EX-99.1 2 doc2.txt 3RD QUARTER PRESS RELEASE CCC INFORMATION SERVICES GROUP INC. REPORTS $0.02 EPS FOR THE THIRD QUARTER, INCLUDING IMPACT OF A NET CHARGE EQUAL TO $0.27 PER SHARE CHICAGO, NOVEMBER 1, 2004 - CCC Information Services Group Inc. (Nasdaq: CCCG) reported net income of $0.5 million, or $0.02 per share, for the third quarter ending September 30, 2004, compared to net income of $6.4 million, or $0.23 per share, for the same quarter in 2003. The Company's third quarter results include the net impact of a non-cash stock compensation charge in connection with the self-tender offer and a net benefit related to a litigation settlement. Please review the income statement line items summarized below when analyzing the Company's third quarter results. TABLE 1 ($ in millions)
IMPACT OF CHARGE/(BENEFIT) ON ----------------------------- OPERATING NET Q3 2004 Charge/(Benefit) INCOME INCOME EPS ---------- ------- ------ Stock compensation expense non-cash. 13.1 8.2 0.34 ---------- ------- ------ Litigation Settlement. . . . . . . . (2.6) (1.6) (0.07) ---------- ------- ------ TOTAL NET CHARGE . . . . . . . . . . 10.5 6.6 0.27 ========== ======= ======
STOCK COMPENSATION EXPENSE NON-CASH -------------------------------------- During the quarter the company completed a $210 million self-tender offer to purchase 11.2 million shares, which leaves approximately 15.9 million shares outstanding. Participation by the company's shareholders was high, as over 90 percent of the share base tendered their shares. Due to the high participation rate, the ownership profile of the company remained relatively unchanged. In connection with the self-tender offer, the company recorded a charge of $13.1 million, or $0.34 per share, to reflect non-cash stock compensation expense related to employee options. The ability of employee stock option holders to participate in the self-tender offer through the Company on a net exercise basis resulted in variable stock compensation accounting for the Company's Stock Incentive Plans, which resulted in the non-cash charge. According to stock compensation accounting requirements, the charge had to cover all vested employee stock options including those that were not tendered and those that were unable to be exercised due to the 44 percent pro-ration factor. Employee option holders received $3.5 million, or 1.7%, of the $210 million returned to shareholders. All stock option holders received the same terms and conditions for the self-tender as shareholders and warrant holders. There are no further requirements for stock compensation expense in connection with the tender offer. In addition, the variable stock compensation accounting for the Company's Stock Incentive Plans ended on August 30, the date the tender offer closed. LITIGATION SETTLEMENT ---------------------- The Company recorded a net benefit for a litigation settlement of $2.6 million, or $0.07 per share, for the third quarter, which was comprised of three parts. During the quarter, CCC received $4.8 million as a result of the settlement of a lawsuit filed by certain insurers that had issued policies to the Company involving coverage in connection with the company's vehicle valuation product now known as CCC Valuescope Claim Services. Of the $4.8 million, $0.3 million was used to pay for legal costs related to the litigation. CCC also recorded a charge of $1.9 million to increase its net reserve for settlement of the litigation relating to CCC Valuescope, from $4.3 million to $6.2 million. The net result of the insurance settlement, after the $1.9 million charge and deduction of $0.3 million for legal costs resulted in the net pre-tax benefit of $2.6 million for the quarter. FINANCIAL HIGHLIGHTS --------------------- Revenue for the third quarter increased 1.0 percent to $49.1 million, compared to $48.6 million for the same quarter in 2003. Operating income for the quarter was $1.4 million, including a net charge of $10.5 million representing the net effect of the charge and benefit mentioned in Table 1 above, compared to operating income of $10.7 million for the same quarter in 2003. Revenue for the first nine months of 2004 was $148.2 million, an increase of 2.6 percent compared to $144.5 million for the first nine months of 2003. Operating income for the first nine months of the year was $20.1 million, including two charges totaling $1.7 million in the second quarter, and a net charge of $10.5 million representing the net effect of the charge and benefit mentioned in Table 1 above. Operating income for the first nine months of 2003 was $29.4 million, including a charge of $1.1 million in the second quarter of 2003. The product portfolio revenues for the third quarter, including a comparison to the same quarter in 2003, are shown in the table below: TABLE 2 ($ IN 000'S)
Q1 Q2 Q3 Q3 % Change vs. Portfolio. . . . . . 2004 2004 2004 2003 Prior Year --------------------------------------------------- CCC Pathways . . . . $31,174 $31,255 $30,937 $ 29,504 4.9 % CCC Valuescope . . . 10,139 10,161 10,301 10,720 (3.9)% Workflow . . . . . . 6,258 6,541 6,391 6,645 (3.8)% Information Services 502 504 511 445 14.8 % Other. . . . . . . . 1,530 1,012 952 1,307 (27.2)% --------------------------------------------------- Total. . . . . . . . $49,603 $49,473 $49,092 $ 48,621 1.0 % ===================================================
Key revenue highlights for the quarter are as follows: - The CCC Pathways portfolio increased 4.9% from prior year due to the growth of our estimating solutions in the repair facility and insurance channels, as well as sales of our recycled parts solution to insurance companies. - The CCC Valuescope portfolio grew 1.4 percent sequentially primarily due to the addition of new customers to the portfolio. - The Workflow portfolio fell 3.8 percent from prior year as growth in CCC Autoverse was offset by a decrease in EZNet . - Other revenue decreased in line with the company's plan to exit the customer hardware business, and a planned phase out by a customer of the CARS Direct service, a product originally introduced in 1997. Revenue, operating expenses and income for the third quarter, compared to the same quarter in 2003, are as follows: )
TABLE 3 ($ IN 000'S Q1 Q2 Q3 Q3 % Change vs. 2004 2004 2004 2003 Prior Year -------- -------- -------- ---------------------- REVENUE . . . . . . . . . . . . . . . $49,603 $49,473 $49,092 $ 48,621 1.0% EXPENSES PRODUCTION AND CUSTOMER SUPPORT . . 8,349 7,807 7,976 8,279 (3.7)% COMMISSIONS, ROYALTIES AND LICENSES 3,174 3,145 3,166 3,184 (0.6)% SELLING, GENERAL AND ADMINISTRATIVE 17,930 19,105 17,086 16,699 2.3% DEPRECIATION AND AMORTIZATION . . . 2,103 1,805 1,719 1,944 (11.6)% PRODUCT DEVELOPMENT AND PROGRAMMING 8,037 8,089 7,175 7,838 (8.5)% STOCK COMPENSATION EXPENSE NON-CASH - - 13,139 - n/a LITIGATION SETTLEMENT . . . . . . . - - (2,586) - n/a RESTRUCTURING CHARGE. . . . . . . . - 886 - - -------- -------- -------- ----------------------- TOTAL OPERATING EXPENSES. . . . . . . 39,593 40,837 47,675 37,944 25.6% -------- -------- -------- ----------------------- OPERATING INCOME. . . . . . . . . . . $10,010 $ 8,636 $ 1,417 $ 10,677 (86.7)% ======== ======== ======== ======================= OPERATING MARGIN . . . . . . . . . 20.2% 17.5% 2.9% 22.0%
Key operating expense highlights for the quarter are as follows: - Production and customer support expenses declined from prior year due to costs incurred last year to transition to a new customer support model. - Selling, general and administrative expenses increased from prior year as a result of an increase to certain incentive compensation costs tied to business performance. The increase in compensation expense was partially offset by savings generated from improved expense controls and the organizational realignment completed in the second quarter. - Product development and programming expenses decreased primarily due to the organizational realignment of the company that took place in the second quarter. The company issued the following guidance for the fourth quarter and full year 2004: Revenue growth for the fourth quarter is expected to be in the 1 to 2 percent range versus the prior year, which would produce full year revenue growth in the 2 to 3 percent range. This is a change from our previous guidance of 3 to 4 percent. Operating income for the fourth quarter should be in the $12 to $13 million range, with full year operating income expected to be in the $32 to $33 million range, including the impact of the charges taken in the second quarter of $1.7 million and the impact of the net charge of $10.5 million taken in the third quarter. This is a decrease from our previous guidance of $43 to $45 million due to the impact of the net charge taken in the third quarter. Earnings per share for the fourth quarter is expected to be in the $0.36 to $0.39 per share range. Earnings per share for 2004 is expected to be in the $0.75 to $0.77 per share range, which represents a decrease from our previous guidance of $0.96 to $1.00 per share. Earnings per share guidance for the full year includes the impact of the reduction in the number of shares outstanding following completion of the self-tender offer as well as the effect of the $0.04 per share in charges taken in the second quarter and the $0.27 per share net charge recorded in the third quarter. Please note that due to the timing of the tender offer, the fully diluted share base expected to be used for the fourth quarter earnings per share calculation is much lower than the fully diluted share base that is expected to be used for the full year earnings per share calculation. As a result, adding together the earnings per share for the individual quarters will not produce the full year earnings per share figure. (The company is using a fully diluted share base of 24.2 million to calculate the full year EPS figure and 17 million shares for the fourth quarter) CCC also supplied the following preliminary guidance for 2005: - Revenue growth is expected to be in the low to mid single digit percent range - Earnings per share is anticipated to grow by 85 to 95 percent over 2004. Please note that this guidance is based on expectations for 2005 earnings compared to 2004 reported results, which include the impact of the net charges taken in the second and third quarters, and also reflects the decrease in the fully diluted share base due to the self-tender offer - The company expects to use 17.3 million shares for the fully diluted earnings per share calculation for 2005 The company will be hosting its third quarter earnings call to discuss results at 11:00 AM EST. A live web cast will be made available at WWW.CCCIS.COM. For additional information about CCC's third quarter results, please refer to the company's Form 10-Q, which was filed this morning. ABOUT CCC CCC Information Services Group Inc. (NASDAQ: CCCG), headquartered in Chicago, is a leading supplier of advanced software, communications systems, Internet and wireless-enabled technology solutions to the automotive claims and collision repair industries. Its technology-based products and services optimize efficiency throughout the entire claims management supply chain and facilitate communication among approximately 21,000 collision repair facilities, 350 insurance companies and a range of industry participants. For more information about CCC Information Services, visit CCC's Web site at www.cccis.com. This release contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to the safe harbor provisions of those sections and the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in the Company's filings with the SEC, and that actual results or developments may differ materially from those in the forward-looking statements. Specific factors that might cause actual results to differ from expectations include, but are not limited to, competition in the automotive claims and collision repair industries, the ability to develop new products and services, the prolonged sales and implementation cycle of some of the company's new products, the ability to protect trade secrets and proprietary information, the ability to generate the cash flow necessary to meet the Company's obligations, the outcome of certain legal proceedings, and other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis, judgment, belief or expectation only as of the date hereof. The Company has based these forward-looking statements on information currently available and disclaims any intention or obligation to update or revise any forward-looking statement. CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------- 2004 2003 2004 2003 ------------------------------------- Revenues. . . . . . . . . . . . . . . . . . . . . $49,092 $48,621 $148,168 $144,450 Expenses: Production and customer support. . . . . . . . . 7,976 8,279 24,132 23,377 Commissions, royalties and licenses. . . . . . . 3,166 3,184 9,485 8,614 Selling, general and administrative. . . . . . . 17,086 16,699 54,120 52,415 Depreciation and amortization. . . . . . . . . . 1,719 1,944 5,628 5,888 Product development and programming. . . . . . . 7,175 7,838 23,302 23,690 Stock compensation expense non-cash. . . . . . . 13,139 - 13,139 - Restructuring charges. . . . . . . . . . . . . . - - 886 1,061 Litigation Settlement. . . . . . . . . . . . . . (2,586) - (2,586) - --------------------------------------- Total operating expenses. . . . . . . . . . . . . 47,675 37,944 128,106 115,045 Operating income. . . . . . . . . . . . . . . . . 1,417 10,677 20,062 29,405 Interest expense. . . . . . . . . . . . . . . . . (1,199) (169) (1,471) (556) Other income, net . . . . . . . . . . . . . . . . 265 45 432 201 Equity in income (loss) of ChoiceParts investment 161 (150) 365 (144) --------------------------------------- Income before income taxes. . . . . . . . . . . . 644 10,403 19,388 28,906 Income tax provision. . . . . . . . . . . . . . . (161) (4,052) (7,356) (11,090) --------------------------------------- Net income. . . . . . . . . . . . . . . . . . . . $ 483 $ 6,351 $ 12,032 $ 17,816 ======================================= PER SHARE DATA: Income per common share: Basic. . . . . . . . . . . . . . . . . . . . . . $ 0.02 $ 0.24 $ 0.47 $ 0.68 ======================================= Diluted. . . . . . . . . . . . . . . . . . . . . $ 0.02 $ 0.23 $ 0.45 $ 0.65 ======================================= Weighted average shares outstanding: Basic. . . . . . . . . . . . . . . . . . . . . . 22,965 26,256 25,351 26,210 Diluted. . . . . . . . . . . . . . . . . . . . . 24,161 27,484 26,629 27,621
The accompanying notes are an integral part of these consolidated financial statements. CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES CONSOLIDATED INTERIM BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 2004 2003 ------------------------------ ASSETS Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,427 $ 20,755 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7,004 Accounts receivable (net of allowances of $2,425 and $2,943 at September 30, 2004 and December 31, 2003, respectively) . . . . . . . . . . . . . . . . . . 13,872 10,247 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,879 8,369 ------------------------------ Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,178 46,375 Property and equipment (net of accumulated depreciation of $38,471 and $36,211 at September 30, 2004 and December 31, 2003, respectively). . . . . . 11,845 12,776 Intangible assets (net of accumulated amortization of $1,355 and $713 at September 30,2004 and December 31, 2003, respectively). . . . . . . . . . . . 1,512 2,153 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,747 15,747 Deferred income taxes (net of valuation allowance of $11,599). . . . . . . . . . 12,952 9,127 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630 265 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,814 292 ------------------------------ Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79,678 $ 86,735 ============================== LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,061 $ 5,937 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,602 16,522 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,653 1,602 Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . 1,775 - Deferred revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,255 7,930 Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 97 ------------------------------ Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,716 32,088 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,281 - Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 3,064 ------------------------------ Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,997 35,152 ------------------------------ Commitments and contingencies Preferred stock ($1.00 par value, 100 shares authorized, issued and outstanding) - - Common stock ($0.10 par value, 40,000,000 shares authorized, 15,879,528 and 26,376,839 shares outstanding at September 30, 2004 and December 31, 2003, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,588 3,034 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,201 131,590 Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,856) (36,838) Treasury stock, at cost (4,460,501 and 4,094,665 common shares in treasury at September 30, 2004 and December 31, 2003, respectively). . . . . . . . . . . (52,252) (46,203) ------------------------------ Total stockholders' (deficit) equity . . . . . . . . . . . . . . . . . . . . . . (131,319) 51,583 ------------------------------ Total liabilities and stockholders' (deficit) equity . . . . . . . . . . . . . . $ 79,678 $ 86,735 ==============================
The accompanying notes are an integral part of these consolidated financial statements. CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 2004 2003 --------------------- Operating Activities: Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,032 $ 17,816 Adjustments to reconcile net income to net cash provided by operating activities: Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 886 1,061 Equity in net (income) losses of ChoiceParts. . . . . . . . . . . . . . . . . . (365) 144 Depreciation and amortization of property and equipment . . . . . . . . . . . . 4,986 5,388 Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . 642 500 Deferred income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . (3,825) 585 Compensation expense related to issuance of restricted stock. . . . . . . . . . 22 5 Stock compensation expense non-cash . . . . . . . . . . . . . . . . . . . . . . 13,139 - Income tax benefit related to exercise of options . . . . . . . . . . . . . . . 827 306 Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 80 Changes in: Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,625) (658) Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490 (128) Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (58) Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,124 (593) Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,210 (5,511) Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,051 1,046 Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (675) 934 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 432 (62) Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,064) (949) -------------------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . 30,399 19,906 -------------------- Investing Activities: Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,085) (4,828) Purchase of short-term investments. . . . . . . . . . . . . . . . . . . . . . . - (7,008) Proceeds from sale of short-term investments. . . . . . . . . . . . . . . . . . 7,004 - Acquisition of Comp-Est, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . - (13,205) -------------------- Net cash provided by (used for) investing activities. . . . . . . . . . . . . . . . 2,919 (25,041) -------------------- Financing Activities: Proceeds from borrowings on long-term debt. . . . . . . . . . . . . . . . . . . 177,500 - Principal repayments on long-term debt. . . . . . . . . . . . . . . . . . . . . (7,444) - Self-tender offer of common stock . . . . . . . . . . . . . . . . . . . . . . . (210,000) - Payments of self-tender offer costs . . . . . . . . . . . . . . . . . . . . . . (935) - Payment of debt issuance costs. . . . . . . . . . . . . . . . . . . . . . . . . (3,550) - Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . 3,035 1,185 Payment of withholding tax related to exercise of stock options . . . . . . . . (1,415) - Proceeds from employee stock purchase plan. . . . . . . . . . . . . . . . . . . 321 294 Payment of principal and interest on notes receivable from officer. . . . . . . - 1,506 Principal repayments of capital lease obligations . . . . . . . . . . . . . . . (158) (359) -------------------- Net cash (used for) provided by financing activities. . . . . . . . . . . . . . . . (42,646) 2,626 -------------------- Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . (9,328) (2,509) Cash and cash equivalents: Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,755 20,200 -------------------- End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,427 $ 17,691 ==================== Supplemental Disclosure: Cash paid: Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,057 176 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,862 9,096
The accompanying notes are an integral part of these consolidated financial statements.