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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 March 31, 1999
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
444 MERCHANDISE MART
CHICAGO, ILLINOIS 60654
(Address of principal executive offices, including zip code)
(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 April 30, 1999, CCC Information Services Group Inc. common stock, par
value $0.10 per share, outstanding was 23,533,351 shares.
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CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page(s)
<S> <C> <C>
Item 1. Financial Statements
Consolidated Interim Statement of Operations (Unaudited), 3
Three Months Ended March 31, 1999 and 1998
Consolidated Interim Balance Sheet, 4
March 31, 1999 (Unaudited) and December 31, 1998
Consolidated Interim Statement of Cash Flows (Unaudited), 5
Three Months Ended March 31, 1999 and 1998
Notes to Consolidated Interim Financial Statements (Unaudited) 6-9
Item 2. Management's Discussion and Analysis 9-12
of Results of Operations and Financial Condition
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13-14
SIGNATURES 15
EXHIBIT INDEX 16-17
</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
March 31,
---------------------
1999 1998
----- ----
<S> <C> <C>
Revenues $ 49,909 $ 44,691
Expenses:
Production and customer support 14,116 9,907
Commissions, royalties and licenses 4,460 5,319
Selling, general and administrative 16,846 14,023
Depreciation and amortization 2,423 2,171
Product development and programming 5,745 6,115
-------- --------
Total operating expenses 43,590 37,535
-------- --------
Operating income 6,319 7,156
Interest expense (195) (64)
Other income, net 39 350
-------- --------
Income before income taxes 6,163 7,442
Income tax provision (2,679) (3,162)
-------- --------
Net income before equity losses 3,484 4,280
Equity in net losses of affiliates (4,495) (1,181)
-------- --------
Net income (loss) (1,011) 3,099
Dividends and accretion on mandatorily
redeemable preferred stock (1) (94)
-------- --------
Net income (loss) applicable to common stock $ (1,012) $ 3,005
-------- --------
-------- --------
PER SHARE DATA
Income (loss) per common share - basic $ (0.04) $ 0.12
-------- --------
-------- --------
Income (loss) per common share - diluted $ (0.04) $ 0.12
-------- --------
-------- --------
Weighted average shares outstanding:
Basic 23,720 24,638
Diluted 24,135 25,418
</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)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 524 $ 1,526
Accounts receivable (net of reserves of $3,079 (unaudited) and
$3,258 at March 31, 1999 and December 31, 1998, respectively) 19,511 23,212
Income taxes receivable - 272
Other current assets 6,215 5,726
-------- --------
Total current assets 26,250 30,736
Property and equipment (net of accumulated depreciation
of $36,412 (unaudited) and $34,494 at March 31, 1999
and December 31, 1998, respectively) 15,210 14,951
Goodwill (net of accumulated amortization of $12,393 (unaudited) and
$11,845 at March 31, 1999 and December 31, 1998, respectively) 13,215 12,799
Deferred income taxes 7,456 7,371
Long term investment in affiliates 5,180 9,843
Other assets 3,335 3,318
-------- --------
Total Assets $ 70,646 $ 79,018
-------- --------
-------- --------
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 24,097 $ 23,128
Income taxes payable 1,634 -
Deferred revenues 5,373 4,327
-------- --------
Total current liabilities 31,104 27,455
Long-term debt - 11,000
Long-term deferred revenue 630 956
Other liabilities 3,602 3,611
Minority interest in consolidated companies 5 5
-------- --------
Total liabilities 35,341 43,027
-------- --------
Mandatorily redeemable preferred stock ($1.00 par value, 100,000 shares
authorized, 684 designated and outstanding at
March 31, 1999 (unaudited) and December 31, 1998) 685 688
-------- --------
Common stock ($0.10 par value, 30,000,000 shares authorized for all periods
presented, 23,745,009 (unaudited) and 23,700,165 shares issued and
outstanding at March 31, 1999 and December 31, 1998, respectively) 2,516 2,510
Additional paid-in capital 96,071 95,573
Accumulated deficit (47,481) (46,469)
Accumulated other comprehensive income (53) (26)
Treasury stock, at cost ($0.10 par value, 1,531,925 and 1,521,925 shares in
treasury at March 31, 1999 (unaudited) and December 31, 1998, respectively (16,433) (16,285)
-------- --------
Total stockholders' equity 34,620 35,303
-------- --------
Total Liabilities, Mandatorily Redeemable Preferred Stock and
Stockholders' Equity $ 70,646 $ 79,018
-------- --------
-------- --------
</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>
Three Months Ended
March 31,
------------------------
1999 1998
----- ----
<S> <C> <C>
Operating activities:
Net income (loss) $ (1,011) $ 3,099
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net losses of affiliates 4,495 1,181
Depreciation and amortization of property and equipment 1,859 1,826
Amortization of goodwill 548 336
Deferred income taxes (85) 86
Other, net 235 13
Changes in:
Accounts receivable, net 3,701 (925)
Other current assets (489) (992)
Other assets (17) 97
Accounts payable and accrued expenses 969 1,218
Income taxes payable 2,061 2,270
Deferred revenues 720 (91)
Other liabilities (9) (104)
-------- -------
Net cash provided by operating activities 12,977 8,014
-------- -------
Investing activities:
Capital expenditures (2,212) (6,090)
Purchase of investment securities (1,484) (8,333)
Proceeds from the sale of investment securities 1,484 31,079
Investments (964) (20,000)
-------- -------
Net cash used for investing activities (3,176) (3,344)
-------- -------
Financing activities:
Principal repayments on long-term debt (15,000) (31)
Proceeds from the issuance of long-term debt 4,000 -
Proceeds from exercise of stock options 140 553
Proceeds from employee stock purchase plan 209 -
Payments to acquire treasury stock (148) -
Payments of accrued preferred stock dividends (4) -
-------- -------
Net cash provided by (used for) financing activities (10,803) 522
-------- -------
Net increase (decrease) in cash (1,002) 5,192
Cash:
Beginning of period 1,526 2,064
-------- -------
End of period $ 524 $ 7,256
-------- -------
-------- -------
Supplemental Disclosures:
Cash paid:
Interest (322) (34)
Income taxes, net of refunds (702) (779)
</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 March 31, 1999, White River Ventures Inc. ("White River") held
approximately 30.8% 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 is acting
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 months ended March 31, 1999 and 1998 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 1998 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
ENDED MARCH 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 23,720 24,638
Shares attributable to common stock equivalents outstanding 415 780
------ ------
24,135 25,418
------ ------
------ ------
</TABLE>
6
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NOTE 3 - OTHER COMPREHENSIVE NET INCOME (LOSS)
The Company's other comprehensive net income (loss) includes foreign
currency translation adjustments. The Company's comprehensive net income (loss)
was as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------
1999 1998
---- ----
<S> <C> <C>
Net income (loss) $(1,012) $3,005
Foreign currency translation adjustments (27) --
------- ------
Comprehensive net income (loss) $(1,039) $3,005
------- ------
------- ------
</TABLE>
NOTE 4 - 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.
Effective January 1, 1998, the Company adopted SOP 97-2, "Software
Revenue Recognition". SOP 97-2 provided guidance on when revenue should be
recognized and in what amounts for licensing, selling, leasing or otherwise
marketing computer software. The Company previously maintained a policy similar
to SOP 97-2 and therefore the adoption of SOP 97-2 did not have a material
impact on the Company's consolidated results of operations or financial
position.
In March 1998, the AICPA issued SOP98-1, "Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use" (SOP 98-1), which
the Company adopted. SOP 98-1 requires the capitalization of certain costs
incurred in connection with developing or obtaining software for internal-use.
The Company previously maintained a policy similar to SOP 98-1 and, therefore,
the adoption of SOP98-1 did not have a material impact on the Company's
consolidated results of operations or financial position.
Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards 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.
NOTE 5 - NONCASH FINANCING ACTIVITIES
The Company directly charges its accumulated deficit account for
preferred stock accretion and preferred stock dividends accrued. These amounts
totaled $0.0 million and $0.1 million during the three months ended March 31,
1999 and 1998, 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 three months
ended March 31, 1999 and 1998, these amounts totaled $0.2 million and $2.0
million, respectively.
NOTE 6 - LONG-TERM DEBT
Under terms included in the amended and restated credit facility
between the Company and its commercial bank, the Company's ability to borrow
under the revolving line of credit was increased from $50 million to $100
million on February 10, 1999. The line of credit commitment is reduced by $10
million on October 31, 2001, $15 million on October 31, 2003 and $75 million on
October 31, 2003. The interest rate under the amended bank credit facility is
the London Interbank Offering Rate (LIBOR) plus 1.0% or the prime rate in effect
from time to time, as selected by the Company. The Company pays a commitment fee
of 0.25% on any unused portion of the revolving credit facility. When borrowings
are outstanding, interest payments are due quarterly.
7
<PAGE>
Under the bank facility, the Company has limitations and restrictions
on its ability to make certain sales or transfers of assets, incur nonpermitted
indebtedness or encumbrances, and redeem or repurchase its capital stock. In
addition, the bank credit facility requires the Company to maintain certain
levels of operating cash flow and debt coverage, and limits its ability to make
investments and declare dividends.
NOTE 7 - INVESTMENT IN INSURQUOTE
On February 10, 1998, the Company invested $20.0 million in InsurQuote
Systems, Inc. (InsurQuote). InsurQuote, formed in 1989, is a provider of
insurance rating information and the software tools used to manage that
information. The Company's $20.0 million investment included 19.9% of InsurQuote
common stock, an $8.9 million subordinated note, warrants, shares of Series C
redeemable convertible preferred stock and Series D convertible preferred stock.
The warrants provide the Company with the right to acquire additional shares of
InsurQuote common stock and are exercisable by the Company through February 10,
2008, subject to potential early termination provisions. The Series C preferred
stock is redeemable in full at the end of five years, or earlier under certain
conditions, if not converted prior to that time. Each share of Series C and D
preferred stock is initially convertible into one share of common stock at the
option of the Company. Under the terms of the investment agreement, the Company,
subject to certain conditions, can increase its investment through additional
purchases of common and preferred shares. The Company's ownership percentage,
assuming conversion into common stock all of the securities currently
exercisable, would be increased to approximately 33% at March 31, 1999.
The Company accounts for its investment in InsurQuote on the equity
method. Notwithstanding the Company's initial 19.9% common stock equity share,
the Company has recorded 100% of InsurQuote's net losses for the period from the
Company's ownership, February 10, 1998 to March 31, 1999. The recording of 100%
of InsurQuote's net losses was the result of the Company's $20.0 million
investment being InsurQuote's primary source of funding for its operating
losses. The Company has not recorded any income tax benefit on the InsurQuote
losses. At March 31, 1999, the Company's remaining recorded investment in
InsurQuote was approximately $3.7 million. The market value of the investment in
InsurQuote at March 31, 1999 was not readily determinable.
On March 31, 1999, InsurQuote received a $20.0 million investment from
a new investor for convertible preferred stock with an 11% voting interest. As a
result of this new investment, the Company's ownership percentage decreased to
14.4% and the Company will cease recording losses on its investment, unless it
is determined that its remaining investment is impaired.
Summary InsurQuote financial information for the three months ended
March 31, 1999 was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Revenues $2,698
Loss from operations $(4,190)
Net loss $(4,481)
</TABLE>
NOTE 8 - BUSINESS SEGMENTS
The Company has three reportable segments; Insurance Services,
Automotive Services and Consumer Processing Services. The Insurance Services
Division sells products and services which assist its customers in managing
total loss and repairable auto claims as well as a product to assist in the
underwriting of insurance. The Automotive Services Division sells products and
services which assist its customers in managing repairable auto claims. The
Consumer Processing Services Division sells products and services which provide
complete outsourcing services on many aspects of the claim process.
The Company's reportable segments are based upon the nature of the
products and services within the Company and the methods used to distribute
these products and services. The Company is organized into revenue producing
divisions and support organizations (product development and customer support)
tasked with facilitating the performance of the revenue producing divisions.
Division expenses represent principally salaries and related employee expenses
directly related to the Division's activities. Each revenue division and support
organization is led by a vice president that reports to either the Chief
Operating Officer
8
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or the Chief Executive Officer. Management evaluates performance at the total
company profit level and at the product revenue level. The support
organization costs are not currently allocated to the revenue producing
divisions and include product engineering, management information systems,
customer support and finance and administration costs.
<TABLE>
<CAPTION>
CONSUMER
INSURANCE AUTOMOTIVE PROCESSING
SERVICES SERVICES SERVICES OTHER* TOTAL
--------- ---------- ---------- ------ -----
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1999
Net Revenue $25,594 $16,572 $ 7,743 $ -- $ 49,909
Expenses (7,468) (8,842) (6,584) (20,696) (43,590)
-------- -------- ------- -------- --------
Operating income 18,126 7,730 1,159 (20,696) 6,319
Equity in net losses of affiliates (4,495) -- -- -- (4,495)
-------- -------- ------- -------- --------
Division operating margin $13,631 $ 7,730 $ 1,159 $(20,696) $ 1,824
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
Accounts receivable $11,095 $ 1,634 $ 6,601 $ 181 $ 19,511
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
THREE MONTHS ENDED MARCH 31, 1998
Net Revenue $25,382 $14,751 $ 4,010 $ 548 $ 44,691
Expenses (7,587) (7,475) (3,237) (19,236) (37,535)
-------- -------- ------- -------- --------
Operating income 17,795 7,276 773 (18,688) 7,156
Equity in net losses of affiliates (1,181) -- -- -- (1,181)
-------- -------- ------- -------- --------
Division operating margin $16,614 $ 7,276 $ 773 $(18,688) $ 5,975
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
Accounts receivable $11,428 $3,382 $ 3,893 $ 524 $ 19,227
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
* Other net revenue includes a discontinued product which provided new
and used car pricing to consumers. Other expenses include support
costs.
NOTE 9 - LEGAL PROCEEDINGS
In March 1999, the Company completed a settlement of a lawsuit filed in
late 1998 involving a former independent sales representative. The settlement of
$1.7 million, recorded in December 1998, included, among other things, payment
for past earned commissions, resolution of disputed commissions, and other costs
associated with the resolution of the dispute.
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
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1998
The Company reported a net loss applicable to common stock of $(1.0)
million, or $(0.04) per share on a diluted basis, for the three months ended
March 31, 1999, versus net income of $3.0 million, or $0.12 per share on a
diluted basis, for the same quarter last year.
REVENUES. First quarter 1999 revenues of $49.9 million were $5.2
million, or 11.7%, higher than the same quarter last year. The increase in
revenues was primarily due to continued growth in the Consumer Processing
Services Division and the increase revenues from the Automotive Services
Division. The Automotive Services Division increase was a result of growth in
the digital imaging product and an increase in the number of collision
estimating seats.
9
<PAGE>
PRODUCTION AND CUSTOMER SUPPORT. Production and customer support
increased from $9.9 million, or 22.2% of revenues, to $14.1 million, or 28.3% of
revenues. The increase in dollars and percentage of revenue was attributable
primarily to an increase in production and customer support capacity related to
Consumer Processing Services and an increase in Automotive Services
workflow/collision estimating seat implementations.
COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
decreased from $5.3 million, or 11.9% of revenues, to $4.5 million, or 8.9% of
revenues. The decrease in dollars and as a percentage of revenue was due
primarily to the conversion of Automotive Services outside sales representatives
to salaried employees.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative increased from $14.0 million, or 31.4% of revenues, to $16.8
million, or 33.8% of revenues. The increase in dollars was due primarily to the
conversion of Automotive Services outside sales representatives to salaried
employees, additional costs associated with the expansion of the Automotive
Services Division customer base and efforts to build and upgrade internal
systems and infrastructure.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
from $2.2 million, or 4.9% of revenues, to $2.4 million, or 4.9% of revenues.
The increase in dollars was mainly the result of an increase in goodwill
amortization resulting from the acquisition of two subsidiaries in the third
quarter of 1998.
PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and
programming decreased from $6.1 million, or 13.7% of revenues, to $5.7
million, or 11.5% of revenues. The dollar decrease was due primarily to the
Company's development efforts on international products being reimbursed
monthly by the Enterstand Joint Venture in Europe.
OTHER INCOME/INTEREST EXPENSE. Net other income/interest expense
decreased from $0.3 million to $(0.2) million. The decrease was principally the
result of lower interest income from the investment of excess cash.
INCOME TAXES. First quarter income taxes decreased from $3.2 million,
or 41.8% of income before taxes, to $2.7 million, or 43.5% of income before
taxes. The dollar decrease was attributable to lower pretax income.
EQUITY IN NET LOSSES OF AFFILIATES. Equity in net losses of affiliates
increased from $1.2 million to $4.5 million. The results include $4.2 million
and $1.2 million loss in InsurQuote Systems, Inc. for first quarter 1999 and
1998, respectively, and $0.3 million loss from the Enterstand Joint Venture in
1999.
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 1999
and 2000, 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
10
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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 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 most of this process by the third quarter of 1999.
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 has nearly completed its assessment and expects that most facility
and office equipment will be compliant by third quarter of 1999.
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 fourth 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.
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
the end of the third quarter of 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
11
<PAGE>
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 address Year 2000 Problems should they occur. The Company expects to
complete its contingency plans by May 1999. 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.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1999, net cash provided by
operating activities was $13.0 million. The Company applied $2.2 million to the
purchase of equipment and software. In addition, the Company applied $11.0
million to the repayment of all the long-term debt that was outstanding at
December 31, 1998.
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 in Item 2 contains a forward-looking statements which involves
certain degrees of risks and uncertainties, including statements relating to
liquidity and capital resources. Except for the historical information, 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 1998
Annual Report on Form 10-K, as amended, filed with the Commission on April 1,
1999.
12
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1999, the Company completed a settlement of a lawsuit filed in
late 1998 involving a former independent sales representative. The settlement of
$1.7 million, recorded in December 1998, included, among other things, payment
for past earned commissions, resolution of disputed commissions, and other costs
associated with the resolution of the dispute.
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
None.
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 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 Amended and Restated Stockholder's Agreement (incorporated
herein by reference to Exhibit 4.1 of the Company's Annual
Report on Form 10-K, Commission File No. 000-28600)
4.2 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)
4.3 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)
4.4 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 Amended and restated Credit Facility Agreement between CCC
Information Services Inc., LaSalle National 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)
13
<PAGE>
10.2 Amended and restated Motors Crash Estimating Guide Data
License (incorporated herein by reference to Exhibit 10.2
of the Company's (incorporated herein by reference to
Exhibit 10.2 of the Company's Annual Report on Form 10-K,
Commission File No. 000-28600)
10.3 European Version of Motors Crash Estimating Guide Data
License (incorporated herein by reference to Exhibit 10.3
of the Company's Annual Report on Form 10-K, Commission
File No. 000-28600)
10.4 Stock Option Plan (incorporated herein by reference to
Exhibit 4.03 of the Company's Registration Statement on
Form S-8, Commission File No. 333-15207 filed October 31,
1996)
10.5 1997 Stock Option Plan, as amended (incorporated herein by
reference to Exhibit 4.05 of the Company's Registration
Statement on Form S-8, Commission File No. 333-67645 filed
November 20, 1998)
10.6 401(k) Company Retirement Saving & Investment Plan
(incorporated herein by reference to Exhibit 4.4 of the
Company's Registration Statement on Form S-8, Commission
File No. 333-32139 filed on July 25, 1997)
10.7 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 5.01 of the Company's Registration
Statement on Form S-8, Commission File No. 333-47205 filed
on March 2, 1998)
10.8 Securities Purchase Agreement between Company and
InsurQuote Systems Inc. dated February 10, 1998
(incorporated herein by reference to Exhibit 10.7 of the
Company's Quarterly Report on Form 10-Q, Commission File
No. 000-28600 filed on May 15, 1999)
10.9 Investment Agreement between Company and InsurQuote Systems
Inc. dated February 10, 1998 (incorporated herein by
reference to Exhibit 10.8 of the Company's Quarterly Report
on Form 10-Q, Commission File No. 000-28600 filed on May
15, 1999)
10.10 Common Stock Warrant to purchase 440,350 shares of
InsurQuote Systems Inc. dated February 10, 1998
(incorporated herein by reference to Exhibit 10.9 of the
Company's Quarterly Report on Form 10-Q, Commission File
No. 000-28600 filed on May 15, 1999)
10.11 Sale and Purchase Agreement between the Company and Phillip
Carter dated July 1, 1998 (incorporated herein by reference
to Exhibit 10.11 of the Company's Annual Report on Form
10-K, Commission File No. 000-28600)
11 Statement Re: Computation of Per Share Earnings
13 InsurQuote Systems, Inc. Audited Consolidated Financial
Statements for the Year Ended June 30, 1998 (incorporated
herein by reference to Exhibit 13 of the Company's Annual
Report on Form 10-K, Commission File No. 000-28600)
27 Financial Data Schedule
(b) Reports on Form 8-K
Preliminary Operating Results Press Release filed on January 27,
1999, Commission File No. 000-28600
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: May 14, 1999 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: Senior Vice President of Finance
and Chief Accounting Officer
15
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
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 Amended and Restated Stockholder's Agreement (incorporated herein by
reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K,
Commission File No. 000-28600)
4.2 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)
4.3 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)
4.4 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 Amended and restated Credit Facility Agreement between CCC Information
Services Inc., LaSalle National 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 Amended and restated Motors Crash Estimating Guide Data License
(incorporated herein by reference to Exhibit 10.2 of the Company's
(incorporated herein by reference to Exhibit 10.2 of the Company's
Annual Report on Form 10-K, Commission File No. 000-28600)
10.3 European Version of Motors Crash Estimating Guide Data License
(incorporated herein by reference to Exhibit 10.3 of the Company's
Annual Report on Form 10-K, Commission File No. 000-28600)
10.4 Stock Option Plan (incorporated herein by reference to Exhibit 4.03 of
the Company's Registration Statement on Form S-8, Commission File No.
333-15207 filed October 31, 1996)
10.5 1997 Stock Option Plan, as amended (incorporated herein by reference to
Exhibit 4.05 of the Company's Registration Statement on Form S-8,
Commission File No. 333-67645 filed November 20, 1998)
10.6 401(k) Company Retirement Saving & Investment Plan (incorporated herein
by reference to Exhibit 4.4 of the Company's Registration Statement on
Form S-8, Commission File No. 333-32139 filed on July 25, 1997)
10.7 Employee Stock Purchase Plan (incorporated herein by reference to
Exhibit 5.01 of the Company's Registration Statement on Form S-8,
Commission File No. 333-47205 filed on March 2, 1998)
10.8 Securities Purchase Agreement between Company and InsurQuote Systems
Inc. dated February 10, 1998 (incorporated herein by reference to
Exhibit 10.7 of the Company's Quarterly Report on Form 10-Q, Commission
File No. 000-28600 filed on May 15, 1999)
10.9 Investment Agreement between Company and InsurQuote Systems Inc. dated
February 10, 1998 (incorporated herein by reference to Exhibit 10.8 of
the Company's Quarterly Report on Form 10-Q, Commission File No.
000-28600 filed on May 15, 1999)
16
<PAGE>
10.10 Common Stock Warrant to purchase 440,350 shares of InsurQuote Systems
Inc. dated February 10, 1998 (incorporated herein by reference to
Exhibit 10.9 of the Company's Quarterly Report on Form 10-Q, Commission
File No. 000-28600 filed on May 15, 1999)
10.11 Sale and Purchase Agreement between the Company and Phillip Carter
dated July 1, 1998 (incorporated herein by reference to Exhibit 10.11
of the Company's Annual Report on Form 10-K, Commission File No.
000-28600)
11 Statement Re: Computation of Per Share Earnings
13 InsurQuote Systems, Inc. Audited Consolidated Financial Statements for
the Year Ended June 30, 1998 (incorporated herein by reference to
Exhibit 13 of the Company's Annual Report on Form 10-K, Commission File
No. 000-28600)
27 Financial Data Schedule
</TABLE>
17
<PAGE>
EXHIBIT 11
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 1998
-------- -------
<S> <C> <C>
Per share income (loss) before dividends and accretion on preferred stock:
Income (loss) before dividends and accretion on preferred stock $ (1,011) $ 3,099
-------- -------
-------- -------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 23,720 24,638
Shares attributable to common stock equivalents outstanding 415 780
-------- -------
24,135 25,418
-------- -------
-------- -------
Per share income (loss) before dividends and accretion on preferred stock $ (0.04) $ 0.12
-------- -------
-------- -------
Per share dividends and accretion on mandatorily redeemable preferred:
Dividends and accretion on mandatorily redeemable preferred: $ (1) $ (94)
-------- -------
-------- -------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 23,720 24,638
Shares attributable to common stock equivalents outstanding 415 780
-------- -------
24,135 25,418
-------- -------
-------- -------
Per share dividends and accretion on mandatorily redeemable preferred $ - $ -
-------- -------
-------- -------
Net income (loss) per share applicable to common stock:
Net income (loss) applicable to common stock $ (1,012) $ 3,005
-------- -------
-------- -------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 23,720 24,638
Shares attributable to common stock equivalents outstanding 415 780
-------- -------
24,135 25,418
-------- -------
-------- -------
Net income (loss) per share applicable to common stock $ (0.04) $ 0.12
-------- -------
-------- -------
</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
MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONSOLIDATED INTERIM FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 524
<SECURITIES> 0
<RECEIVABLES> 22,590
<ALLOWANCES> (3,079)
<INVENTORY> 0
<CURRENT-ASSETS> 26,250
<PP&E> 51,622
<DEPRECIATION> (36,412)
<TOTAL-ASSETS> 70,646
<CURRENT-LIABILITIES> 31,104
<BONDS> 0
685
0
<COMMON> 82,154
<OTHER-SE> (47,534)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 70,646
<SALES> 0
<TOTAL-REVENUES> 49,909
<CGS> 0
<TOTAL-COSTS> 43,590
<OTHER-EXPENSES> 39<F2>
<LOSS-PROVISION> 878
<INTEREST-EXPENSE> 195
<INCOME-PRETAX> 6,163
<INCOME-TAX> 2,679
<INCOME-CONTINUING> (1,011)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,011)<F3>
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)<F4>
<FN>
<F1>ACCUMULATED DEFICIT & CUMULATIVE TRANSLATION ADJUSTMENT.
<F2>OTHER INCOME, NET OF EXPENSES.
<F3>NET LOSS
<F4>INCLUDES DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK.
</FN>
</TABLE>
