<PAGE>
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, 2000
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 November 13, 2000, CCC Information Services Group Inc. common stock, par
value $0.10 per share, outstanding was 21,695,268 shares.
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Interim Statement of Operations (Unaudited),
Three Months and Nine Months Ended September 30, 2000 and 1999 3
Consolidated Interim Balance Sheet,
September 30, 2000 (Unaudited) and December 31, 1999 4
Consolidated Interim Statement of Cash Flows (Unaudited),
Nine Months Ended September 30, 2000 and 1999 5
Notes to Consolidated Interim Financial Statements (Unaudited) 6-13
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition 14-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17-18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
</TABLE>
2
<PAGE>
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 NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- ---------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues $51,461 $51,649 $158,150 $152,526
Expenses:
Production and customer support 15,490 16,577 48,299 45,726
Commissions, royalties and licenses 2,620 3,858 9,196 12,708
Selling, general and administrative 24,078 19,421 66,599 58,453
Depreciation and amortization 3,261 2,589 9,204 7,515
Product development and programming 7,775 5,487 19,881 17,457
Write-off of marketing license agreement 2,701 -- 2,701 --
Litigation settlement 1,425 -- 1,425 --
------- ------- -------- --------
Total operating expenses 57,350 47,932 157,305 141,859
------- ------- -------- --------
Operating income (loss) (5,889) 3,717 845 10,667
Interest expense (881) (412) (2,303) (793)
Other income, net 148 175 4,750 403
Gain on exchange of investment securities -- -- 18,437 --
Equity in losses of ChoiceParts (476) -- (788) --
------- ------- -------- --------
Income (loss) before income taxes (7,098) 3,480 20,941 10,277
Income tax benefit (provision) 3,153 (2,099) 1,215 (4,836)
------- ------- -------- --------
Income (loss) before equity losses and minority interest (3,945) 1,381 22,156 5,441
Equity in net losses of affiliates (3,657) (814) (7,966) (5,810)
Minority share in net losses of subsidiaries -- 1 -- 1
------- ------- -------- --------
Net income (loss) (7,602) 568 14,190 (368)
Dividends and accretion on mandatorily
redeemable preferred stock -- -- -- (2)
------- ------- -------- --------
Net income (loss) applicable to common stock $(7,602) $ 568 $ 14,190 $ (370)
======= ======= ======== ========
PER SHARE DATA
Income (loss) per common share - basic $ (0.35) $ 0.03 $ 0.65 $ (0.02)
======= ======= ======== ========
Income (loss) per commmon share - diluted $ (0.35) $ 0.03 $ 0.64 $ (0.02)
======= ======= ======== ========
Weighted average shares outstanding:
Basic 21,613 22,429 21,906 23,172
Diluted 21,613 22,670 22,221 23,478
</TABLE>
The accompanying notes are an integral part of these
consolidated interim financial statements
3
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 1,978 $ 1,378
Accounts receivable (net of reserves of $2,787 (unaudited) and
$3,975 at September 30, 2000 and December 31, 1999, respectively) 25,751 24,377
Income taxes receivable 4,428 --
Other current assets 8,678 11,546
-------- --------
Total current assets 40,835 37,301
Property and equipment (net of accumulated depreciation
of $46,481 (unaudited) and $40,278 at September 30, 2000
and December 31, 1999, respectively) 22,556 17,807
Goodwill (net of accumulated amortization of $16,039 (unaudited) and
$14,040 at September 30, 2000 and December 31, 1999, respectively) 14,593 16,358
Deferred income taxes 5,044 6,719
Notes receivable 5,263 --
Investment in affiliates 1,411 --
Investments 23,007 3,402
Other assets 1,166 2,962
-------- --------
Total Assets $113,875 $ 84,549
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 42,899 $ 35,548
Income taxes payable -- 1,188
Current portion of long-term debt 354 440
Deferred revenues 4,981 3,993
-------- --------
Total current liabilities 48,234 41,169
Long-term debt 37,405 24,685
Deferred revenues 175 368
Other liabilities 3,325 3,061
Minority interest in consolidated companies 5 5
-------- --------
Total liabilities 89,144 69,288
-------- --------
Common stock ($0.10 par value, 40,000,000 shares authorized,
21,626,344 (unaudited) and 21,991,826 shares issued and
outstanding at September 30, 2000 and December 31, 1999, respectively) 2,580 2,549
Additional paid-in capital 102,660 98,799
Accumulated deficit (31,529) (45,719)
Accumulated other comprehensive loss (442) (65)
Treasury stock, at cost ($0.10 par value, 4,301,665 and 3,618,115 shares in
treasury at September 30, 2000 and December 31, 1999, respectively) (48,538) (40,303)
-------- --------
Total stockholders' equity 24,731 15,261
-------- --------
Total Liabilities and Stockholders' Equity $113,875 $ 84,549
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated interim financial statements
4
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net income (loss) $ 14,190 $ (368)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on exchange of investment securities (18,437) --
Gain on settlement of marketing agreement (3,644) --
Equity in net losses of affiliates 8,754 5,810
Depreciation and amortization of property and equipment 7,048 5,695
Amortization of goodwill 1,999 1,741
Deferred income taxes 1,675 1,154
Other, net (342) 298
Changes in:
Accounts receivable, net (2,273) (903)
Other current assets (2,051) (2,253)
Other assets 1,209 327
Accounts payable and accrued expenses 6,343 10,411
Current income taxes (4,302) (580)
Deferred revenues 795 15
Other liabilities 30 (564)
-------- --------
Net cash provided by operating activities 10,994 20,783
-------- --------
Investing activities:
Capital expenditures (11,832) (7,430)
Purchase of investment securities -- (1,484)
Proceeds from the sale of investment securities -- 1,484
Increase in long-term notes receivable (3,592) --
Investment in ChoiceParts (1,420) --
Purchase of InsurQuote securities (527) --
Investments -- (6,255)
-------- --------
Net cash used for investing activities (17,371) (13,685)
-------- --------
Financing activities:
Principal repayments on long-term debt (20,366) (27,000)
Proceeds from borrowings on long-term debt 33,000 42,000
Proceeds from exercise of stock options 2,104 1,398
Proceeds from employee stock purchase plan 474 588
Payments to acquire treasury stock (8,235) (24,035)
Issuance of treasury stock -- 152
Redemption of preferred stock, including accrued dividends -- (690)
Other, net -- 8
-------- --------
Net cash provided by (used for) financing activities 6,977 (7,579)
-------- --------
Net increase (decrease) in cash 600 (481)
Cash:
Beginning of period 1,378 1,526
-------- --------
End of period $ 1,978 $ 1,045
======== ========
Supplemental Disclosures:
Cash paid:
Interest $ 1,879 $ 643
======== ========
Income taxes, net of refunds $ 1,418 $ 4,259
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated interim financial statements
5
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION
CCC Information Services Group Inc., through its wholly owned subsidiary
CCC Information Services Inc. ("CCC") (collectively referred to as the
"Company"), 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, 2000, White River Ventures Inc. ("White River") held
approximately 33.5% of the total outstanding common stock of the Company. 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 and nine months ended September 30, 2000 and 1999 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 1999 Annual Report on Form 10-K, as amended, filed with the Securities
and Exchange Commission ("SEC").
CHANGE IN ESTIMATE
Effective January 1, 2000, the Company has modified its methodology for
determining allowances for accounts receivable. The previous method applied
primarily a predetermined percentage to the accounts receivable aging balances,
while considering the specific identification of customer accounts requiring
allowances. The modified method incorporates a higher degree of specific
identification of customer accounts requiring allowances in conjunction with the
general percentage application on remaining accounts receivable balances. As a
result of the change, the Company reduced reserves by approximately $1.2 million
in the first quarter of 2000. This amount is reflected in the consolidated
interim statement of operations for the nine month period ended September 30,
2000. Management believes that the new methodology provides for a more accurate
valuation of the Company's accounts receivable balances.
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.
For the three months ended September 30, 2000, 2.6 million common stock
equivalents were not included in the diluted computation because the common
stock equivalents would have been antidilutive for the period.
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"), which provides the
SEC's views in applying generally accepted accounting principles to selected
revenue recognition issues. In June 2000, the SEC issued SAB 101B, the second
amendment to SAB 101, which has delayed the implementation of SAB 101 until no
later than the fourth fiscal quarter of fiscal years beginning after December
15, 1999. The Company does not expect SAB 101 to have a material impact on the
Company's consolidated results of operations or financial position.
6
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - OTHER COMPREHENSIVE INCOME (LOSS)
The Company's other comprehensive income (loss) includes foreign currency
translation adjustments. The Company's comprehensive income (loss) was as
follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
------- ---- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income (loss) $(7,602) $568 $ 14,190 $(368)
Foreign currency translation adjustments (59) 67 (377) 9
------- ---- -------- -----
Comprehensive income (loss) $(7,661) $635 $ 13,813 $(359)
======= ==== ======== =====
</TABLE>
NOTE 5 - NONCASH FINANCING ACTIVITIES
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, 2000 and 1999, these amounts totaled $1.3 million and $0.5
million, respectively.
NOTE 6 - INVESTMENT IN INSURQUOTE
On February 10, 1998, the Company invested $20.0 million in InsurQuote
Systems, Inc. ("InsurQuote"). InsurQuote, formed in 1989, was a provider of
insurance rating information and 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 provided the Company with the right to acquire additional shares of
InsurQuote common stock and were exercisable by the Company through February 10,
2008, subject to potential early termination provisions. The Series C preferred
stock was redeemable in full at the end of five years from issuance, or earlier
under certain conditions, if not converted prior to that time. Each share of
Series C and D preferred stock was 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, could increase its
investment through additional purchases of common and preferred shares.
In February 1998 and subsequently amended in March of 1999, the Company and
InsurQuote entered into a sales and marketing agreement that gave the Company
certain rights to market and sell InsurQuote products to the automobile
insurance carrier market. In March 2000, the Company and InsurQuote entered into
an agreement to terminate the marketing and sales agreement. As part of the
termination agreement, the Company received an unsecured, subordinated
promissory note in the amount of $4.5 million that matures in September 2002 and
bears interest at 7.5% and received cash of $0.5 million in April 2000. As a
result of the termination agreement, the Company recorded a gain on the
settlement of this marketing agreement of approximately $4.1 million in the
first quarter 2000 and was included in other income in the consolidated interim
statement of operations for the nine month period ended September 30, 2000.
The Company accounted for its investment in InsurQuote on the equity
method. Notwithstanding the Company's original 19.9% common stock equity share,
the Company recorded 100% of InsurQuote's net losses for the period from the
Company's initial investment, February 10, 1998 to March 31, 1999. The recording
of 100% of InsurQuote's losses was the result of the Company's $20.0 million
investment being the primary source of funding for InsurQuote's operating losses
during that period. On March 31, 1999, InsurQuote received a $20.0 million
investment from a new investor for convertible preferred stock with a 19.0%
voting interest. As a result of this new investment, the Company's ownership
percentage decreased to 14.7% and the Company ceased recording losses on its
investment, unless its was determined that its remaining investment was
impaired. The Company has not recorded any income tax benefit on the equity in
InsurQuote losses
7
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
recorded in 1999 and 1998.
On April 7, 2000, ChannelPoint, Inc., an e-commerce exchange services and
technology platform provider for insurance and benefits companies, acquired
InsurQuote. Under the terms of the transaction, the Company exercised its
warrant for InsurQuote common stock in exchange for surrendering its $8.9
million subordinated note from InsurQuote. In addition, the Company invested
$0.5 million in cash and converted $0.3 million in interest receivables
associated with the $8.9 million subordinated note for additional common stock.
The Company's securities in InsurQuote were then exchanged for common stock in
the combined entity, ChannelPoint, Inc. ("ChannelPoint"). As a result of this
transaction, the Company now owns 5,036,635 shares, representing approximately
6.0%, on a fully diluted basis, of ChannelPoint's common stock.
In connection with the Company exchanging its equity investment in
InsurQuote securities for ChannelPoint's common stock, the Company's investment
was recorded at its fair market value, and as a result, a gain was reflected in
the consolidated interim statement of operations for the nine months ended
September 30, 2000. The Company accounts for its investment in ChannelPoint as a
cost based investment. Prior to the end of the second quarter of 2000, the
Company reviewed its carrying value of the ChannelPoint common stock. Based on
this review, the Company determined that there had been another than temporary
decline in market value of these securities. This determination was based on
market conditions for like companies, restrictions on the stock holding, delay
in the initial public offering of ChannelPoint's common stock and the limited
liquidity of a private security. The resulting charge related to this change in
carrying value has been included in the net gain on the exchange of securities
of $18.4 million reflected in the consolidated interim statement of operations
for the nine months ended September 30, 2000. The impact on the Company's tax
provision resulting from this gain on exchange of investment securities was
minimal, since for tax purposes it largely represented a reversal of prior
equity losses for which no tax benefit was recorded. As such, the tax impact of
$0.7 million related to the increase from the original cost of the investment of
$20.8 million to the current carrying value of $22.7 million as of September 30,
2000.
NOTE 7 - ENTERSTAND JOINT VENTURE
On December 30, 1998, the Company and Hearst Communications, Inc.
("Hearst") established a joint venture, Enterstand Limited ("Enterstand"), in
Europe to develop and market claims processing tools to insurers and collision
repair facilities. Under the provision of the Subscription and Stockholders
Agreement ("Subscription Agreement"), the Company invested $2.0 million for a
19.9% equity interest. The Subscription Agreement provides the Company with an
option to purchase 85.0% of Hearst's shares of Enterstand at an agreed upon
purchase price. The option is exercisable by the Company after one year from the
date of the Subscription Agreement.
On March 17, 2000, the Company and Hearst agreed to terms for an amendment
to the Subscription Agreement. Under the terms of the amendment, both parties
contributed additional funds to Enterstand to provide additional working
capital. On March 20, 2000, the Company funded $0.5 million and Hearst funded
$5.0 million to Enterstand. After these investments, the Company's ownership
percentage decreased to 14.2%. The Company's option under the Subscription
Agreement was adjusted to include a right to purchase 78.0% of the shares issued
to Hearst in connection with this transaction and would give the Company an
84.5% ownership in Enterstand, if exercised.
In addition, on March 31, 2000, the Company and Hearst loaned Enterstand
$8.5 million and $1.5 million, respectively, which were evidenced by promissory
notes. Of the $8.5 million loaned to Enterstand by the Company, $3.5 million was
funded in cash and $5.0 million of receivables from Enterstand were converted
into the note receivable. These promissory notes mature in March 2005 and bear
interest at 9.0%.
The Company applies the equity method of accounting for its investment in
Enterstand. Since the inception date through March 31, 2000, the Company
recorded 19.9% of Enterstand's losses. Notwithstanding the Company's current
ownership percentage of 14.2%, for the period April 1, 2000 through September
30, 2000, the Company has recorded 85.0% of Enterstand losses based on the
8
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company's proportionate share of the total funding to Enterstand which occurred
on March 31, 2000. The Company recorded a charge of $8.0 million and $1.6
million for its share of Enterstand's losses for the nine months ended September
30, 2000 and 1999, respectively. The Company has not recorded any income tax
benefit on the equity in Enterstand losses recorded since inception.
Summary financial information for Enterstand for the three and nine months
ended September 30, 2000 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 2000
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Revenues $ -- $ --
======= ========
Loss from operations $(4,053) $(12,147)
======= ========
Net loss $(4,303) $(12,498)
======= ========
</TABLE>
NOTE 8 - INVESTMENT IN CHOICEPARTS
On May 4, 2000, the Company formed a new independent company, ChoiceParts,
LLC ("ChoiceParts") with The Reynolds and Reynolds Company and Automatic Data
Processing, Inc. ChoiceParts will serve as an online auto parts marketplace for
franchised auto retailers, collision repair facilities and other parts
suppliers. On May 4, 2000, the Company invested approximately $1.4 million in
ChoiceParts for a 27.5% equity interest. In addition, the Company has a
commitment to fund an additional $5.5 million to ChoiceParts based on its
pro-rata ownership percentage through April 2001. The Company applies the equity
method of accounting for its investment in ChoiceParts and recorded a charge of
$0.5 million and $0.8 million for the three month period ended September 30,
2000 and for the period May 4, 2000 through September 30, 2000, respectively.
Based on the nature of the Company's investment, the Company has recorded a
related income tax benefit on its share of the losses.
Summary financial information for ChoiceParts for the three month period
ended September 30, 2000 and from inception date May 4, 2000 through September
30, 2000 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 2000
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Revenues $ 3,643 $ 5,993
======= =======
Loss from operations $(1,857) $(2,970)
======= =======
Net loss $(1,730) $(2,865)
======= =======
</TABLE>
NOTE 9 - INVESTMENT IN INFO4CARS
On December 23, 1999, the Company sold certain net assets related to its
Dealer Services products to Info4cars.com Inc., a provider of used car buying
information to consumers and auto dealers ("Info4cars") in exchange for a note
receivable of $0.6 million and common stock representing a 9.0% interest in
Info4cars. During 2000, Info4cars failed to make interest payments due and
payable to the Company under the terms of the note on February 1, May 1, and
August 1. In September 2000, the Company and Info4cars agreed to amend the
principal amount and terms of repayment of the note receivable (the "Amended
Note"). The Amended Note includes the past due interest payments owed to the
Company on the original note, matures in May 2003 and bears interest at the
Prime Rate. In addition, the
9
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company converted its common stock into shares of Series A Convertible
Preferred Stock (the "Series A Preferred Stock"). As holders of the Series A
Preferred Stock, the Company is entitled to receive, when and as declared by the
board of directors of Info4cars, cash dividends at the rate of 8.0% of the
original issue price per annum on each outstanding share of Series A Preferred
Stock.
NOTE 10 - MARKETING LICENSE AGREEMENT
In September 2000, the Company determined that certain prepaid marketing
license fees paid to a third party related to the Company's shop management
products were impaired based on an analysis of future revenue and profitability
streams. The Company recorded a charge of $1.9 million in connection with the
write-off of this asset. In addition, certain contractual committed consulting
fees and development expenses of $0.8 million related to this third party have
also been recorded and included in the consolidated statement of operations for
the three and nine months ended September 30, 2000.
NOTE 11- LITIGATION SETTLEMENT
CCC was a defendant in an arbitration proceeding before the American
Arbitration Association captioned Autobody Software Solutions, Inc. v. CCC
Information Services Inc., as reported in the Quarterly Reports on form 10-Q for
the quarterly periods ended March 31, 2000 and June 30, 2000. The plaintiff had
demanded damages in excess of $23.0 million in that proceeding. The parties have
settled this action by execution of a Release and Settlement Agreement
("Settlement Agreement") as of October 12, 2000, pursuant to which CCC has paid
the Plaintiff $0.3 million and conveyed 15,000 shares of the Company's common
stock. The Company will also make a total of four additional annual payments in
the amount of $0.2 million each, commencing six months after the date of the
Settlement Agreement. The plaintiff has released CCC from all claims and has
stipulated to the dismissal of its action with prejudice. In connection with
this settlement, the Company has recorded and included a charge of $1.4 million
in the consolidated statement of operations for the three and nine months ended
September 30, 2000.
NOTE 12 - BUSINESS SEGMENTS
Statement of Financial Accounting Standard No. 131, "Disclosures About
Segments for Enterprise and Related Information," requires companies to provide
certain information about their operating segments.
The Company has four reportable segments: CCC U.S., Consumer Services, CCC
International and Drive Logic (formerly described as the Company's Internet
Business-to-Business division). CCC U.S. sells products and services that assist
its customers in managing total loss and repairable auto claims. Consumer
Services sells products and outsourcing services to the private passenger
automobile industry, including policy underwriting, fulfillment services and
claims processing. International offers products to help manage the claims
process and settlement of repairable automobile claims in Europe. DriveLogic,
formed in 1999 as an outgrowth of the CCC U.S. Division, is focused on providing
Internet and wireless-enabled technology solutions to the auto claims and
collision repair industries.
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 shared services organizations (e.g. product development, management
information systems, finance and administration) tasked with facilitating the
performance of the revenue producing divisions. Divisional 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 president or executive vice president that reports to the Chief Executive
Officer. Management evaluates performance at the total company profit level,
divisional profit level and at the product revenue level. The shared services
costs are not currently allocated to the revenue producing divisions and include
product development, management information systems and finance and
administration costs.
10
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Financial information relating to each reportable segment was as follows
(in thousands):
<TABLE>
<CAPTION>
CCC CONSUMER CCC SHARED
U.S. SERVICES INTERNATIONAL DRIVELOGIC SERVICES TOTAL
--------- -------- ------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 2000
Net revenue $ 43,887 $ 5,679 $ 1,895 $ -- $ -- $ 51,461
Expenses:
Operating expenses (17,212) (6,582) (2,841) (5,197) (21,392) (53,224)
Write-off of marketing
license agreement (2,701) -- -- -- -- (2,701)
Litigation settlement (1,425) -- -- -- -- (1,425)
--------- -------- ------------- ---------- -------- ---------
Operating income (loss) 22,549 (903) (946) (5,197) (21,392) (5,889)
Equity in losses of affiliates -- -- (3,657) (476) -- (4,133)
--------- -------- ------------- ---------- -------- ---------
Division operating margin $ 22,549 $ (903) $(4,603) $ (5,673) $(21,392) $ (10,022)
--------- -------- ------------- ---------- -------- ---------
THREE MONTHS ENDED SEPTEMBER 30, 1999
Net revenue $ 42,954 $ 7,031 $ 1,664 $ -- $ -- $ 51,649
Expenses (21,951) (7,584) (1,830) -- (16,567) (47,932)
--------- -------- ------------- ---------- -------- ---------
Operating income (loss) 21,003 (553) (166) -- (16,567) 3,717
Equity in losses of affiliates -- -- (814) -- -- (814)
--------- -------- ------------- ---------- -------- ---------
Division operating margin $ 21,003 $ (553) $ (980) $ -- $(16,567) $ 2,903
========= ======== ============= ========== ======== =========
NINE MONTHS ENDED SEPTEMBER 30, 2000
Net revenue $ 131,688 $ 20,209 $ 6,253 $ -- $ -- $ 158,150
Expenses:
Operating expenses (51,508) (21,296) (9,149) (11,212) (60,014) (153,179)
Write-off of marketing
license agreement (2,701) -- -- -- -- (2,701)
Litigation settlement (1,425) -- -- -- -- (1,425)
--------- -------- ------------- ---------- -------- ---------
Operating income (loss) 76,054 (1,087) (2,896) (11,212) (60,014) 845
Gain on settlement of marketing agreement 4,144 -- -- -- -- 4,144
Gain on exchange of investment securities 18,437 -- -- -- -- 18,437
Equity in losses of affiliates -- -- (7,966) (788) -- (8,754)
--------- -------- ------------- ---------- -------- ---------
Division operating margin $ 98,635 $(1,087) $(10,862) $(12,000) $(60,014) $ 14,672
========= ======== ============= ========== ======== =========
BALANCE AT SEPTEMBER 30, 2000
Accounts receivable, net $ 15,654 $ 7,056 $ 3,041 $ -- $ -- $ 25,751
========= ======== ============= ========== ======== =========
NINE MONTHS ENDED SEPTEMBER 30, 1999
Net revenue $ 129,159 $ 20,729 $ 2,638 $ -- $ -- $ 152,526
Expenses (66,311) (20,841) (3,024) -- (51,683) (141,859)
--------- -------- ------------- ---------- -------- ---------
Operating income (loss) 62,848 (112) (386) -- (51,683) 10,667
Equity in losses of affiliates (4,167) -- (1,643) -- -- (5,810)
--------- -------- ------------- ---------- -------- ---------
Division operating margin $ 58,681 $ (112) $(2,029) $ -- $(51,683) $ 4,857
========= ======== ============= ========== ======== =========
BALANCE AT SEPTEMBER 30, 1999
Accounts receivable, net $ 14,196 $ 8,587 $ 5,042 $ -- $ -- $ 27,825
========= ======== ============= ========== ======== =========
</TABLE>
During the nine months ended September 30, 2000 and 1999, substantially all
revenues recognized in the CCC U.S. and Consumer Services Divisions were derived
from customers located in the United States. During those same periods,
substantially all revenues recognized in the CCC International segment were
derived from customers located in Europe.
11
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - LEGAL PROCEEDINGS
On or about August 2, 2000, a putative statewide class action was filed in
the State Court of Fulton County, Georgia, against CCC and State Farm Mutual
Automobile Insurance Company. The case is captioned Mary A. Walker v. State Farm
Mutual Automobile Insurance Company and CCC Information Services, Inc., Civil
Action File No. 00VS007964-C ("Walker"). The Walker lawsuit was filed by a group
of plaintiffs' attorneys who previously filed two putative class actions against
CCC and various of its customers in Fulton County State Court, as reported in
the Quarterly Report on form 10-Q for the fiscal period ended June 30, 2000. The
plaintiff asserts substantially the same claims and seeks substantially the same
relief as in those previously filed Fulton County actions. CCC has filed an
answer denying the substance of the plaintiffs' claims. No other action has been
taken in the cases.
On or about August 2, 2000, a putative class action purportedly on behalf
of certain residents of fourteen states was filed in the Franklin County Court
of Common Pleas, State of Ohio, against Nationwide Mutual Insurance Company and
CCC. The case is captioned Roy Whitworth et al. v. Nationwide Mutual Insurance
Company and CCC Information Services, Inc., Case No. 00CV H08 6980
("Whitworth"). The Whitworth lawsuit was filed by a group of plaintiffs'
attorneys that includes certain attorneys who previously filed three putative
class actions against CCC and various of its customers in Fulton County State
Court, as reported in the Quarterly Report on form 10-Q for the fiscal period
ended June 30, 2000 and above. The plaintiffs assert substantially the same
claims and seek substantially the same relief as in those previously filed
Fulton County actions. The plaintiffs further allege that CCC's Total Loss
valuation product provides values that do not comply with applicable regulations
in Ohio and thirteen other states. CCC has filed a motion to dismiss the
plaintiffs' claims. No other action has been taken in the case.
On or about October 23, 2000, an amended complaint was filed by the
plaintiff in the State Court of Fulton County, Georgia, in the matter of McGowan
v. Progressive Casualty Insurance Co., Progressive Insurance Co., CCC
Information Services Inc., and David Parham, Civil Action File No. 00VS006525-J,
which matter was reported in the Quarterly Report on form 10-Q for the fiscal
period ended June 30, 2000. The allegations of the amended complaint are
substantially identical to the original complaint, except that the plaintiff now
seeks to represent a nationwide class rather than a statewide class. Plaintiff
also seeks to represent a similar statewide sub-class under the Georgia RICO
statute.
On or about August 23, 2000, a putative statewide class action was filed in
the Circuit Court for Hillsborough County, Florida, against CCC and USAA
Casualty Insurance Company. The lawsuit is captioned Peter Sintes et al. v. USAA
Casualty Insurance Company and CCC Information Services, Inc., Case No.
00-006308 ("Sintes"). Plaintiffs allege that USAA contracted with CCC to provide
valuations of "total loss" vehicles and that CCC supplied valuations that were
intentionally below the actual fair market value of the insured vehicle. The
plaintiffs assert various common law claims against USAA seeking unspecified
damages. The plaintiffs also assert a single claim for injunctive relief against
USAA and CCC. Plaintiffs also request an award of pre- and post-judgment
interest and an award of attorneys' fees, litigation expenses and costs. The
group of plaintiffs' attorneys who filed the Sintes case includes several
attorneys who have previously filed similar cases against CCC and various of its
customers in the Circuit Court of Cook County, Illinois. CCC was only recently
served with the complaint. No other action has been taken in the case.
CCC intends to vigorously defend all of the above-described lawsuits. Due
to the numerous legal and factual issues that must be resolved during the course
of the litigation, CCC is unable to predict the ultimate outcome of any of these
actions. If CCC were held liable in any of these actions (or otherwise concludes
that it is in CCC's best interests to settle any of them), CCC could be required
to pay monetary damages (or settlement payments). Depending upon the theory of
recovery or the resolution of the plaintiff's claims for compensatory and
punitive damages, or potential claims for indemnification or contribution by
CCC's customers in any of the actions, these monetary damages (or settlement
payments) could be substantial and could have a material adverse effect on CCC's
business, financial condition, or results of operations. The Company is unable
to estimate the magnitude of its exposure, if any, at this time.
12
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As additional information is gathered and the litigations proceed, CCC will
continue to assess their potential impact.
CCC was a defendant in an arbitration proceeding before the American
Arbitration Association captioned Autobody Software Solutions, Inc. v. CCC
Information Services Inc., as reported in the Quarterly Reports on form 10-Q for
the quarterly periods ended March 31, 2000 and June 30, 2000. The plaintiff had
demanded damages in excess of $23.0 million in that proceeding. The parties have
settled this action by execution of a Release and Settlement Agreement
("Settlement Agreement") as of October 12, 2000, pursuant to which CCC has paid
the Plaintiff $0.3 million and conveyed 15,000 shares of the Company's common
stock. The Company will also make a total of four additional annual payments in
the amount of $0.2 million each, commencing six months after the date of the
Settlement Agreement. The plaintiff has released CCC from all claims and has
stipulated to the dismissal of its action with prejudice.
13
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1999
The Company reported a net loss applicable to common stock of $7.6 million,
or $(0.35) per share on a diluted basis, for the three months ended September
30, 2000, versus net income of $0.6 million, or $0.03 per share on a diluted
basis, for the same quarter last year.
REVENUES. Third quarter 2000 revenues of $51.5 million were $0.2 million
lower than the same quarter last year. Revenues for CCC U.S. Division increased
$1.0 million, or 2.2%, from 1999. Additionally, CCC International revenues
increased $0.2 million, or 13.9%, principally due to revenues from the
acquisition of D.W. Norris in the third quarter of 1999. These increases were
offset, in part, by a decrease of $1.4 million in Consumer Services revenues.
PRODUCTION AND CUSTOMER SUPPORT. Production and customer support decreased
from $16.6 million, or 32.1% of revenues, to $15.5 million, or 30.1% of
revenues. The year over year decrease was due primarily to customer support
costs related to Consumer Services and a reduction related to the sale of the
Dealer Services business. This decrease was offset, in part, by the addition of
D.W. Norris to the International Division in the fourth quarter of 1999.
COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
decreased from $3.9 million, or 7.5% of revenues, to $2.6 million, or 5.1% of
revenues. The commission decrease was a result of the CCC U.S. Division's
conversion of its independent sales representatives for collision repair
facilities to salaried employees and the Company's elimination of its highly
commissioned Dealer Services products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
increased from $19.4 million, or 37.6% of revenues, to $24.1 million, or 46.8%
of revenues. The increase was a result of $3.0 million in costs associated with
DriveLogic (formerly described as the Company's Internet Business-to-Business
division). In addition, legal fees incurred in connection with various legal
matters increased $1.0 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
$2.6 million, or 5.0% of revenues, to $3.3 million, or 6.3% of revenues. The
increase was mainly the result of an increase in goodwill amortization resulting
from the acquisition of D.W. Norris in the third quarter of 1999 and an increase
in amortization of internal use software costs.
PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming
increased from $5.5 million, or 10.6% of revenues, to $7.8 million, or 15.1% of
revenues. The increase in dollars was due to higher development costs of $2.1
million associated with DriveLogic.
WRITE-OFF OF MARKETING LICENSE AGREEMENT. The Company determined that
certain prepaid marketing fees paid to a third party related to the Company's
shop management products were impaired based on an analysis of future revenue
and profitability streams. The Company recorded a charge of $1.9 million in
connection with the write-off of this asset. In addition, certain contractual
committed consulting fees and development expenses of $0.8 million related to
this third party have also been recorded in the third quarter of 2000.
LITIGATION SETTLEMENT. The Company recorded a charge of $1.4 million in the
third quarter of 2000 related to settlement costs of an arbitration proceeding
before the American Arbitration Association captioned Autobody Software
Solutions, Inc. v. CCC Information Services Inc.
INTEREST EXPENSE. Interest expense increased from $0.4 million in 1999 to
$0.9 million in 2000. The increase from 1999 was due to a higher level of
borrowings in late 1999 and 2000 under the Company's bank credit facility. The
increase in borrowings was mainly the result of the Company's stock repurchase
program, acquisitions, funding to Enterstand and startup costs for DriveLogic.
EQUITY IN LOSSES OF CHOICEPARTS. The Company recorded a charge of $0.5
million for the three months ended September 30, 2000 related to its share of
the losses in ChoiceParts.
14
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
INCOME TAXES. Income taxes decreased from a provision of $2.1 million, or
60.3% of income before taxes, to a benefit of $3.2 million, or 44.4% of income
before losses. The provision for 1999 included a third quarter increase to the
provision reflecting a year-to-date change to the effective rate as a result of
lowering the amount of expected pre-tax income for the full year 1999. The
provision for 2000 included an adjustment for the first two quarters of the year
to reflect an increase in the amount of forecasted pre-tax income and a change
in the sourcing of income between domestic and international operations. The
adjustment resulted in an additional benefit recorded in the third quarter of
2000.
EQUITY IN NET LOSSES OF AFFILIATES. Equity in net losses of affiliates were
related to Enterstand and increased from $0.8 million in 1999 to $3.7 million in
2000. The increase in the losses was primarily the result of the change in the
percentage of losses recognized from 19.9% to 85.0%.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1999
The Company reported net income applicable to common stock of $14.2
million, or $0.64 per share on a diluted basis, for the nine months ended
September 30, 2000, versus a net loss of $0.4 million, or $(0.02) per share on a
diluted basis, for the same period last year.
REVENUES. Revenues of $158.2 million were $5.6 million, or 3.7%, higher
than the same period last year. The increase in revenues was primarily due to
growth in the Company's International and Consumer Services divisions. The
acquisition of D.W. Norris in the third quarter of 1999 accounted for $3.3
million of the increase in revenues in the International division from the prior
year. In addition, in the first quarter of 2000 the Company reduced accounts
receivable allowance reserves by approximately $1.2 million based on a detailed
analysis of exposures and required reserves on an individual account basis.
PRODUCTION AND CUSTOMER SUPPORT. Production and customer support increased
from $45.7 million, or 30.0% of revenues, to $48.3 million, or 30.5% of
revenues. The year over year increase was due primarily to customer support
costs related to the Consumer Services Division and the addition of D.W. Norris
to the International Division, offset, in part, by a reduction related to the
sale of the Dealer Services business.
COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
decreased from $12.7 million, or 8.3% of revenues, to $9.2 million, or 5.8% of
revenues. The commission decrease was a result of the CCC U.S. Division's
conversion of its independent sales representatives for collision repair
facilities to salaried employees and the Company's elimination of its highly
commissioned Dealer Services products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
increased from $58.5 million, or 38.3% of revenues, to $66.6 million of
revenues, or 42.1%. Of this increase, approximately $7.8 million was due to
costs associated with DriveLogic. This increase was offset by the impact of a
prior year one-time compensation charge of $1.2 million as a result of a stock
repurchase and $0.8 in reorganization costs of CCC U.S.'s automotive services
group incurred in the second quarter of 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
$7.5 million, or 4.9% of revenues, to $9.2 million, or 5.8% of revenues. The
increase was mainly the result of an increase in goodwill amortization resulting
from the acquisition of D.W. Norris in the third quarter of 1999 and an increase
in amortization of internal use software costs, primarily those relating to a
new customer relationship management system installed in the third quarter of
1999.
PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming
increased from $17.5 million, or 11.4% of revenues, to $19.9 million, or 12.6%
of revenues. The increase in dollars was due to additional development costs of
$3.1 million associated with DriveLogic, offset, in part, by lower development
costs related to CCC U.S. Division products.
WRITE-OFF OF MARKETING LICENSE AGREEMENT. The Company determined that
certain prepaid marketing fees paid to a third party related to the Company's
shop management products were impaired based on an analysis of future revenue
and profitability streams. The Company recorded a charge of $1.9 million in
connection with the write-off of this asset. In addition, certain contractual
committed consulting fees and development expenses of $0.8 million related to
this third party have also been recorded in the third quarter of 2000.
15
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
LITIGATION SETTLEMENT. The Company recorded a charge of $1.4 million in the
third quarter of 2000 related to settlement costs of an arbitration proceeding
before the American Arbitration Association captioned Autobody Software
Solutions, Inc. v. CCC Information Services Inc.
INTEREST EXPENSE. Interest expense increased from $0.8 million in 1999 to
$2.3 million in 2000. The increase from 1999 was due to a higher level of
borrowings in late 1999 and 2000 under the Company's bank credit facility. The
increase in borrowings was mainly the result of the Company's stock repurchase
program, acquisitions, funding to Enterstand and startup costs for DriveLogic.
OTHER INCOME, NET. Other income, net increased from $0.4 million in 1999 to
$4.8 million in 2000. The increase from prior year was principally due to a $4.1
million gain recorded in the first quarter of 2000 on the termination of the
sales and marketing agreement between the Company and InsurQuote.
GAIN ON EXCHANGE OF INVESTMENT SECURITIES. The Company recorded a gain of
approximately $18.4 million in connection with the exchange of its equity
investment in InsurQuote securities for ChannelPoint common stock. Net of income
taxes, the gain was approximately $17.7 million.
EQUITY IN LOSSES OF CHOICEPARTS. The Company recorded a charge of $0.8
million for the period May 4, 2000 through September 30, 2000 related to its
share of the losses in ChoiceParts.
INCOME TAXES. Income taxes decreased from a provision of $4.8 million,
or 47.1% of income before taxes, to a tax benefit of $1.2 million, or -5.8%
of income before taxes. The decrease reflected minimal tax expense associated
with the gain on exchange of investment securities.
EQUITY IN NET LOSSES OF AFFILIATES. Equity in net losses of affiliates
increased from $5.8 million in 1999 to $8.0 million in 2000. The results
included $4.2 million in losses relating to InsurQuote for 1999, and $8.0
million and $1.6 million in losses relating to Enterstand for 2000 and 1999,
respectively. The increase in Enterstand losses reflects the change in
percentage of losses recognized from 19.9% to 85%. The Company ceased
recording the net losses of InsurQuote in the second quarter of 1999 as a
result of a new investor funding InsurQuote's net losses subsequent to March
31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 2000, net cash provided by
operating activities was $11.0 million and net borrowings on the Company's
credit facility were approximately $13.0 million. During that same period, the
Company had capital expenditures of $11.8 million. In addition, the Company
loaned Enterstand $8.5 million, of which $3.5 million was funded in cash, and
invested approximately $1.4 million in ChoiceParts for a 27.5% equity interest.
The Company also purchased 683,550 of its outstanding shares at a cost of $8.2
million.
Management believes that cash flows from operations, the Company's existing
credit facility and other financing alternatives available to the Company 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, certain sections
of this Form 10-Q contain forward-looking statements that involve 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 inherent uncertainty of the ultimate resolution of
pending litigation, 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 software development
and information services industries (including Internet-related businesses). In
addition, discussions concerning new business ventures, such as DriveLogic, are
inherently uncertain. 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-
16
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
1 filed with the Securities and Exchange Commission ("Commission") on August 16,
1996, the Company's 1999 Annual Report on Form 10-K filed on March 30, 2000, and
Amendment No. 1 on Form 10-K/A, filed with the Commission on April 28, 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about August 2, 2000, a putative statewide class action was filed in
the State Court of Fulton County, Georgia, against CCC and State Farm Mutual
Automobile Insurance Company. The case is captioned Mary A. Walker v. State Farm
Mutual Automobile Insurance Company and CCC Information Services, Inc., Civil
Action File No. 00VS007964-C. The Walker lawsuit was filed by a group of
plaintiffs' attorneys who previously filed two putative class actions against
CCC and various of its customers in Fulton County State Court, as reported in
the Quarterly Report on form 10-Q for the fiscal period ended June 30, 2000. The
plaintiff asserts substantially the same claims and seeks substantially the same
relief as in those previously filed Fulton County actions. CCC has filed an
answer denying the substance of the plaintiffs' claims. No other action has been
taken in the cases.
On or about August 2, 2000, a putative class action purportedly on behalf
of certain residents of fourteen states was filed in the Franklin County Court
of Common Pleas, State of Ohio, against Nationwide Mutual Insurance Company and
CCC. The case is captioned Roy Whitworth et al. v. Nationwide Mutual Insurance
Company and CCC Information Services, Inc., Case No. 00CV H08 6980. The
Whitworth lawsuit was filed by a group of plaintiffs' attorneys that includes
certain attorneys who previously filed three putative class actions against CCC
and various of its customers in Fulton County State Court, as reported in the
Quarterly Report on form 10-Q for the fiscal period ended June 30, 2000 and
above. The plaintiffs assert substantially the same claims and seek
substantially the same relief as in those previously filed Fulton County
actions. The plaintiffs further allege that CCC's Total Loss valuation product
provides values that do not comply with applicable regulations in Ohio and
thirteen other states. CCC has filed a motion to dismiss the plaintiffs' claims.
No other action has been taken in the case.
On or about October 23, 2000, an amended complaint was filed by the
plaintiff in the State Court of Fulton County, Georgia, in the matter of McGowan
v. Progressive Casualty Insurance Co., Progressive Insurance Co., CCC
Information Services Inc., and David Parham, Civil Action File No. 00VS006525-J,
which matter was reported in the Quarterly Report on form 10-Q for the fiscal
period ended June 30, 2000. The allegations of the amended complaint are
substantially identical to the original complaint, except that the plaintiff now
seeks to represent a nationwide class rather than a statewide class. Plaintiff
also seeks to represent a similar statewide sub-class under the Georgia RICO
statute.
On or about August 23, 2000, a putative statewide class action was filed in
the Circuit Court for Hillsborough County, Florida, against CCC and USAA
Casualty Insurance Company. The lawsuit is captioned Peter Sintes et al. v. USAA
Casualty Insurance Company and CCC Information Services, Inc., Case No.
00-006308. Plaintiffs allege that USAA contracted with CCC to provide valuations
of "total loss" vehicles and that CCC supplied valuations that were
intentionally below the actual fair market value of the insured vehicle. The
plaintiffs assert various common law claims against USAA seeking unspecified
damages. The plaintiffs also assert a single claim for injunctive relief against
USAA and CCC. Plaintiffs also request an award of pre- and post-judgment
interest and an award of attorneys' fees, litigation expenses, and costs. The
group of plaintiffs' attorneys who filed the Sintes case includes several
attorneys who have previously filed similar cases against CCC and various of its
customers in the Circuit Court of Cook County, Illinois. CCC was only recently
served with the complaint. No other action has been taken in the case.
CCC intends to vigorously defend all of the above-described lawsuits. Due
to the numerous legal and factual issues that must be resolved during the course
of the litigation, CCC is unable to predict the
17
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
ultimate outcome of any of these actions. If CCC were held liable in any of
these actions (or otherwise concludes that it is in CCC's best interests to
settle any of them), CCC could be required to pay monetary damages (or
settlement payments). Depending upon the theory of recovery or the resolution of
the plaintiff's claims for compensatory and punitive damages, or potential
claims for indemnification or contribution by CCC's customers in any of the
actions, these monetary damages (or settlement payments) could be substantial
and could have a material adverse effect on CCC's business, financial condition,
or results of operations. The Company is unable to estimate the magnitude of its
exposure, if any, at this time. As additional information is gathered and the
litigations proceed, CCC will continue to assess their potential impact.
CCC was a defendant in an arbitration proceeding before the American
Arbitration Association captioned Autobody Software Solutions, Inc. v. CCC
Information Services Inc., as reported in the Quarterly Reports on form 10-Q for
the quarterly periods ended March 31, 2000 and June 30, 2000. The plaintiff had
demanded damages in excess of $23.0 million in that proceeding. The parties have
settled this action by execution of a Release and Settlement Agreement
("Settlement Agreement") as of October 12, 2000, pursuant to which CCC has paid
the Plaintiff $0.3 million and conveyed 15,000 shares of the Company's common
stock. The Company will also make a total of four additional annual payments in
the amount of $0.2 million each, commencing six months after the date of the
Settlement Agreement. The plaintiff has released CCC from all claims and has
stipulated to the dismissal of its action with prejudice.
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
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None
18
<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, 2000 CCC Information Services Group Inc.
By: /s/ Githesh Ramamurthy
-----------------------------------
Name: Githesh Ramamurthy
Title: Chairman and Chief Executive Officer
By: /s/ Reid E. Simpson
-----------------------------------
Name: Reid E. Simpson
Title: Executive Vice President
and Chief Financial Officer
19
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
EXHIBIT INDEX
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
20
