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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, 1998
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: 000-28600
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 X No
--- ---
As of October 31, 1998, CCC Information Services Group Inc. common stock, par
value $0.10 per share, outstanding was 23,784,591 shares.
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page(s)
<S> <C>
Item 1. Financial Statements
Consolidated Interim Statement of Operations (Unaudited)
Three and Nine Months Ended September 30, 1998 and 1997 3
Consolidated Interim Balance Sheet,
September 30, 1998 (Unaudited) and December 31, 1997 4
Consolidated Interim Statement of Cash Flows (Unaudited),
Nine Months Ended September 30, 1998 and 1997 5
Notes to Consolidated Interim Financial Statements
(Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition 7-11
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 15-16
</TABLE>
2
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CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED INTERIM STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 48,048 $ 40,457 $ 138,886 $ 115,523
Expenses:
Production and customer support 12,854 9,118 33,596 26,141
Commissions, royalties and licenses 5,540 4,959 16,385 13,759
Selling, general and administrative 16,006 12,694 44,198 36,948
Depreciation and amortization 2,405 2,014 6,846 5,697
Product development and programming 6,644 5,153 19,710 14,396
Claims Settlement Relocation - - 1,707 -
--------- -------- --------- ---------
Total operating expenses 43,449 33,938 122,442 96,941
--------- -------- --------- ---------
Operating income 4,599 6,519 16,444 18,582
Interest expense (61) (34) (126) (106)
Other income, net 403 431 1,215 1,060
--------- -------- --------- ---------
Income before income taxes 4,941 6,916 17,533 19,536
Income tax provision (2,125) (2,908) (7,333) (8,222)
--------- -------- --------- ---------
Net income before minority interest 2,816 4,008 10,200 11,314
Minority interest in net loss of subsidiaries 14 - 14 -
--------- -------- --------- ---------
Net income 2,830 4,008 10,214 11,314
Dividends and accretion on mandatorily
redeemable preferred stock 6 (93) (185) (271)
--------- -------- --------- ---------
Net income applicable to common stock $ 2,836 $ 3,915 $ 10,029 $ 11,043
--------- -------- --------- ---------
--------- -------- --------- ---------
PER SHARE DATA
Income per common share - basic $ 0.11 $ 0.16 $ 0.40 $ 0.47
--------- -------- --------- ---------
--------- -------- --------- ---------
Income per common share - diluted $ 0.11 $ 0.16 $ 0.39 $ 0.44
--------- -------- --------- ---------
--------- -------- --------- ---------
Weighted average shares outstanding:
Basic 24,998 23,853 24,833 23,676
Diluted 25,388 24,997 25,440 24,884
</TABLE>
The accompanying notes are an integral Part of These
Considated interim financial statements.
3
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CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
(Unaudited)
ASSETS
Cash $ 1,909 $ 2,064
Investments in marketable securities 1,531 30,054
Accounts receivable (net of reserves of $4,170 (unaudited) and
$2,663 at September 30, 1998 and December 31, 1997, respectively) 28,391 18,302
Other current assets 6,953 5,270
------------- ------------
Total current assets 38,784 55,690
Property and equipment (net of accumulated depreciation
of $32,565 (unaudited) and $26,793 at September 30, 1998
and December 31, 1997, respectively) 15,239 9,700
Goodwill (net of accumulated amortization of $13,357 (unaudited) and
$10,238 at September 30, 1998 and December 31, 1997, respectively) 13,661 9,885
Deferred income taxes 6,616 7,237
Long term investment 20,001 --
Other assets 1,301 982
------------- ------------
Total Assets $ 95,602 $ 83,494
------------- ------------
------------- ------------
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 21,621 $ 18,383
Income taxes payable 968 2,637
Current portion of long-term debt 19 111
Deferred revenues 4,916 5,824
------------- ------------
Total current liabilities 27,524 26,955
Long-term deferred revenue 1,282 1,728
Other liabilities 3,883 3,930
------------- ------------
Total liabilities 32,689 32,613
------------- ------------
Mandatorily redeemable preferred stock ($1.00 par value, 100,000
shares authorized, 4,915 designated and outstanding at
September 30, 1998 (unaudited) and December 31, 1997) 5,239 5,054
------------- ------------
Common stock ($0.10 par value, 30,000,000 shares authorized for all periods
presented, 25,059,736 (unaudited) and 24,577,910 shares issued and
outstanding at September 30, 1998 and December 31, 1997, respectively) 2,507 2,458
Additional paid-in capital 95,219 90,273
Accumulated deficit (36,403) (46,431)
Cumulative translation adjustment (5) --
Treasury stock, at cost (3,644) (473)
------------- ------------
Total stockholders' equity 57,674 45,827
------------- ------------
Total Liabilities, Mandatorily Redeemable Preferred Stock and
Stockholders' Equity $ 95,602 $ 83,494
------------- ------------
------------- ------------
</TABLE>
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)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 10,214 $ 11,314
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in net loss of subsidiaries (14) --
Depreciation and amortization of equipment
and purchased software 5,690 4,661
Amortization of goodwill 1,121 1,009
Deferred income taxes 433 (592)
Contract funding revenue amortization -- (123)
Other, net 47 106
Changes in:
Accounts receivable, net (9,340) (5,144)
Other current assets (1,656) (1,140)
Other assets (310) 84
Accounts payable and accrued expenses 2,920 2,654
Income taxes payable 1,520 3,655
Deferred revenues (1,354) 1,389
Other liabilities (397) 131
-------- --------
Net cash provided by operating activities 8,874 18,004
-------- --------
Investing activities:
Purchases of equipment and software (9,344) (6,050)
Purchases of land and buildings (1,800) --
Purchase of investment securities (12,778) (45,111)
Purchase of subsidiaries, net of cash (4,797) --
Purchase of long term investment (20,000) --
Proceeds from the sale of investment securities 41,301 23,987
Other, net (19) 21
-------- --------
Net cash used for investing activities (7,437) (27,153)
-------- --------
Financing activities:
Principal repayments on long-term debt (5,092) (89)
Proceeds from the issuance of long-term debt 5,000 --
Proceeds from exercise of stock options 1,128 --
Proceeds from employee stock purchase plan 428 834
Payments to acquire treasury stock (3,056) --
-------- --------
Net cash provided by (used for) financing activities (1,592) 745
-------- --------
Net increase (decrease) in cash (155) (8,404)
Cash:
Beginning of period 2,064 9,403
-------- --------
End of period $ 1,909 $ 999
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURES:
Cash paid:
Interest (78) (95)
Income taxes, net (5,373) (5,171)
</TABLE>
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 FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION
CCC Information Services Group Inc. ("Company") (formerly known as
InfoVest Corporation), through its wholly owned subsidiary CCC Information
Services Inc., is a supplier of automobile claims information and processing
services, claims management software and communication services. The Company's
services and products enable automobile insurance company customers and
collision repair facility customers to improve efficiency, manage costs and
increase consumer satisfaction in the management of automobile claims and
restoration.
As of September 30, 1998, White River Ventures Inc. ("White River") held
approximately 34% of the total outstanding common stock of the Company. White
River is a wholly owned subsidiary of White River Corporation. As a result of
White River's substantial equity interest and 51% voting power, including
rights established through its ownership interest in the Company's Mandatorily
Redeemable Series E Preferred Stock, the Company is a consolidated subsidiary
of White River.
On June 30, 1998, White River Corporation, the sole shareholder of White
River, was acquired in a merger with Demeter Holdings Corporation, which is
solely controlled by the President and Fellows of Harvard College, a
Massachusetts educational corporation and title-holding company for the
endowment fund of Harvard University. Charlesbank Capital Partners LLC will act
as investment manager with respect to the investment of White River in the
Company.
NOTE 2 - CONSOLIDATED INTERIM FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying consolidated interim financial statements as of and for
the three and nine months ended September 30, 1998 and 1997 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 1997 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
PER SHARE INFORMATION
Earnings per share are based on the weighted average number of shares of
common stock outstanding and common stock equivalents using the treasury method
computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- -------------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding: 1998 1997 1998 1997
------- ------ ------ ------
Shares attributable to common stock outstanding 24,998 23,853 24,833 23,676
Shares attributable to common stock
equivalents outstanding 390 1,144 607 1,208
------- ------ ------ ------
25,388 24,997 25,440 24,884
------- ------ ------ ------
------- ------ ------ ------
</TABLE>
6
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NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130")
which establishes standards for reporting and display of comprehensive income
and its components in the financial statements. Comprehensive income
represents the change in stockholders' equity during a period resulting from
transactions and other events and circumstances from non-owner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. The adoption of SFAS 130
had no impact on the Company's consolidated results of operations, balance
sheet or cash flows. The Company currently does not have any elements to be
included in comprehensive income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
new standards for reporting information about operating segments in interim and
annual financial statements. This statement is also effective for fiscal years
beginning after December 15, 1997. The Company is currently evaluating the
impact this statement will have on the consolidated financial statements.
NOTE 4 - NONCASH FINANCING ACTIVITIES
The Company directly charges its accumulated deficit account for preferred
stock accretion and preferred stock dividends accrued. These amounts totaled
$0.2 million and $0.3 million during the nine months ended September 30, 1998
and 1997, respectively.
In conjunction with the exercise of certain stock options, the Company has
reduced current income taxes payable with an offsetting credit to paid-in
capital for the tax benefit of stock options exercised. During the nine months
ended September 30, 1998 and 1997, these amounts totaled $3.3 million and $2.7
million, respectively.
NOTE 5 - 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED WITH QUARTER ENDED SEPTEMBER 30,
1997
CCC Information Services Group Inc. ("Company") reported net income
applicable to common stock of $2.8 million, or $0.11 per share on a diluted
basis, for the quarter ended September 30, 1998, versus net income of $3.9
million, or $0.16 per share on a diluted basis, for the same quarter last year.
Third quarter 1998 revenues of $48.0 million were $7.6 million, or 18.8%,
higher than the same quarter last year. The increase in revenues was primarily
due to higher revenues from workflow/collision estimating software seats and
accelerating growth in the claims outsourcing business. Workflow/collision
estimating software seat revenues increased due to an increase in the number of
seats in both the autobody and insurance markets.
Production and customer support expenses increased from $9.1 million, or
22.5% of revenues, to $12.9 million, or 26.9% of revenues. The increase in
dollars and percentage of revenue was attributable primarily to an increase in
production and customer support capacity following an increase in
workflow/collision estimating seat implementations. Commission, royalties and
licenses increased from
7
<PAGE>
$5.0 million, or 12.4% of revenues, to $5.5 million, or 11.5% of revenues.
The increase in dollars was due primarily to higher revenues from PATHWAYS
workflow estimating seats and autobody collision estimating seats, which
generate both a commission and a data royalty. Selling, general and
administrative increased from $12.7 million, or 31.4% of revenues, to $16.0
million, or 33.3% of revenues. The increase in dollars was due primarily to
an increase in the resources committed to selling both workflow/collision
estimating and consultative services and efforts to build and upgrade
internal systems. Depreciation and amortization increased from $2.0 million,
or 5.0% of revenues, to $2.4 million, or 5.0% of revenues. The increase in
dollars was a result of higher capital expenditures for internal systems,
primarily expenditures for product engineering and customer support and an
increase in goodwill amortization resulting from the acquisition of two
subsidiaries during the quarter. Product development and programming
increased from $5.2 million, or 12.9% of revenues, to $6.6 million, or 13.8%
of revenues. The dollar increase was due primarily to an increased allocation
of Company resources to product development, primarily in the claims
outsourcing business and wage pressure associated with retaining and
recruiting software engineers.
Third quarter income taxes decreased from $2.9 million, or 42.0% of income
before taxes, to $2.1 million, or 43.0% of income before taxes. The dollar
decrease was attributable to lower pretax income.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1997
The Company reported net income applicable to common stock of $10.0
million, or $0.39 per share on a diluted basis, for the nine months ended
September 30, 1998, versus a $11.0 million, or $0.44 per share on a diluted
basis, for the same period last year. For the nine months ended September 30,
1998 operating income of $16.4 million was $2.1 million or 11.4% lower than the
comparable 1997 period. The operating income for the nine months ended
September 30, 1998 includes $1.7 million of one time charges for relocating the
Claims settlement division.
Revenues for the nine months ended September 30, 1998 of $138.9 million
were $23.4 million, or 20.3%, higher than the same period last year. The
increase in revenues was primarily due to higher revenues from
workflow/collision estimating software seats and accelerating growth in the
claims outsourcing business. Workflow/collision estimating software seat
revenues increased due to an increase in the number of seats in both the
autobody and insurance markets.
Production and customer support expenses increased from $26.1 million, or
22.6% of revenues, to $33.6 million, or 24.2% of revenues. The increase in
dollars and as a percent of revenues was attributable primarily to an increase
in productive and customer support capacity following an increase in
workflow/collision estimating seat implementations. Commission, royalties and
licenses increased from $13.8 million, or 11.9% of revenues, to $16.4 million,
or 11.8% of revenues. The increase in dollars and as a percent of revenues was
due primarily to higher revenues from PATHWAYS workflow estimating seats and
autobody collision estimating seats, which generate both a commission and a
data royalty. Selling, general and administrative increased from $36.9 million,
or 31.9% of revenues, to $44.2 million, or 31.8% of revenues. The increase in
dollars was due primarily to an increase in the resources committed to selling
both workflow/collision estimating and consultative services and efforts to
build and upgrade internal systems. The decline as a percentage of revenue was
primarily due to the leveraging of costs against a higher revenue base.
Depreciation and amortization increased from $5.7 million, or 4.9% of revenues,
to $6.8 million, or 4.9% of revenues. The increase in dollars was a result of
higher capital expenditures for internal systems, primarily expenditures for
product engineering and customer support and an increase in goodwill
amortization resulting from the acquisition of two subsidiaries during the
third quarter. Product development and programming increased from $14.4
million, or 12.5% of revenues, to $19.7 million, or 14.2% of revenues. The
increase in dollars and as a percent of revenues was due primarily to an
increased allocation of Company resources to product development, primarily in
the claims outsourcing business and wage pressure associated with retaining and
recruiting software engineers. Claims settlement relocation charges of $1.7
million incurred in the nine months ended September 30, 1998 relate to the
decision to relocate the processing operations of the Claims settlement
division.
8
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YEAR 2000 ISSUE
BACKGROUND. Some computers, software and other equipment include programming
code in which calendar year data is abbreviated to only two digits. As a
result of this design decision, some of these systems could fail to operate or
fail to produce correct results if "00" is interpreted to mean 1900, rather
than 2000 ("Year 2000 Problem"). These problems are widely expected to
increase in frequency and severity as the year 2000 approaches. The Company
defines an application to be Year 2000 compliant if it can accurately process
date data (including calculating, comparing and sequencing) from, into and
between twentieth and twenty first centuries, including leap year calculations.
ASSESSMENT. The Year 2000 Problem could affect computers, software, and other
equipment used, operated, or maintained by the Company. Accordingly, the
Company is reviewing its internal computer programs and systems to ensure that
the programs and systems will be Year 2000 compliant. The Company presently
believes that its computer systems will be Year 2000 compliant in a timely
manner. However, while the estimated cost of these efforts are not expected to
be material to the Company's financial position or any year's results of
operations, there can be no assurance to this effect.
SOFTWARE SOLD TO CUSTOMERS. The Company believes that it has substantially
identified all potential Year 2000 Problems with any of the software products,
which it develops and markets. As a key supplier to insurance companies and
collision repair facilities, the Company has identified a significant exposure
for Year 2000 problems regarding the effect of its legacy collision estimating
software on some customers' ability to complete an estimate. A major
undertaking is currently in process to convert those customers impacted to the
Year 2000 compliant version of the software. While lost revenues from such an
event are a concern for the Company, the greater risks are the monetary damages
for which the Company could be liable if it in fact is found responsible for
the shutdown of one of its customer's facilities. Such a finding could have a
material adverse impact on the Company's results of operations.
INTERNAL INFRASTRUCTURE. The Company believes that it has identified
substantially all of the major computers, software applications, and related
equipment, with the exception of desktop hardware and software applications,
used in connection with its internal operations that must be modified, upgraded
or replaced to minimize the possibility of a material disruption to its
business. The Company has commenced the process of modifying, upgrading, and
replacing major systems that have been identified as adversely affected, and
expects to complete this process before the middle of 1999. The Company is
still evaluating the impact on desktop hardware and software applications.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers
and related systems, the operation of office and facilities equipment, such as
fax machines, photocopiers, telephone switches, security systems, elevators,
and other common devices may be affected by the Year 2000 Problem. The Company
will be assessing the potential effect of, and costs of remediating, the Year
2000 Problem on its office and facilities equipment.
The Company estimates the total cost to the Company of completing any required
modifications, upgrades, or replacements of these internal systems will not
have a material adverse effect on the Company's business or results of
operations. Currently, the Company is expensing approximately $600 thousand
per quarter associated with this effort. It is expected that this cost will
continue through the second quarter of 1999. This estimate is being monitored
and will be revised as additional information becomes available.
SUPPLIERS. The Company has initiated communications with third party suppliers
of the major computers, software, and other equipment used, operated, or
maintained by the Company to identify and, to the extent possible, to resolve
issues involving the Year 2000 Problem. However, the Company has limited or no
control over the actions of these third party suppliers. Thus, while the
Company expects that it will be able to resolve any significant Year 2000
Problems with these systems, there can be no assurance that these suppliers
will resolve any or all Year 2000 Problems with these systems before the
occurrence of a material disruption to the business of the Company or any of
its customers. Any failure of these third parties to resolve Year 2000
problems with their systems in a timely manner could have a material adverse
effect on the Company's business, financial condition, and results of
operation.
9
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MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS. The Company expects to
identify and resolve all Year 2000 Problems that could materially adversely
affect its business operations. However, management believes that it is not
possible to determine with complete certainty that all Year 2000 Problems
affecting the Company have been identified or corrected. The number of
devices that could be affected and the interactions among these devices are
simply too numerous. In addition, one cannot accurately predict how many
Year 2000 Problem-related failures will occur or the severity, duration, or
financial consequences of these perhaps inevitable failures. As a result,
management expects that the Company could likely suffer the following
consequences:
1. a significant number of operational inconveniences and inefficiencies
for the Company and its customers that may divert management's time
and attention and financial and human resources from its ordinary
business activities; and
2. a lesser number of serious failures that may require significant
efforts by the Company or its customers to prevent or alleviate
material business disruptions.
Although the Company expects its critical systems to be compliant by mid
1999, there is no guarantee that these results will be achieved. Specific
factors that give rise to this uncertainty include a possible loss of
technical resources to perform the work, failure to identify all susceptible
systems, non-compliance by third parties whose systems and operations impact
the Company, and other similar uncertainties. A possible worst case scenario
might include one or more of the Company's software products sold to
customers being non-compliant. Such an event could result in a material
disruption to the Company's or customers operations. For example, the
software could experience an interruption in its ability to properly
calculate or access the data required to complete a collision estimate.
Should the worst case scenario occur it could, depending on its duration,
have a material impact on the Company's results of operations and financial
position.
CONTINGENCY PLANS. The Company is currently developing contingency plans to
be implemented as part of its efforts to identify and correct Year 2000
Problems affecting its internal systems. The Company expects to complete its
contingency plans by the end of 1998. Depending on the systems affected,
these plans could include accelerated replacement of affected equipment or
software, short to medium use of backup equipment and software, increased
work hours for Company personnel or use of contract personnel to correct on
an accelerated schedule any Year 2000 Problems that arise or to provide
manual workarounds for information systems, and similar approaches. If the
Company is required to implement any of these contingency plans, it could
have a material adverse effect on the Company's financial condition and
results of operations.
Based on the activities described above, Management believes the Company is
devoting the necessary resources to identify and resolve Year 2000 Problems.
The success of this effort and a favorable outcome to the various potential
situations described herein will determine the impact the Year 2000 Problem
has on the Company's business or results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 establishes new
standards for reporting information about operating segments in interim and
annual financial statements. This statement is effective for fiscal years
beginning after December 15, 1997. The Company is currently evaluating the
impact this statement will have on the consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1998, net cash provided by
operating activities was $8.9 million. In addition, the Company had net cash
provided from the sale of investment securities of $28.5 million. The Company
applied $9.3 million to the purchase of equipment and software, $1.8 million
to the purchase of a building in Sioux Falls, South Dakota associated with
the relocation of certain customer service and claims processing operations,
purchase of two subsidiaries of $4.8 million to expand into Europe and to
expand claim processing, invested $20.0 million in a long term investment in a
10
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Company which is developing services to manage insurance rating information
and repurchased a portion of the Company's outstanding shares of $3.1
million.
Management believes that cash flows from operations and the Company's
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 that 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 under liquidity and capital resources above contains a
forward-looking statement which involves certain degrees of risks and
uncertainties. The risks and uncertainties, include, 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 ("Commission") on August 16, 1996 and the Company's 1997 Annual
Report on Form 10-K filed with the Commission on March 31, 1998.
11
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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
(a) The annual meeting of the stockholders of the Registrant was held on
August 25, 1998.
(b) The directors listed in the Registrant's Proxy Statement dated
August 12, 1998, were elected to serve until the earlier of the next Annual
Meeting of Stockholders or until their respective successors have been
elected and qualified, as follows:
<TABLE>
<CAPTION>
Director For Withheld Abstentions
-------- --- -------- -----------
<S> <C> <C> <C>
Michael R. Eisenson 24,448,424 500 0
Thomas L. Kempner 24,448,424 500 0
Dudley C. Mecum 24,448,424 500 0
David M. Phillips 24,448,424 500 0
Mark A. Rosen 24,448,424 500 0
Michael R. Stanfield 24,448,424 500 0
Herbert S. Winokur 24,448,424 500 0
</TABLE>
(c) The Company's Employee Stock Purchase plan was approved. Voting by
stockholders on the proposal was 24,365,474 for, 83,150 against,
300 withheld and 0 abstentions.
(d) An increase to the number of shares authorized to be purchased
pursuant to the Company's Employee Stock Option plan was approved.
Voting by stockholders on the proposal was 24,282,960 for, 165,464
against, 500 withheld and 0 abstentions.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation of the Company
filed as Exhibit 3.1 of the Company's Annual Report on Form 10-K
(the "Annual Report") (filed with
12
<PAGE>
the Commission File No. 000-28600 on March 14, 1997, and hereby
incorporated by reference)
3.2 Amended and Restated Bylaws (incorporated herein by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K, Commission
File No. 000-28600)
4.1 Stockholder's Agreement (incorporated herein by reference to
Exhibit 4.2 of the Company's Registration Statement on Form S-1,
Commission File No. 333-07287)
4.2 Regulatory Contingency Agreement dated as of June 16, 1994 by and
among the Company and White River Ventures Inc. (incorporated
herein by reference to Exhibit 4.3 of the Company's Registration
Statement on Form S-1, Commission File No. 333-07287)
4.3 Series C Preferred Designation (incorporated herein by reference to
Exhibit 4.4 of the Company's Registration Statement on Form S-1,
Commission File No. 333-07287)
4.4 Series D Preferred Designation (incorporated herein by reference to
Exhibit 4.5 of the Company's Registration Statement on Form S-1,
Commission File No. 333-07287)
4.5 Series E Preferred Designation (incorporated herein by reference to
Exhibit 4.6 of the Company's Registration Statement on Form S-1,
Commission File No. 333-07287)
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 10.1 of the Company's
Annual Report on Form 10-K, Commission File No. 000-28600)
10.2 Amendment dated September 30, 1997 to Credit Facility Agreement
between CCC Information Services Inc., Signet Bank and the other
financial institutions party thereto (incorporated herein by
reference to Exhibit 10.2 of the Company's Quarterly Report filed
on Form 10-Q, Commission File No. 000-28600, filed November 11, 1997)
10.3 Motors Crash Estimating Guide Data License (incorporated herein by
reference to Exhibit 10.3 of the Company's Registration Statement on
Form S-1, Commission File No. 333-07287)
10.4 Stock Option Plan (incorporated herein by reference to Exhibit 10.3
of the Company's Annual Report on Form 10-K, Commission File
No. 000-28600)
10.5 1997 Stock Option Plan (incorporated herein by reference to
Exhibit 4.04 of the Company's Registration Statement on Form S-8,
Commission File No. 333-07287)
10.6 1997 Stock Option Agreement (incorporated herein by reference to
Exhibit 4.05 of the Company's Registration Statement on Form S-8,
Commission File No. 333-07287)
10.7 Securities Purchase Agreement between Company and InsurQuote Systems
Inc. dated February 10, 1998
10.8 Investment Agreement between Company and InsurQuote Systems Inc.
dated February 10, 1998
10.9 Common Stock Warrant to purchase 440,350 shares of InsurQuote Systems
Inc. dated February 10, 1998
10.10 401(K) Company Retirement Saving & Investment Savings Plan
(incorporated herein by reference to Exhibit 4.4 of the Company's
Registration Agreement on Form S-8, Commission Number 333-32139 filed
July 25, 1997)
27 Financial Data Schedule
13
<PAGE>
(b) Reports on Form 8-K
None.
14
<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, 1998 CCC Information Services Group Inc.
By: /s/ David M. Phillips
------------------------------------
Name: David M. Phillips
Title: Chairman and Chief Executive Officer
By: /s/ Leonard L. Ciarrocchi
------------------------------------
Name: Leonard L. Ciarrocchi
Title: Executive Vice President
and Chief Financial Officer
By: /s/ Michael P. Devereux
------------------------------------
Name: Michael P. Devereux
Title: Vice President, Controller
and Chief Accounting Officer
15
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
EXHIBIT INDEX
3.1 Amended and Restated Certificate of Incorporation of the Company filed as
Exhibit 3.1 of the Company's Annual Report on Form 10-K (the "Annual
Report") (filed with the Commission File No. 000-28600 on March 14, 1997,
and hereby incorporated by reference)
3.2 Amended and Restated Bylaws (incorporated herein by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K, Commission File
No. 000-28600)
4.1 Stockholder's Agreement (incorporated herein by reference to Exhibit 4.2
of the Company's Registration Statement on Form S-1, Commission File
No. 333-07287)
4.2 Regulatory Contingency Agreement dated as of June 16, 1994 by and among
the Company and White River Ventures Inc. (incorporated herein by
reference to Exhibit 4.3 of the Company's Registration Statement on
Form S-1, Commission File No. 333-07287)
4.3 Series C Preferred Designation (incorporated herein by reference to
Exhibit 4.4 of the Company's Registration Statement on Form S-1,
Commission File No. 333-07287)
4.4 Series D Preferred Designation (incorporated herein by reference to
Exhibit 4.5 of the Company's Registration Statement on Form S-1,
Commission File No. 333-07287)
4.5 Series E Preferred Designation (incorporated herein by reference to
Exhibit 4.6 of the Company's Registration Statement on Form S-1,
Commission File No. 333-07287)
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 10.1 of the Company's
Annual Report on Form 10-K, Commission File No. 000-28600)
10.2 Amendment dated September 30, 1997 to Credit Facility Agreement
between CCC Information Services Inc., Signet Bank and the other
financial institutions party thereto (incorporated herein by reference
to Exhibit 10.2 of the Company's Quarterly Report filed on Form 10-Q,
Commission File No. 000-28600, filed November 11, 1997
10.3 Motors Crash Estimating Guide Data License (incorporated herein by
reference to Exhibit 10.3 of the Company's Registration Statement on
Form S-1, Commission File No. 333-07287)
10.4 Stock Option Plan (incorporated herein by reference to Exhibit 10.3
of the Company's Annual Report on Form 10-K, Commission File
No. 000-28600)
10.5 1997 Stock Option Plan (incorporated herein by reference to Exhibit 4.04
of the Company's Registration Statement on Form S-8, Commission File
No. 333-07287)
10.6 1997 Stock Option Agreement (incorporated herein by reference to
Exhibit 4.05 of the Company's Registration Statement on Form S-8,
Commission File No. 333-07287)
10.7 Securities Purchase Agreement between Company and InsurQuote Systems
Inc. dated February 10, 1998
10.8 Investment Agreement between Company and InsurQuote Systems Inc.
dated February 10, 1998
10.9 Common Stock Warrant to purchase 440,350 shares of InsurQuote Systems
Inc. dated February 10, 1998
16
<PAGE>
10.10 401(K) Company Retirement Saving and Investment Savings Plan
(incorporated herein by reference to Exhibit 4.4 of the Company's
Registration Agreement on Form S-8, Commission Number 333-32139 file
July 25, 1997
27 Financial Data Schedule
(b) Reports on Form 8-K
17
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Month Ended
September 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Per share income before minority interest and
dividend and accretion on preferred stock:
Income before minority interest and dividends
and accretion on preferred stock: $ 10,200 $ 11,314
-------- --------
-------- --------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 24,833 23,676
Shares attributable to common stock equivalents
outstanding 607 1,208
-------- --------
25,440 23,884
-------- --------
-------- --------
Per share income before minority interest and
dividends and accretion on preferred stock $ 0.40 $ 0.45
-------- --------
-------- --------
Per share minority interest:
Minority interest in net loss of subsidiaries $ 14 $ -
-------- --------
-------- --------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 24,833 23,676
Shares attributable to common stock equivalents
outstanding 607 1,208
-------- --------
25,440 24,884
-------- --------
-------- --------
Per share minority interest in net loss of
subsidiaries $ - $ -
-------- --------
-------- --------
Per share dividends and accretion:
Dividends and accretion $ (185) $ (271)
-------- --------
-------- --------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 24,833 23,676
Shares attributable to common stock equivalent
outstanding 607 1,208
-------- --------
25,440 24,884
-------- --------
-------- --------
Per share dividends and accretion $ (0.01) $ (0.01)
-------- --------
-------- --------
Net income per share applicable to common stock:
Net income applicable to common stock $ 10,029 $ 11,043
-------- --------
-------- --------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 24,833 23,676
Shares attributable to common stock equivalent
outstanding 607 1,208
-------- --------
25,440 24,884
-------- --------
-------- --------
Net income per share applicable to common stock $ 0.39 $ 0.44
-------- --------
-------- --------
</TABLE>
<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 AND
NINE MONTHS ENDED SEPTEMBER 30, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,909
<SECURITIES> 1,531
<RECEIVABLES> 32,561
<ALLOWANCES> (4,170)
<INVENTORY> 0
<CURRENT-ASSETS> 6,953
<PP&E> 47,804
<DEPRECIATION> (32,565)
<TOTAL-ASSETS> 95,593
<CURRENT-LIABILITIES> 27,524
<BONDS> 0
5,239
0
<COMMON> 94,082
<OTHER-SE> (36,408)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 95,593
<SALES> 0
<TOTAL-REVENUES> 138,886
<CGS> 0
<TOTAL-COSTS> 122,442
<OTHER-EXPENSES> (1,215)<F2>
<LOSS-PROVISION> 1,944
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> 17,533
<INCOME-TAX> 7,333
<INCOME-CONTINUING> 10,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,214
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.39<F3>
<FN>
<F1>Accumulated deficit & cumulative translation adjustment.
<F2>Other income, net of expenses.
<F3>Includes dividends and accretion on mandatorily redeemable preferred stock.
</FN>
</TABLE>
