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| ICGE > SEC Filings for ICGE > Form 10-K/A on 31-Mar-2009 | All Recent SEC Filings |
31-Mar-2009
Annual Report
Liquidity and Capital Resources
The following table summarizes our and our consolidated subsidiaries' cash and
cash equivalents, restricted cash and marketable securities as of December 31,
2008 and 2007:
December 31, 2008 December 31, 2007
Consolidated Consolidated
Corporate Subsidiaries Total Corporate Subsidiaries Total
(in thousands)
Cash and cash equivalents $ 73,208 $ 16,087 $ 89,295 $ 69,125 $ 12,906 $ 82,031
Restricted Cash (1) - 232 232 - 5 5
$ 73,208 $ 16,319 $ 89,527 $ 69,125 $ 12,911 $ 82,036
Marketable securities (2) $ 63,918 $ - $ 63,918 $ 84,376 $ - $ 84,376
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(1) Restricted cash at December 31, 2007 does not include $0.2 million of long-term restricted cash included in "Other" assets on the Company's consolidated balance sheets.
(2) Includes a contributing asset of $6.5 million at December 31, 2008 and an offsetting liability of $3.7 million at December 31, 2007 related to derivative instruments associated with the Company's marketable securities.
We believe existing cash and cash equivalents and proceeds from the potential
sales of all or a portion of our interests in certain marketable securities and
partner companies 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. On February 3, 2009, we entered
into certain arrangements under which we have guaranteed approximately
$3.6 million of debt for a partner company. Under these arrangements, we placed
approximately $3.6 million in a bank account that may be used to repay the
partner company debt when it matures in 2009 or otherwise becomes due and
payable. We will receive additional preferred ownership interests with respect
to this partner company if and to the extent that any funds from the bank
account are used to repay debt in connection with these guarantee arrangements.
Funds from the bank account will be returned to us if and to the extent that all
or any portion of the $3.6 million debt is forgiven, discharged or repaid from
some source other than the bank account. As of the date of this filing, we were
not obligated for any other 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.
ICG Commerce, Investor Force and Vcommerce have funded their operations through
a combination of cash flow from operations, borrowings and equity issuances. ICG
Commerce expects that its existing cash balance and cash flow from operations
will be sufficient to fund its operations through 2009, while Investor Force and
Vcommerce are expected to require additional borrowings and/or equity issuances
to fund their respective operations through 2009.
Consolidated working capital improved by $4.5 million from December 31, 2007 to
December 31, 2008, primarily due to cash proceeds received from the sales of
marketable securities, partially offset by acquisitions of ownership interests
in existing partner companies.
Summary of Statements of Cash Flows
Year Ended December 31,
2008 2007 2006
(in thousands)
Cash used in operating activities $ (12,385 ) $ (16,174 ) $ (7,325 )
Cash provided by (used in) investing activities $ 28,964 $ 15,428 $ (7,019 )
Cash used in financing activities $ (8,593 ) $ (37,960 ) $ (9,454 )
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The decrease in cash used in operating activities from 2007 to 2008 is due to an
improved net loss position, other income from sales of partner companies and the
receipt of a $4.9 million federal income tax refund in 2008 compared with 2007,
offset by greater equity loss and impairment charges in 2008. The increase in
cash used in operating activities from 2006 to 2007 is primarily due to the
receipt of a $8.1 million refund received in 2006 related to $26.9 million of
estimated federal income tax payments paid in 2005.
The increase in cash provided by investing activities from 2007 to 2008 is
primarily related to proceeds received from the sale of marketable securities,
partially offset by greater net acquisitions of ownership interests in partner
companies in 2008 versus 2007. The variability in cash provided by (used in)
investing activities in 2007 versus 2006 is the result of net monetizations of
ownership interests in partner companies and marketable securities in 2007
versus net acquisition of ownership interests in partner companies in 2006.
The decrease in cash used in financing activities from 2007 to 2008 is the
result of the repurchases of the Company's Common Stock in 2008, which was less
than the repurchase of all outstanding senior convertible notes in 2007. The
increase in cash used in financing activities from 2006 to 2007 is primarily
related to repurchases of notes in 2007 versus proceeds from employee loan
repayments in 2006 and a lower amount of notes repurchased in 2006.
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
ultimate liability with respect to these actions will materially affect our
financial position or cash flows.
Contractual Cash Obligations and Commercial Commitments
The following table summarizes our contractual cash obligations and commercial
commitments as of December 31, 2008:
Payments due by period
Less
than 1 1-3 3-5 More than
Total year years years 5 years
(in thousands)
Operating leases $ 12,164 $ 2,224 $ 3,703 $ 2,318 $ 3,919
Capital leases 153 108 45 - -
Other debt 4,081 210 163 3,708 -
$ 16,398 $ 2,542 $ 3,911 $ 6,026 $ 3,919
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Off-Balance Sheet Arrangements
We are not involved in any off-balance sheet arrangements that have or are
reasonably likely to have a material future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
Our Partner Companies
As of December 31, 2008, we owned interests in 14 partner companies that are
categorized below based on segment and method of accounting.
CORE PARTNER COMPANIES (%Voting Interest)
Consolidated Equity Cost
ICG Commerce (65%) Channel Intelligence (46%) (none)
Investor Force (81%) Freeborders (31%)
Vcommerce (53%) Metastorm (32%)
StarCite (34%)
WhiteFence (36%)
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OTHER HOLDINGS PARTNER COMPANIES (%Voting Interest)
Consolidated Equity Cost
(none) ClickEquations (30%) Anthem (9%)
GoIndustry (29%) (1) Captive Capital (5%)
Jamcracker (2%)
Tibersoft (5%)
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(1) As of
December 31,
2008 and
March 2,
2009, we
owned
133,832,852
shares, or
approximately
29% of the
voting
securities,
of
GoIndustry.
GoIndustry's
common stock
is traded on
the AIM
market of the
London Stock
Exchange
under ticker
symbol GOI.
See "Note 3 -
Ownership
Interests in
Partner
Companies,
Goodwill and
Intangibles,
net" to
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 consistently the same partner
companies for 2008, 2007 and 2006. Additionally, Channel Intelligence and
Vcommerce, the partner companies in which we acquired an interest after
January 1, 2006, are included in the core segment from their respective
acquisition dates, and ClickEquations is included in the other holdings segment
beginning in March 2008, at which time we aquired 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.
"Discontinued Operations and Dispositions" are those partner companies that have
been sold or ceased operations and are no longer included in a segment for all
periods presented. "Corporate" expenses represent the general and administrative
expenses of our business operations, which include supporting the partner
companies and operating as a public company. The 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, losses
on convertible note repurchases and transactions, income taxes, accounting
changes and impairment charges associated with partner companies, which are
reflected in "Other" reconciling items in the information that follows.
Segment Information
(in thousands)
Reconciling Items
Discontinued
Other Total Operations and Consolidated
Core Holdings Segment Dispositions Corporate Other Results
For the Year Ended
December 31, 2008
Revenues $ 71,181 $ - $ 71,181 $ - $ - $ - $ 71,181
Net income (loss) $ (23,758 ) $ (4,381 ) $ (28,139 ) $ - $ (18,966 ) $ 24,179 $ (22,926 )
For the Year Ended
December 31, 2007
Revenues $ 52,923 $ - $ 52,923 $ - $ - $ - $ 52,923
Net income (loss) $ (18,194 ) $ (856 ) $ (19,050 ) $ 1,849 $ (17,022 ) 3,595 $ (30,628 )
For the Year Ended
December 31, 2006
Revenues $ 64,749 $ - $ 64,749 $ - $ - $ - $ 64,749
Net income (loss) $ (15,089 ) $ 592 $ (14,497 ) $ 7,824 $ (13,788 ) 36,085 $ 15,624
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For the Years Ended December 31, 2008, 2007 and 2006
Results of Operations - Core Companies
The following presentation of our Results of Operations - Core Companies
includes the results of our consolidated core partner companies and our share of
the results of our equity method core partner companies.
Year Ended December 31,
Selected data: 2008 2007 2006
(in thousands)
Revenues $ 71,181 $ 52,923 $ 64,749
Cost of revenue (46,400 ) (39,523 ) (42,840 )
Selling, general and administrative (16,390 ) (11,101 ) (20,809 )
Research and development (10,212 ) (6,033 ) (8,779 )
Impairment related and other (994 ) (188 ) (1,873 )
Operating expenses $ (73,996 ) (56,845 ) (74,301 )
Interest and other (1,139 ) 451 51
Income taxes (687 ) (309 ) -
Equity loss (19,117 ) (14,414 ) (5,588 )
Net loss $ (23,758 ) $ (18,194 ) $ (15,089 )
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Revenues
Revenue increased $18.3 million to $71.2 million in 2008, from $52.9 million in
2007. $11.9 million of the increase is attributable to ICG Commerce. ICG
Commerce provides procurement outsourcing services generally under long-term
relationships. These long-term relationships continued to contribute to ICG
Commerce's success with revenue increasing 23% in 2008 over 2007. The majority
of ICG Commerce's contracts are terminable by the client on short notice or
without notice, sometimes without financial penalty. Accordingly, we do not
believe it is appropriate to characterize the total contract value of these
long-term relationships as backlog. The consolidation of Vcommerce beginning in
May 2008 contributed the majority of the residual increase.
Revenue decreased $11.8 million, from $64.7 million in 2006 to $52.9 million in
2007. The primary driver of the decrease is the deconsolidation of StarCite for
all of 2007. StarCite completed a transaction to consolidate with OnVantage,
Inc. on December 29, 2006. Following the closing of the transaction, our
ownership interest in the combined entity is accounted for under the equity
method of accounting and StarCite revenue is not consolidated. The 2007 revenue
decrease was partially offset by increased revenues at ICG Commerce.
Operating Expenses
Operating expenses increased $17.2 million, from $56.8 million in 2007 to
$74.0 million in 2008. This increase is the result of consolidating Vcommerce
beginning in May 2008, which contributed $9.5 million, as well as an increase in
operating expenses related to ICG Commerce's increased revenues in 2008.
Operating expenses decreased $17.5 million, from $74.3 million in 2006 to
$56.8 million in 2007. The primary driver of the decrease is the deconsolidation
of StarCite for all of the 2007 period versus being included for all of the 2006
period.
Equity Loss
A portion of our net results from our core companies is derived from those
partner companies in which we hold a substantial minority ownership interest.
Our share of the net income or net losses of these companies is recorded in our
Consolidated Statements of Operations under "Equity loss."
Year Ended December 31,
Selected data: 2008 2007 2006
(in thousands)
Total revenues $ 193,498 $ 161,486 $ 69,088
Total net loss $ (46,505 ) $ (40,208 ) $ (17,767 )
Our share of total net loss ("equity loss") $ (19,117 ) $ (14,414 ) $ (5,588 )
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The 2008 increases over 2007 are primarily the result of increased net losses at Metastorm and StarCite. Metastorm's net loss increased as the result of increased amortization expense associated with an acquisition, litigation expenses and expenses associated with an initial public offering that was not consummated. StarCite's net loss increased as the result of severance and merger integration expenses. Accordingly, our share of the total net loss increased. The 2007 increases over 2006 are primarily the result of the inclusion of StarCite as an equity method core company for all of 2007 after its previously-mentioned merger with OnVantage and the addition of Channel Intelligence for all of 2007. Our share of the net loss also increased in 2007 versus the prior periods as a result of those companies in which our ownership had increased relative to prior years (primarily Channel Intelligence and Vcommerce) experiencing an increase in net losses as these companies continue to increase operating expenses to expand market share. Results of Operations - Other Holdings Companies The following presentation of our Results of Operations - Other Holdings Companies includes the results of our consolidated other holdings partner companies and our share of the results of our equity method other holdings partner companies.
Year Ended December 31,
Selected data: 2008 2007 2006
(in thousands)
Revenues $ - $ - $ -
Operating expenses - - -
Interest and other - - -
Equity income (loss) (4,381 ) (856 ) 592
Net income (loss) $ (4,381 ) $ (856 ) $ 592
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Equity loss related to our other holdings increased in 2008 and 2007 as a result of GoIndustry recording more net losses both periods and the addition of ClickEquations as an equity method company in 2008.
Results of Operations - Reconciling Items
Discontinued Operations and Dispositions
The following is a summary of the components included in "Discontinued
Operations and Dispositions," a reconciling item for segment reporting purposes:
Year Ended December 31,
2008 2007 2006
(in thousands)
Discontinued operations $ - $ 995 $ 8,289
Equity income (loss) of partner companies
sold/disposed of - 854 (465 )
Net income $ - $ 1,849 $ 7,824
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In 2006, Investor Force completed the sale of its database division to
Morningstar, Inc. ("Morningstar") for $10.0 million. In 2007 and 2006, the
Company received $0.2 million and $0.1 million, respectively, of additional
proceeds from the sale of the assets of Delphion, Inc. In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 144, these three
operations have been treated as discontinued operations. Accordingly, the
operating results of these discontinued operations have been presented
separately from continuing operations and include the gains or losses recognized
on disposition. See Note 7 to our Consolidated Financial Statements.
Cash proceeds to Investor Force of $9.0 million were received in August 2006,
and $1.0 million was received in August 2007. The Company recorded gains of
approximately $7.0 million and $1.0 million on this transaction in 2006 and
2007, respectively. The remaining $0.2 million loss for 2007 and the
$1.2 million of income from discontinued operations related to the 2006
operating activities of the Investor Force database division.
The impact to our consolidated results of equity method partner companies in
which we disposed of our ownership interest, or which have ceased operations,
during 2007 and 2006 is also included in the caption "Dispositions" for segment
reporting purposes. Equity income primarily relates to Marketron International,
Inc. ("Marketron") in 2007 and 2006.
Corporate
Year Ended December 31,
2008 2007 2006
(in thousands)
General and administrative $ (19,775 ) $ (21,680 ) $ (20,874 )
Impairment related and other (794 ) - -
Interest income (expense), net 1,603 4,658 7,086
Net loss $ (18,966 ) $ (17,022 ) $ (13,788 )
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General and Administrative
Our general and administrative expenses decreased $1.9 million in 2008 from
2007, primarily due to decreases in employee-related expenses associated with
our annual bonus program of $1.4 million and stock-based compensation of
$0.7 million partially offset by and other outside services of $0.2 million.
Our general and administrative expenses increased $0.8 million in 2007 from
2006, primarily due to increased employee costs and other outside services of
$1.7 million partially offset by a decrease in stock-based compensation of
$0.9 million.
Impairment related and other
Our impairment related and other expenses increased $0.8 million due to
severance charges. Those charges primarily related to cash payments of
. . .
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