-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EhIDHmWTIKxaTW8vXWgkk9LkHy+/WU/bd9IyAjhenAeRX5hziu5h6pOdFOjRgAR6 cy3C7lmEgiDmvnU+07T3mg== 0000912057-99-004199.txt : 19991110 0000912057-99-004199.hdr.sgml : 19991110 ACCESSION NUMBER: 0000912057-99-004199 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CCC INFORMATION SERVICES GROUP INC CENTRAL INDEX KEY: 0001017917 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 541242469 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28600 FILM NUMBER: 99744669 BUSINESS ADDRESS: STREET 1: WORLD TRADE CENTER CHICAGO STREET 2: 444 MERCHANDISE MART CITY: CHICAGO STATE: IL ZIP: 60654 BUSINESS PHONE: 3122224636 10-Q 1 10-Q 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, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 000-28600 CCC INFORMATION SERVICES GROUP INC. (Exact name of registrant as specified in its charter) DELAWARE 54-1242469 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) WORLD TRADE CENTER CHICAGO 444 MERCHANDISE MART CHICAGO, ILLINOIS 60654 (Address of principal executive offices, including zip code) (312) 222-4636 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of November 5, 1999, CCC Information Services Group Inc. common stock, par value $0.10 per share, outstanding was 21,899,266 shares. CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page(s) Item 1. Financial Statements Consolidated Interim Statement of Operations (Unaudited), Three Months and Nine Months Ended September 30, 1999 and 1998 3 Consolidated Interim Balance Sheet, September 30, 1999 (Unaudited) and December 31, 1998 4 Consolidated Interim Statement of Cash Flows (Unaudited), Nine Months Ended September 30, 1999 and 1998 5 Notes to Consolidated Interim Financial Statements (Unaudited) 6-10 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 11-15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults Upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15-16 SIGNATURES 17 EXHIBIT INDEX 18
2 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)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 --------- --------- --------- --------- Revenues $ 51,649 $ 48,048 $ 152,526 $ 138,886 Expenses: Production and customer support 16,577 12,854 45,726 33,596 Commissions, royalties and licenses 3,858 5,540 12,708 16,385 Selling, general and administrative 19,421 16,006 58,453 44,198 Depreciation and amortization 2,589 2,405 7,515 6,846 Product development and programming 5,487 6,644 17,457 19,710 Relocation of claims settlement function - - - 1,707 --------- --------- --------- --------- Total operating expenses 47,932 43,449 141,859 122,442 --------- --------- --------- --------- Operating income 3,717 4,599 10,667 16,444 Interest expense (412) (61) (793) (126) Other income, net 175 172 403 634 --------- --------- --------- --------- Income before income taxes 3,480 4,710 10,277 16,952 Income tax provision (2,099) (2,125) (4,836) (7,333) --------- --------- --------- --------- Income before equity losses 1,381 2,585 5,441 9,619 Equity in net losses of affiliates (814) (3,203) (5,810) (7,420) Minority share in loss of subsidiaries 1 14 1 14 --------- --------- --------- --------- Net income (loss) 568 (604) (368) 2,213 Dividends and accretion on mandatorily redeemable preferred stock - 6 (2) (185) --------- --------- --------- --------- Net income (loss) applicable to common stock $ 568 $ (598) $ (370) $ 2,028 --------- --------- --------- --------- --------- --------- --------- --------- PER SHARE DATA Income (loss) per common share - basic $ 0.03 $ (0.02) $ (0.02) $ 0.08 --------- --------- --------- --------- --------- --------- --------- --------- Income (loss) per common share - diluted $ 0.03 $ (0.02) $ (0.02) $ 0.08 --------- --------- --------- --------- --------- --------- --------- --------- Weighted average shares outstanding: Basic 22,429 24,998 23,172 24,833 Diluted 22,670 25,388 23,478 25,440
The accompanying notes are an integral part of these consolidated interim financial statements. 3 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES CONSOLIDATED INTERIM BALANCE SHEET (IN THOUSANDS)
September 30, December 31, 1999 1998 ------------- ------------- (Unaudited) ASSETS Cash $ 1,045 $ 1,526 Accounts receivable (net of reserves of $4,288 (unaudited) and $3,258 at September 30, 1999 and December 31, 1998, respectively) 27,825 23,212 Income taxes receivable 1,402 272 Other current assets 7,952 5,726 -------- -------- Total current assets 38,224 30,736 Property and equipment (net of accumulated depreciation of $40,765 (unaudited) and $34,494 at September 30, 1999 and December 31, 1998, respectively) 17,148 14,951 Goodwill (net of accumulated amortization of $13,585 (unaudited) and $11,845 at September 30, 1999 and December 31, 1998, respectively) 16,853 12,799 Deferred income taxes 6,286 7,371 Long-term investment in affiliates 3,865 9,843 Other assets 3,091 3,318 -------- -------- Total Assets $ 85,467 $ 79,018 -------- -------- -------- -------- LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $ 36,247 $ 23,128 Current portion of long-term debt 736 - Deferred revenues 4,823 4,327 -------- -------- Total current liabilities 41,806 27,455 Long-term debt 26,539 11,000 Long-term deferred revenue 475 956 Other liabilities 3,047 3,611 Minority interest in consolidated companies 5 5 -------- -------- Total liabilities 71,872 43,027 -------- -------- Mandatorily redeemable preferred stock ($1.00 par value, 100,000 shares authorized, 0 and 684 designated and outstanding at September 30, 1999 (unaudited) and December 31, 1998, respectively) - 688 -------- -------- Common stock ($0.10 par value, 30,000,000 shares authorized for all periods presented, 21,892,668 (unaudited) and 23,700,165 shares issued and outstanding at September 30, 1999 and December 31, 1998, respectively) 2,537 2,510 Additional paid-in capital 98,106 95,573 Accumulated deficit (46,839) (46,469) Accumulated other comprehensive income (17) (26) Treasury stock, at cost ($0.10 par value, 3,607,115 and 1,521,925 shares in treasury at September 30, 1999 (unaudited) and December 31, 1998, respectively) (40,192) (16,285) -------- -------- Total stockholders' equity 13,595 35,303 -------- -------- Total Liabilities, Mandatorily Redeemable Preferred Stock and Stockholders' Equity $ 85,467 $ 79,018 -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated interim financial statements. 4 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED ----------------- SEPTEMBER 30, ------------- 1999 1998 -------- -------- Operating activities: Net income (loss) $ (368) $ 2,213 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Equity in net losses of affiliates 5,810 7,420 Minority interest share of losses of subsidiaries - (14) Depreciation and amortization of property and equipment 5,695 5,690 Amortization of goodwill 1,741 1,121 Deferred income taxes 1,154 433 Other, net 298 47 Changes in: Accounts receivable, net (903) (9,340) Other current assets (2,253) (1,656) Other assets 327 271 Accounts payable and accrued expenses 10,411 2,920 Income taxes receivable (580) 1,520 Current portion of deferred revenues 496 - Deferred revenues (481) (1,354) Other liabilities (564) (397) -------- -------- Net cash provided by operating activities 20,783 8,874 -------- -------- Investing activities: Capital expenditures (7,430) (11,144) Purchase of investment securities (1,484) (12,778) Proceeds from the sale of investment securities 1,484 41,301 Investments (6,255) (24,797) Other, net - (19) -------- -------- Net cash used for investing activities (13,685) (7,437) -------- -------- Financing activities: Principal repayments on long-term debt (27,000) (5,092) Proceeds from the issuance of long-term debt 42,000 5,000 Proceeds from exercise of stock options 1,398 1,128 Proceeds from employee stock purchase plan 588 428 Payments to acquire treasury stock (24,035) (3,056) Issuance of treasury stock 152 - Redemption of preferred stock, including accrued dividends (690) - Other, net 8 - -------- -------- Net cash used for financing activities (7,579) (1,592) -------- -------- Net decrease in cash (481) (155) Cash: Beginning of period 1,526 2,064 -------- -------- End of period $ 1,045 $ 1,909 -------- -------- -------- -------- SUPPLEMENTAL DISCLOSURES: Cash paid: Interest $ (643) $ (78) -------- -------- -------- -------- Income taxes, net of refunds $ (4,259) $ (5,373) -------- -------- -------- --------
The accompanying notes are an integral part of these consolidated interim financial statements. 5 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION CCC Information Services Group Inc. ("Company") (formerly known as InfoVest Corporation), through its wholly owned subsidiary CCC Information Services Inc., is a supplier of automobile claims information and processing services, claims management software and communication services. The Company's services and products enable automobile insurance company customers and collision repair facility customers to improve efficiency, manage costs and increase consumer satisfaction in the management of automobile claims and restoration. As of September 30, 1999, White River Ventures Inc. ("White River") held approximately 33.1% of the total outstanding common stock of the Company. White River is a wholly owned subsidiary of White River Corporation. 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. On June 16, 1999, and in accordance with the terms of the Company's Mandatorily Redeemable Series D and Series E Preferred Stock, all outstanding shares of the Company's preferred stock were redeemed. Following the redemption of the Company's Series E Preferred Stock, White River no longer has certain voting rights that entitle it to have 51% of the votes cast on any matter to be voted upon by holders of the Company's common stock. 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, 1999 and 1998 are unaudited. The Company is of the opinion that all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's interim results of operations and financial condition have been included. The results of operations for any interim period should not be regarded as necessarily indicative of results of operations for any future period. These consolidated interim financial statements should be read in conjunction with the Company's 1998 Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission. PER SHARE INFORMATION Earnings per share are based on the weighted average number of shares of common stock outstanding and common stock equivalents using the treasury method computed as follows:
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, -------------------- --------------------- 1999 1998 1999 1998 ------- ------- ------- -------- Weighted average common shares outstanding: 22,429 24,998 23,172 24,833 Shares attibutable to common stock outstanding 241 390 306 607 ------- ------- ------- -------- Shares attibutable to common stock equivalents outstanding 22,670 25,388 23,478 25,440 ------- ------- ------- -------- ------- ------- ------- --------
6 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:
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, --------------------- ---------------------- 1999 1998 1999 1998 ------- ------- ------- ------- Net income (loss) $ 568 $ (604) $ (368) $ 2,213 Foreign currency translation adjustments 67 (5) 9 (5) ------- ------- ------- ------- Comprehensive income (loss) $ 635 $ (609) $ (359) $ 2,208 ------- ------- ------- ------- ------- ------- ------- -------
NOTE 4 - NONCASH FINANCING ACTIVITIES The Company directly charges its accumulated deficit account for preferred stock accretion and preferred stock dividends accrued. These amounts totaled $0.0 million and $0.2 million during the nine months ended September 30, 1999 and 1998, respectively. In conjunction with the exercise of certain stock options, the Company has reduced current income taxes payable with an offsetting credit to paid-in capital for the tax benefit of stock options exercised. During the nine months ended September 30, 1999 and 1998, these amounts totaled $0.5 million and $3.3 million, respectively. NOTE 5 - LONG-TERM DEBT Under terms included in the amended and restated credit facility between the Company and its commercial bank, the Company's ability to borrow under the revolving line of credit was increased from $50 million to $100 million on February 10, 1999. The line of credit commitment is reduced by $10 million on October 31, 2001, $15 million on October 31, 2003 and $75 million on October 31, 2003. The interest rate under the amended bank credit facility is the London Interbank Offering Rate (LIBOR) plus 1.0% or the prime rate in effect from time to time, as selected by the Company. The Company pays a commitment fee of 0.25% on any unused portion of the revolving credit facility. When borrowings are outstanding, interest payments are due quarterly. Under the bank facility, the Company has limitations and restrictions on its ability to make certain sales or transfers of assets, incur indebtedness or encumbrances, and redeem or repurchase its capital stock. In addition, the bank credit facility requires the Company to maintain certain levels of operating cash flow and debt coverage, and limits its ability to make investments and declare dividends. NOTE 6 - INVESTMENT IN INSURQUOTE On February 10, 1998, the Company invested $20.0 million in InsurQuote Systems, Inc. ("InsurQuote"). InsurQuote, formed in 1989, is a provider of insurance rating information and the software tools used to manage that information. The Company's $20.0 million investment included 19.9% of InsurQuote common stock, an $8.9 million subordinated note, warrants, shares of Series C redeemable convertible preferred stock and Series D convertible preferred stock. The warrants provide the Company with the right to acquire additional shares of InsurQuote common stock and are exercisable by the Company through February 10, 2008, subject to potential early termination provisions. The Series C preferred stock is redeemable in full at the end of five years, or earlier under certain conditions, if not converted prior to that time. Each share of Series C and D preferred stock is initially convertible into one share of common stock at the option of the Company. Under the terms of the investment agreement, the Company, subject to certain conditions, can increase its investment through additional purchases of common and preferred shares. The Company's ownership percentage, assuming conversion into common stock all of the securities currently exercisable, would increase to approximately 31.9% at September 30, 1999. 7 The Company accounted for its investment in InsurQuote on the equity method through March 31, 1999. Notwithstanding the Company's initial 19.9% common stock equity share, the Company has recorded 100% of InsurQuote's net losses for the period from the Company's initial investment, February 10, 1998 to March 31, 1999. The recording of 100% of InsurQuote's net losses was the result of the Company's $20.0 million investment being InsurQuote's primary source of funding for its operating losses. The Company has not recorded any income tax benefit on the InsurQuote losses. At September 30, 1999, the Company's remaining recorded investment in InsurQuote was approximately $3.7 million. The market value of the investment in InsurQuote at September 30, 1999 was not readily determinable. On March 31, 1999, InsurQuote received a $20.0 million investment from a new investor for convertible preferred stock with an 11% voting interest. As a result of this new investment, the Company's ownership percentage decreased to 12.3% and the Company has ceased recording losses on its investment, unless it is determined that its remaining investment is impaired. Summary InsurQuote financial information for the nine months ended September 30, 1999 was as follows:
(IN THOUSANDS) -------------- Revenues $ 7,709 ---------- ---------- Loss from operations $ (13,618) ---------- ---------- Net loss $ (14,239) ---------- ----------
NOTE 7 - BUSINESS SEGMENTS The Company has three reportable segments; Insurance Services, Automotive Services and Consumer Processing Services. The Insurance Services Division sells products and services which assist its customers in managing total loss and repairable auto claims as well as a product to assist in the underwriting of insurance. The Automotive Services Division sells products and services which assist its customers in managing repairable auto claims. The Consumer Processing Services Division sells products and services which provide complete outsourcing services on many aspects of the claim process. The Company's reportable segments are based upon the nature of the products and services within the Company and the methods used to distribute these products and services. The Company is organized into revenue producing divisions and support organizations (product development and customer support) tasked with facilitating the performance of the revenue producing divisions. Division expenses represent principally salaries and related employee expenses directly related to the Division's activities. Each revenue division and support organization is led by a vice president that reports to either the Chief Operating Officer or the Chief Executive Officer. Management evaluates performance at the total company profit level and at the product revenue level. The support organization costs are not currently allocated to the revenue producing divisions and include product engineering, management information systems, customer support and finance and administration costs. 8
CONSUMER INSURANCE AUTOMOTIVE PROCESSING SERVICES SERVICES SERVICES OTHER* TOTAL --------- --------- --------- --------- --------- NINE MONTHS ENDED SEPTEMBER 30, 1999 Net revenue $ 76,793 $ 50,010 $ 25,723 $ - $ 152,526 Expenses (22,631) (27,136) (23,530) (68,562) (141,859) --------- --------- --------- --------- --------- Operating income 54,162 22,874 2,193 (68,562) 10,667 Equity in losses of affiliates (5,810) -- -- -- (5,810) --------- --------- --------- --------- --------- Division operating margin $ 48,352 $ 22,874 $ 2,193 $ (68,562) $ 4,857 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- BALANCE AT SEPTEMBER 30, 1999 Accounts receivable, net $ 13,599 $ 420 $ 13,629 $ 177 $ 27,825 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- NINE MONTHS ENDED SEPTEMBER 30, 1998 Net revenue $ 76,287 $ 46,779 $ 15,101 $ 719 $ 138,886 Expenses (22,988) (25,380) (13,913) (60,161) (122,442) --------- --------- --------- --------- --------- Operating income 53,299 21,399 1,188 (59,442) 16,444 Equity in losses of affiliates (7,420) -- -- - (7,420) --------- --------- --------- --------- --------- Division operating margin $ 45,879 $ 21,399 $ 1,188 $ (59,442) $ 9,024 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- BALANCE AT SEPTEMBER 30, 1998 Accounts receivable, net $ 14,769 $ 3,465 $ 9,672 $ 485 $ 28,391 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
* Other net revenue includes a discontinued product which provided new and used car pricing to consumers. Other expenses include product engineering, management information systems, customer support and finance and administration costs. NOTE 8 - LEGAL PROCEEDINGS In March 1999, the Company completed a settlement of a lawsuit filed in late 1998 involving a former independent sales representative. The settlement of $1.7 million, recorded in December 1998, included, among other things, payment for past earned commissions, resolution of disputed commissions, and other costs associated with the resolution of the dispute. The Company is a party to various claims and routine litigation arising in the normal course of business. Such claims and litigation are not expected to have a material adverse effect on the financial condition or results of operations of the Company. NOTE 9 - ACQUISITION On August 13, 1999, the Company acquired 100% of the outstanding stock of D.W. Norris Limited ("D.W. Norris") for $5.2 million. D.W. Norris provides vehicle accident damage assessment, accident investigation, theft investigation and other third-party insurance services throughout the United Kingdom. The purchase agreement provides for the payment of a contingent purchase price, not to exceed approximately $3 million, in the event that D.W. Norris meets certain performance measures through December 2002. 9 NOTE 10 - SUBSEQUENT EVENT On October 13, 1999, the Company acquired certain assets of Fleming and Hall Administrators for a purchase price of $0.3 million. Fleming and Hall Administrators provides third-party administration to the auto insurance industry in the southeastern United States. The purchase agreement provides for the payment of a contingent purchase price, not to exceed approximately $1.4 million, in the event that Fleming and Hall meets certain performance measures through December 2004. 10 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, 1999 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1998 The Company reported net income applicable to common stock of $0.6 million, or $0.03 per share on a diluted basis, for the three months ended September 30, 1999, versus a net loss of $0.6 million, or $(0.02) per share on a diluted basis, for the same quarter last year. REVENUES. Third quarter 1999 revenues of $51.6 million were $3.6 million, or 7.5%, higher than the same quarter last year. The increase in revenues was primarily due to continued growth in the Consumer Processing Services Division, including the growth of international business. PRODUCTION AND CUSTOMER SUPPORT. Production and customer support increased from $12.9 million, or 26.8% of revenues, to $16.6 million, or 32.1% of revenues. The increase in dollars and percentage of revenue was attributable primarily to an increase in production and customer support capacity related to Consumer Processing Services Division. COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses decreased from $5.5 million, or 11.5% of revenues, to $3.9 million, or 7.5% of revenues. The decrease in dollars and as a percentage of revenue was due primarily to the conversion of Automotive Services outside sales representatives to salaried employees. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative increased from $16.0 million, or 33.3% of revenues, to $19.4 million, or 37.6% of revenues. The increase in dollars was due primarily to consulting costs for projects aimed at improving the customer service infrastructure and telecommunications and conversion of Automotive Services outside sales representatives to salaried employees. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from $2.4 million, or 5.0% of revenues, to $2.6 million, or 5.0% of revenues. The increase in dollars was mainly the result of an increase in goodwill amortization resulting from acquisitions and an increase in amortization of new customer relationship management software. PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming decreased from $6.6 million, or 13.8% of revenues, to $5.5 million, or 10.6% of revenues. The dollar amount and percentage of revenue decreases were due primarily to the Company's development efforts on international products being reimbursed monthly by the Enterstand Joint Venture in Europe which was established in the fourth quarter of 1998. OTHER INCOME/INTEREST EXPENSE. Net other income/interest expense decreased from $0.1 million to $(0.2) million. The decrease was principally the result of higher interest expense due to borrowing under the revolving credit facility in 1999. INCOME TAXES. Third quarter income taxes were $2.1 million for both 1999 and 1998, or 45.1% and 60.3% of income before taxes for the third quarter of 1999 and 1998, respectively. The increase in the 1999 effective tax rate reflected an adjustment to the year-to-date provision driven mainly from lower than anticipated results in the quarter. EQUITY IN NET LOSSES OF AFFILIATES. Equity in net losses of affiliates decreased from $3.2 million to $0.8 million. The results included $3.2 million loss in InsurQuote for third quarter 1998 and $0.8 million loss from the Enterstand Joint Venture, in third quarter of 1999. The Company ceased recording equity in net losses of InsurQuote in the second quarter of 1999 as a result of a new investor in InsurQuote. 11 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1998 The Company reported a net loss applicable to common stock of $0.4 million, or $(0.02) per share on a diluted basis, for the nine months ended September 30, 1999, versus net income of $2.0 million, or $0.08 per share on a diluted basis, for the same period last year. REVENUES. Revenues of $152.5 million were $13.6 million, or 9.8%, higher than the same period last year. The increase in revenues was primarily due to continued growth in the Consumer Processing Services Division, including the growth of international business, and an increase revenues from the Automotive Services Division. The Automotive Services Division increase was a result of growth in the digital imaging product and Pathways conversion fees. PRODUCTION AND CUSTOMER SUPPORT. Production and customer support increased from $33.6 million, or 24.2% of revenues, to $45.7 million, or 30.0% of revenues. The increase in dollars and percentage of revenue was attributable primarily to an increase in production and customer support capacity related to Consumer Processing Services and Automotive Services. COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses decreased from $16.4 million, or 11.9% of revenues, to $12.7 million, or 8.4% of revenues. The decrease in dollars and as a percentage of revenue was due primarily to the conversion of Automotive Services outside sales representatives to salaried employees. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative increased from $44.2 million, or 31.8% of revenues, to $58.5 million, or 38.3% of revenues. The increase in dollars was due primarily to a compensation charge of $1.2 million as a result of a stock repurchase from a charitable trust funded by the Company's chairman, David M. Phillips; consulting costs for projects aimed at improving the internal telecommunications and customer service infrastructure and reorganization costs of the Automotive Services division. The Automotive Services division reorganization costs include severance costs and conversion costs of outside sales representatives to salaried employees. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from $6.8 million, or 4.9% of revenues, to $7.5 million, or 4.9% of revenues. The increase in dollars was mainly the result of an increase in goodwill amortization resulting from acquisitions and an increase in amortization of new customer relationship management software. PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming decreased from $19.7 million, or 14.2% of revenues, to $17.5 million, or 11.4% of revenues. The dollar and percentage of revenue decreases were due primarily to the Company's development efforts on international products being reimbursed monthly by the Enterstand Joint Venture in Europe. RELOCATION OF CLAIMS SETTLEMENT FUNCTION. In the second quarter of 1998, the Company recorded a charge of $1.7 million related to the relocation of certain customer service and claims processing operations to South Dakota. OTHER INCOME/INTEREST EXPENSE. Net other income/interest expense decreased from $0.5 million to $(0.4) million. The decrease was principally the result of higher interest expense due to borrowing under the revolving credit facility in 1999 and lower interest income from the investment of excess cash in 1999. INCOME TAXES. Income taxes decreased from $7.3 million, or 43.3% of income before taxes, to $4.8 million, or 47.1% of income before taxes. The dollar decrease and the rate increase were mainly attributable to lower pretax income. EQUITY IN NET LOSSES OF AFFILIATES. Equity in net losses of affiliates decreased from $7.4 million to $5.8 million. The results included $4.2 million and $7.4 million in losses in InsurQuote for 1999 and 1998, respectively, and $1.6 million loss from the Enterstand Joint Venture, in 1999. The Company ceased recording equity in net losses of InsurQuote in the second quarter of 1999 as a result of a new investor in InsurQuote. 12 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES YEAR 2000 ISSUE BACKGROUND. Some computers, software and other equipment include programming code in which calendar year data is abbreviated to only two digits. As a result of this design decision, some of these systems could fail to operate or fail to produce correct results if "00" is interpreted to mean 1900, rather than 2000 ("Year 2000 Problem"). These problems are widely expected to increase in frequency and severity as the year 2000 approaches. The Company defines an application to be Year 2000 compliant if it can accurately process date data (including calculating, comparing and sequencing) from, into and between 1999 and 2000, including leap year calculations. ASSESSMENT. The Year 2000 Problem could affect computers, software, and other equipment used, operated, or maintained by the Company. Accordingly, the Company is reviewing its internal computer programs and systems to ensure that the programs and systems will be Year 2000 compliant. The Company presently believes that its computer systems will be Year 2000 compliant in a timely manner. However, while the estimated cost of these efforts are not expected to be material to the Company's financial position or any year's results of operations, there can be no assurance to this effect. SOFTWARE SOLD TO CUSTOMERS. The Company believes that it has substantially identified all potential Year 2000 Problems with any of the software products, which it develops and markets. As a key supplier to insurance companies and collision repair facilities, the Company has identified a significant exposure for Year 2000 problems regarding the effect of its legacy collision estimating software on some customers' ability to complete an estimate. The Company has converted almost all of those customers impacted to the Year 2000 compliant version of the software. The remaining customers will be converted early in the fourth quarter of 1999. While lost revenues from such an event are a concern for the Company, the greater risks are the monetary damages for which the Company could be liable if it in fact is found responsible for the shutdown of one of its customer's facilities. Such a finding could have a material adverse impact on the Company's results of operations. INTERNAL INFRASTRUCTURE. The Company believes that it has identified substantially all of the major computers, software applications, and related equipment used in connection with its internal operations that must be modified, upgraded or replaced to minimize the possibility of a material disruption to its business. The Company has modified, upgraded, and replaced substantially all major systems that have been identified as adversely affected. The remaining systems will be compliant in the fourth quarter of 1999. SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers and related systems, the operation of office and facilities equipment, such as fax machines, photocopiers, telephone switches, security systems, elevators, and other common devices may be affected by the Year 2000 Problem. The Company has nearly completed its assessment of its facility and office equipment. A majority of this equipment is now compliant, with the remaining items to be completed in the fourth quarter of 1999. The Company estimates the total cost to the Company of completing any required modifications, upgrades, or replacements of these internal systems will not have a material adverse effect on the Company's business or results of operations. Currently, the Company is expensing approximately $0.6 million per quarter associated with this effort. It is expected that this cost will continue through the fourth quarter of 1999. This estimate is being monitored and will be revised as additional information becomes available. SUPPLIERS. The Company has substantially completed communications with third party suppliers of the major computers, software, and other equipment used, operated, or maintained by the Company to identify and, to the extent possible, to resolve issues involving the Year 2000 Problem. However, the Company has limited or no control over the actions of these third party suppliers. Thus, while the Company expects that it will be able to resolve any significant Year 2000 Problems with these systems, there can be no assurance that these suppliers will resolve any or all Year 2000 Problems with these systems before the occurrence of a material disruption to the business of the Company or any of its customers. Any failure of these third parties to resolve Year 2000 Problems with their systems in a timely manner could have a material adverse effect on the Company's business, financial condition, and results of operation. MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS. The Company expects to identify and resolve all Year 2000 Problems that could materially adversely affect its business operations. However, management believes that it is not possible to determine with complete certainty that all Year 2000 Problems affecting the Company have been identified or corrected. The number of devices that could be affected and the interactions 13 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES among these devices are simply too numerous. In addition, one cannot accurately predict how many Year 2000 Problem-related failures will occur or the severity, duration, or financial consequences of these perhaps inevitable failures. As a result, management expects that the Company could likely suffer the following consequences: 1. a significant number of operational inconveniences and inefficiencies for the Company and its customers that may divert management's time and attention and financial and human resources from its ordinary business activities; and 2. a lesser number of serious failures that may require significant efforts by the Company or its customers to prevent or alleviate material business disruptions. Although the Company believes its critical customer systems and critical internal system are compliant, there is no guarantee of these results. Specific factors that give rise to this uncertainty include a possible loss of technical resources to perform the work, failure to identify all susceptible systems, non-compliance by third parties whose systems and operations impact the Company, and other similar uncertainties. A possible worst case scenario might include one or more of the Company's software products sold to customers being non-compliant. Such an event could result in a material disruption to the Company's or customers operations. For example, the software could experience an interruption in its ability to properly calculate or access the data required to complete a collision estimate. Should the worst case scenario occur it could, depending on its duration, have a material impact on the Company's results of operations and financial position. CONTINGENCY PLANS. The Company has completed a significant portion of its contingency plans to address Year 2000 Problems should they occur. The Company expects to finalize its contingency plans in the fourth quarter of 1999. Depending on the systems affected, these plans could include accelerated replacement of affected equipment or software, short to medium use of backup equipment and software, increased work hours for Company personnel or use of contract personnel to correct on an accelerated schedule any Year 2000 Problems that arise or to provide manual workarounds for information systems, and similar approaches. If the Company is required to implement any of these contingency plans, it could have a material adverse effect on the Company's financial condition and results of operations. Based on the activities described above, management believes the Company is devoting the necessary resources to identify and resolve Year 2000 Problems. The success of this effort and a favorable outcome to the various potential situations described herein will determine the impact the Year 2000 Problem has on the Company's business or results of operations. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1999, net cash provided by operating activities was $20.8 million. The Company applied $7.4 million to the purchase of equipment and software. In addition, the Company borrowed $15.0 million of long-term debt. The Company also acquired 2.1 million of the its outstanding shares for $24.0 million during the nine months ended September 30, 1999. On August 13, 1999, the Company acquired 100% of the outstanding stock of D.W. Norris Limited for $5.2 million. On October 13, 1999, the Company acquired certain assets of Fleming and Hall Administrators for approximately $0.3 million. Management believes that cash flows from operations and the Company's credit facility will be sufficient to meet the Company's liquidity needs over the next 12 months. There can be no assurance, however, that the Company will be able to satisfy its liquidity needs in the future without engaging in financing activities beyond that described above. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 contains certain safe harbors regarding forward-looking statements. In that context, the discussion in Item 2 contains forward-looking statements which involves certain degrees of risks and uncertainties, including statements relating to liquidity and capital resources. Except for the historical information, the risks and uncertainties, include, without limitation, the effect of competitive pricing within the industry, the presence of competitors with greater 14 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES financial resources than the Company, the intense competition for top software engineering talent and the volatile nature of technological change within the automobile claims industry. Additional factors that could affect the Company's financial condition and results of operations are included in the Company's Initial Public Offering Prospectus and Registration on Form S-1 filed with the Securities and Exchange Commission ("Commission") on August 16, 1996 and the Company's 1998 Annual Report on Form 10-K, as amended, filed with the Commission on April 1, 1999. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1999, the Company completed a settlement of a lawsuit filed in late 1998 involving a former independent sales representative. The settlement of $1.7 million, recorded in December 1998, included, among other things, payment for past earned commissions, resolution of disputed commissions, and other costs associated with the resolution of the dispute. The Company is a party to various claims and routine litigation arising in the normal course of business. Such claims and litigation are not expected to have a material adverse effect on the financial condition or results of operations of the Company. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Amended and Restated Certificate of Incorporation of the Company filed as Exhibit 3.1 of the Company's Annual Report on Form 10-K (the "Annual Report") (filed with the Commission File No. 000-28600 on March 14, 1997, and hereby incorporated by reference) 3.2 Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 10.1 Amended and restated Credit Facility Agreement between CCC Information Services Inc., LaSalle National Bank and the other financial institutions party thereto (incorporated herein by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 10.2 Amended and restated Motors Crash Estimating Guide Data License (incorporated herein by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 10.3 European Version of Motors Crash Estimating Guide Data License (incorporated herein by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 15 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES 10.4 Stock Option Plan (incorporated herein by reference to Exhibit 4.03 of the Company's Registration Statement on Form S-8, Commission File No. 333-15207 filed October 31, 1996) 10.5 1997 Stock Option Plan, as amended (incorporated herein by reference to Exhibit 4.05 of the Company's Registration Statement on Form S-8, Commission File No. 333-67645 filed November 20, 1998) 10.6 401(k) Company Retirement Saving & Investment Plan (incorporated herein by reference to Exhibit 4.4 of the Company's Registration Statement on Form S-8, Commission File No. 333-32139 filed on July 25, 1997) 10.7 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 5.01 of the Company's Registration Statement on Form S-8, Commission File No. 333-47205 filed on March 2, 1998) 10.8 Securities Purchase Agreement between Company and InsurQuote Systems Inc. dated February 10, 1998 (incorporated herein by reference to Exhibit 10.7 of the Company's Quarterly Report on Form 10-Q, Commission File No. 000-28600 filed on May 15, 1999) 10.9 Investment Agreement between Company and InsurQuote Systems Inc. dated February 10, 1998 (incorporated herein by reference to Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q, Commission File No. 000-28600 filed on May 15, 1999) 10.10 Common Stock Warrant to purchase 440,350 shares of InsurQuote Systems Inc. dated February 10, 1998 (incorporated herein by reference to Exhibit 10.9 of the Company's Quarterly Report on Form 10-Q, Commission File No. 000-28600 filed on May 15, 1999) 10.11 Sale and Purchase Agreement between the Company and Phillip Carter dated July 1, 1998 (incorporated herein by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 11 Statement Re: Computation of Per Share Earnings 13 InsurQuote Systems, Inc. Audited Consolidated Financial Statements for the Year Ended June 30, 1998 (incorporated herein by reference to Exhibit 13 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 27 Financial Data Schedule (b) Reports on Form 8-K None 16 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 9, 1999 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 By: /s/ Michael P. Devereux ----------------------- Name: Michael P. Devereux Title: Senior Vice President of Finance and Chief Accounting Officer 17 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES EXHIBIT INDEX 3.1 Amended and Restated Certificate of Incorporation of the Company filed as Exhibit 3.1 of the Company's Annual Report on Form 10-K (the "Annual Report") (filed with the Commission File No. 000-28600 on March 14, 1997, and hereby incorporated by reference) 3.2 Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 10.1 Amended and restated Credit Facility Agreement between CCC Information Services Inc., LaSalle National Bank and the other financial institutions party thereto (incorporated herein by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 10.2 Amended and restated Motors Crash Estimating Guide Data License (incorporated herein by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 10.3 European Version of Motors Crash Estimating Guide Data License (incorporated herein by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 10.4 Stock Option Plan (incorporated herein by reference to Exhibit 4.03 of the Company's Registration Statement on Form S-8, Commission File No. 333-15207 filed October 31, 1996) 10.5 1997 Stock Option Plan, as amended (incorporated herein by reference to Exhibit 4.05 of the Company's Registration Statement on Form S-8, Commission File No. 333-67645 filed November 20, 1998) 10.6 401(k) Company Retirement Saving & Investment Plan (incorporated herein by reference to Exhibit 4.4 of the Company's Registration Statement on Form S-8, Commission File No. 333-32139 filed on July 25, 1997) 10.7 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 5.01 of the Company's Registration Statement on Form S-8, Commission File No. 333-47205 filed on March 2, 1998) 10.8 Securities Purchase Agreement between Company and InsurQuote Systems Inc. dated February 10, 1998 (incorporated herein by reference to Exhibit 10.7 of the Company's Quarterly Report on Form 10-Q, Commission File No. 000-28600 filed on May 15, 1999) 10.9 Investment Agreement between Company and InsurQuote Systems Inc. dated February 10, 1998 (incorporated herein by reference to Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q, Commission File No. 000-28600 filed on May 15, 1999) 10.10 Common Stock Warrant to purchase 440,350 shares of InsurQuote Systems Inc. dated February 10, 1998 (incorporated herein by reference to Exhibit 10.9 of the Company's Quarterly Report on Form 10-Q, Commission File No. 000-28600 filed on May 15, 1999) 10.11 Sale and Purchase Agreement between the Company and Phillip Carter dated July 1, 1998 (incorporated herein by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 11 Statement Re: Computation of Per Share Earnings 13 InsurQuote Systems, Inc. Audited Consolidated Financial Statements for the Year Ended June 30, 1998 (incorporated herein by reference to Exhibit 13 of the Company's Annual Report on Form 10-K, Commission File No. 000-28600) 27 Financial Data Schedule 18 EX-11 2 EXHIBIT-11 CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 1999 1998 1999 1998 -------- -------- -------- -------- Per share income (loss) before dividends and accretion on preferred stock: Income (loss) before dividends and accretion on preferred stock $ 568 $ (604) $ (368) $ 2,213 -------- -------- -------- -------- -------- -------- -------- -------- Weighted average common shares outstanding: Shares attributable to common stock outstanding 22,429 24,998 23,172 24,833 Shares attributable to common stock equivalents outstanding 241 390 306 607 -------- -------- -------- -------- 22,670 25,388 23,478 25,440 -------- -------- -------- -------- -------- -------- -------- -------- Per share income (loss) before dividends and accretion on preferred stock $ 0.03 $ (0.02) $ (0.02) $ 0.08 -------- -------- -------- -------- -------- -------- -------- -------- Per share dividends and accretion on mandatorily redeemable preferred: Dividends and accretion on mandatorily redeemable preferred: $ - $ 6 $ (2) $ (185) -------- -------- -------- -------- -------- -------- -------- -------- Weighted average common shares outstanding: Shares attributable to common stock outstanding 22,429 24,998 23,172 24,833 Shares attributable to common stock equivalents outstanding 241 390 306 607 -------- -------- -------- -------- 22,670 25,388 23,478 25,440 -------- -------- -------- -------- -------- -------- -------- -------- 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 $ 568 $ (598) $ (370) $ 2,028 -------- -------- -------- -------- -------- -------- -------- -------- Weighted average common shares outstanding: Shares attributable to common stock outstanding 22,429 24,998 23,172 24,833 Shares attributable to common stock equivalents outstanding 241 390 306 607 -------- -------- -------- -------- 22,670 25,388 23,478 25,440 -------- -------- -------- -------- -------- -------- -------- -------- Net income (loss) per share applicable to common stock $ 0.03 $ (0.02) $ (0.02) $ 0.08 -------- -------- -------- -------- -------- -------- -------- --------
EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED INTERIM FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1,045 0 32,113 (4,288) 0 38,224 57,913 (40,765) 85,467 41,806 0 0 0 60,451 (46,856) 85,467 0 152,526 0 141,859 403 2,394 (793) 10,277 4,836 (368) 0 0 0 (368) (0.02) (0.02) ACCUMULATED DEFICIT & CUMULATIVE TRANSLATION ADJUSTMENT. OTHER INCOME, NET OF EXPENSES. NET LOSS INCLUDES DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK.
-----END PRIVACY-ENHANCED MESSAGE-----