<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 March 31, 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 May 12, 2000, CCC Information Services Group Inc. common stock, par
value $0.10 per share, outstanding was 22,184,945 shares.
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Interim Statement of Operations (Unaudited), 3
Three Months Ended March 31, 2000 and 1999
Consolidated Interim Balance Sheet, 4
March 31, 2000 (Unaudited) and December 31, 1999
Consolidated Interim Statement of Cash Flows (Unaudited), 5
Three Months Ended March 31, 2000 and 1999
Notes to Consolidated Interim Financial Statements (Unaudited) 6-9
Item 2. Management's Discussion and Analysis 10-11
of Results of Operations and Financial Condition
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
</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 Ended
March 31,
--------------------
2000 1999
------- -------
<S> <C> <C>
Revenues $55,424 $49,909
Expenses:
Production and customer support 16,195 14,116
Commissions, royalties and licenses 3,397 4,460
Selling, general and administrative 20,509 16,846
Depreciation and amortization 2,881 2,423
Product development and programming 5,967 5,745
------- -------
Total operating expenses 48,949 43,590
------- -------
Operating income 6,475 6,319
Interest expense (667) (195)
Other income, net 4,377 39
------- -------
Income before income taxes 10,185 6,163
Income tax provision (4,837) (2,679)
------- -------
Income before equity losses 5,348 3,484
Equity in net losses of affiliates (813) (4,495)
------- -------
Net income (loss) 4,535 (1,011)
Dividends and accretion on mandatorily
redeemable preferred stock - (1)
------- -------
Net income (loss) applicable to common stock $ 4,535 $(1,012)
------- -------
------- -------
PER SHARE DATA
Income (loss) per common share - basic $ 0.20 $ (0.04)
------- -------
------- -------
Income (loss) per common share - diluted $ 0.20 $ (0.04)
------- -------
------- -------
Weighted average shares outstanding:
Basic 22,149 23,720
Diluted 22,811 24,135
</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)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 722 $ 1,378
Accounts receivable (net of reserves of $2,752 (unaudited) and
$3,975 at March 31, 2000 and December 31, 1999, respectively) 29,534 24,377
Other current assets 6,056 11,546
-------- --------
Total current assets 36,312 37,301
Property and equipment (net of accumulated depreciation
of $42,462 (unaudited) and $40,278 at March 31, 2000
and December 31, 1999, respectively) 18,652 17,807
Goodwill (net of accumulated amortization of $14,668 (unaudited) and
$14,040 at March 31, 2000 and December 31, 1999, respectively) 15,928 16,358
Deferred income taxes 6,529 6,719
Notes receivable 13,677 -
Investment in affiliates 2,374 3,402
Other assets 2,984 2,962
-------- --------
Total Assets $ 96,456 $ 84,549
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 33,895 $ 35,548
Income taxes payable 4,419 1,188
Current portion of long-term debt 551 440
Deferred revenues 5,369 3,993
-------- --------
Total current liabilities 44,234 41,169
Long-term debt 25,483 24,685
Deferred revenues 305 368
Other liabilities 3,261 3,061
Minority interest in consolidated companies 5 5
-------- --------
Total Liabilities 73,288 69,288
-------- --------
Common stock ($0.10 par value, 20,000,000 shares authorized,
22,266,013 (unaudited) and 21,991,826 shares issued and
outstanding at March 31, 2000 and December 31, 1999, respectively) 2,577 2,549
Additional paid-in capital 102,265 98,799
Accumulated deficit (41,184) (45,719)
Accumulated other comprehensive loss (187) (65)
Treasury stock, at cost ($0.10 par value, 3,618,115 shares in treasury
at March 31, 2000 (unaudited) and December 31, 1999 (40,303) (40,303)
-------- --------
Total stockholders' equity 23,168 15,261
-------- --------
Total Liabilities and Stockholders' Equity $ 96,456 $ 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>
Three Months Ended
March 31,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net income (loss) $ 4,535 $ (1,011)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on settlement of marketing agreement (4,144) -
Equity in net losses of affiliates 813 4,495
Depreciation and amortization of property and equipment 2,197 1,859
Amortization of goodwill 664 548
Deferred income tax provision (benefit) 190 (85)
Other, net (117) 235
Changes in:
Accounts receivable, net (5,976) 3,701
Other current assets 1,071 (489)
Other assets 23 (17)
Accounts payable and accrued expenses (2,176) 969
Current income taxes 4,547 2,061
Deferred revenues 1,313 720
Other liabilities (34) (9)
------- --------
Net cash provided by operating activities 2,906 12,977
------- --------
Investing activities:
Capital expenditures (3,047) (2,212)
Purchase of investment securities - (1,484)
Proceeds from the sale of investment securities - 1,484
Investments (3,602) (964)
------- --------
Net cash used for investing activities (6,649) (3,176)
------- --------
Financing activities:
Principal repayments on long-term debt (7,000) (15,000)
Proceeds from borrowings on long-term debt 8,000 4,000
Proceeds from exercise of stock options 2,024 140
Proceeds from employee stock purchase plan 154 209
Payments to acquire treasury stock - (148)
Payments of accrued preferred stock dividends - (4)
Other, net (91) -
------- --------
Net cash provided by (used for) financing activities 3,087 (10,803)
------- --------
Net decrease in cash (656) (1,002)
Cash:
Beginning of period 1,378 1,526
------- --------
End of period $ 722 $ 524
------- --------
------- --------
SUPPLEMENTAL DISCLOSURES:
Cash paid:
Interest (551) (322)
Income taxes, net of refunds (100) (702)
</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
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 March 31, 2000, White River Ventures Inc. ("White River") held
approximately 33% 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 months ended March 31, 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.
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. This amount is reflected in the consolidated
interim statement of operations for the three month period ended March 31,
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 computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------
2000 1999
------ ------
<S> <C> <C>
Weighted average common shares outstanding:
Shares attibutable to common stock outstanding 22,149 23,720
Shares attibutable to common stock equivalents outstanding 662 415
------ ------
22,811 24,135
------ ------
------ ------
</TABLE>
6
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - 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
ENDED MARCH 31,
-------------------
2000 1999
------ ------
<S> <C> <C>
Net income (loss) $4,535 $(1,012)
Foreign currency translation adjustments (122) (27)
------ -------
Comprehensive income (loss) $4,413 $(1,039)
------ -------
------ -------
</TABLE>
NOTE 4 - 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 three months
ended March 31, 2000 and 1999, these amounts totaled $1.3 million and $0.2
million, respectively.
NOTE 5 - 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 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 will receive $5.0 million, of which $4.5
million will be paid in the form of an unsecured, subordinated promissory note
that matures in September 2002 and $0.5 million will be paid in cash in the
second quarter of 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 which is included in other income in the consolidated interim
statement of operations for the three month period ended March 31, 2000.
The Company has 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
7
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ceased recording losses on its investment, unless it is determined that its
remaining investment is impaired. The Company has not recorded any income tax
benefit on the InsurQuote losses recorded in 1999 and 1998. At March 31, 2000
and March 31, 1999, the Company's remaining investment in InsurQuote was
approximately $3.6 million and $3.7 million, respectively.
On April 7, 2000, ChannelPoint, Inc., a leading e-commerce exchange
services and technology platform provider for insurance and benefits companies,
merged with InsurQuote. Under the terms of the transaction, the Company
exercised its warrant for InsurQuote common stock in exchange for surrendering
its subordinated note from InsurQuote. The Company's securities in InsurQuote
were exchanged for common stock in the combined entity, ChannelPoint, Inc. As a
result of the merger, the Company now owns 5,064,723 shares, representing
approximately 6.5% on a fully diluted basis, of ChannelPoint, Inc.'s common
stock. In connection with these transactions, the Company's investment will be
revalued to its fair market value, and the gain will be reflected in the
consolidated interim statement of operations in the second quarter of 2000.
NOTE 6 - 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% 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. The Company applies the equity method of
accounting for its investment in Enterstand and recorded a charge of $0.8
million and $0.3 million for its 19.9% share of Enterstand's losses for the
three months ended March 31, 2000 and 1999, respectively.
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 was adjusted to include a
right to purchase 78% 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, and 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 million of receivables from the joint venture
were converted into the note receivable. These promissory notes mature in March
2005 and bear interest at 9%.
Summary Enterstand financial information for the three months ended
March 31, 2000 was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Revenues $ -
------
------
Loss from operations $4,082
------
------
Net loss $4,082
------
------
</TABLE>
8
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - BUSINESS SEGMENTS
SFAS 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,
International and Internet Business-to-Business. CCC U.S. sells products and
services which assist its customers in managing total loss and repairable auto
claims. The Consumer Services Division sells products and services which provide
complete outsourcing services on all aspects of the claim process. The
International Division offers products to help manage the claims process and
settlement of repairable automobile claims in Europe. The Internet
Business-to-Business Division, formed in 1999 as an outgrowth of the CCC U.S.
Division, is concentrating on developing products and services that will serve
the automobile claims industry supply chain through the Internet.
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 and at the product revenue level. The shared
services costs are not currently allocated to the revenue producing divisions
and includes product development, management information systems and finance
and administration costs.
<TABLE>
<CAPTION>
INTERNET
CCC CONSUMER CCC BUSINESS-TO- SHARED
U.S. SERVICES INTERNATIONAL BUSINESS SERVICES TOTAL
-------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Net revenue $ 44,935 $ 7,744 $ 2,745 $ - $ 55,424
Expenses (17,207) (7,576) (2,761) (1,783) (19,622) (48,949)
-------- ------- ------- ------- -------- --------
Operating income 27,728 168 (16) (1,783) (19,622) 6,475
Equity in losses of affiliates - - (813) - - (813)
-------- ------- ------- ------- -------- --------
Division operating margin $ 27,728 $ 168 $ (829) $(1,783) $(19,622) $ 5,662
-------- ------- ------- ------- -------- --------
-------- ------- ------- ------- -------- --------
BALANCE AT MARCH 31, 2000
Accounts receivable, net $ 14,829 $10,442 $ 4,263 $ - $ - $ 29,534
-------- ------- ------- ------- -------- --------
-------- ------- ------- ------- -------- --------
THREE MONTHS ENDED MARCH 31, 1999
Net revenue $ 42,963 $ 6,681 $ 265 $ - $ - $ 49,909
Expenses (21,601) (6,412) (454) - (15,123) (43,590)
-------- ------- ------- ------- -------- --------
Operating income 21,362 269 (189) - (15,123) 6,319
Equity in losses of affiliates (4,167) - (328) - - (4,495)
-------- ------- ------- ------- -------- --------
Division operating margin $ 17,195 $ 269 $ (517) $ - $(15,123) $ 1,824
-------- ------- ------- ------- -------- --------
-------- ------- ------- ------- -------- --------
BALANCE AT MARCH 31, 1999
Accounts receivable, net $ 13,515 $ 5,523 $ 473 $ - $ - $19,511
-------- ------- ------- ------- -------- --------
-------- ------- ------- ------- -------- --------
</TABLE>
During the quarters ended March 31, 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.
9
<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 MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1999
The Company reported net income applicable to common stock of $4.5
million, or $0.20 per share on a diluted basis, for the three months ended March
31, 2000, versus a net loss of $(1.0) million, or $(0.04) per share on a diluted
basis, for the same quarter last year.
REVENUES. First quarter 2000 revenues of $55.4 million were $5.5
million, or 11.1%, higher than the same quarter last year. The increase in
revenues was primarily due to continued growth in the Company's International
and Consumer Services divisions. The acquisition of D.W. Norris in the third
quarter of 1999 accounted for $2.0 million of the increase in revenues in the
International division from the prior year. Consumer Services accounted for $1.1
million of the increase. In addition, the Company adjusted accounts receivable
allowance reserves by approximately $1.2 million based on a detailed analysis of
exposures and required reserves on an individual account basis in the accounts
receivable.
PRODUCTION AND CUSTOMER SUPPORT. Production and customer support
increased from $14.1 million, or 28.3% of revenues, to $16.2 million, or 29.2%
of revenues. The year over year increase was due primarily to additional
production and customer support related to the Consumer Services Division and
the addition of D.W. Norris to the International Division.
COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
decreased from $4.5 million, or 8.9% of revenues, to $3.4 million, or 6.1% of
revenues. The commission decrease was a result of the CCC U.S. Division's
conversion of a portion of its independent sales representatives for collision
repair facilities to salaried employees and the Company's elimination of certain
of its highly commissioned Dealer Services products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative increased from $16.8 million, or 33.8% of revenues, to $20.5
million, or 37.0%. Of this increase, approximately $1.5 million was due to costs
associated with the Company's Internet Business-to-Business division projects
and approximately $1.6 million was due to consulting costs for projects aimed at
improving the internal telecommunications and customer service infrastructure.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
from $2.4 million, or 4.9% of revenues, to $2.9 million, or 5.2% of revenues.
The increase in dollars was mainly the result of an increase in goodwill
amortization resulting from acquisitions occurring in late 1998 and 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 $5.7 million, or 11.5% of revenues, to $6.0 million,
or 10.8% of revenues. The increase in dollars was due to the Company's
development efforts associated with the Company's Internet Business-to-Business
division projects.
INTEREST EXPENSE. Interest expense increased from $0.2 million in 1999
to $0.7 million in 2000. The increase from 1999 was due to borrowings in 1999
under the Company's bank credit facility. The increase in borrowings was mainly
the result of the Company stock repurchase program and acquisitions.
OTHER INCOME, NET. Other income, net increased from $39,000 in 1999 to
$4.4 million in 2000. The increase from prior year was principally due to a $4.1
million gain recorded on the termination of the sales and marketing agreement
between the Company and InsurQuote.
INCOME TAXES. Income taxes increased from $2.7 million, or 43.5% of
income before taxes, to $4.8 million, or 47.5% of income before taxes. The
dollar increase and the rate increase were mainly attributable to higher pretax
income.
10
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
EQUITY IN NET LOSSES OF AFFILIATES. Equity in net losses of affiliates
decreased from $4.5 million in 1999 to $0.8 million in 2000. The results
included $4.2 million in losses relating to InsurQuote for 1999, and $0.8
million and $0.3 million in losses relating to Enterstand for 2000 and 1999,
respectively. 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 three months ended March 31, 2000, net cash provided by
operating activities was $2.9 million. The Company applied $3.0 million to the
purchase of equipment and software.
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, 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). 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, 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 March 27, 1998, a case entitled Gardner v. Allstate
Indemnity Co., Civil Action No. CV-98-730-GR was filed in the Circuit Court
of Montgomery County, Alabama. CCC is not named as a defendant in the case,
and no relief is sought against CCC by the plaintiffs. In the Complaint,
plaintiffs asserted claims against one of CCC's customers, Allstate Indemnity
Co., for unjust enrichment and constructive trust and for breach of contract
based on Allstate's use of an unidentified total loss valuation product.
Allstate removed the case to the United States District Court for the Middle
District of Alabama in April, 1998 (Gardner v. Allstate Indemnity Co., Civil
Action 98-D-480-N). Plaintiffs moved for class certification on August 28,
1998. Plaintiffs' class certification motion was granted on April 28, 2000.
Pursuant to the April 28, 2000 order, the district court certified a plaintiff
class of all Alabama customers who, from March 26, 1992 through the time of
final judgment in the case, (1) have been insured under or paid pursuant to
an Allstate auto policy; (2) whose vehicles have been declared a total loss
by Allstate; and (3) to whom Allstate has paid out a claim for a total loss
adjusted based on CCC valuations. The parties are to submit a proposed class
notice to the court by May 22, 2000. CCC understands that Allstate intends to
file a motion for reconsideration of the class certification ruling and to
defend the case vigorously.
Autobody Software Solutions, Inc., initiated an arbitration against
CCC before the American Arbitration Association (Autobody Software Solutions,
Inc. v. CCC Information Services Inc., No. 51 117 00495 99). The arbitration
arises out of two agreements that CCC entered into with Autobody: (1) an
agreement to purchase all of Autobody's rights in a software program; and (2)
an agreement to market that software program and to pay royalties to Autobody
in exchange for Autobody's agreement to update and enhance the software
program to make the program Y2K compliant and compatible with CCC's own
Windows-based software.
Autobody and certain individuals first filed a complaint in the
United States District Court for the Northern District of California on
November 19, 1998, asserting various claims and requesting declaratory and
injunctive relief, and unspecified compensatory, treble and punitive damages,
as well as an award of attorneys' fees, costs, and interest. On September 16,
1999, the district court denied the plaintiffs' motion for preliminary
injunction and granted CCC's motion to compel arbitration. Autobody
subsequently initiated arbitration proceedings against CCC on November 11,
1999, asserting claims for breach of contract, unfair competition, fraud and
misappropriation of trade secrets. An arbitrator was initially selected by
the parties in January, 2000; the parties subsequently agreed on the
selection of a new arbitrator in April, 2000. The Arbitration is currently
scheduled for trial in July, 2000.
While Autobody's Demand for Arbitration purports to seek damages in
excess of $11.5M, the demand is without any explanation or support. As
discovery has just recently commenced, the Company is not aware of any basis
for the relief sought. CCC intends to defend the action vigorously and has
asserted its own claim for damages against Autobody for its breach and
wrongful conduct. Specifically, CCC believes that Autobody's claims are
barred by the terms of the agreements between the parties and by Autobody's
own failure to upgrade and enhance the software program as required by the
agreements.
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 (incorporated herein by reference to Exhibit 3.1 of
the Company's 1997 Annual Report on Form 10-K, Commission
File Number 000-28600 on March 14, 1997)
11
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
3.2 Amended and Restated Bylaws (incorporated herein by
reference to Exhibit 3.2 of the Company's 1998 Annual
Report on Form 10-K, as amended, Commission File Number
000-28600 filed on April 1, 1999)
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 1998
Annual Report on Form 10-K, as amended, Commission File
Number 000-28600 filed on April 1, 1999)
10.2 Amended and Restated MOTOR Crash Estimating Guide Data
License (incorporated herein by reference to Exhibit 10.2
of the Company's 1998 Annual Report on Form 10-K, as
amended, Commission File Number 000-28600 filed on April 1,
1999)
10.3 European Version of MOTOR Crash Estimating Guide Data
License (incorporated herein by reference to Exhibit 10.3
of the Company's 1998 Annual Report on Form 10-K, as
amended, Commission File Number 000-28600 filed on April 1,
1999)
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 Number 333-15207 filed October
31, 1996)
10.5 1997 Stock Option Plan, as amended (incorporated herein by
reference to Exhibit 4.04 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 Savings Plan
(incorporated herein by reference to Exhibit 4.04 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 4.04 of the Company's Registration
Statement on Form S-8, Commission File Number 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, 1998)
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 Number 000-28600 filed on May
15, 1998)
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, 1998)
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 1998 Annual Report on
Form 10-K, as amended, Commission File Number 000-28600
filed on April 1, 1999)
10.12 1997 Stock Option Plan, as amended (incorporated herein by
reference to the Company's Registration Statement on Form
S-8, Commission File Number 333-79983 filed on June 4,
1999)
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None
12
<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 15, 2000 CCC Information Services Group Inc.
By: /s/ Githesh Ramamurthy
------------------------
Name: Githesh Ramamurthy
Title: President and Chief Executive
Officer
By: /s/ Reid E. Simpson
------------------------
Name: Reid E. Simpson
Title: Executive Vice President
and Chief Financial Officer
13
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES
EXHIBIT INDEX
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 of the Company's 1997
Annual Report on Form 10-K, Commission File Number 000-28600 filed on
March 14, 1997)
3.2 Amended and Restated Bylaws (incorporated herein by reference to
Exhibit 3.2 of the Company's 1998 Annual Report on Form 10-K, as
amended, Commission File Number 000-28600 filed on April 1, 1999)
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 1998 Annual Report on Form 10-K, as amended,
Commission File Number 000-28600 filed on April 1, 1999)
10.2 Amended and Restated MOTOR Crash Estimating Guide Data License
(incorporated herein by reference to Exhibit 10.2 of the Company's 1998
Annual Report on Form 10-K, as amended, Commission File Number
000-28600 filed on April 1, 1999)
10.3 European Version of MOTOR Crash Estimating Guide Data License
(incorporated herein by reference to Exhibit 10.3 of the Company's 1998
Annual Report on Form 10-K, as amended, Commission File Number
000-28600 filed on April 1, 1999)
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
Number 333-15207 filed October 31, 1996)
10.5 1997 Stock Option Plan, as amended (incorporated herein by reference to
Exhibit 4.04 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 Savings Plan
(incorporated herein by reference to Exhibit 4.04 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 4.04 of the Company's Registration Statement on Form S-8,
Commission File Number 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, 1998)
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 Number
000-28600 filed on May 15, 1998)
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, 1998)
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 1998 Annual Report on Form 10-K, as amended,
Commission File Number 000-28600 filed on April 1, 1999)
10.12 1997 Stock Option Plan, as amended (incorporated herein by reference to
the Company's Registration Statement on Form S-8, Commission File
Number 333-79983 filed on June 4, 1999)
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
14
<PAGE>
EXHIBIT 11
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
-------- -------
<S> <C> <C>
Per share income (loss) before dividends and accretion on preferred stock:
Income (loss) before dividends and accretion on preferred stock $ 4,535 $(1,011)
------- -------
------- -------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 22,149 23,720
Shares attributable to common stock equivalents outstanding 662 415
------- -------
22,811 24,135
------- -------
------- -------
Per share income (loss) before dividends and accretion on preferred stock $ 0.20 $ (0.04)
------- -------
------- -------
Per share dividends and accretion on mandatorily redeemable preferred:
Dividends and accretion on mandatorily redeemable preferred: $ - $ (1)
------- -------
------- -------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 22,149 23,720
Shares attributable to common stock equivalents outstanding 662 415
------- -------
22,811 24,135
------- -------
------- -------
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 $ 4,535 $(1,012)
------- -------
------- -------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 22,149 23,720
Shares attributable to common stock equivalents outstanding 662 415
------- -------
22,811 24,135
------- -------
------- -------
Net income (loss) per share applicable to common stock $ 0.20 $ (0.04)
------- -------
------- -------
</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, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 722
<SECURITIES> 0
<RECEIVABLES> 32,286
<ALLOWANCES> (2,752)
<INVENTORY> 0
<CURRENT-ASSETS> 36,312
<PP&E> 61,114
<DEPRECIATION> (42,462)
<TOTAL-ASSETS> 96,456
<CURRENT-LIABILITIES> 44,234
<BONDS> 0
0
0
<COMMON> 64,539
<OTHER-SE> (41,371)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 96,456
<SALES> 0
<TOTAL-REVENUES> 55,424
<CGS> 0
<TOTAL-COSTS> 48,949
<OTHER-EXPENSES> 4,377<F2>
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 667
<INCOME-PRETAX> 10,185
<INCOME-TAX> 4,837
<INCOME-CONTINUING> 4,535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,535
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.20
<FN>
<F1>ACCUMULATED DEFICIT & CUMULATIVE TRANSLATION ADJUSTMENT.
<F2>OTHER INCOME, NET OF EXPENSES AND INCLUDES A GAIN RELATED TO THE SETTLEMENT
OF THE INSURQUOTE MARKETING AGREEMENT IN THE AMOUNT OF $4,144.
</FN>
</TABLE>
