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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] 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: 333-07287
CCC INFORMATION SERVICES GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 54-1242469
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
WORLD TRADE CENTER CHICAGO 60654
444 MERCHANDISE MART (Zip Code)
CHICAGO, ILLINOIS
(Address of principal executive offices)
(312) 222-4636
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
---- ---
As of October 31, 1996, 23,430,040 shares of CCC Information Services Group
Inc. common stock, par value $0.10 per share, were outstanding.
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CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page(s)
Item 1. Financial Statements
Consolidated Interim Statement of Operations (Unaudited), 3
Quarter and Three Quarters Ended September 30, 1996
and 1995
Consolidated Interim Balance Sheet, 4
September 30, 1996 (Unaudited) and December 31, 1995
Consolidated Interim Statement of Cash Flows (Unaudited), 5
Three Quarters Ended September 30, 1996 and 1995
Notes to Consolidated Interim Financial Statements 6-8
Item 2. Management's Discussion and Analysis 9-11
of Results of Operations and Financial Condition
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12-13
SIGNATURES 14
EXHIBIT INDEX 15
2
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CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
THIRD QUARTER ENDED THREE QUARTERS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $32,602 $28,817 $95,927 $85,441
Expenses:
Production and customer support 7,697 7,852 23,217 24,198
Commissions, royalties and licenses 3,462 2,992 10,122 8,551
Selling, general and administrative 10,266 9,380 29,309 27,110
Depreciation and amortization 1,624 2,361 5,596 7,215
Product development and programming 4,186 3,809 12,263 10,827
Litigation settlement -- -- -- 4,500
------- ------- ------- -------
Total operating expenses 27,235 26,394 80,507 82,401
------- ------- ------- -------
Operating income 5,367 2,423 15,420 3,040
Interest expense (526) (1,422) (2,508) (4,532)
Other income, net 169 68 462 401
------- ------- ------- -------
Income (loss) before income taxes 5,010 1,069 13,374 (1,091)
Income tax benefit (provision) (292) (243) (1,965) 810
------- ------- ------- -------
Income (loss) before extraordinary item and
dividends and accretion on mandatorily
redeemable preferred stock 4,718 826 11,409 (281)
Extraordinary loss on early retirement of
debt, net of income taxes (678) -- (678) --
------- ------- ------- -------
Net income (loss) 4,040 826 10,731 (281)
Dividends and accretion on mandatorily
redeemable preferred stock (5,003) (765) (6,607) (2,220)
------- ------- ------- -------
Net income (loss) applicable to common stock $ (963) $ 61 $ 4,124 $(2,501)
------- ------- ------- -------
------- ------- ------- -------
Income (loss) per common and common
equivalent share from:
Income (loss) before extraordinary item and
dividends and accretion on mandatorily
redeemable preferred stock $ 0.22 $ 0.04 $ 0.60 $ (0.02)
Extraordinary loss on early retirement of
debt, net of income taxes (0.03) -- (0.03) --
Dividends and accretion on mandatorily
redeemable preferred stock (0.24) (0.04) (0.35) (0.13)
------- ------- ------- -------
Net income (loss) applicable to common stock $ (0.05) $ -- $ 0.22 $ (0.15)
------- ------- ------- -------
------- ------- ------- -------
Weighted average common and common
equivalent shares outstanding 21,270 17,017 18,890 16,746
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these
consolidated interim financial statements.
3
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CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEET
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
ASSETS
Cash $ 17,615 $ 3,895
Accounts receivable (net of reserves of $1,948
(unaudited) and $1,472 at September 30, 1996 and
December 31, 1995, respectively) 11,242 9,899
Income taxes receivable -- 1,079
Other current assets 3,358 2,877
-------- --------
Total current assets 32,215 17,750
Equipment and purchased software (net of accumulated
depreciation of $21,592 (unaudited) and $23,695 at
September 30, 1996 and December 31, 1995,
respectively) 7,223 7,310
Goodwill (net of accumulated amortization of $8,557
(unaudited) and $7,548 at September 30, 1996 and
December 31, 1995, respectively) 11,566 12,575
Deferred income taxes 5,565 3,810
Other assets 1,184 2,648
-------- --------
Total Assets $ 57,753 $ 44,093
-------- --------
-------- --------
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued expenses $ 16,583 $ 19,652
Income taxes payable 2,211 --
Current portion of long-term debt 119 7,660
Current portion of deferred revenues 8,162 5,063
Current portion of contract funding 528 3,328
-------- --------
Total current liabilities 27,603 35,703
Long-term debt 141 27,220
Contract funding -- 135
Long-term deferred revenue 2,013 597
Other liabilities 3,357 2,733
-------- --------
Total liabilities 33,114 66,388
-------- --------
Mandatorily redeemable preferred stock ($1.00 par
value, 100,000 shares authorized, 4,915
(unaudited) and 39,000 designated and outstanding
at September 30, 1996 and December 31, 1995,
respectively) 4,600 34,125
-------- --------
Common stock ($0.10 par value, 30,000,000 shares
authorized for all periods presented, 23,430,040
(unaudited) and 16,316,400 shares issued and
outstanding at September 30, 1996 and December 31,
1995, respectively) 2,343 1,632
Additional paid-in capital 83,805 11,679
Accumulated deficit (65,923) (69,519)
Treasury stock, at cost (186) (212)
-------- --------
Total stockholders' equity (deficit) 20,039 (56,420)
-------- --------
Total Liabilities, Mandatorily Redeemable
Preferred Stock and Stockholders' Equity
(Deficit) $ 57,753 $ 44,093
-------- --------
-------- --------
The accompanying notes are an integral part of these
consolidated interim financial statements.
4
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CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE QUARTERS ENDED
SEPTEMBER 30,
--------------------
1996 1995
-------- -------
Operating activities:
Net income (loss) $ 10,731 $ (281)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary loss on early retirement of
debt, net of income taxes 678 --
Depreciation and amortization of equipment
and purchased software 4,560 6,104
Amortization of goodwill 1,009 1,009
Deferred income taxes (1,755) 2,721
Contract funding revenue amortization (2,935) (8,567)
Other, net 330 351
Changes in:
Accounts receivable, net (1,343) (1,069)
Other current assets (481) 464
Other assets (84) 141
Accounts payable and accrued expenses (3,069) 4,769
Income taxes payable 3,735 (2,872)
Deferred revenues 4,515 1,863
Other liabilities 1,072 (12)
-------- -------
Net cash provided by operating activities 16,963 4,621
-------- -------
Investing activities:
Purchases of equipment and software (3,193) (1,977)
Proceeds from sale of discontinued operations,
net of expenses -- 500
Other, net 24 192
-------- -------
Net cash used for investing activities (3,169) (1,285)
-------- -------
Financing activities:
Proceeds from issuance of long-term debt 10,750 4,000
Principal repayments on long-term debt (46,711) (7,274)
Proceeds from initial public offering of common stock,
net of underwriters' discounts and equity issue costs 72,124 --
Proceeds from exercise of stock options 283 4
Redemption of mandatorily redeemable preferred stock,
including accrued dividends (36,131) --
Debt issue costs (382) --
Other, net (7) (1)
-------- -------
Net cash used for financing activities (74) (3,271)
-------- -------
Net increase in cash 13,720 65
Cash:
Beginning of period 3,895 5,702
-------- -------
End of period $ 17,615 $ 5,767
-------- -------
-------- -------
The accompanying notes are an integral part of these
consolidated interim financial statements.
5
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CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION
CCC Information Services Group Inc. ("Company") (formerly known as
InfoVest Corporation), through its primary operating subsidiary, CCC
Information Services Inc. ("CCC") is a supplier of automobile claims
information and processing, claims management software and communication
services. The Company's services and products enable more than 300 automobile
insurance company customers and more than 9,000 collision repair facility
customers to improve efficiency, manage costs and increase consumer
satisfaction in the management of automobile claims and restoration.
The Company is a consolidated subsidiary of White River Ventures Inc.
("White River"). White River is a wholly owned subsidiary of White River
Corporation. As of September 30, 1996, White River held approximately 37% of
the total outstanding common stock of the Company and had 51% of the voting
power associated with the Company's total outstanding voting stock. See Note
6 - Mandatorily Redeemable Preferred Stock.
NOTE 2 - CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The accompanying consolidated interim financial statements as of and for
the three quarters ended September 30, 1996 are unaudited. The Company is of
the opinion that all material adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Company's
interim results of operations and financial condition have been included. The
results of operations for any interim period should not be regarded as
necessarily indicative of results of operations for any future period. These
consolidated interim financial statements should be read in conjunction with
the Company's annual consolidated financial statements included in the
Company's Initial Public Offering Prospectus and Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on August 16,
1996. See Note 5 - Initial Public Offering of Common Stock.
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" in the first quarter of 1996. This Statement
establishes a new standard for accounting for the impairment of long-lived
assets and certain identifiable intangibles. The adoption of SFAS No. 121 was
not material to the Company's financial position or results of operations.
The Financial Accounting Standards Board has also issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which became effective January 1,
1996. This Statement establishes an alternative to the Company's current
method of accounting for compensation associated with stock issued to
employees. Management does not intend to adopt the alternative method allowed
by SFAS No. 123. Accordingly, adoption of this Statement will only require
additional financial statement footnote disclosures to describe the Company's
stock-based compensation.
NOTE 4 - NONCASH INVESTING AND FINANCING ACTIVITIES
In addition to amounts reported as purchases of equipment and software
in the consolidated interim statement of cash flow, the Company has directly
financed certain noncash capital expenditures. These amounts totaled $1.3
million and $0.7 million during the three quarters ended September 30, 1996
and 1995, respectively.
6
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NOTE 4 - NONCASH INVESTING AND FINANCING ACTIVITIES (Continued)
The Company directly charges retained earnings for preferred stock
accretion and preferred stock dividends payable. These amounts totaled $6.6
million and $2.2 million during the three quarters ended September 30, 1996
and 1995, respectively.
On June 6, 1996, the Company distributed 40,000 shares and options to
purchase an additional 50,000 shares of Faneuil ISG, Inc. to its stockholders
of record. The shares and options distributed were received by the Company in
partial consideration for the sale of certain business assets of the Company
to Faneuil ISG, Inc. in August 1994. The book value associated with this
investment at the time of distribution was $530 thousand.
NOTE 5 - INITIAL PUBLIC OFFERING OF COMMON STOCK
On July 22, 1996, the Company's Board of Directors authorized the filing
of a registration statement with the Securities and Exchange Commission for
an initial public offering (IPO) of the Company's common stock. In addition,
on July 22, 1996 the Company's Board of Directors authorized a 40 for 1 split
of the common stock of the Company, which was effective August 13, 1996. All
reported share information has been restated to reflect the split. On August
21, 1996, the Company completed its IPO by issuing 6,900,000 shares of common
stock, par value $0.10, at $11.50 per share. Gross proceeds from the IPO of
$79.3 million were reduced by Underwriters' discounts and equity issue costs
of $7.2 million. Proceeds from the IPO were used to repay certain bank debt
and to redeem a substantial portion of the Company's Mandatorily Redeemable
Preferred Stock ("Preferred Stock").
NOTE 6 - MANDATORILY REDEEMABLE PREFERRED STOCK
As required by the terms of the Company's Series C and Series D
Preferred Stock, the Company used 50% of the net proceeds from the IPO to
redeem 34,085 shares of outstanding Preferred Stock at its stated value of
$34.1 million plus accrued dividends of $2.0 million. As a result of the
redemption and in accordance with the terms of the Preferred Stock, Preferred
Stock dividends from the IPO date through June 16, 1998 have been eliminated.
As a result of the IPO, White River's common equity ownership percentage
was reduced from approximately 52% to approximately 37%. On August 23, 1996,
White River informed the Company of its intention to exchange 500 Shares of
Series D Preferred Stock for 500 Shares of Series E Preferred Stock as
provided under the terms of an agreement between White River and the Company.
Pursuant to the request from White River, the Company issued 500 Shares of
Series E Preferred Stock in exchange for 500 Shares of Series D Preferred
Stock. At September 30, 1996, 630 Shares of Series C Preferred Stock, 3,785
Shares of Series D Preferred Stock and 500 Shares of Series E Preferred Stock
are issued and outstanding. The Series E Preferred Stock provides White River
with a maximum of 51% of the total voting power associated with the Company's
total outstanding voting stock when combined with the amount of the Company's
common stock held directly by White River.
NOTE 7 - LONG-TERM DEBT
Primarily with proceeds from the IPO, the Company repaid all outstanding
balances under a term loan and revolving credit facility with its former
commercial lender. In August 1996, the Company executed a new revolving
credit facility with a new commercial bank and terminated its former credit
facility. As a result, the write-off of deferred financing fees associated
with the former credit facility have been reflected as an extraordinary loss,
net of income taxes, in the accompanying consolidated interim statement of
operations for the quarter and three quarters ended September 30, 1996.
7
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NOTE 7 - LONG-TERM DEBT (Continued)
The new credit facility provides CCC with the ability to borrow up to $20
million under a revolving line of credit for general corporate purposes.
There have been no borrowings under the new facility. The interest rate under
the new revolving credit facility would be the London Inter-Bank Offering
Rate (LIBOR) plus 1.5% or the prime rate, as selected by CCC. In addition,
CCC pays a commitment fee of 0.25% on any unused portion of the revolving
credit facility. The new facility expires on October 1, 2001.
Under the new revolving credit facility, CCC is, with certain
exceptions, prohibited from making certain sales or transfers of assets,
incurring nonpermitted indebtedness or encumbrances, and redeeming or
repurchasing its capital stock, among other restrictions. In addition, the
new bank credit facility also requires CCC to maintain certain levels of
operating cash flow in relation to total debt and debt service coverage, and
limits CCC's ability to make capital expenditures and investments and declare
dividends.
The Company has made cash interest payments of $2.6 million and $3.2
million during the three quarters ended September 30, 1996 and 1995,
respectively.
NOTE 8 - INCOME TAXES
Because of the Company's past history of operating losses and its
inability to project future taxable income with certainty, the Company
established deferred income tax asset valuation allowances. Based upon the
recapitalization of the Company achieved through its initial public offering
and management's increased confidence in predicting future taxable income,
all deferred income tax valuation allowances are expected to be released to
income by December 31, 1996. Deferred income tax valuation allowances of $1.6
million and $3.8 million were released to income during the quarter and three
quarters ended September 30, 1996, respectively. The Company has received
refunds in excess of payments of $10 thousand and $657 thousand during the
three quarters ended September 30, 1996 and 1995, respectively.
NOTE 9 - LEGAL PROCEEDINGS
In April 1996, the Company completely settled a lawsuit involving an
independent publisher of used car valuation books. The settlement amount
approximated the settlement charge of $4.5 million previously recorded in
April 1995. In conjunction with the settlement agreement, the Company
received a three year license to the publisher's used car valuation book data
at market rates.
The Company is a party to various claims and routine litigation arising
in the normal course of business. Such claims and litigation are not expected
to have a material adverse effect on the financial condition or results of
operations of the Company.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED WITH QUARTER ENDED
SEPTEMBER 30, 1995
CCC Information Services Group Inc. ("Company") reported a net loss
applicable to common stock of $1.0 million, or $0.05 per share, for the
quarter ended September 30, 1996, versus break-even results for the same
quarter last year. Third quarter 1996 results included dividends and
accretion on mandatorily redeemable preferred stock of $5.0 million, or $0.24
per share, and an extraordinary loss on early retirement of debt, net of
income taxes, of $0.7 million, or $0.03 per share. Of the dividends and
accretion of $5.0 million, $4.5 million resulted from an accelerated
accretion to stated value resulting from the earlier than scheduled preferred
stock redemption. Third quarter 1996 operating income of $5.4 million was
$2.9 million, or 121%, higher than the same quarter last year.
Third quarter 1996 revenues of $32.6 million were $3.8 million, or
13.1%, higher than the same quarter last year. The increase in revenues is
due primarily to higher revenues from collision estimating software
licensing, from ACCESS-TM- claims services and from Total Loss valuation
services. Collision estimating software licensing revenues increased
primarily because of an increase in the number of software licenses,
particularly at collision repair facilities. ACCESS-TM- claims services
revenues increased primarily as a result of higher transaction volume. Total
Loss services revenue increased primarily as a result of a regulatory change
in three large industrial states that allowed the Company to market its
premium vehicle valuation product in those states.
The Company's plans to increase operating expenditures over the second
half of 1996 to enhance internal functions and capabilities (including
improvements to customer call tracking software, additional customer service
staff to implement major new customers, staff training and certain sales and
marketing activities) have been delayed to meet jointly-agreed implementation
schedules for certain customers. As a result, only a portion of the planned
third quarter increase in operating expenditures was incurred. Postponement
of these expenditures has caused certain third quarter operating expenses to
be lower than expected; the principal affected reporting categories are
indicated below. The Company now expects to incur approximately $1.0 million
of the postponed expenditures in the fourth quarter of 1996.
Production and customer support decreased from $7.9 million, or 27.2% of
revenues, to $7.7 million or 23.6% of revenues, due primarily to the
Company's efforts to reduce selected production costs and to postponement, as
a result of a delayed customer service implementations, of certain planned
operating expenditures. Commission, royalties and licenses increased from
$3.0 million, or 10.4% of revenues, to $3.5 million, or 10.6% of revenues.
The increase as a percent of revenues was due primarily to higher revenues
from collision estimating licensing which generates both a commission and a
data royalty. Selling, general and administrative increased from $9.4
million, or 32.6% of revenues, to $10.3 million, or 31.5% of revenues. The
decline as a percentage of revenue primarily represents the increase in
revenues but also reflects the Company's cost containment programs and
postponement, as a result of a delayed customer service implementations, of
certain planned operating expenditures. Depreciation and amortization
declined from $2.4 million, or 8.2% of revenues, to $1.6 million, or 5.0% of
revenues. The decline relates primarily to expiration, as of March 31, 1996,
of purchased software amortization associated with the Company's acquisition
of its former partner's interest in CCC Development Company, the joint
venture that initially developed the Company's EZEst collision estimating
software. Product development and programming increased from $3.8 million, or
13.2% of revenues to $4.2 million, or 12.8% of revenues. The decline as a
percentage of revenues primarily reflects the increase in revenues but also
reflects postponement, as a result of a delayed customer service
implementations, of certain planned operating expenditures.
Interest expense declined from $1.4 million to $0.5 million due to
repayments of long-term debt and contract funding amortization, including
repayments following the Company's initial public offering of common stock.
The third quarter effective income tax rate of 5.8% reflects the release of
certain deferred income tax valuation allowances, including an increase in
the rate of valuation allowance release,
9
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as a percentage of income before income taxes, over that reported over the
first two quarters of the year. Third quarter valuation allowances released
totaled $1.6 million. See additional explanation of income taxes under the
three quarter period discussion below.
THREE QUARTERS ENDED SEPTEMBER 30, 1996 COMPARED WITH THREE QUARTERS ENDED
SEPTEMBER 30, 1995
For the three quarters ended September 30, 1996, the Company reported
net income applicable to common stock of $4.1 million, or $0.22 per share,
versus net loss of $2.5 million, or $0.15 per share, for the same period last
year. Operating income for the three quarters ended September 30, 1996 of
$15.4 million was $12.4 million higher than the same period last year. A
litigation settlement charge of $4.5 million was recorded in the comparable
1995 period.
Revenues for the three quarters ended September 30, 1996 of $95.9
million were $10.5 million, or 12.3%, higher than the same period last year.
The increase in revenues was due primarily to higher revenues from collision
estimating software licensing, from EZNet-TM- communications services and
from ACCESS-TM- claims services. Collision estimating software licensing
revenues increased primarily because of an increase in the number of software
licenses, particularly at collision repair facilities. EZNet-TM-
communications services and ACCESS-TM- claims services revenues increased
primarily as a result of higher transaction volume.
Production and customer support decreased from $24.2 million, or 28.3%
of revenues, to $23.2 million or 24.2% of revenues, due primarily to the
Company's efforts to reduce selected production costs. Commission, royalties
and licenses increased from $8.6 million, or 10.0% of revenues, to $10.1
million, or 10.6% of revenues. The increase as a percent of revenues was due
primarily to higher revenues from collision estimating licensing which
generates both a commission and a data royalty. Selling, general and
administrative increased from $27.1 million, or 31.7% of revenues, to $29.3
million, or 30.6% of revenues. The decline as a percentage of revenue
primarily represents the increase in revenues but also reflects the Company's
cost containment programs. Depreciation and amortization declined from $7.2
million, or 8.4% of revenues, to $5.6 million, or 5.8% of revenues. The
decline relates primarily to expiration, as of March 31, 1996, of purchased
software amortization associated with the Company's acquisition of its former
partner's interest in CCC Development Company. Product development and
programming increased from $10.8 million, or 12.7% of revenues to $12.3
million, or 12.8% of revenues. The increase was due primarily to an
increasing allocation of Company resources to product development and wage
pressure associated with retaining software engineers.
Interest expense declined from $4.5 million to $2.5 million due to
repayments of long-term debt, including the substantial debt repayments
following the Company's initial public offering of common stock. The
effective income tax rate for the three quarter period of 14.7% reflects the
release of certain deferred income tax valuation allowances. The Company now
expects that all deferred income tax valuation allowances reserves will be
released by the end of calendar 1996. The decision to release all deferred
income tax valuation allowances was based upon the successful
recapitalization of the Company through its initial public offering and
management's increased confidence in predicting future taxable income. The
effective income tax rate for the three quarter period approximates the
income tax rate expected for the full calendar year.
LIQUIDITY AND CAPITAL RESOURCES
On August 21, 1996, the Company completed its initial public offering of
common stock, generating proceeds of $72.1 million, net of underwriters'
discounts and related equity issue costs. Proceeds from the offering of $36.1
million were used to redeem approximately 87% of the Company's mandatorily
redeemable preferred stock at stated value plus accrued dividends. In
addition, proceeds from the offering of $28.0 million were used to make
principal repayments on long-term debt. The balance of the Company's
principal repayments during the three quarters ended September 30, 1996 was
generated from operations. On August 22, 1996, the Company secured a $20.0
million revolving credit facility through a new commercial bank. There have
been no borrowings under the new facility. Indebtedness under the new
facility would bear interest at either of two rates as selected by the
Company: the London Inter-Bank Offering Rate (LIBOR) plus 1.5% or the prime
rate.
10
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Following the offering, the Company's principal liquidity requirements
include its operating activities, including product development, and its
investments in internal and customer capital equipment. During the three
quarters ended September 30, 1996, net cash provided by operating activities
was $17.0 million, net of contract funding revenue amortization of $2.9
million. The Company applied $3.2 million, excluding noncash capital
expenditures, to purchase equipment and software and $8.0 million to make
principal repayments on long-term debt. Excess cash from operations of $5.8
million and excess cash from the offering of $8.0 million are the primary
causes of the increase in cash of $13.7 million during the three quarter
period.
During the three quarters ended September 30, 1995, net cash provided by
operating activities was $4.6 million, net of contract funding revenue
amortization of $8.6 million. The Company applied $2.0 million, excluding
noncash capital expenditures, to purchase equipment and software and $3.3
million to make principal repayments on long-term debt. In addition, during
the three quarter period, the Company received the final payment from the
sale of certain discontinued operations of $0.5 million which had been held
back in escrow pending resolution of certain contingencies.
Management believes that cash flows from operations and the new credit
facility will be sufficient to meet the Company's liquidity needs over the
next 12 months. There can be no assurance, however, that the Company will be
able to satisfy its liquidity needs in the future without engaging in
financing activities beyond those described above.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 contains certain
safe harbors regarding forward-looking statements. In that context, the
discussion in this Item 2 contains forward-looking statements which involve
certain degrees of risk and uncertainties, including statements relating to
liquidity and capital resources. Except for the historical information, the
matters discussed in this Item 2 are such forward-looking statements that
involve risks and uncertainties, including, without limitation, the effect of
competitive pricing within the industry, the presence of competitors with
greater financial resources than the Company, the intense competition for top
software engineering talent and the volatile nature of technological change
within the automobile claims industry. Additional factors that could affect
the Company's financial condition and results of operations are included in
the Company's Initial Public Offering Prospectus and Registration on Form S-1
filed with the Securities and Exchange Commission on August 16, 1996.
11
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various claims and routine litigation arising
in the normal course of business. Such claims and litigation are not expected
to have a material adverse effect on the financial condition or results of
operations of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 27, 1996, White River Ventures Inc., holder of 8,584,564 shares
of common stock on such date (representing a majority of the issued and
outstanding shares of common stock of the Registrant), executed a written
consent approving the name change of the Registrant. On August 8, 1996, the
following shareholders (representing a majority of the issued and outstanding
shares of common stock of the Registrant), executed a written consent
authorizing (i) certain amendments to the certificate of incorporation and
bylaws of the Registrant, and (ii) a 40 for 1 stock split of the common stock
of the Registrant in the form of a dividend:
SHARES OF
COMMON
STOCK
---------
White River Ventures Inc. 8,584,564
Loeb Investors Co. XV 3,069,600
Loeb Investors Co. XIII 87,760
Loeb Investors Co. 108 300,955
David M. Phillips 927,760
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 of the Registrant's
Registration Statement on Form S-1 (Commission File
No. 333-07287) (the "Registration Statement"))
3.2 Amended and Restated Bylaws (incorporated herein by reference to
Exhibit 3.2 of the Registration Statement)
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.1 Credit Facility Agreement between CCC Information Services Inc.,
Signet Bank and the other financial institutions party thereto
(incorporated herein by reference to Exhibit 10.4 of the
Registration Statement)
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
13
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1996 CCC Information Services Group Inc.
By: /s/ David M. Phillips
_____________________________
Name: David M. Phillips
Title: Chairman, President
and Chief Executive Officer
By: /s/ Leonard L. Ciarrocchi
_____________________________
Name: Leonard L. Ciarrocchi
Title: Executive Vice President
and Chief Financial Officer
By: /s/ Donald J. Hallagan
_____________________________
Name: Donald J. Hallagan
Title: Vice President and Controller
Principal Accounting Officer
14
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
EXHIBIT INDEX
3.1 Amended and Restated Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1 of the Registration Statement)
3.2 Amended and Restated Bylaws (incorporated herein by reference to
Exhibit 3.2 of the Registration Statement)
10.1 Credit Facility Agreement between CCC Information Services Inc., Signet
Bank and the other financial institutions party thereto (incorporated
herein by reference to Exhibit 10.4 of the Registration Statement)
27 Financial Data Schedule
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE THREE
QUARTERS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED INTERIM FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 17,615
<SECURITIES> 0
<RECEIVABLES> 13,190
<ALLOWANCES> 1,948
<INVENTORY> 0
<CURRENT-ASSETS> 32,215
<PP&E> 28,815
<DEPRECIATION> 21,592
<TOTAL-ASSETS> 57,753
<CURRENT-LIABILITIES> 27,603
<BONDS> 141
4,600
0
<COMMON> 85,962
<OTHER-SE> (65,923)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 57,753
<SALES> 0
<TOTAL-REVENUES> 95,927
<CGS> 0
<TOTAL-COSTS> 80,507
<OTHER-EXPENSES> 462<F2>
<LOSS-PROVISION> 670
<INTEREST-EXPENSE> 2,508
<INCOME-PRETAX> 13,374
<INCOME-TAX> 1,965
<INCOME-CONTINUING> 11,409
<DISCONTINUED> 0
<EXTRAORDINARY> (678)<F3>
<CHANGES> 0
<NET-INCOME> 10,731
<EPS-PRIMARY> .22<F4>
<EPS-DILUTED> 0
<FN>
<F1>ACCUMULATED DEFICIT
<F2>OTHER INCOME, NET OF EXPENSES
<F3>LOSS ON EARLY RETIREMENT OF DEBT, NET OF INCOME TAXES
<F4>INCLUDES DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK
</FN>
</TABLE>
