and recorded these amounts as gains,
which are included in Other income (loss), net on the Companys Consolidated Statement of
Operations in the respective periods.
Other
The Company owns approximately 9% of Anthem Ventures Fund, L.P., formerly eColony,
Inc., and Anthem Ventures Annex Fund,
L.P. (collectively Anthem), which invests in technology companies. Anthem was acquired by the Company in 2000. The Company currently has no carrying value in Anthem.
Accordingly, the receipt of distributions from Anthem, if any, by the Company would result in a
gain at the time the Company receives such distributions.
Escrow Information
As of December 31, 2010, the Company had 13,069 outstanding shares of ICE common stock remaining in
escrow; the stock was valued at $1.5 million based on the December 31, 2010 closing stock price of
ICEs common stock. Additionally, the Company had outstanding aggregate cash proceeds, subject to
ongoing 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.
55
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Ownership Interests in Partner Companies (Continued)
On February 17, 2011, the sale of Metastorm to Open Text was consummated, and $1.6 million of the
Companys total proceeds related to the sale were placed in escrow in connection with a customary
indemnification holdback. Subject to any indemnification claims that Open Text may assert, the
escrowed sale proceeds will be released to the Company in the fourth quarter of 2011.
6. Marketable Securities
Marketable securities represent the Companys holdings in publicly-traded equity securities
accounted for as available-for-sale securities. At December 31, 2010, the Company did not hold
interests in any marketable securities. At December 31, 2009, the Company held a noncontrolling
interest in Blackboard. The cost, unrealized holding gains/(losses), and fair value of the
1,619,571 shares of Blackboard common stock held by the Company at December 31, 2009 were $2.3
million, $71.2 million and $73.5 million, respectively. The Companys cost for Blackboard of $2.3
million includes the value of warrants exercised and the carrying value on the date Blackboard
common stock became a publicly-traded security.
During the years ended December 31, 2010 and 2009, the Company sold 1,619,571 shares and 567,489
shares, respectively, of Blackboard common stock at average prices per share of $42.87 and $38.69,
respectively. The Company received total proceeds of $69.4 million and $21.9 million during the
years ended December 31, 2010 and 2009, respectively, and recognized gains on the sale of these
securities in the amounts of $67.0 million and $21.1 million in those respective periods. The
gains on the sales of Blackboard common stock are included in Other income (loss), net on the
Companys Consolidated Statements of Operations.
From time to time during the years ended December 31, 2010, 2009 and 2008, the Company also held
shares of ICE common stock; all of these shares were both obtained and sold during the same
individual periods. See Note 5, Ownership Interests in Partner Companies.
7. Financial Instruments
Derivative Financial Instruments
During the years ended December 31, 2010, 2009 and 2008, ICG Commerce utilized average rate
currency options with quarterly expirations 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, net of amounts received in the relevant period.
In 2010, ICG Commerce entered into an interest rate swap hedge agreement with PNC Bank to mitigate
the risk of fluctuations in the variable interest rate related to ICG Commerces term loan with PNC
Bank. The net mark-to-market adjustments recognized by ICG Commerce are detailed in the table
below and represent the change in value of the swap related to the fluctuations in the applicable
interest rates during the relevant period. This instrument is set to mature in 2015.
From February 2006 to July 2010, the Company managed its exposure to and benefits from price
fluctuations of Blackboard common stock through the use of cashless collar contracts. 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 common stock held by the Company. As
of December 31, 2010, all cashless collar contracts held by the Company expired or were terminated
by the Company. As of December 31, 2009, the Company was party to cashless collar contracts to
hedge 1,000,000 shares of the total 1,619,571 shares of Blackboard common stock it held at that
date.
56
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Financial Instruments (Continued)
During the years ended December 31, 2010 and 2009, the Company incurred costs of $0.2 million and
$0.5 million, respectively, to terminate cashless collar contracts related to a total of 1,250,000
shares of Blackboard common stock and recorded losses in these amounts, which is included in Other
income (loss), net on the Companys Consolidated Statements of Operations in the respective
periods. Two cashless collar contracts relating to 375,000 shares of Blackboard common stock
expired during 2010. Since the value of the matured hedges was zero, there was no gain or loss
associated with the expiration of those contracts. The cashless collar contracts were marked to
market through earnings each period, which impact is detailed in the below table. The income or
loss was 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 following table presents the classifications and fair values of our derivative instruments as
of December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets |
|
|
|
|
|
December 31, |
|
|
December 31, |
|
Derivative Instrument |
|
Classification |
|
2010 |
|
|
2009 |
|
|
|
|
|
(in thousands) |
|
Cashless collar contracts |
|
Hedges of marketable securities |
|
$ |
|
|
|
$ |
(547 |
) |
Foreign exchange put option |
|
Other assets, net |
|
$ |
|
|
|
$ |
|
|
Interest rate swap |
|
Accrued expenses |
|
$ |
12 |
|
|
$ |
|
|
The following table presents the mark-to-market impact on earnings resulting from the
Companys hedging activities for the years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations |
|
|
|
|
|
Year ended December 31, |
|
Derivative Instrument |
|
Classification |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
(in thousands) |
|
Cashless collar contracts |
|
Other income (loss), net |
|
$ |
547 |
|
|
$ |
(7,098 |
) |
|
$ |
10,204 |
|
Foreign exchange instruments |
|
Other income (loss), net |
|
$ |
(60 |
) |
|
$ |
(33 |
) |
|
$ |
(132 |
) |
Interest rate swap |
|
Other income (loss), net |
|
$ |
(12 |
) |
|
$ |
|
|
|
$ |
|
|
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, which 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.
57
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Financial Instruments (Continued)
The fair value hierarchy of the Companys financial assets measured at fair value on a recurring
basis was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (money market accounts) |
|
$ |
81,205 |
|
|
$ |
81,205 |
|
|
$ |
|
|
|
$ |
|
|
Hedges of interest rate risk (1) |
|
|
(12 |
) |
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
81,193 |
|
|
$ |
81,205 |
|
|
$ |
(12 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (money market accounts) |
|
$ |
49,972 |
|
|
$ |
49,972 |
|
|
$ |
|
|
|
$ |
|
|
Marketable securities (see Note 6) |
|
|
73,512 |
|
|
|
73,512 |
|
|
|
|
|
|
|
|
|
Hedges of marketable securities (1) |
|
|
(547 |
) |
|
|
|
|
|
|
(547 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
122,937 |
|
|
$ |
123,484 |
|
|
$ |
(547 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Companys counterparties under these arrangements provide 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 asset or liability. |
8. Fixed Assets
Fixed assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
Useful Life |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(in thousands) |
|
Computer equipment and software,
office equipment and furniture |
|
3-7 years |
|
$ |
18,982 |
|
|
$ |
16,280 |
|
Leasehold improvements |
|
3-6 years |
|
|
1,018 |
|
|
|
971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
17,251 |
|
Less: accumulated depreciation and amortization |
|
|
|
|
|
|
(14,009 |
) |
|
|
(13,072 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,991 |
|
|
$ |
4,179 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended December 31, 2010, 2009 and
2008 was $2.5 million, $1.5
million and $1.6 million, respectively. The Company uses the straight line method of depreciation.
58
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Debt
Long-Term Debt
The Companys long-term debt of $20.1 million at December 31, 2010 related to its consolidated
partner companies and primarily consisted of a term loan at ICG Commerce. The Companys long-term
debt at December 31, 2009 of $1.0 million relates to its consolidated partner companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
Interest Rates |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICG Commerce term loan |
|
|
2.013.34 |
% |
|
$ |
18,667 |
|
|
$ |
|
|
Capital leases |
|
|
2.2512.98 |
% |
|
|
503 |
|
|
|
241 |
|
Other debt |
|
|
8.2510.27 |
% |
|
|
911 |
|
|
|
785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,081 |
|
|
|
1,026 |
|
Current maturities |
|
|
|
|
|
|
(4,623 |
) |
|
|
(381 |
) |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
$ |
15,458 |
|
|
$ |
645 |
|
|
|
|
|
|
|
|
|
|
|
|
The Companys long-term debt matures as follows:
|
|
|
|
|
2011 |
|
$ |
4,623 |
|
2012 |
|
|
4,631 |
|
2013 |
|
|
4,159 |
|
2014 |
|
|
4,001 |
|
2015 |
|
|
2,667 |
|
|
|
|
|
|
|
$ |
20,081 |
|
|
|
|
|
Loan and Credit Agreements
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. 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. 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. The term loan and the line of credit both bear interest at either a base
rate equal to 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%, or a daily to six month 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, at ICG Commerces option. On August 6, 2010, ICG Commerce entered into an
interest rate swap hedge agreement whereby 50% of the term loan was effectively converted to a
fixed interest rate by the hedge agreement. The fixed rate stipulated by the hedge agreement is
1.34%. ICG Commerce will still be required to pay the aforementioned interest rate margin on this
portion of the term loan, which would result in a final interest rate of between 3.09% and 3.84%.
The termination date of the hedge agreement is August 1, 2015. ICG Commerce has the right, but not
the obligation, to terminate the hedge agreement without cause, and without penalty on August 1,
2012.
59
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Debt (Continued)
At December 31, 2010, the effective interest rate being paid by ICG Commerce related to the term
loan, including the applicable margin, was 2.01% for the portion of the loan tied to a floating
LIBOR rate and 3.09% for the portion of the loan covered by the interest rate swap hedge agreement.
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.
There were no amounts (including letters of credit) outstanding under the relevant line of credit
agreements as of December 31, 2010 and 2009. The proceeds from the $20.0 million term loan were
used to fund a cash dividend paid to certain stockholders of ICG Commerce, including the Company,
on August 4, 2010. See Note 5, Ownership Interests in Partner Companies.
On December 18, 2009, the Company entered into an amended and restated letter of credit agreement
with Comerica Bank (the LC 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 LC Agreement. On
December 17, 2010, the LC Agreement was extended to December 16, 2011. 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 LC 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 December 31,
2010 or 2009.
On May 8, 2008, the Company entered into a series of loan agreements with Credit Suisse Capital
LLC. Under 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. On July 26, 2010, the Company terminated its remaining cashless collar
contracts. Accordingly, these loan agreements were also terminated as of that date. The Company
did not at any time draw any amounts under these loan agreements.
10. 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 December 31, 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 December 31, 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 the partner companies in which our management takes a very
active role in providing strategic direction and management assistance. We own majority
controlling equity positions or substantial minority equity positions in these partner companies.
We expect to devote relatively large initial amounts of capital to acquire stakes in core
companies, particularly consolidated core companies, since any such acquisition would entail the
deployment of cash and/or the issuance of ICG stock to purchase of a large equity stake in a target with relatively strong financial characteristics
and growth potential. Our venture reporting segment includes partner companies to which we
generally devote less capital, hold relatively smaller ownership stakes and generally have less
influence over the strategic directions and management decisions than our core partner companies.
60
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Segment Information (Continued)
Approximately 8%, 10% and 13% of the Companys consolidated revenue for the years ended December
31, 2010, 2009 and 2008, respectively, relates to sales generated in the United Kingdom. The
remaining consolidated revenue for the years ended December 31, 2010, 2009 and 2008 primarily
relates to sales generated in the United States. As of December 31, 2010 and 2009, the Companys
assets were located primarily in the United States.
On February 17, 2011, the sale of Metastorm to Open Text was consummated. Metastorm had been a
core equity company, and the Companys portion of Metastorms net results was included in the
Companys core segment. Due to the sale of Metastorm, the Company has removed the amount of
equity loss related to Metastorm from the core segment and reflected this amount in Dispositions
in the below table. Had the Companys equity loss related to Metastorm been included in the core
segment, net income (loss) attributable to ICG Group, Inc. for the years ended
December 31, 2010, 2009 and 2008 would have been $(8.6) million, $26.0 million and $(23.8) million,
respectively.
The following summarizes selected information related to the Companys segments for the years ended
December 31, 2010, 2009 and 2008. All significant intersegment activity has been eliminated.
Assets are owned or allocated assets are used by each operating segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Reconciling Items |
|
|
Consolidated |
|
|
|
Core |
|
|
Venture |
|
|
Segment |
|
|
Dispositions |
|
|
Corporate |
|
|
Other(1) |
|
|
Results |
|
Year Ended December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
115,710 |
|
|
$ |
|
|
|
$ |
115,710 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
115,710 |
|
Net income (loss)
attributable to ICG Group, Inc. |
|
$ |
(5,655 |
) |
|
$ |
(4,149 |
) |
|
$ |
(9,804 |
) |
|
$ |
(2,115 |
) |
|
$ |
(17,684 |
) |
|
$ |
76,192 |
|
|
$ |
46,589 |
|
Assets (2) |
|
$ |
152,466 |
|
|
$ |
15,149 |
|
|
$ |
167,615 |
|
|
$ |
26,829 |
|
|
$ |
86,545 |
|
|
$ |
|
|
|
$ |
280,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
90,252 |
|
|
$ |
|
|
|
$ |
90,252 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
90,252 |
|
Net income (loss)
attributable to ICG Group, Inc. |
|
$ |
28,503 |
|
|
$ |
(3,197 |
) |
|
$ |
25,306 |
|
|
$ |
(2,102 |
) |
|
$ |
(15,858 |
) |
|
$ |
8,188 |
|
|
$ |
15,534 |
|
Assets (2) |
|
$ |
161,295 |
|
|
$ |
21,832 |
|
|
$ |
183,127 |
|
|
$ |
31,491 |
|
|
$ |
115,469 |
|
|
$ |
|
|
|
$ |
330,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
71,181 |
|
|
$ |
|
|
|
$ |
71,181 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
71,181 |
|
Net income (loss)
attributable to ICG Group, Inc. |
|
$ |
(18,999 |
) |
|
$ |
(4,381 |
) |
|
$ |
(23,380 |
) |
|
$ |
(4,759 |
) |
|
$ |
(18,966 |
) |
|
$ |
24,179 |
|
|
$ |
(22,926 |
) |
Assets (2) |
|
$ |
106,531 |
|
|
$ |
8,281 |
|
|
$ |
114,812 |
|
|
$ |
31,843 |
|
|
$ |
138,925 |
|
|
$ |
|
|
|
$ |
285,580 |
|
|
|
|
(1) |
|
The following table reflects the components in other (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate other income (loss) (Note 15) |
|
$ |
74,507 |
|
|
$ |
15,976 |
|
|
$ |
44,277 |
|
Corporate income tax benefit (Note 16) |
|
|
5,918 |
|
|
|
10,627 |
|
|
|
330 |
|
Noncontrolling interest |
|
|
(1,319 |
) |
|
|
(12,995 |
) |
|
|
(1,960 |
) |
Impairment of GoIndustry (Venture) (Note 5) |
|
|
(2,914 |
) |
|
|
(544 |
) |
|
|
(10,204 |
) |
Impairment of Vcommerce (Core) (Note 3) |
|
|
|
|
|
|
(4,876 |
) |
|
|
(8,264 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
76,192 |
|
|
$ |
8,188 |
|
|
$ |
24,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
The Companys carrying value of Metastorm, the sale of which was
consummated of February 17, 2011, has been removed from
the core segment in the table above and reflected in Dispositions for all periods presented.
|
61
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. 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 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 December 31, 2010 and 2009 is included in Ownership interests in
partner companies in the Parent Company Balance Sheets.
Parent Company Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
72,915 |
|
|
$ |
29,443 |
|
Income tax receivable |
|
|
6,314 |
|
|
|
11,071 |
|
Other current assets |
|
|
526 |
|
|
|
562 |
|
|
|
|
|
|
|
|
Current assets |
|
|
79,755 |
|
|
|
41,076 |
|
Ownership interests in partner companies |
|
|
142,541 |
|
|
|
170,498 |
|
Marketable securities |
|
|
|
|
|
|
73,512 |
|
Intangible assets |
|
|
400 |
|
|
|
|
|
Deferred tax assets |
|
|
3,695 |
|
|
|
|
|
Other |
|
|
1,583 |
|
|
|
881 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
227,974 |
|
|
$ |
285,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
4,815 |
|
|
$ |
4,433 |
|
Hedges of marketable securities |
|
|
|
|
|
|
547 |
|
Non-current liabilities |
|
|
294 |
|
|
|
350 |
|
Stockholders equity |
|
|
222,865 |
|
|
|
280,637 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
227,974 |
|
|
$ |
285,967 |
|
|
|
|
|
|
|
|
Parent Company Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
17,169 |
|
|
|
16,257 |
|
|
|
19,755 |
|
Impairment related and other |
|
|
796 |
|
|
|
4,876 |
|
|
|
9,058 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
17,965 |
|
|
|
21,133 |
|
|
|
28,813 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(17,965 |
) |
|
|
(21,133 |
) |
|
|
(28,813 |
) |
Other income (loss), net (1) |
|
|
73,151 |
|
|
|
15,976 |
|
|
|
44,277 |
|
Interest income (expense), net |
|
|
281 |
|
|
|
399 |
|
|
|
1,603 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity loss |
|
|
55,467 |
|
|
|
(4,758 |
) |
|
|
17,067 |
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) |
|
|
4,806 |
|
|
|
10,627 |
|
|
|
330 |
|
Equity income (loss) |
|
|
(14,796 |
) |
|
|
9,665 |
|
|
|
(40,323 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
45,477 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For purposes of parent company reporting, discontinued operations (see Note 3,
Acquisitions, Discontinued Operations and Pro Forma Information) are included in the Other
income (loss), net line item. |
62
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Parent Company Financial Information (Continued)
Parent Company Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
45,477 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
Adjustments to reconcile net income (loss) to cash used in
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
58 |
|
|
|
90 |
|
|
|
133 |
|
Impairment related and other |
|
|
796 |
|
|
|
4,876 |
|
|
|
9,058 |
|
Equity-based compensation |
|
|
2,345 |
|
|
|
2,888 |
|
|
|
6,012 |
|
Equity (income) loss |
|
|
14,796 |
|
|
|
(9,665 |
) |
|
|
40,323 |
|
Other (income) loss, net (1) |
|
|
(73,151 |
) |
|
|
(15,976 |
) |
|
|
(44,277 |
) |
Deferred tax assets |
|
|
(3,695 |
) |
|
|
|
|
|
|
|
|
Changes in assets and liabilities, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Taxes receivable |
|
|
4,757 |
|
|
|
(10,627 |
) |
|
|
4,889 |
|
Prepaid expenses and other assets |
|
|
36 |
|
|
|
299 |
|
|
|
(8 |
) |
Accounts payable |
|
|
11 |
|
|
|
(6 |
) |
|
|
6 |
|
Accrued expenses |
|
|
(445 |
) |
|
|
297 |
|
|
|
(180 |
) |
Accrued compensation and benefits |
|
|
289 |
|
|
|
(89 |
) |
|
|
(1,014 |
) |
Other liabilities |
|
|
(57 |
) |
|
|
(60 |
) |
|
|
403 |
|
|
|
|
|
|
|
|
|
|
|
Cash used in operating activities |
|
|
(8,783 |
) |
|
|
(12,439 |
) |
|
|
(7,581 |
) |
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
|
(450 |
) |
|
|
(52 |
) |
|
|
(47 |
) |
Proceeds from sales of marketable securities |
|
|
74,383 |
|
|
|
21,625 |
|
|
|
60,233 |
|
Proceeds from sales of ownership interests in partner companies |
|
|
1,878 |
|
|
|
2,607 |
|
|
|
3,267 |
|
Receipt of cash dividend from ICG Commerce |
|
|
31,821 |
|
|
|
|
|
|
|
|
|
Acquisitions of ownership interests in partner companies, net |
|
|
(5,836 |
) |
|
|
(52,804 |
) |
|
|
(42,460 |
) |
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) investing activities |
|
|
101,796 |
|
|
|
(28,624 |
) |
|
|
20,993 |
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of noncontrolling interest in subsidiary equity |
|
|
(49,658 |
) |
|
|
|
|
|
|
|
|
Tax withholdings related to equity-based awards |
|
|
(1,777 |
) |
|
|
|
|
|
|
|
|
Stock options exercises |
|
|
1,894 |
|
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
|
|
|
|
(2,702 |
) |
|
|
(9,329 |
) |
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) financing activities |
|
|
(49,541 |
) |
|
|
(2,702 |
) |
|
|
(9,329 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
43,472 |
|
|
|
(43,765 |
) |
|
|
4,083 |
|
Cash and cash equivalents at beginning at year |
|
|
29,443 |
|
|
|
73,208 |
|
|
|
69,125 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
72,915 |
|
|
$ |
29,443 |
|
|
$ |
73,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For purposes of Parent Company reporting, discontinued operations are
included in the Other income (loss) line item.
See the subsection Discontinued Operations in Note 3,
Acquisitions, Discontinued Operations and Pro Forma Information.
|
12. ICG Group, Inc.s Stockholders Equity
Holders of the Companys Common Stock are entitled to one vote per share and are entitled to
dividends as declared. No cash dividends have been declared to date, and the Company does not
intend to pay cash dividends in the foreseeable future.
The Company may establish one or more classes or series of preferred stock. The holders of the
preferred stock may be entitled to preferences over common stockholders with respect to dividends,
liquidation, dissolution, or winding up of the Company, as established by the Companys Board of
Directors. As of December 31, 2010, 10,000,000 shares of preferred stock were authorized; none of
these shares have been issued, and the Company does not have any plan to issue any of these shares
in the foreseeable future.
63
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Equity-Based Compensation
As of December 31, 2010, incentive or non-qualified stock options may be granted to Company
employees, directors and consultants under the Companys 2005 Omnibus Equity Compensation Plan, as
such has been amended from time to time (the 2005 Equity Plan) or the LGO Corporation 2001 Equity
Compensation Plan (f/k/a Logistics.com 2001 Equity Compensation Plan) (the LGO Plan and, together
with the 2005 Equity Plan, the Plans). Generally, the grants vest over a one-to-four-year period
and expire eight to ten years after the grant date. At December 31, 2010, the Company had
2,164,454 shares of Common Stock reserved under the Plans for possible future issuance. Most
partner companies also maintain their own equity incentive/compensation plans.
Total equity-based compensation for the years ended December 31, 2010, 2009, and 2008 was $3.1
million, $3.7 million and $6.8 million, respectively. Equity-based compensation for these periods
is included primarily in Selling, General and Administrative on the Companys Consolidated
Statements of Operations.
The following table provides additional information related to the Companys equity-based
compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized |
|
|
Equity-Based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-Based |
|
|
Compensation |
|
|
|
Year Ended |
|
|
Compensation |
|
|
Expense at |
|
|
|
December 31, |
|
|
at Dec. 31, 2010 |
|
|
Dec. 31, 2010 |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Appreciation Rights |
|
$ |
2,037 |
|
|
$ |
2,629 |
|
|
$ |
4,138 |
|
|
$ |
5,669 |
|
|
|
3.1 |
|
Stock Options |
|
|
1 |
|
|
|
3 |
|
|
|
29 |
|
|
|
1 |
|
|
|
2.0 |
|
Restricted Stock |
|
|
103 |
|
|
|
82 |
|
|
|
1,577 |
|
|
|
436 |
|
|
|
3.5 |
|
Deferred Stock Units |
|
|
204 |
|
|
|
174 |
|
|
|
320 |
|
|
|
34 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-Based Compensation |
|
|
2,345 |
|
|
|
2,888 |
|
|
|
6,064 |
|
|
|
6,140 |
|
|
|
|
|
Equity-Based
Compensation for
Consolidated Partner
Companies: |
|
|
724 |
|
|
|
763 |
|
|
|
770 |
|
|
|
1,338 |
|
|
|
3.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,069 |
|
|
$ |
3,651 |
|
|
$ |
6,834 |
|
|
$ |
7,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Appreciation Rights (SARs)
In 2010, 2009 and 2008, the Company issued SARs to certain employees. Each SAR represents the
right of the holder to receive, upon exercise of the 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. The fair market value at the grant date is determined by the
NASDAQ closing price of the Companys Common Stock on the date of grant (or the closing price on the next
trading day if there are no trades in the Companys stock on the date of grant).
64
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Equity-Based Compensation (Continued)
Changes in SARs for the year ended December 31, 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
SARs |
|
|
Base Price |
|
|
Fair Value |
|
Issued at December 31, 2007 |
|
|
3,616,115 |
|
|
$ |
7.58 |
|
|
$ |
4.58 |
|
SARs exercised (1) |
|
|
(67,363 |
) |
|
$ |
7.34 |
|
|
$ |
4.43 |
|
SARs forfeited |
|
|
(782 |
) |
|
$ |
7.34 |
|
|
$ |
4.43 |
|
SARs granted |
|
|
322,400 |
|
|
$ |
8.41 |
|
|
$ |
4.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued at December 31, 2008 |
|
|
3,870,370 |
|
|
$ |
7.65 |
|
|
$ |
4.61 |
|
SARs granted |
|
|
100,000 |
|
|
$ |
7.00 |
|
|
$ |
4.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued at December 31, 2009 |
|
|
3,970,370 |
|
|
$ |
7.63 |
|
|
$ |
4.60 |
|
SARs exercised (2) |
|
|
(1,440,488 |
) |
|
$ |
7.52 |
|
|
$ |
4.53 |
|
SARs forfeited |
|
|
(64,937 |
) |
|
$ |
9.24 |
|
|
$ |
5.11 |
|
SARs granted |
|
|
1,506,940 |
|
|
$ |
7.11 |
|
|
$ |
4.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued at December 31, 2010 |
|
|
3,971,885 |
|
|
$ |
7.45 |
|
|
$ |
4.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These exercises resulted in the issuance of 2,576 shares of the
Companys Common Stock, net of tax withholdings of less than
$0.1 million. |
|
(2) |
|
These exercises resulted in the issuance of 372,499 shares of
the Companys Common Stock, net of tax withholdings of $1.8
million. |
The following table summarizes information about SARs outstanding at December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Intrinsic |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Value of SARs |
|
|
|
|
|
|
|
|
|
|
|
Remaining Contractual Life |
|
|
Outstanding at |
|
|
|
SARs |
|
|
SARs |
|
|
of SARs Outstanding |
|
|
December 31, 2010 |
|
Grant Price |
|
Outstanding |
|
|
Exercisable |
|
|
(in years) |
|
|
(in thousands) |
|
$6.70 - $7.00 |
|
|
1,401,940 |
|
|
|
29,166 |
|
|
9.1 |
|
|
$ |
10,555 |
|
$7.34 |
|
|
1,991,610 |
|
|
|
1,991,610 |
|
|
4.6 |
|
|
$ |
13,762 |
|
$8.13 - $8.76 |
|
|
337,922 |
|
|
|
143,945 |
|
|
8.1 |
|
|
$ |
1,978 |
|
$9.50 - $12.01 |
|
|
240,413 |
|
|
|
134,163 |
|
|
6.3 |
|
|
$ |
720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,971,885 |
|
|
|
2,298,884 |
|
|
|
|
|
|
$ |
27,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, the Company expects an additional 1,673,001 SARs to vest in the
future.
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.
65
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Equity-Based Compensation (Continued)
Changes in stock options for the years ended December 31, 2010, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
|
Grant Date |
|
|
Grant Date |
|
|
|
Shares |
|
|
Exercise Price |
|
|
Fair Value |
|
Outstanding at December 31, 2007 |
|
|
637,454 |
|
|
$ |
37.13 |
|
|
$ |
29.69 |
|
Options granted |
|
|
500 |
|
|
$ |
7.22 |
|
|
$ |
4.26 |
|
Options cancelled |
|
|
(23,000 |
) |
|
$ |
19.76 |
|
|
$ |
15.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008 |
|
|
614,954 |
|
|
$ |
36.58 |
|
|
$ |
29.81 |
|
Options granted |
|
|
250 |
|
|
$ |
4.30 |
|
|
$ |
2.47 |
|
Options cancelled |
|
|
(85,800 |
) |
|
$ |
42.75 |
|
|
$ |
34.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
529,404 |
|
|
$ |
35.56 |
|
|
$ |
29.06 |
|
Options exercised (1) |
|
|
(180,923 |
) |
|
$ |
10.48 |
|
|
$ |
9.13 |
|
Options cancelled |
|
|
(37,312 |
) |
|
$ |
315.18 |
|
|
$ |
249.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010 |
|
|
311,169 |
|
|
$ |
16.64 |
|
|
$ |
14.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company received cash of $1.9 million related to 2010 stock option exercises. |
At December 31, 2010, 2009 and 2008 there were 310,919, 528,351 and 613,818 options
exercisable, respectively, at a weighted average exercise price of $16.65, $35.63 and $36.64 per
share, respectively, under the Plans.
The following tables summarize information about stock options outstanding at December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Aggregate Intrinsic |
|
|
|
|
|
|
|
|
|
|
|
Remaining Contractual Life |
|
|
Value at |
|
|
|
Shares |
|
|
Shares |
|
|
of Shares Outstanding |
|
|
December 31, 2010 |
|
Exercise Price |
|
Outstanding |
|
|
Vested |
|
|
(in years) |
|
|
(in thousands) |
|
$4.30 - $7.77 |
|
|
136,624 |
|
|
|
136,478 |
|
|
2.3 |
|
|
$ |
1,234 |
|
$8.39 - $10.00 |
|
|
63,409 |
|
|
|
63,305 |
|
|
2.8 |
|
|
$ |
354 |
|
$15.80 - $80.62 |
|
|
111,136 |
|
|
|
111,136 |
|
|
0.4 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311,169 |
|
|
|
310,919 |
|
|
|
|
|
|
$ |
1,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, the Company expects an additional 250 stock options to vest in the
future.
SARs and Stock Options Fair Value Assumptions
The Company estimates the grant date fair value of SARs and stock options 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 approximates the historical volatility of our Common Stock
over the period commensurate with the expected term of the award. The expected term calculation is
based on an average of the award vest term and the life of the option. 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 as
well as a change in the estimated forfeitures of SARs and stock option awards can materially affect
the amount of equity-based compensation recognized in the Companys Consolidated Statements of
Operations. Changes in the requisite service period can also materially affect the amount of
equity-based compensation recognized in the Companys Consolidated Statements of Operations.
66
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Equity-Based Compensation (Continued)
The following assumptions were used to determine the fair value of stock options and SARs granted
to employees by the Company for the three years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
2008 |
Expected volatility |
|
60% |
|
60% |
|
60% |
Average expected option life |
|
2.756.25 years |
|
6.25 years |
|
6.25 years |
Risk-free interest rate |
|
1.54-2.92% |
|
2.00-2.54% |
|
3.08% |
Dividend yield |
|
0.0% |
|
0.0% |
|
0.0% |
Restricted Stock
Changes in restricted stock for the years ended December 31, 2010, 2009 and 2008 are shown in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average Grant |
|
|
|
Shares |
|
|
Date Fair Value |
|
Issued and unvested, December 31, 2007 |
|
|
486,279 |
|
|
$ |
7.39 |
|
Vested |
|
|
(468,729 |
) |
|
$ |
7.20 |
|
Forfeited |
|
|
(250 |
) |
|
$ |
6.98 |
|
|
|
|
|
|
|
|
|
Issued and unvested, December 31, 2008 |
|
|
17,300 |
|
|
$ |
10.82 |
|
Granted |
|
|
24,000 |
|
|
$ |
7.00 |
|
Vested |
|
|
(6,775 |
) |
|
$ |
10.49 |
|
|
|
|
|
|
|
|
|
Issued and unvested, December 31, 2009 |
|
|
34,525 |
|
|
$ |
8.23 |
|
Granted |
|
|
42,500 |
|
|
$ |
8.75 |
|
Vested |
|
|
(9,025 |
) |
|
$ |
7.54 |
|
Forfeited |
|
|
(7,500 |
) |
|
$ |
12.01 |
|
|
|
|
|
|
|
|
|
Issued and unvested, December 31, 2010 |
|
|
60,500 |
|
|
$ |
8.23 |
|
|
|
|
|
|
|
|
|
The total aggregate fair value of restricted stock awards that vested and were converted to the
Companys Common Stock during the years ended December 31, 2010, 2009 and 2008 was $0.1 million,
$0.1 million and $3.3 million, respectively. During the year ended December 31, 2010, 2,777 shares
were surrendered for satisfying withholding taxes. At December 31, 2010, the Company expects the
60,500 outstanding restricted shares to vest.
Recipients of restricted stock did not pay any cash consideration to the Company for the shares and
have the right to vote all shares subject to the grant and receive all dividends with respect to
the shares, whether or not the shares have vested. The 2010 and 2009 restricted stock grants were
valued at $0.4 million and $0.2 million, respectively, and are being amortized over the vesting
period. There were no restricted stock grants in 2008. There were two restricted stock grants in
2010. The first grant vests 25% in 2011 and 25% each January through 2014. The second
grant also vests 25% in 2011, then 25% each October through 2014. The 2009 restricted
stock grants vested 25% in 2010 and 25% each October through 2013.
67
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Equity-Based Compensation (Continued)
Deferred Stock Units (DSUs)
In 2010, 2009 and 2008, each non-management member of the Companys Board of Directors received
DSUs for his service on the Board and its committees under the Companys Non-Management Director
Compensation Plan (the Director Plan). DSUs received by directors in conjunction with their
service on the Board and its committees vest on the one-year anniversary date of the grant and are
expensed over the twelve-month vesting period. Also in 2010, 2009 and 2008, the Company issued
quarterly compensation payments to each non-management director for his service on the Board and
its committees under the Director Plan. Each director had the right to elect to receive such
payments in whole or in part in the form of DSUs in lieu of cash under the Director Plan. Each
participating director would receive DSUs representing shares of the Companys Common Stock with a
fair market value equal to the relevant cash fees (with such fair market value determined by
reference to the closing Common Stock price reported by NASDAQ on the date these cash fees
otherwise would have been paid). These DSUs vest immediately. The Company recorded expense when
the fees to which the DSUs relate are earned.
During the years ended December 31, 2010, 2009
and 2008, the Company issued DSUs to the Companys
non-management directors valued at $0.4 million, $0.3 million and $0.5 million, respectively.
The expense of $0.2 million, $0.1 million and $0.3 million for the years ended December 31, 2010,
2009 and 2008, respectively, associated with the annual DSU grants is included in equity-based
compensation expense. The expense of $0.2 million for each of the years ended December 31, 2010,
2009 and 2008 associated with the quarterly grants for service, is included in Selling, General
and Administrative (but is not reflected in the summarized Equity-Based Compensation table above) on
the Companys Consolidated Statements of Operations. Changes in DSUs for the year ended December
31, 2010 are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
DSUs |
|
|
Grant Date Fair Value |
|
Issued and unvested, December 31, 2007 |
|
|
31,500 |
|
|
$ |
11.37 |
|
Granted |
|
|
36,000 |
|
|
$ |
8.70 |
|
Vested |
|
|
(31,500 |
) |
|
$ |
11.37 |
|
|
|
|
|
|
|
|
|
Issued and unvested, December 31, 2008 |
|
|
36,000 |
|
|
$ |
8.70 |
|
Granted |
|
|
36,000 |
|
|
$ |
4.05 |
|
Vested |
|
|
(36,000 |
) |
|
$ |
8.70 |
|
|
|
|
|
|
|
|
|
Issued and unvested, December 31, 2009 |
|
|
36,000 |
|
|
$ |
4.05 |
|
Granted |
|
|
36,000 |
|
|
$ |
6.80 |
|
Vested |
|
|
(36,000 |
) |
|
$ |
4.05 |
|
Forfeited |
|
|
(4,500 |
) |
|
$ |
6.80 |
|
|
|
|
|
|
|
|
|
Issued and unvested, December 31, 2010 |
|
|
31,500 |
|
|
$ |
6.80 |
|
|
|
|
|
|
|
|
|
Subsequent
to year end, the Company issued 60,000 DSUs to the Companys
non-management directors valued at $0.8 million under the
Companys Amended and Restated Non-Management Director
Compensation Plan. DSUs received by directors in conjunction
with their service on the Board and its committees vest on the
one-year anniversary of the grant and are expensed over that
twelve-month period.
Consolidated Partner Companies
The Companys consolidated partner companies, primarily ICG Commerce, recorded $0.7 million, $0.8
million and $0.8 million of equity based compensation related to equity-based awards during the
years ended December 31, 2010, 2009 and 2008, respectively.
ICG Commerces stock options generally vest over 4 years with 25% vesting on the first anniversary
of the grant date and the remaining 75% vesting monthly equally over the next 36 months. The fair
value of each of ICG Commerces option awards was estimated on the grant date using the
Black-Scholes option pricing model.
68
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Commitments and Contingencies
The Company and its consolidated subsidiaries are involved in various claims and legal actions
arising in the ordinary course of business. In the opinion of management, the amount of the
ultimate liability with respect to these actions will not materially affect the financial position,
results of operations or cash flows of the Company and its subsidiaries.
The Company and its consolidated partner companies lease their facilities under operating lease
agreements expiring 2011 through 2017. Future minimum lease payments as of December 31, 2010 under
the leases are as follows (in thousands):
|
|
|
|
|
2011 |
|
$ |
2,849 |
|
2012 |
|
$ |
2,568 |
|
2013 |
|
$ |
2,191 |
|
2014 |
|
$ |
1,976 |
|
2015 |
|
$ |
1,694 |
|
Thereafter |
|
$ |
2,470 |
|
Rent
expense under the non-cancelable operating leases was $3.0 million in 2010, $2.5 million in
2009 and $1.9 million in 2008.
Some of the Companys partner companies are not presumed by the SEC to be controlled by the
Company. Increases in the value of the Companys interests in non-controlled partner companies and
changes in income or loss and revenue attributable to them could result in the Companys inability
to comply with the order exempting it from registering under the Investment Company Act unless it
takes action to come into compliance with the order. The Company believes it can take actions to
maintain compliance with its exemptive order that will not adversely affect its operations or
stockholder value.
15. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Realized gains on marketable securities, net of hedge
termination costs (Notes 5, 6 and 7) |
|
$ |
66,952 |
|
|
$ |
20,805 |
|
|
$ |
634 |
|
Gain on sale of Creditex (Note 5) |
|
|
5,089 |
|
|
|
430 |
|
|
|
34,752 |
|
Sales/distributions of ownership interests in Partner Companies (Note 5) |
|
|
1,879 |
|
|
|
2,177 |
|
|
|
3,255 |
|
Unrealized gain (loss) on mark-to-market of hedges (Note 7) |
|
|
547 |
|
|
|
(7,098 |
) |
|
|
10,204 |
|
Impairments of cost method Partner Companies |
|
|
|
|
|
|
|
|
|
|
(4,735 |
) |
Other |
|
|
40 |
|
|
|
(338 |
) |
|
|
167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,507 |
|
|
|
15,976 |
|
|
|
44,277 |
|
Total other income (loss) for Consolidated Partner Companies |
|
|
(360 |
) |
|
|
602 |
|
|
|
(1,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
74,147 |
|
|
$ |
16,578 |
|
|
$ |
43,225 |
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2008, the Company concluded that the carrying value of
several cost method companies would not be recoverable and recorded impairments totaling $4.7
million to reduce the Companys carrying value of these cost method companies.
69
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Other Income (Loss) Continued
During the years ended December 31, 2010, 2009 and 2008, ICG Commerce recorded foreign currency
gains and losses related to changes in exchange rates associated with its operations in the United
Kingdom and Europe. 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.
16. Income Taxes
Total income tax (benefit) expense was allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Income tax (benefit) expense from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Federal taxes |
|
$ |
(919 |
) |
|
$ |
(10,455 |
) |
|
$ |
(147 |
) |
State taxes |
|
|
72 |
|
|
|
(9 |
) |
|
|
53 |
|
Foreign taxes |
|
|
310 |
|
|
|
(175 |
) |
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
Current taxes |
|
$ |
(537 |
) |
|
$ |
(10,639 |
) |
|
$ |
357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Federal taxes |
|
$ |
807 |
|
|
$ |
(28,702 |
) |
|
$ |
|
|
State taxes |
|
|
(15 |
) |
|
|
65 |
|
|
|
|
|
Foreign taxes |
|
|
(1 |
) |
|
|
(234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes |
|
$ |
791 |
|
|
$ |
(28,871 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
$ |
254 |
|
|
$ |
(39,510 |
) |
|
$ |
357 |
|
|
|
|
|
|
|
|
|
|
|
The Company and InvestorForce 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 and capital loss carryforwards 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 was $29 million, all of which was
used in 2010. The total amount available for these carryforwards at December 31, 2010 was $188.8
million. These losses expire in varying amounts between 2011 and 2023.
Additionally, at December 31, 2010 the Company and InvestorForce had $31.1 million of net operating
loss carryforwards that are not subject to the Section 382 annual limitation. These net operating
losses expire between 2026 and 2029.
GovDelivery joined in filing the consolidated federal income tax return with the Company and
InvestorForce beginning in 2010. As of December 31, 2010, GovDelivery had 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.
70
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Income Taxes (Continued)
During 2009, the Internal Revenue Service completed its audit of the Companys federal income tax
returns for the years 2005 through 2007. As a result of this audit, the Company is entitled to a
refund in the amount of $4.7 million. The refund is primarily related to the Companys ability to
utilize certain capital losses which the Company previously thought were not utilizable as a result
of the Companys ownership change in 2004. During the year ended December 31, 2010, the Company
received this refund.
In November 2009, the Worker, Homeownership and Business Assistance Act of 2009, which expanded the
ability of businesses to carry back net operating losses was enacted. This legislation allows the
Company to carry back its net operating loss from 2008 or 2009 to 2005, when the Company paid
federal income taxes. The Company carried back its net operating loss, excluding the net operating
loss attributable to InvestorForce, from 2009 for which the Company expects a refund of $6.3
million. The Company expects to receive this refund in 2011.
ICG Commerce filed its own consolidated federal income tax return, separate from the Company
through June 30, 2010. 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, approximately $74.0 million of net operating loss carryforwards are
expected to be available to the Company between December 31, 2009 and December 31, 2023. The
annual limitation ICG Commerce has on the utilization of its net operating losses is approximately
$3.1 million per year. The amount available in 2010 is approximately $34.1 million.
As of December 31, 2009, in light of ICG Commerces consistent recent history of profitability,
current-year results and its estimates of projected future profitability, management believed that
it was more likely than not that the benefit of the majority of its net deferred tax assets will be
realized and therefore a reduction of the valuation allowance against its net deferred tax asset
was appropriate. Accordingly the Company recognized a deferred tax benefit of $28.7 million
related to the reduction of the valuation allowance in 2009.
ICG Commerce maintains a valuation allowance for certain of 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.
Effective July 1, 2010, ICG Commerce is included in the Companys consolidated federal income tax
return as a result of the transactions described in Note 5, Ownership Interests in Partner
Companies. Accordingly, ICG Commerces carryforward period for its net operating losses expires
in 2022 instead of 2023. This eliminated $2.6 million of net operating loss carryforward.
Due to the inclusion of ICG Commerce in the Companys consolidated federal income tax return,
subsequent to July 1, 2010
operating losses of other members of the consolidated group offset a portion of ICG Commerces
taxable income. The benefit of these losses,
which amounted to $4.8 million,
reduced the deferred tax expense in the Companys
Consolidated Statements of Operations for the year ended December 31, 2010.
Inclusion of ICG Commerce in the Companys consolidated federal income tax return did not affect
managements assessment of the need for a valuation allowance for only a portion of the Companys
deferred tax assets. 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.
71
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Income Taxes (Continued)
The Companys net deferred tax asset (liability) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss and capital loss carryforward 382 limited |
|
$ |
108,791 |
|
|
$ |
121,103 |
|
Net operating loss carryforward not 382 limited |
|
|
10,902 |
|
|
|
8,907 |
|
Capital loss carryforward not 382 limited |
|
|
|
|
|
|
2,063 |
|
Partner Company basis difference |
|
|
80,916 |
|
|
|
121,058 |
|
Reserves and accruals |
|
|
6,540 |
|
|
|
3,743 |
|
Equity-based compensation expense |
|
|
6,188 |
|
|
|
8,270 |
|
AMT and other credits |
|
|
590 |
|
|
|
406 |
|
Other, net |
|
|
800 |
|
|
|
2,524 |
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
214,727 |
|
|
|
268,074 |
|
Valuation allowance |
|
|
(181,704 |
) |
|
|
(208,395 |
) |
|
|
|
|
|
|
|
Deferred tax asset |
|
|
33,023 |
|
|
|
59,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
(5,220 |
) |
|
|
(5,898 |
) |
Other comprehensive income |
|
|
|
|
|
|
(24,910 |
) |
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
(5,220 |
) |
|
|
(30,808 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets |
|
$ |
27,803 |
|
|
$ |
28,871 |
|
|
|
|
|
|
|
|
Beginning in 2009, the Company has modified its presentation of deferred tax assets and
liabilities. ICG Commerces deferred tax assets and liabilities have been combined with the
Companys, and the Company has reduced the gross amount of its net operating loss and capital loss
carryforwards that are subject to the Section 382 limitation to the amount of the limitation
available until the carryforwards expire.
In connection with the decrease in the valuation allowance, ICG Commerce evaluated its exposure
under the provisions of current guidance relating to accounting for uncertainty in income taxes and, as a
result, recorded a liability for unrecognized income tax expenses of $0.3 million at December 31,
2009. The unrecognized tax expenses relate to ICG Commerces treatment of accrued bonuses, the
treatment of an alternative minimum tax foreign tax credit, and unfiled state tax returns. This
expense was reversed in 2010 when the uncertainty was resolved.
The Companys practice is to recognize interest and/or penalties related to income tax matters in
income tax expense. The Company had no material accrual for interest or penalties on the Companys
Consolidated Balance Sheets at December 31, 2010 or 2009. The Company recognized an income tax
benefit related to $0.7 million of interest received in conjunction with the aforementioned
refunds, which is included in the Companys Consolidated Statements of Operations for the year
ended December 31, 2010.
Tax years 2005 and forward are subject to examination for federal tax purposes. Tax years 1996
through 2004 are subject to examination for federal tax purposes to the extent of net operating
losses used in future years that are otherwise subject to examination.
72
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Income Taxes (Continued)
The effective tax rate differs from the federal statutory rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Tax expense (benefit) at statutory rate |
|
|
35.0 |
% |
|
|
(35.0 |
)% |
|
|
(35.0 |
)% |
IRS audit adjustment and interest |
|
|
(1.4 |
)% |
|
|
(43.4 |
)% |
|
|
|
|
Foreign and state taxes |
|
|
0.8 |
% |
|
|
(3.2 |
)% |
|
|
2.1 |
% |
Non-deductible expenses and other |
|
|
(1.8 |
)% |
|
|
(2.9 |
)% |
|
|
1.2 |
% |
Valuation allowance |
|
|
(55.1 |
)% |
|
|
(275.3 |
)% |
|
|
33.2 |
% |
Consolidation of ICG Commerce |
|
|
74.7 |
% |
|
|
|
|
|
|
|
|
Reduction in deferred tax liability |
|
|
(51.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
% |
|
|
(359.8 |
)% |
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
17. Net Income (Loss) per Share
The calculations of net income (loss) per share were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands, except shares and per share data) |
|
Basic and Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
45,977 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
Income (loss) on discontinued operations |
|
|
612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG Group, Inc. |
|
$ |
46,589 |
|
|
$ |
15,534 |
|
|
$ |
(22,926 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share |
|
$ |
1.26 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
Income (loss) on discontinued operations per share |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG Group, Inc. per share |
|
$ |
1.28 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share |
|
$ |
1.24 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
Income (loss) on discontinued operations per share |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG Group, Inc. per share |
|
$ |
1.26 |
|
|
$ |
0.42 |
|
|
$ |
(0.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic income (loss) per share |
|
|
36,426,603 |
|
|
|
36,660,158 |
|
|
|
38,105,583 |
|
|
|
|
|
|
|
|
|
|
|
Incremental Diluted Shares Impact: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
65,208 |
|
|
|
22,776 |
|
|
|
|
|
SARs |
|
|
538,090 |
|
|
|
|
|
|
|
|
|
Restricted stock |
|
|
18,408 |
|
|
|
241 |
|
|
|
|
|
DSUs |
|
|
15,216 |
|
|
|
21,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the computation of diluted income (loss) per share |
|
|
37,063,525 |
|
|
|
36,704,976 |
|
|
|
38,105,583 |
|
|
|
|
|
|
|
|
|
|
|
The following potentially dilutive securities were not included in the computation of diluted
net loss per share, as their effect would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Shares |
|
|
Price per Share |
|
Year ended December 31, 2010 |
|
|
|
|
|
|
|
|
Stock options |
|
|
111,136 |
|
|
$ |
41.65 |
|
SARs |
|
|
1,600,940 |
|
|
$ |
7.19 |
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009 |
|
|
|
|
|
|
|
|
Stock options |
|
|
406,730 |
|
|
$ |
46.57 |
|
SARs |
|
|
3,970,370 |
|
|
$ |
7.63 |
|
Restricted stock |
|
|
32,025 |
|
|
$ |
8.23 |
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008 |
|
|
|
|
|
|
|
|
Stock options |
|
|
614,954 |
|
|
$ |
36.58 |
|
SARs |
|
|
3,870,370 |
|
|
$ |
7.65 |
|
Restricted stock |
|
|
17,300 |
|
|
$ |
10.82 |
|
DSUs |
|
|
36,000 |
|
|
$ |
8.70 |
|
73
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. Redeemable Noncontrolling Interest
Certain GovDelivery Series AA Preferred
stockholders have the ability to force GovDelivery to redeem their Series AA Preferred shares beginning in 2013.
Because this redemption is outside the control of GovDelivery, the Company has classified this noncontrolling interest outside of equity
and will accrete to its estimated redemption value. This noncontrolling interest is classified as Redeemable
noncontrolling interest on the Companys Consolidated Balance Sheets.
The
following reconciles the activity related to the redeemable noncontrolling interest during 2010
(in thousands):
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
(1,420 |
) |
Impact of
share redemption from sale of GovDocs |
|
|
479 |
|
Redeemable noncontrolling interest portion of net (income)/loss |
|
|
(55 |
) |
Accretion to
estimated redemption value |
|
|
(186 |
) |
|
|
|
|
Balance at December 31, 2010 |
|
$ |
(1,182 |
) |
|
|
|
|
19. 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 year ended December 31, 2010. During the years ended
December 31, 2009 and 2008, the Company repurchased 492,282 shares and 1,948,158 shares,
respectively, of its Common Stock. These shares were repurchased at an average stock price of
$5.45 per share and $4.75 per share in 2009 and 2008, respectively. All repurchases are reflected
in Treasury stock, at cost as a reduction of Stockholders Equity on the Companys Consolidated
Balance Sheets in the relevant periods.
20. Related Parties
The Company provides strategic and operational support to its partner companies in the normal
course of its business. The Companys employees and consultants generally provide these services.
The costs related to employees are paid by the Company and are reflected by the Company in general
and administrative expenses. Non-management members of the Companys Board of Directors are
compensated with cash and equity grants in the Company that are accounted for in accordance with
guidance for equity-based payment compensation.
74
ICG GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. Selected Quarterly Financial Information
(Unaudited)
The following table sets forth selected quarterly consolidated financial information for the
years ended December 31, 2010 and 2009. The operating results for any given quarter are not
necessarily indicative of results for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010 Quarter Ended |
|
|
Fiscal 2009 Quarter Ended |
|
|
|
Mar.31 |
|
|
Jun.30 |
|
|
Sep.30 |
|
|
Dec.31 |
|
|
Mar.31 |
|
|
Jun.30 |
|
|
Sep.30 |
|
|
Dec.31 |
|
|
|
(in thousands, except per share data) |
|
Revenue |
|
$ |
25,755 |
|
|
$ |
26,657 |
|
|
$ |
30,222 |
|
|
$ |
33,076 |
|
|
$ |
21,652 |
|
|
$ |
22,077 |
|
|
$ |
22,572 |
|
|
$ |
23,951 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
16,682 |
|
|
|
17,643 |
|
|
|
18,056 |
|
|
|
18,669 |
|
|
|
13,205 |
|
|
|
14,598 |
|
|
|
14,402 |
|
|
|
14,715 |
|
Selling, general & administrative |
|
|
10,434 |
|
|
|
10,788 |
|
|
|
9,989 |
|
|
|
10,995 |
|
|
|
9,216 |
|
|
|
9,158 |
|
|
|
8,347 |
|
|
|
7,857 |
|
Research and development |
|
|
2,424 |
|
|
|
2,645 |
|
|
|
2,729 |
|
|
|
2,846 |
|
|
|
2,648 |
|
|
|
2,592 |
|
|
|
2,178 |
|
|
|
1,597 |
|
Amortization of intangible assets |
|
|
339 |
|
|
|
339 |
|
|
|
342 |
|
|
|
337 |
|
|
|
77 |
|
|
|
77 |
|
|
|
51 |
|
|
|
|
|
Impairment related and other |
|
|
72 |
|
|
|
96 |
|
|
|
1,004 |
|
|
|
10 |
|
|
|
30 |
|
|
|
3,790 |
|
|
|
1,244 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses |
|
|
29,951 |
|
|
|
31,511 |
|
|
|
32,120 |
|
|
|
32,857 |
|
|
|
25,176 |
|
|
|
30,215 |
|
|
|
26,222 |
|
|
|
24,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(4,196 |
) |
|
|
(4,854 |
) |
|
|
(1,898 |
) |
|
|
219 |
|
|
|
(3,524 |
) |
|
|
(8,138 |
) |
|
|
(3,650 |
) |
|
|
(346 |
) |
Other income (loss), net |
|
|
40,296 |
|
|
|
24,627 |
|
|
|
9,196 |
|
|
|
28 |
|
|
|
(2,247 |
) |
|
|
3,246 |
|
|
|
10,226 |
|
|
|
5,353 |
|
Interest income |
|
|
61 |
|
|
|
138 |
|
|
|
56 |
|
|
|
75 |
|
|
|
142 |
|
|
|
98 |
|
|
|
98 |
|
|
|
108 |
|
Interest expense |
|
|
(44 |
) |
|
|
(25 |
) |
|
|
(123 |
) |
|
|
(174 |
) |
|
|
(84 |
) |
|
|
(73 |
) |
|
|
(49 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes, equity
loss, discontinued operations and
noncontrolling interest |
|
|
36,117 |
|
|
|
19,886 |
|
|
|
7,231 |
|
|
|
148 |
|
|
|
(5,713 |
) |
|
|
(4,867 |
) |
|
|
6,625 |
|
|
|
5,105 |
|
Income tax (expense) benefit |
|
|
(616 |
) |
|
|
411 |
|
|
|
(2,860 |
) |
|
|
2,811 |
|
|
|
53 |
|
|
|
(421 |
) |
|
|
(516 |
) |
|
|
40,394 |
|
Equity loss |
|
|
(6,335 |
) |
|
|
(4,580 |
) |
|
|
(2,952 |
) |
|
|
(2,155 |
) |
|
|
(4,953 |
) |
|
|
(2,924 |
) |
|
|
(2,761 |
) |
|
|
(1,493 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
29,166 |
|
|
|
15,717 |
|
|
|
1,419 |
|
|
|
804 |
|
|
|
(10,613 |
) |
|
|
(8,212 |
) |
|
|
3,348 |
|
|
|
44,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued operations, including gain on sale
|
|
|
(22 |
) |
|
|
223 |
|
|
|
601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
29,144 |
|
|
|
15,940 |
|
|
|
2,020 |
|
|
|
804 |
|
|
|
(10,613 |
) |
|
|
(8,212 |
) |
|
|
3,348 |
|
|
|
44,006 |
|
Less: Net income attributable to the
noncontrolling interest |
|
|
373 |
|
|
|
179 |
|
|
|
229 |
|
|
|
538 |
|
|
|
392 |
|
|
|
337 |
|
|
|
277 |
|
|
|
11,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG Group, Inc. |
|
$ |
28,771 |
|
|
$ |
15,761 |
|
|
$ |
1,791 |
|
|
$ |
266 |
|
|
$ |
(11,005 |
) |
|
$ |
(8,549 |
) |
|
$ |
3,071 |
|
|
$ |
32,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to
ICG Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations |
|
$ |
28,802 |
|
|
$ |
15,570 |
|
|
$ |
1,339 |
|
|
$ |
266 |
|
|
$ |
(11,005 |
) |
|
$ |
(8,549 |
) |
|
$ |
3,071 |
|
|
$ |
32,017 |
|
Net income (loss) from discontinued operations |
|
|
(31 |
) |
|
|
191 |
|
|
|
452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
28,771 |
|
|
$ |
15,761 |
|
|
$ |
1,791 |
|
|
$ |
266 |
|
|
$ |
(11,005 |
) |
|
$ |
(8,549 |
) |
|
$ |
3,071 |
|
|
$ |
32,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.79 |
|
|
$ |
0.43 |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
$ |
(0.30 |
) |
|
$ |
(0.23 |
) |
|
$ |
0.08 |
|
|
$ |
0.87 |
|
Income (loss) from discontinued operations |
|
|
|
|
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG Group, Inc. |
|
$ |
0.79 |
|
|
$ |
0.43 |
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
(0.30 |
) |
|
$ |
(0.23 |
) |
|
$ |
0.08 |
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic income
(loss) per share (1) |
|
|
36,305 |
|
|
|
36,346 |
|
|
|
36,368 |
|
|
|
36,684 |
|
|
|
36,676 |
|
|
|
36,666 |
|
|
|
36,676 |
|
|
|
36,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.79 |
|
|
$ |
0.42 |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
$ |
(0.30 |
) |
|
$ |
(0.23 |
) |
|
$ |
0.08 |
|
|
$ |
0.87 |
|
Income (loss) from discontinued operations |
|
|
|
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to ICG Group, Inc. |
|
$ |
0.79 |
|
|
$ |
0.43 |
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
(0.30 |
) |
|
$ |
(0.23 |
) |
|
$ |
0.08 |
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of diluted income
(loss) per share (1) |
|
|
36,346 |
|
|
|
37,074 |
|
|
|
36,956 |
|
|
|
37,875 |
|
|
|
36,676 |
|
|
|
36,666 |
|
|
|
36,740 |
|
|
|
36,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The sum of quarterly income (loss) per share differs from the full year amount due to changes in the number of shares outstanding during the year. |
|
|
|
ITEM 9. |
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures |
None.
75
|
|
|
ITEM 9A. |
|
Controls and Procedures |
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management,
including the 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 Exchange Act) as of the end of the period covered in this Report. Based upon
that evaluation, the 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 included in the
Companys 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 the Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely discussions regarding required disclosure.
Managements Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act). The Companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. The Companys internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements for external purposes in accordance with generally accepted accounting principles, (iii)
provide reasonable assurance that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company, and (iv) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Companys assets that could have a material effect on the financial
statements.
Management of ICG Group, Inc. evaluated the Companys internal control over
financial reporting as of December 31, 2010. In making this assessment, it used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Managements assessment included an evaluation of the design of its
internal control over financial reporting and testing of the operational effectiveness of its
internal control over financial reporting. Management reviewed the results of its assessment with
the Audit Committee of the Board of Directors. Based on this assessment, as of December 31, 2010,
the Companys internal control over financial reporting was effective based on those criteria.
The Companys independent registered public accounting firm, KPMG LLP, has audited the
operating effectiveness of the
Companys
internal control over financial reporting. KPMG LLPs report on
the operating effectiveness of the Companys
internal control over financial reporting appears below.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the period covered
by this Report that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
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.
76
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
ICG Group, Inc. (formerly Internet Capital Group, Inc.):
We
have audited ICG Group, Inc. (formerly Internet Capital Group, Inc.) and subsidiaries (the Company) internal control over
financial reporting as of December 31, 2010, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). ICG Group, Inc.s
(formerly Internet Capital Group, Inc.s) management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Managements Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, ICG Group, Inc.
(formerly Internet Capital Group, Inc.) and subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2010, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of ICG Group,
Inc. (formerly Internet Capital Group, Inc.) and
subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of
operations, changes in equity, comprehensive income (loss) and cash flows for each of the years in
the three-year period ended December 31, 2010, and our report dated March 16, 2011 expressed an
unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
March 16, 2011
77
|
|
|
ITEM 9B. |
|
Other Information |
None.
PART III
|
|
|
ITEM 10. |
|
Directors, Executive Officers and Corporate Governance |
We incorporate by reference the information contained under the captions Election of Directors,
Section 16(a) Beneficial Ownership Reporting Compliance, Executive Officers and Corporate
Governance in our Definitive Proxy Statement for our 2011 Annual Meeting of Stockholders to be
filed within 120 days after the end of the year covered by this Report pursuant to Regulation 14A
under the Exchange Act.
We have adopted a written code of business conduct and ethics, known as our Corporate Code of
Conduct, which applies to all of our directors, officers and employees, including our principal
executive officer and our principal financial and accounting officer. Our Corporate Code of
Conduct is available on our internet website, www.icg.com. Any amendments to our Corporate Code of
Conduct or waivers from the provisions of the Corporate Code of Conduct for our principal executive
officer or our principal financial and accounting officer will be disclosed in accordance with
applicable SEC and stock exchange rules.
|
|
|
ITEM 11. |
|
Executive Compensation |
We incorporate by reference the information contained under the caption Executive Compensation in
our Definitive Proxy Statement for our 2011 Annual Meeting of Stockholders to be filed within 120
days after the end of the year covered by this Report pursuant to Regulation 14A under the Exchange
Act.
|
|
|
ITEM 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
We incorporate by reference the information contained under the caption Security Ownership of
Certain Beneficial Owners and Directors and Officers in our Definitive Proxy Statement for our
2011 Annual Meeting of Stockholders to be filed within 120 days after the end of the year covered
by this Report pursuant to Regulation 14A under the Exchange Act.
|
|
|
ITEM 13. |
|
Certain Relationships and Related Transactions, and Director Independence |
We incorporate by reference the information contained under the caption Certain Relationships and
Related Transactions in our Definitive Proxy Statement for our 2011 Annual Meeting of Stockholders
to be filed within 120 days after the end of the year covered by this Report pursuant to Regulation
14A under the Exchange Act.
|
|
|
ITEM 14. |
|
Principal Accountant Fees and Services |
We incorporate by reference the information contained under the caption Ratification of
Appointment of Independent Registered Public Accountant in our Definitive Proxy Statement for our
2011 Annual Meeting of Stockholders to be filed within 120 days after the end of the year covered
by this Report pursuant to Regulation 14A under the Exchange Act.
78
PART IV
|
|
|
ITEM 15. |
|
Exhibits and Financial Statement Schedules |
1. Consolidated Financial Statements
The Consolidated Financial Statements and related Notes thereto as set forth under Item 8 of this
Report are incorporated herein by reference.
2. Financial Statement Schedule
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
ICG Group, Inc. (formerly Internet Capital Group, Inc.):
Under date of March 16, 2011, we reported on the consolidated balance sheets of ICG Group, Inc.
(formerly Internet Capital Group, Inc.) and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related
consolidated statements of operations, changes in equity, comprehensive income (loss) and cash
flows for each of the years in the three-year period ended December 31, 2010. In connection with
our audits of the aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule. The consolidated financial statement schedule is the
responsibility of the Companys management. Our responsibility is to express an opinion on the
consolidated financial statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG LLP
Philadelphia, Pennsylvania
March 16, 2011
79
The following financial statement schedule of ICG Group, Inc. for each of the years
ended December 31, 2010, 2009 and 2008 should be read in conjunction with our Consolidated
Financial Statements and related Notes thereto.
ICG GROUP, INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2007, 2008 and 2009
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the |
|
|
Charged to |
|
|
Charged to |
|
|
|
|
|
|
Balance at the |
|
|
|
beginning of |
|
|
costs and |
|
|
Other |
|
|
|
|
|
|
end of |
|
|
|
the year |
|
|
expenses |
|
|
accounts |
|
|
Write-offs |
|
|
the year |
|
Allowance for Doubtful Accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
$ |
44 |
|
|
$ |
750 |
(a) |
|
$ |
|
|
|
$ |
(73 |
) |
|
$ |
721 |
|
December 31, 2009 |
|
$ |
721 |
|
|
$ |
(166 |
) (b) |
|
$ |
343 |
|
|
$ |
(308 |
) |
|
$ |
590 |
|
December 31, 2010 |
|
$ |
590 |
|
|
$ |
293 |
|
|
$ |
(39 |
) |
|
$ |
(128 |
) |
|
$ |
716 |
|
|
|
|
(a) |
|
Reserve of $411 was established upon acquisition of consolidated core company during 2008. |
|
(b) |
|
Reserve of $79 was established upon acquisition of consolidated core company during 2009;
reserve of $92 was eliminated upon sale of subsidiary assets during 2009. |
80
3. List of Exhibits
The following is a list of exhibits required by Item 601 of Regulation S-K filed as part of this
Report. Where so indicated, exhibits that were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the previous filing is
indicated in parentheses.
|
|
|
|
|
Exhibit Number |
|
Document |
|
2.1 |
|
|
Agreement of Merger, dated February 2, 1999, between Internet
Capital Group, L.L.C. and the Company (incorporated
by reference to Exhibit 2.1 to the Companys Registration Statement
on Form S-1, filed May 11, 1999 (File No. 333-78193)). |
|
|
|
|
|
|
3.1.1 |
|
|
Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 2.1 to the Companys
Registration Statement on Form 8-A, filed August 4, 1999 (File No.
000-26989)). |
|
|
|
|
|
|
3.1.2 |
|
|
Certificate of Amendment of Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.3 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2002, filed
March 31, 2003 (File No. 001-16249)). |
|
|
|
|
|
|
3.1.3 |
|
|
Second Amendment of Restated Certificate of Incorporation of
the Company (incorporated by reference to Exhibit
3.1 to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004, filed August 9, 2004 (File No. 001-16249)). |
|
|
|
|
|
|
3.1.4 |
|
|
Third Amendment of Restated Certificate of Incorporation of
the Company (incorporated by reference to Exhibit
3.1 to the Companys Current Report on Form 8-K, filed June 22, 2011 (File No. 001-16249). |
|
|
|
|
|
|
3.2 |
|
|
Amended and Restated By-laws of the Company
(incorporated by reference to Exhibit 3.2 to the Companys Current
Report on Form 8-K, filed June 22, 2011 (File No. 001-16249)). |
|
|
|
|
|
|
4.1 |
|
|
Form of Certificate for Company Common Stock
(filed herewith). |
|
|
|
|
|
|
10.1 |
|
|
Amended and Restated 1999 Equity
Compensation Plan of the Company (incorporated by reference to Exhibit 10.6 to the
Companys Current Report on Form 8-K, filed March 5, 2007 (File No.
001-16249)).* |
|
|
|
|
|
|
10.2 |
|
|
Third Amended and Restated 2005 Omnibus
Equity Compensation Plan of the Company (filed herewith).* |
|
|
|
|
|
|
10.3 |
|
|
ICG
Amended and Restated Non-Management Director Compensation Plan (filed herewith).* |
|
|
|
|
|
|
10.4 |
|
|
Amended and Restated Director Deferred
Stock Unit Program of the Company (filed herewith).* |
|
|
|
|
|
|
10.5.1 |
|
|
Logistics.com, Inc. 2001 Equity Compensation Plan (incorporated by
reference to Exhibit 10.3 to the Companys Annual Report on Form
10-K for the year ended December 31, 2002, filed March 31, 2003
(File No. 001-16249)).* |
|
|
|
|
|
|
10.5.2 |
|
|
Amendment No. 1 to the Logistics.com, Inc. 2001 Equity Compensation
Plan (incorporated by reference to Exhibit 10.3.1 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2002,
filed March 31, 2003 (File No. 001-16249)).* |
81
|
|
|
|
|
Exhibit Number |
|
Document |
|
10.6 |
|
|
2010 Performance Plan (incorporated by
reference to Exhibit 10.1 of the Companys Current Report on Form
8-K, filed March 3, 2010 (File No. 001-16249)).* |
|
|
|
|
|
|
10.7 |
|
|
2011 Performance Plan (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form
8-K, filed March 14, 2011 (File No. 001-16249)).* |
|
|
|
|
|
|
10.8 |
|
|
Form of Company Restricted Stock Grant Without
Performance Acceleration (filed herewith).* |
|
|
|
|
|
|
10.9 |
|
|
Form of Company Non-Management Director
Restricted Stock Grant (filed herewith).* |
|
|
|
|
|
|
10.10 |
|
|
Form of Company Restricted Stock Grant With
Performance Acceleration (incorporated by reference to Exhibit 10.33
to the Companys Annual Report on Form 10-K for the year ended
December 31, 2004, filed March 16, 2005 (File No. 001-16249)).* |
|
|
|
|
|
|
10.11 |
|
|
Form of Company Stock Option Grant Without
Performance Acceleration (incorporated by reference to Exhibit 10.34
to the Companys Annual Report on Form 10-K for the year ended
December 31, 2004, filed March 16, 2005 (File No. 001-16249)).* |
|
|
|
|
|
|
10.12 |
|
|
Form of Company Stock Option Grant With
Performance Acceleration (incorporated by reference to Exhibit 10.35
to the Companys Annual Report on Form 10-K for the year ended
December 31, 2004, filed March 16, 2005 (File No. 001-16249)).* |
|
|
|
|
|
|
10.13 |
|
|
Form of Company Non-Employee Director Initial
Stock Option Grant (incorporated by reference to Exhibit 10.36 to
the Companys Annual Report on Form 10-K for the year ended December
31, 2004, filed March 16, 2005 (File No. 001-16249)).* |
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10.14 |
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Form of Company Non-Employee Director Annual
Stock Option Grant (incorporated by reference to Exhibit 10.37 to
the Companys Annual Report on Form 10-K for the year ended December
31, 2004, filed March 16, 2005 (File No. 001-16249)).* |
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10.15 |
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Form of Company Stock Unit Award Agreement (filed herewith).* |
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10.16 |
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Form of Company Stock Appreciation Rights
Certificate (filed herewith).* |
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10.17 |
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Form of Company Non-Employee Director
Stock Appreciation Rights Certificate (filed herewith).* |
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10.18.1 |
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Employment Agreement, dated February 28, 2007, by and among Internet
Capital Group Operations, Inc., the Company and
Walter W. Buckley, III (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K, filed March 5, 2007 (File
No. 001-16249)).* |
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10.18.2 |
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|
Amendment 2008-1 to the Employment Agreement, dated as of December
18, 2008, by and between Internet Capital Group Operations, Inc. and
Walter W. Buckley, III (incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K, filed December 18, 2008 (File No. 001-16249)).* |
82
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|
Exhibit Number |
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Document |
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10.18.3 |
|
|
Amendment 2010-1 to the Employment Agreement, dated as of June 18,
2010, by and between Internet Capital Group Operations, Inc. and
Walter W. Buckley, III (incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K, filed June 24, 2010 (File
No. 001-16249)).* |
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10.19.1 |
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Letter Agreement, dated December 18, 2008, by and between the Company and R. Kirk Morgan (incorporated by reference to
Exhibit 10.4 to the Companys Current Report on Form 8-K, filed
December 18, 2008 (File No. 001-16249)).* |
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10.19.2 |
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Letter Agreement, dated June 18, 2010, by and between the Company
and R. Kirk Morgan (incorporated by reference to
Exhibit 10.4 to the Companys Current Report on Form 8-K, filed June
24, 2010 (File No. 001-16249)).* |
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10.20.1 |
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Employment Agreement, dated April 18, 2007, by and between the Company
and Douglas A. Alexander (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K, filed
April 18, 2007 (File No. 001-16249)).* |
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10.20.2 |
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Amendment 2008-1 to the Employment Agreement, dated as of December
18, 2008, by and between Internet Capital Group Operations, Inc. and
Douglas A. Alexander (incorporated by reference to Exhibit 10.3 to
the Companys Current Report on Form 8-K, filed December 18, 2008
(File No. 001-16249)).* |
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10.20.3 |
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Amendment 2010-1 to the Employment Agreement, dated as of June 18,
2010, by and between Internet Capital Group Operations, Inc. and
Douglas A. Alexander (incorporated by reference to Exhibit 10.3 to
the Companys Current Report on Form 8-K, filed June 24, 2010 (File
No. 001-16249)).* |
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10.21 |
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Form of Restrictive Covenant Agreement (incorporated by reference to
Exhibit 10.4 to the Companys Current Report on Form 8-K, filed July
28, 2005 (File No. 001-16249)).* |
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10.22.1 |
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Amended and Restated Letter of Credit Agreement, dated as of
December 18, 2009, by and between Comerica Bank, the Company, ICG Holdings, Inc. and Internet Capital Group
Operations, Inc. (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K, filed December 22, 2009 (File
No. 001-16249)). |
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10.22.2 |
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Amendment to Amended and Restated Letter of Credit Agreement, dated
as of December 17, 2010, by and between Comerica Bank, the
Company, ICG Holdings, Inc. and Internet Capital Group
Operations, Inc. (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K, filed December 21, 2010 (File
No. 001-16249)). |
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10.23.1 |
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Agreement of Lease, dated June 30, 2003, between FV Office Partners,
L.P. and Internet Capital Group Operations, Inc. (incorporated by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2003, filed August 14, 2003
(File No. 001-16249)). |
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10.23.2 |
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First Amendment to Lease, dated November 20, 2003, between FV Office
Partners, L.P. and Internet Capital Group Operations, Inc.
(incorporated by reference to Exhibit 10.37 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2003, filed
March 15, 2004 (File No. 001-16249)). |
83
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|
Exhibit Number |
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Document |
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10.23.3 |
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Second Amendment to Lease, dated August 21, 2006, by and between
Chesterbrook Partners, L.P. (as successor-in-interest to FV Office
Partners, L.P.) and Internet Capital Group Operations, Inc.
(incorporated by reference to Exhibit 10.33.3 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2006,
filed March 16, 2007 (File No. 001-16249)). |
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10.24 |
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Form of Agreement of Limited Partnership for the Companys Carried Interest Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Companys Current report on Form
8-K, filed December 13, 2007 (File No. 001-16249)).* |
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10.25 |
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|
Form of Limited Partnership Interest Grant (incorporated by
reference to Exhibit 10.3 to the Companys Current Report on Form
8-K, filed December 13, 2007 (File No. 001-16249)).* |
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10.26 |
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Company Compensation Clawback Policy
(filed herewith). |
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10.27 |
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|
Stock Purchase Agreement dated May 5, 2010 by and between ICG
Holdings, Inc, and ICGC Holdings, L.P. (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K, filed May
6, 2010 (File No. 001-16249)). |
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11.1 |
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Statement Regarding Computation of Per Share Earnings (included
herein at Note 2-Significant Accounting Policies in the subsection
Net Income (Loss) Per Share to the Consolidated Financial
Statements and Note 17-Net Income (Loss) Per Share to the
Consolidated Financial Statements). |
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14.1 |
|
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Company Corporate Code of Conduct (incorporated by
reference to Exhibit 14.1 to the Companys Current Report on Form
8-K, filed June 22, 2011 (File No. 001-16249)). |
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21.1 |
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|
Subsidiaries
of the Company. ** |
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23.1 |
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|
Consent
of KPMG LLP. ** |
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23.2 |
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|
Consent
of Grant Thornton LLP/Metastorm Inc. ** |
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23.3 |
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Consent
of KPMG LLP. ** |
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23.4 |
|
|
Consent
of Baker Tilly UK Audit LLP/GoIndustry-DoveBid plc (filed herewith). |
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31.1 |
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Certification of Chief Executive Officer required by Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith). |
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31.2 |
|
|
Certification of Chief Financial Officer required by Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith). |
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32.1 |
|
|
Certification of the Chief Executive Officer required by Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith). |
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32.2 |
|
|
Certification of the Chief Financial Officer required by Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith). |
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99.1 |
|
|
Consolidated
Financial Statements of Metastorm Inc. ** |
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99.2 |
|
|
Consolidated
Financial Statements of StarCite, Inc. ** |
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99.3 |
|
|
Consolidated
Financial Statements of GoIndustry-DoveBid plc (filed herewith). |
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* |
|
Management contract or compensatory plan or arrangement. |
** |
|
Filed with the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2010 (filed on March 16, 2011). |
84
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
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|
Date: June 24, 2011 |
ICG GROUP, INC.
|
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By: |
/s/ R. KIRK MORGAN
|
|
|
|
Name: |
R. Kirk Morgan |
|
|
|
Title: |
Chief Financial Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Company and in the capacities indicated, and on the
date set forth above.
|
|
|
Signature |
|
Title |
|
|
|
/s/WALTER W. BUCKLEY, III
|
|
Chief Executive Officer and Chairman of the Board |
|
|
of Directors (Principal Executive Officer) |
|
|
|
/s/R. KIRK MORGAN
R. Kirk Morgan |
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
|
/s/DAVID
J. ADELMAN
|
|
Director |
|
|
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|
|
Director |
|
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|
|
/s/THOMAS A. DECKER
|
|
Director |
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|
/s/DAVID K. DOWNES
|
|
Director |
|
|
|
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|
|
/s/THOMAS P. GERRITY
|
|
Director |
|
|
|
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|
|
/s/MICHAEL J. HAGAN
|
|
Director |
|
|
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|
|
/s/PETER K. MILLER
|
|
Director |
|
|
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|
|
/s/PHILIP J. RINGO
|
|
Director |
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85