Internet Capital Group Announces Financial Results for First Quarter 2004; Net Loss, Excluding Unusual Items, Decreases by 57%; Stockholders' Equity Increases to $129 Million
WAYNE, Pa.--(BUSINESS WIRE)--05/06/2004--Internet Capital Group, Inc. (Nasdaq:ICGE) today reported its results for the first quarter ended March 31, 2004.
"This year has already proven to be a transition from survival mode to a heightened focus on growth and value creation, as evidenced by encouraging partner company progress and our recent announcement of additional financing and plans to satisfy our outstanding debt ahead of maturity," said Walter Buckley, ICG's chairman and chief executive officer. "The knowledge we've gained from experiencing the challenging environment of the last few years, coupled with a strengthened balance sheet and the progress being made at the partner companies, puts us in a good position to build and develop our e-business applications companies. Ultimately, we believe these actions will drive stockholder value."
Highlights of the first quarter are as follows:
-- Consolidated net loss for the first quarter of 2004 was $(124) million, compared to $(18) million in the prior year. Unusual items reported in the first quarter results include charges relating to debt-for-equity exchanges of $(133) million, or $(0.21) per share, and gains relating to sales of eMerge Interactive and Onvia.com common stock of $19 million, or $0.03 per share. The prior year quarter included gains relating to cash debt repurchases of $6 million or $0.02 per share and other charges of $(1) million. Excluding unusual items, net loss for the quarter was $(10) million versus $(23) million for the 2003 period, an approximate reduction of 57%.
-- For the third consecutive quarter, private Core companies reported positive Aggregate EBITDA. Private Core companies reported $3.2 million of Aggregate EBITDA versus an Aggregate EBITDA loss of $(7.1) million in the prior year period.
-- Stockholders' equity increased to $129 million at March 31, 2004 versus a deficit of $(19.3) million at December 31, 2003.
-- ICG entered into an agreement to secure $60 million in financing, which is expected to close on Monday, May 10, 2004. The net proceeds will be used to redeem the remaining $39.1 million in outstanding convertible notes, and the balance will be applied to general working capital as well as potential acquisitions of interests in new and existing partner companies.
-- Cash on an ICG corporate basis increased by $4.3 million, from $50.6 million at December 31, 2003 to $54.9 million at March 31, 2004. As of March 31, 2004, the market value of ICG's holdings in its three public partner companies and the receivable from the sale of Onvia.com common stock totaled approximately $16.4 million.
ICG Financial Results
ICG reported consolidated revenue of $12 million and a net loss of $(124) million, or $(0.19) per share, for the first quarter of 2004. This compares to consolidated revenue of $19 million and a net loss of $(18) million, or $(0.07) per share, for the comparable 2003 period. The decrease in revenue is primarily due to the loss of a significant customer and the deconsolidation of two partner companies.
Results for the first quarter of 2004 include $114 million of unusual net charges, which primarily relate to the accounting for the debt-for-equity exchanges and gains on public partner company monetizations, compared to $5 million of net gains reported for the corresponding 2003 period.
"We are encouraged by the progress we made this quarter as our consolidated net losses continue to narrow, excluding the effects of the debt-for-equity exchanges and other unusual items," commented Anthony Dolanski, chief financial officer of ICG. "We're currently in the best financial position we've been in for a number of years, demonstrated by our reporting positive stockholders' equity and our recently announced financing. We are able to fully focus all of our capital and expertise on maximizing the success of our partner companies by driving earnings and revenue growth."
Private Core Company Results
In an effort to illustrate macro trends within its private Core companies, ICG provides an aggregation of revenue and net loss figures reflecting 100% of the revenue and Aggregate EBITDA for these companies. The Company has consistently defined Aggregate EBITDA for these purposes as earnings/(losses) before interest, tax, depreciation, amortization and excluding stock-based compensation, restructuring charges and impairments ("Aggregate EBITDA"). ICG does not own its Core companies in their entirety and, therefore, this information should be considered in this context. Aggregate revenue and Aggregate EBITDA, in this context, represent certain of the financial measures used by the Company's management to evaluate the performance for Core companies. The Company's management believes these non-GAAP financial measures provide useful information to investors, potential investors, securities analysts and others so each group can evaluate private Core companies' current and future prospects in a similar manner as the Company's management. A reconciliation to the most comparable GAAP measure is included as an attachment to this release.
As part of our annual review of the Core category composition, iSky and Syncra have been moved to the Emerging category. ICG's private Core company results reflect these changes and all prior periods have been retroactively adjusted.
ICG's private Core companies reported the following financial results:
-- Positive Aggregate EBITDA of $3.2 million for the quarter as compared with a $(7.1) million Aggregate EBITDA loss in the first quarter of 2003. This is the third consecutive quarter in which these companies have reported positive Aggregate EBITDA.
-- Aggregate revenue for ICG's private Core companies was $78 million for the quarter, or a 13% increase over aggregate revenue of $69 million during the first quarter of 2003.
-- For the quarter, ICG's private Core companies also reported an aggregate $(5) million net loss as compared with a $(16) million net loss in the first quarter of 2003.
ICG expects that based on private Core company first quarter results and the Company's visibility into the remainder of 2004, both revenues and earnings will continue to be an improvement over those of 2003.
ICG will host a webcast at 10:00am ET today to discuss results. As part of the live webcast for this call, ICG will post a slide presentation to accompany the prepared remarks. To access the webcast, go to internetcapital.com and click on the link for the first quarter conference call webcast. Please log on to the website approximately ten minutes prior to the call to register and download and install any necessary audio software. The conference call is also accessible through listen-only mode at 877-211-0292. The international dial in number is 706-679-0702. The pass code to the call is "First Quarter Earnings."
For those unable to participate in the conference call, a replay will be available beginning May 6, 2004 at 11:00am until May 13, 2004 at 11:59pm. To access the replay, dial 800-642-1687 (domestic) or 706-645-9291 (international). The access code is 7017394. The replay and slide presentation can also be accessed on the Internet Capital Group web site at internetcapital.com.
About Internet Capital Group
Internet Capital Group (www.internetcapital.com) is an e-business applications holding company that builds, acquires, and owns software and services businesses that leverage the Internet to help organizations operate more productively. Founded in 1996, ICG devotes its expertise and capital to maximizing the success of e-business companies that take advantage of the evolution to Internet architectures in key business sectors.
Safe Harbor Statement under Private Securities Litigation Reform Act of 1995
The statements contained in this press release that are not historical facts are forward-looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future performance of our partner companies, acquisitions or dispositions of interests in additional partner companies, debt obligations, additional financing requirements, the effect of economic conditions generally and in the e-commerce and information technology markets specifically, and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. These and other factors may cause actual results to differ materially from those projected.
Internet Capital Group, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
March 31,
---------------------
2004 2003
---------------------
Revenue $12,146 $19,395
Operating Expenses
Cost of revenue 7,434 11,934
Selling, general and administrative 8,876 15,730
Research and development 2,495 5,461
Amortization of intangibles 786 1,724
Impairment related and other 653 537
---------------------
Total operating expenses 20,244 35,386
---------------------
(8,098) (15,991)
Other income (loss), net (113,739) 5,774
Interest income 227 442
Interest expense (1,630) (4,553)
---------------------
Loss before minority interest and equity loss (123,240) (14,328)
Minority interest 630 1,434
Equity loss (1,185) (4,925)
---------------------
Loss from continuing operations (123,795) (17,819)
Income (loss) on discontinued operations - (283)
---------------------
Net loss $(123,795) $(18,102)
=====================
Historical basic and diluted loss per
share: (a)
Loss from continuing operations $(0.19) $(0.07)
Discontinued operations - -
---------------------
$(0.19) $(0.07)
=====================
Shares used in computation of historical basic
and diluted loss per share 637,068 269,580
=====================
Proforma basic and diluted loss per share: (a)
Loss from continuing operations $(3.89) $(1.32)
Discontinued operations - (0.02)
---------------------
$(3.89) $(1.34)
=====================
Shares used in computation of proforma basic
and diluted loss per share 31,853 13,479
=====================
(a) The Company reported net loss per share using historical shares in
the press release above. The proforma net loss calculation takes
into effect the reverse stock split to be effective end of day May
7, 2004.
Internet Capital Group, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
March 31, Dec. 31,
2004 2003
---------- ----------
ASSETS
Cash, cash equivalents and short-term
investments $81,591 $79,409
Other current assets 31,932 32,030
---------- ----------
Total current assets 113,523 111,439
Assets of discontinued operations 278 278
Fixed assets, net 2,144 2,368
Ownership interests in and
advances to Partner Companies 55,721 53,415
Goodwill 45,196 45,196
Intangibles, net 5,814 6,452
Available-for-sale securities 10,582 6,714
Other assets 4,549 5,301
---------- ----------
Total Assets $237,807 $231,163
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current maturities of convertible
subordinated notes $39,111 $173,919
Other current
liabilities 56,819 61,280
---------- ----------
Total current liabilities 95,930 235,199
Liabilities of discontinued operations 278 278
Minority interest and other liabilities 12,890 14,980
---------- ----------
Total Liabilities 109,098 250,457
Stockholders' equity (deficit) 128,709 (19,294)
---------- ----------
Total Liabilities and Stockholders'
Equity (Deficit) $237,807 $231,163
========== ==========
Internet Capital Group, Inc.
Reconciliation of Non-GAAP financial measures
to GAAP Consolidated Results
($ in millions)
----- ----- ----- ----- ------
1Q 2Q 3Q 4Q 1Q
03 03 03 03 04
----- ----- ----- ----- ------
Revenue
-----------------------------------
Aggregate Private Core Company
Revenue (a) $69 $73 $77 $82 $78
Non-consolidated Partner
Companies (50) (55) (61) (65) (66)
----- ----- ----- ----- ------
Consolidated Revenue $19 $18 $16 $17 $12
===== ===== ===== ===== ======
Loss
-----------------------------------
Aggregate Private Core Company
EBITDA (a) (b) $(7) $(2) $3 $9 $3
Interest, Taxes,
Depreciation, Amortization,
Stock-Based Compensation and
non-recurring items (9) (9) (15) (14) (8)
----- ----- ----- ----- ------
Aggregate Private Core Company Net
Loss $(16) $(11) $(12) $(5) $(5)
Amount attributable to other
shareholders (6) (4) (8) - -
----- ----- ----- ----- ------
ICG's share of Net Loss of Private
Core Companies $(10) $(7) $(4) $(5) $(5)
ICG's share of Net Loss of Public
Core Companies (2) (1) (1) - -
ICG's share of Net Loss of Emerging
and Disposed Companies (2) (1) - (1) -
Losses from Discontinued Operations - (1) (1) - -
Corporate Expenses and Interest
Expense, Net (9) (9) (8) (7) (5)
Other Income (Loss), Impairments
and Other (c) 5 (7) (22) (43) (114)
----- ----- ----- ----- ------
Consolidated Net Income (Loss) $(18) $(26) $(36) $(56) $(124)
===== ===== ===== ===== ======
(a) Total Private Core Company figures are based on the financial
statements prepared by each partner company and, in some cases,
adjustments and estimates by Internet Capital Group. In addition,
these figures are preliminary in nature, are subject to change and
may differ from previously reported figures as a result of, among
other things, changes in the composition of the private core group
of companies, changes to reported figures by each partner company
for any necessary corrections, changes resulting from differing
interpretations of accounting principles upon review by the
Securities and Exchange Commission, or changes in accounting
literature.
(b) The Company has consistently defined Aggregate EBITDA for these
purposes as earnings/(losses) before interest, tax, depreciation
and amortization and excluding stock based compensation,
restructuring charges and impairments. EBITDA is a commonly used
metric and is presented here to enhance understanding of our
partner company operating results. EBITDA does not measure
financial performance under GAAP and other companies may present
similarly titled measures that are calculated differently. EBITDA
is not an alternative to operating or net income/(loss), as
determined in accordance with GAAP, as an indicator of
performance, nor is it an alternative to cash flow from operations
as determined in accordance with GAAP, as a measure of liquidity.
(c) Detail of Other Income
(Loss), Impairments and
Other 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
----- ----- ------- ------- --------
Debt for equity exchange
expense $ - $ - $(31)(d) $(35)(d) $(133)(d)
Gain from cash debt
repurchases 6 - - - -
Impairments of Partner
Companies - (4) - - -
Loss from discontinued
operations transactions - - - (9) -
Gains (losses) on Partner
Company dispositions (1) (1) 2 1 19
Corporate restructuring - (2) 7 - -
----- ----- ------- ------- --------
$5 $(7) $(22) $(43) $(114)
===== ===== ======= ======= ========
(d) Under Statement of Financial Accounting Standards No. 84, "Induced
Conversion of Convertible Debt", the Company is required to record
a non-cash accounting expense equal to the fair value of shares
issued in excess of the fair value of shares issuable pursuant to
the original conversion terms. Such expense amounted to $30.6
million, $35.1 million and $132.6 million during the three months
ended September 30, 2003, December 31, 2003, and March 31, 2004,
respectively, which is offset by an increase to stockholders'
equity.
INTERNET CAPITAL GROUP, INC.
March 31, 2004
Description of Terms for Consolidated Statements of Operations and
Supplemental Information - Consolidated Statements of Operations
----------------------------------------------------------------------
Consolidated Statements of Operations
-------------------------------------
Effect of Various Accounting Methods on our Results of Operations
The various interests that the Company acquires in its partner
companies are accounted for under three methods: consolidation, equity
method and cost method. The effect of a partner company's net results
of operations on the Company's net results of operations is generally
the same under either the consolidation method of accounting or the
equity method of accounting, because under each of these methods only
our share of the earnings or losses of a partner company is reflected
in its net results of operations in the Consolidated Statements of
Operations. The applicable accounting method is generally determined
based on the Company's voting interest in a partner company.
Consolidation. Partner companies in which the Company directly or
indirectly possesses voting control or those where the Company has
effective control, and for which other shareholders do not possess the
right to participate in significant management decisions are generally
accounted for under the consolidation method of accounting. Under this
method, a partner company's accounts (revenue, cost of revenue,
selling, general and administrative, research and development,
impairment related and other, amortization of intangibles, other
income (loss) and interest income/expense) are reflected within the
Company's Consolidated Statements of Operations. Participation of
other partner company stockholders in the earnings or losses of a
consolidated partner company is reflected in the caption "Minority
interest" in the Company's Consolidated Statements of Operations.
Minority interest adjusts the Company's consolidated net results of
operations to reflect only its share of the earnings or losses of the
consolidated partner company. As of March 31, 2004, the Company
accounted for 2 of its partner companies under this method.
Equity Method. Partner companies whose results the Company does not
consolidate, but over whom it exercises significant influence, are
generally 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 company's board of
directors and ownership level, which is generally a 20% to 50%
interest in the voting securities of the partner company, including
voting rights associated with the Company's holdings in common,
preferred and other convertible instruments in the partner company.
Under the equity method of accounting, a partner company's accounts
are not reflected within the Company's Consolidated Statements of
Operations; however, its share of the earnings or losses of the
partner company is reflected in the caption "Equity Loss" in the
Consolidated Statements of Operations. As of March 31, 2004, the
Company accounted for 13 of its partner companies under this method.
Cost Method. 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, the Company's
share of the earnings or losses of these companies is not included in
the Company's Consolidated Statements of Operations. As of March 31,
2004, the Company accounted for 14 of its partner companies under this
method.
Supplemental Information - Consolidated Statements of Operations
----------------------------------------------------------------
ICG's share of net loss of Core, Emerging and disposed Partner
Companies
Represents ICG's share of the net loss of Core, Emerging and disposed
Partner Companies accounted for under the consolidated and equity
method of accounting.
Discontinued Operations
During the three months ended December 31, 2003, one of the Company's
consolidated Partner Companies, OneCoast Network, disposed of
substantially all of its assets. Accordingly, the operating results of
this discontinued operation have been presented separately from
continuing operations.
During the three months ended December 31, 2002, two of the Company's
consolidated Partner Companies, Delphion and Logistics, disposed of
substantially all of their assets. Accordingly, the operating results
of these two discontinued operations have been presented separately
from continuing operations.
Corporate Expenses and Interest Expense, net
General and administrative expenses consist of payroll and related
expenses for executive, operational, acquisitions, finance and
administrative personnel, professional fees and other general
corporate expenses for Internet Capital Group. Stock-based
compensation is included and primarily consists of non-cash charges
related to certain compensation arrangements.
Interest expense relates primarily to the interest expense on the
Company's outstanding 5.5 % convertible notes due December 2004.
Debt for equity exchange expense
During the three months ended March 31, 2004, the Company, in a
number of transactions, exchanged $134.8 million of its 5.5 %
convertible notes in exchange for 317.7 million shares of common
stock. Under Statement of Financial Accounting Standards No. 84,
"Induced Conversions of Convertible Debt", the Company is required to
record a non-cash accounting expense equal to the fair value of shares
issued in excess of the fair value of shares issuable pursuant to the
original conversion terms. Such expense is calculated as follows:
Q1 '04
------
(in millions)
Bonds repurchased $ 134.8
------
Shares issued for debt exchanges 317.7
------
Fair value of shares issued $ 133.3
Fair value of shares issuable -original terms $ (0.4)
Accrued interest $ (0.8)
Debt issue costs expensed 0.5
------
Net expense recorded $132.6
======
Gain (losses) on Partner Company dispositions
During the three months ended March 31, 2004, the Company disposed of
the majority of its holdings in eMerge Interactive and all of its
holdings in Onvia.com and recorded a gain of approximately $19
million.
Internet Capital Group, Inc.
Schedule of Ownership Interests in Partner Companies
March 31, 2004
----------------------------------------------------------------------
PRIVATE CORE PRIMARY OWNERSHIP
----------------------------------------------------------------------
Blackboard, Inc. 15%
CommerceQuest, Inc. 80%
CreditTrade Inc. 30%
eCredit.com, Inc. 40%
Freeborders, Inc. 48%
GoIndustry AG 54%
ICG Commerce Holdings, Inc. 76%
Investor Force Holdings, Inc. 38%
LinkShare Corporation 40%
Marketron International, Inc. 40%
StarCite, Inc. 17%
----------------------------------------------------------------------
----------------------------------------------------------------------
PRIVATE EMERGING PRIMARY OWNERSHIP
----------------------------------------------------------------------
Agribuys, Inc. 26%
Anthem/CIC Ventures Fund LP 9%
Arbinet-thexchange Inc. 3%
Axxis, Inc. (f/k/a FuelSpot.com, Inc.) 9%
Captive Capital Corporation 5%
ClearCommerce Corporation 11%
ComputerJobs.com, Inc. 46%
Co-nect Inc. 36%
Emptoris, Inc. 9%
Entegrity Solutions Corporation 2%
iSky, Inc. 25%
Jamcracker, Inc. 2%
Mobility Technologies, Inc. 3%
Syncra Systems, Inc. 31%
Tibersoft Corporation 5%
----------------------------------------------------------------------
----------------------------------------------------------------------
PUBLIC CORE COMMON SHARES HELD
----------------------------------------------------------------------
eMerge Interactive, Inc. (Nasdaq:EMRG) 1,053,964
Universal Access Global Holdings Inc. (Nasdaq:UAXS) 1,083,206
Verticalnet, Inc. (Nasdaq:VERT) 2,917,794
----------------------------------------------------------------------
CONTACT:Internet Capital Group, Inc. Karen Greene, 610-727-6900 IR@internetcapital.com
SOURCE: Internet Capital Group, Inc.
05/06/2004 08:36 EASTERN |
