CCC INFORMATION SERVICES GROUP INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

-------------------------

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

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 August 14, 2002, 25,871,792 shares of CCC Information Services Group Inc.
common stock, par value $0.10 per share, were outstanding.

CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES

TABLE OF CONTENTS

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)

The accompanying notes are an integral part of these
consolidated interim financial statements.

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CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES

CONSOLIDATED INTERIM BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

The accompanying notes are an integral part of these
consolidated interim financial statements.

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CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
(IN THOUSANDS)

(UNAUDITED)

The accompanying notes are an integral part of these
consolidated interim financial statements.

5

CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION

CCC Information Services Group Inc. ("CCCG"), incorporated in Delaware
in 1983 and headquartered in Chicago, Illinois, is a holding company that
operates through its wholly-owned subsidiary, CCC Information Services Inc.
("CCC") (collectively referred to as the "Company" or "we"), which now operates
as one business segment, employing 840 full-time employees. We automate the
process of evaluating and settling automobile claims. Our products and services
allow our customers to integrate estimate information, including labor time and
cost and various other calculations derived from our extensive databases,
electronic images, documents and other related information into organized
electronic workfiles. We develop, market and supply a variety of automobile
claims services which enable customers in the automobile claims industry,
including automobile insurance companies, collision repair facilities,
independent appraisers, automobile dealers and consumers, to manage the
automobile claims and vehicle restoration process.

NOTE 2 - CONSOLIDATED INTERIM FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The accompanying consolidated interim financial statements as of and
for the three and six months ended June 30, 2002 and 2001 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 Annual Report on Form 10-K for the year ended December 31, 2001 filed
with the Securities and Exchange Commission ("SEC").

PER SHARE INFORMATION

Earnings per share are based on the weighted average number of shares
of common stock outstanding and common stock equivalents using the treasury
method. For the three and six months ended June 30, 2002, options and warrants
to purchase a weighted average number of 803,339 and 1,265,954 shares of common
stock, respectively, were not included in the computations of diluted earnings
per share because the options' and warrants' exercise prices were greater than
the average market price of the common shares during the period. In addition, if
the Company has net losses, options and warrants to purchase shares are not
included in the computation of diluted earnings per share because the options
and warrants, if included, would be antidilutive.

CONTINGENCIES

In the normal course of business, the Company is subject to various
proceedings, lawsuits, claims and other matters. The Company believes the
amounts provided in its consolidated financial statements, as prescribed by
generally accepted accounting principles, are adequate in light of the
probable and reasonably estimable liabilities. However, there can be no
assurances that the actual amounts required to discharge alleged liabilities
from various lawsuits, claims, legal proceedings and other matters will not
exceed the amounts reflected in the Company's consolidated financial
statements or will not have a material adverse effect on its consolidated
results of operations, financial condition or cash flows. Any amounts of
costs that may be incurred in excess of those amounts provided as of June 30,
2002 cannot currently be reasonably determined.

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NOTE 3 - GOODWILL

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 142 became effective for the Company
January 1, 2002. Under SFAS 142, goodwill is no longer amortized to earnings,
but instead reviewed for impairment on at least an annual basis. The Company
adopted SFAS 142 on January 1, 2002 and ceased the amortization of goodwill
against earnings. In accordance with the implementation provisions of SFAS 142,
the Company has completed the required transitional impairment analysis and has
determined that there is no impairment in the value of goodwill. The adoption of
SFAS 142 reduced amortization expense for the three and six months ended June
30, 2002, by $0.2 million and $0.4 million, respectively. On an annual basis
through 2007, the Company expects the impact of SFAS 142 to reduce amortization
expense by $0.8 million.

Net income and earnings per share for the three months ended March
31, 2001 and June 30, 2001 and the six months ended June 30, 2001, adjusted
to eliminate the historical amortization of goodwill, is as follows (in
thousands except per share data):

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NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS

On August 15, 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143").
SFAS 143 addresses the financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS 143 is required for adoption for fiscal years
beginning after June 14, 2002. The Company anticipates that the adoption of SFAS
143 will not have a significant effect on the Company's results of operations or
its financial position.

On October 3, 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS is effective for fiscal years beginning after
December 15, 2001. The objectives of SFAS 144 are to address the significant
issues relating to the implementation of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121"), and to develop a single
accounting model, based on the framework established in SFAS 121, for long-lived
assets to be disposed of by sale, whether previously held or used or newly
acquired. The Company's adoption of SFAS 144 on January 1, 2002 did not have a
significant effect on the Company's results of operations or its financial
position.

On July 30, 2002, the FASB issued Statement of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" ("SFAS 146"). The standard requires companies to recognize costs
associated with exit or disposal activities at fair value, when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The Company anticipates that the adoption
of SFAS 146 will not have a significant effect on the Company's results of
operations or its financial position.

NOTE 5 - 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:

NOTE 6 - INVESTMENT IN CHANNELPOINT

ChannelPoint, Inc. is an e-commerce exchange services and technology
platform provider for insurance and benefits companies. As of June 30, 2002, the
Company owned 5,036,634 shares, representing approximately 5.7%, on a fully
diluted basis, of ChannelPoint's common stock. The carrying value of this
investment and related note receivable of $27.1 million, net of $0.5 million
received in full settlement of the loan obligations outstanding, was fully
written off in 2001 after an impairment review. On June 27, 2002, ChannelPoint,
Inc. filed a certificate of dissolution with the Delaware Secretary of State and
is now proceeding with its dissolution in accordance with the plan of complete
liquidation and dissolution.

NOTE 7 - INVESTMENT IN CHOICEPARTS

On May 4, 2000, the Company formed a new independent company,
ChoiceParts, LLC ("ChoiceParts") with Automatic Data Processing, Inc. and The
Reynolds and Reynolds Company. ChoiceParts develops and operates an electronic
parts exchange for the auto parts marketplace for franchised auto retailers,
collision repair facilities and other parts suppliers. The Company has a 27.5%
equity interest in ChoiceParts. In February 2002, the Company funded an
additional $0.3 million to ChoiceParts. Approximately $1.7 million of the
commitment was still outstanding as of June 30, 2002 and while there are no
specific plans to fund at this time, all or some of this commitment may be
funded in 2002. The Company applies the equity method of accounting for its
investment in ChoiceParts and recorded a charge of $0.1 million and $0.4 million
related to the Company's share of the losses in ChoiceParts for the three months
and six months ended June 30, 2002, respectively. Based on the nature of the
Company's investment, the Company has

8

recorded a related income tax benefit on its share of the losses.

Summary financial information for ChoiceParts for the three and six
month periods ended June 30, 2002 was as follows:

NOTE 8 - INFO4CARS

In the fourth quarter of 2001, the Company recorded a loss of
approximately $1.1 million in connection with the write-off of its investment in
Info4cars.com Inc. ("Info4cars"), including a $0.8 million bad debt provision
related to the notes receivable plus accrued interest. In March 2002, the
Company received $0.5 million from Info4cars in full settlement of the loan
obligations outstanding, which is included in "other income, net" in the
consolidated interim statement of operations. In addition, the Company converted
its 174 shares of Series A Convertible Preferred Stock to 43 shares of common
stock representing 8% of the common stock outstanding. The carrying value of
these shares of common stock on the Company's balance sheet is zero.

NOTE 9 - RESTRUCTURING CHARGES

In June 2001, the Company announced a set of strategic decisions as
part of a company-wide effort to improve profitability. During the three and six
months ended June 30, 2002, the Company paid $0.2 and $0.4 million,
respectively, in severance and outplacement payments. As of June 30, 2002, $0.1
million of additional payments remain unpaid. The Company expects to pay the
remaining amounts in 2002.

During the fourth quarter of 2001, the Company recorded a charge of
$4.3 million, net of expected future sublease income, to write-off excess office
space in Chicago. The charge recorded is adequate as of June 30, 2002.

NOTE 10 - DISCONTINUED OPERATIONS

On April 19, 2001, the Company announced its decision to discontinue
the operations of its CCC Consumer Services segment and completed the wind down
of the operations of this segment in December 2001. During the first quarter of
2002, the remaining severance costs of $0.1 million were paid. In addition, the
Company paid $0.1 million in other contractual commitments in the second quarter
of 2002. As of June 30, 2002, $0.5 million of additional payments remain unpaid,
which the Company expects to pay in 2002.

Revenues and loss from discontinued operations were as follows:

9

The net liabilities of discontinued operations as of June 30, 2002 and
December 31, 2001 consisted of the following:

NOTE 11 - LONG TERM DEBT

On November 30, 2001, CCC entered into a $30 million credit facility
agreement (the "Credit Facility") with two lenders from the previous credit
facility. The Credit Facility matures on November 30, 2004. All advances under
the Credit Facility bear interest, at CCC's election, at the London Interbank
Offered Rate ("LIBOR") plus a variable spread based on our leverage ratio, or
the prime rate in effect from time to time plus a variable spread based on our
leverage ratio. CCC pays a commitment fee of 0.50% on any unused portion of the
Credit Facility.

During 2001, the Company entered into two separate agreements to
lease software licenses. These leases, which are for 36 months and expire in
early 2004, are classified as capital leases.

In the first quarter of 2002, the Company entered into an insurance
premium financing agreement. The term of the insurance policy covered by this
agreement is 14 months and expires in April 2003. The Company financed $0.6
million at a annual rate of 4.19%. The agreement requires the Company to make
ten equal installments beginning in March 2002 and ending in December 2002.

Long-term debt consisted of the following:

NOTE 12 - CCC CAPITAL TRUST

On February 23, 2001, CCC Capital Trust ("CCC Trust"), a business trust
controlled by CCCG, issued 15,000 Trust Preferred Securities, which are
presented on the consolidated interim balance sheet as "Company obligated
manditorily redeemable preferred securities of subsidiary trust holding solely
company-guaranteed debentures", ("Trust Preferred Securities") and CCCG issued
100 shares of its Series F Preferred Stock, par value $1.00 per share, and a
warrant to purchase 1,200,000 shares of its common stock at an exercise price of
$6.875 per share to Capricorn Investors III, L.P., one of our existing
stockholders. CCCG and CCC Trust received an aggregate purchase price of $15.0
million from the sale of these securities.

10

In connection with the issuance of the Trust Preferred Securities by
CCC Trust and the related purchase by the Company of all of the common
securities of CCC Trust, the Company issued an Increasing Rate Note Due 2006 in
the principal amount of approximately $15.5 million, due February 23, 2006
("Increasing Rate Note") to CCC Trust. The sole asset of CCC Trust is the
Increasing Rate Note and any interest accrued thereon. The interest payment
dates on the Increasing Rate Note correspond to the distribution dates on the
Trust Preferred Securities. The Trust Preferred Securities mature simultaneously
with the Increasing Rate Note. The Company has unconditionally guaranteed all of
the Trust Preferred Securities to the extent of the assets of CCC Trust.

The Increasing Rate Note is subordinated to the Company's bank debt.
Cumulative distributions on the Trust Preferred Securities accrue at a rate of
(i) 9% per annum, payable in cash or in kind at the Company's option, for the
first three years from February 23, 2001 and (ii) 11% per annum, payable in
cash, thereafter. The Trust Preferred Securities are mandatorily redeemable on
February 23, 2006. In addition, all or any portion of the outstanding Trust
Preferred Securities may be called for redemption at the option of the Company
at any time on or after February 23, 2004. The redemption price for both the
mandatory and the optional redemptions is equal to the liquidation amount of the
Trust Preferred Securities plus accrued but unpaid distributions. On April 1 and
July 1, 2002 the Company paid $0.4 million each, for the first and second
quarterly interest payments.

NOTE 13 - INCOME TAXES

The increase in current income tax assets at June 30, 2002 is
attributable to the Job Creation and Workers Assistance Act of 2002, which
increased the available carryback period for net operating losses from two years
to five years. As of June 30, 2002, the income tax receivable represents the
expected refund of taxes paid in 1996, 1997, 1998 and 1999 when the operating
losses incurred during 2001 were carried back to those prior years. During July
2002, the Company received this refund. For the three and six months ended June
30, 2002, the Company recorded an income tax provision based on income earned.

NOTE 14 - LEGAL PROCEEDINGS

The Company has pending against it a variety of putative class
action suits and individual actions raising issues regarding the use of the
Company's TOTAL LOSS valuation product by its insurance company customers.
Many of these suits are brought by the same group or groups of plaintiffs'
lawyers. Set forth below is a discussion of developments with respect to this
litigation since the discussion in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001 and the Quarterly Report on Form 10-Q
for the period ended March 31, 2002.

On July 5, a complaint was filed against CCC and one of its insurance
company customers in the Superior Court for the State of California, County of
Alameda. ANDERSON v. CALIFORNIA STATE AUTOMOBILE ASS'N, CCC INFORMATION SERVICES
INC., and DOES 1-100, Case Action No. 2002056932 (Superior Court for the State
of California, County of Alameda) (filed July 5, 2002). The plaintiffs in the
ANDERSON case allege that their insurer, using a valuation prepared by CCC,
offered them an inadequate amount for their vehicle, which had been declared a
total loss. On that basis, the plaintiffs assert claims against CCC for
conspiracy to commit statutory consumer fraud and conspiracy to commit common
law fraud. The plaintiffs seek to represent a class consisting of all persons
who were insured under an automobile policy written by CSAA whose vehicle was
declared a total loss for which CSAA's total loss valuation was based on a
valuation report prepared by CCC. The plaintiff's seek restitution and/or
disgorgement of revenues or profits, pre-judgment interest, unspecified damages,
and an award of attorneys' fees and costs.

In ALVAREZ-FLORES v. AMERICAN FINANCIAL GROUP, INC., ATLANTA CASUALTY
CO., and CCC INFORMATION SERVICES INC., No. 99 CH 15032 (Circuit Court of Cook
County,

11

Illinois) (filed October 19, 1999), on June 28, 2002, the plaintiff's claims
against all defendants, including CCC, were dismissed without prejudice for
failure to state a claim for relief. The plaintiff has until September 4, 2002,
in order to file a second amended complaint.

In STEPHENS v. THE PROGRESSIVE CORP., PROGRESSIVE PREFERRED INS. CO.
and CCC INFORMATION SERVICES INC., No. 99 CH 15557 (Circuit Court of Cook
County, Illinois) (filed October 28, 1999), on June 28, 2002, the plaintiff's
claims against all defendants, including CCC, were dismissed with prejudice.

In STOUDEMIRE v. METROPOLITAN GENERAL INSURANCE COMPANY, MET LIFE AUTO
& HOME INSURANCE AND CCC INFORMATION SERVICES INC., Civil Action No. CV
01-3135-TSM (Circuit Court of Montgomery County, Alabama) (filed October 16,
2000), the case has been resolved and the plaintiffs' claims against CCC and its
co-defendant shall be dismissed with prejudice. The resolution of this case will
not have a material adverse impact on the Company's results of operations or
financial condition.

In WASHINGTON v CALIFORNIA STATE AUTOMOBILE ASSOCIATION, CCC
INFORMATION SERVICES INC., and DOES 1-100, Case No. CGC-02-406786 (Superior
Court for the State of California, City and County of San Francisco) (filed
April 16, 2002), the plaintiffs filed an amended complaint on June 17, 2002 in
which CCC was no longer named as a defendant.

The plaintiffs' claims against CCC were dismissed without prejudice in
or around March 2002 in each of the following cases pending in the Circuit Court
of Madison County, Illinois: SCHOENLEBER v. PRUDENTIAL PROPERTY AND CASUALTY
INC. CO. and CCC INFORMATION SERVICES INC., Case No. 01 L 99 (filed January 18,
2001); EDWARDS v. MID-CENTURY INS. CO. d/b/a FARMERS INS. AND CCC INFORMATION
SERVICES INC., Case No. 01 L 151 (filed February 6, 2001); BORDONI v. CGU INS.
GROUP d/b/a CGU INS. CO. OF ILLINOIS and CCC INFORMATION SERVICES INC., Case No.
01 L 157 (filed February 6, 2001); RICHARDSON v. PROGRESSIVE PREMIER INS. CO. OF
ILLINOIS d/b/a PROGRESSIVE and CCC INFORMATION SERVICES INC., Case No. 01 L 149
(filed February 6, 2001); HUFF v. HARTFORD INS. CO. OF ILLINOIS d/b/a THE
HARTFORD AND CCC INFORMATION SERVICES INC., Case No. 01 L 158 (filed February 6,
2001); KNACKSTEDT v. ST. PAUL FIRE AND MARINE INS. CO. and CCC INFORMATION
SERVICES INC., Case No. 01 L 153 (filed February 6, 2001); MOORE v. SHELTER INS.
COS. and CCC INFORMATION SERVICES INC., Case No. 01 L 160 (filed February 6,
2001).

CCC intends to vigorously defend its interests in the lawsuits and
claims to which it is a party and support its customers in other actions. Due
to the numerous legal and factual issues that must be resolved during the
course of litigation, CCC is unable to predict the ultimate outcome of any of
these actions. If CCC were held liable in any of the actions (or otherwise
concludes that it is in CCC's best interest to settle any of them), CCC could
be required to pay monetary damages (or settlement payments). Depending upon
the theory of recovery or the resolution of the plaintiff's claims for
compensatory and punitive damages, or potential claims for indemnification or
contribution by CCC's customers in any of the actions, these monetary damages
(or settlement payments) could be substantial and could have a material
adverse effect on CCC's business, financial condition or results of
operations. During the fourth quarter of 2001, the Company recorded a pre-tax
charge of $4.3 million, net of an expected insurance reimbursement of $2.0
million, as an estimate of the amount that CCC will contribute toward an
anticipated settlement of certain of the claims relating to CCC's TOTAL LOSS
valuation service. The charge recorded is adequate as of June 30, 2002, for
the settlement of the claims covered thereby. Beyond that amount, the Company
is unable to estimate the magnitude of its exposure, if any, at this time. As
additional information is gathered and the litigations proceed, CCC will
continue to assess its potential impact.

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CCC INFORMATION SERVICES GROUP INC.
AND SUBSIDIARIES

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

Our products and services include PATHWAYS collision estimating and
appraisal solution products, TOTAL LOSS valuation services, information services
products and workflow products.

PATHWAYS COLLISION ESTIMATING AND APPRAISAL SOLUTION PRODUCTS

PATHWAYS APPRAISAL SOLUTION AND PATHWAYS ESTIMATING SOLUTION. We
developed PATHWAYS collision estimating software in 1995 to help automobile
insurance companies, collision repair facilities and independent appraisers
manage aspects of their day-to-day automobile claim activities, including
receipt of new assignments, preparation of estimates, communication of status
and completed activity and maintenance of notes and reports. The PATHWAYS
platform allows customers to integrate our other services, including our DIGITAL
IMAGING product, RECYCLED PARTS SERVICES and TOTAL LOSS valuation services, in
order to organize individual claim information in electronic workfiles, which
can be stored on our EZNET communications network, described in greater detail
later in this section under "Workflow Products."

Customers also use PATHWAYS collision estimating software to access
databases of information gathered from various vendors. These databases include
a database that provides local part availability and price information on
aftermarket and reconditioned parts. Customers using PATHWAYS collision
estimating software with RECYCLED PARTS SERVICES also have access to a database
that provides local part availability and price information on recycled or
salvage parts.

We sell PATHWAYS Collision estimating software to automobile insurance
companies, collision repair facilities and independent appraisers under
multi-year contracts on a monthly subscription basis, which are billed to our
customers one month in advance.

PATHWAYS DIGITAL IMAGING. PATHWAYS DIGITAL IMAGING allows automobile
insurance companies, collision repair facilities and independent appraisers to
digitally photograph and transmit images of damaged vehicles to the PATHWAYS
estimate workfile. These electronic images can be accessed by an authorized
participant in the automobile claim process at any time and from any location
that is web enabled. PATHWAYS DIGITAL IMAGING reduces the need for onsite
inspections and eliminates film, photo processing, travel and overnight delivery
costs. We sell PATHWAYS DIGITAL IMAGING to our customers as an integrated
function within PATHWAYS Appraisal Solution or PATHWAYS Estimating Solution
under multi-year contracts on a monthly subscription basis, which are billed to
customers one month in advance.

PATHWAYS ENTERPRISE SOLUTION AND PATHWAYS PROFESSIONAL ADVANTAGE.
PATHWAYS ENTERPRISE SOLUTION is an automotive repair shop management software
system for multiple location collision repair organizations that allows them to
manage accounts, prepare employee schedules and perform various other management
functions. PATHWAYS PROFESSIONAL ADVANTAGE, similar to PATHWAYS ENTERPRISE
SOLUTION, is a shop management software system for a single store location. We
sell PATHWAYS PROFESSIONAL ADVANTAGE and PATHWAYS ENTERPRISE SOLUTION to our
customers under multi-year contracts on a monthly subscription basis, which are
billed to customers one month in advance.

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TOTAL LOSS VALUATION SERVICES

TOTAL LOSS. Our TOTAL LOSS service is used primarily by automobile
insurance companies in processing claims involving vehicles that have been
heavily damaged or stolen. Typically, when the cost to repair a vehicle exceeds
70% to 90% of the vehicle's value, the automobile insurance company will declare
that vehicle to be a "total loss." In such cases, we provide the insurer with
the local market value of the vehicle to assist the insurer in processing the
claim.

We sell TOTAL LOSS to our customers, including those who are PATHWAYS
collision estimating customers, on a per transaction basis. Customers are billed
in the month following the transaction.

INFORMATION SERVICES PRODUCTS

CLAIMSCOPE NAVIGATOR is our next generation, on-line, Web-based
information service that provides a comprehensive method to create management
reports comparing industry and company performance using PATHWAYS collision
estimating and TOTAL LOSS data. CLAIMSCOPE NAVIGATOR permits our customers to
conduct in-depth analyses of claim information by parts and labor usage, cycle
time measurements and vehicle type and condition.

WORKFLOW PRODUCTS

EZNET COMMUNICATIONS NETWORK. Our EZNET communications network is a
central communications hub and repository for automobile insurance companies.
The network allows customers to electronically communicate claim information,
including assignments, work files, estimates, images and auditable estimate
data, internally and among appraisers, collision repair facilities, reinspectors
and other parties involved in the automobile claims process. EZNET allows
customers to share information and review claims, regardless of the location.
EZNET provides customers with an electronic library to catalog, organize and
store completed claims files.

We sell EZNET services to our customers under multi-year contracts and
bill customers on both a per transaction basis and a monthly subscription basis.

PATHWAYS APPRAISAL QUALITY SOLUTION is the first computerized solution
that allows for electronic audits (QAAR PLUS) of automobile repair estimates
prepared by direct repair facilities, independent appraisers and internal
insurance staff for quality control and for identification and correction of
errors or discrepancies prior to the completion of repairs. We sell PATHWAYS
APPRAISAL QUALITY SOLUTION to our customers on a subscription and/or per
transaction basis under multi-year agreements.

OTHER PRODUCTS AND SERVICES

OTHER. Some of our other principal products and services include our
Computerized Automobile Rental System and the leasing and selling of computer
hardware.

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RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH THREE MONTHS ENDED
JUNE 30, 2001

The Company reported net income of $5.3 million, or $0.20 per share on
a diluted basis, for the three months ended June 30, 2002, versus a net loss of
$(18.5) million, or $(0.85) per share on a diluted basis, for the same quarter
last year. Included in the prior year quarter was the loss from the write-off of
the investment in ChannelPoint of $(27.6) million and the restructuring charge
of $(6.2) million.

OPERATING INCOME. Operating income increased quarter over quarter by
$16.2 million due to a decrease in expenses of $14.1 million and an increase in
revenues of $2.1 million. Our operating margin, (operating income (loss) as a
percentage of revenue), increased to 19.1% for the quarter ended June 30, 2002
compared to (15.1%) in 2001. The increase in operating income and margin for the
second quarter of 2002 was due primarily to a continued improvement in
profitability resulting from our restructuring charge, which occurred in June
2001. As a result of the restructuring, the number of full-time employees has
decreased by approximately 29% in 2002 over the prior year. Operating income for
the second quarter last year also included an operating loss of $(2.9) million
for CCC International, which was shut down in June 2001.

REVENUES. Revenues for the second quarter 2002 were $48.2 million
versus $46.1 million for the same quarter last year. Excluding revenues of $0.4
million from CCC International for the quarter ended June 30, 2001, revenues
from our U.S. business in the second quarter 2002 increased $2.4 million, or
5.3%, compared to the same quarter last year.

Revenues by major product groups in the U.S. include:

Revenues from our PATHWAYS collision estimating products increased in
the second quarter of 2002 by $2.0 million or 7.3% compared to the same quarter
last year. This was led by an increase in the number of units due to new
automotive collision repair customers and increased units from existing
insurance company customers and to an increase in the number of PATHWAYS DIGITAL
IMAGING product units used by our automotive collision repair customers.

Revenues from our TOTAL LOSS valuation services decreased by $0.5
million or 4% from the second quarter of 2001 to the second quarter of 2002 due
to lower transaction volumes.

Revenues from our workflow products, which includes our EZNET
communications network and our PATHWAYS APPRAISAL QUALITY SOLUTION, increased in
the second quarter of 2002 by $1.0 million or 21.5% compared to the second
quarter of 2001. This was mainly due to increased transaction volume from
several new customers and existing insurance companies adding new direct repair
transactions to the EZNET communications network.

The decrease in revenues from our other products and services,
including our Computerized Automobile Rental System and the leasing of computer
hardware, was due to a decrease in

15

transaction volume, a decrease in the number of units leased and a reduced
price negotiated for a customer leasing hardware.

PRODUCTION AND CUSTOMER SUPPORT. Production and customer support
expenses decreased by 12.4% from $8.6 million for the three months ended June
30, 2001, or 18.7% of revenues, to $7.6 million, or 15.7% of revenues. These
expenses decreased by $0.3 million as a result of our shut down of CCC
International, $0.3 million due to lower headcount and associated costs related
to improved efficiency in the customer support area, including the consolidation
of certain customer support functions and $0.4 million from the DriveLogic
support department eliminated in June 2001 as part of restructuring.

COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
were $2.5 million for both the three months ended June 30, 2002 and June 30,
2001.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses decreased by 16.0% from $23.3 million, or 50.5% of
revenues, for the three months ended June 30, 2001, to $19.5 million, or 40.6%
of revenues, for the three months ended June 30, 2002. These expenses decreased
primarily as a result of investments made in the second quarter of 2001 in
DriveLogic, when DriveLogic was operated as a separate business unit. Another
contributing factor was lower communication expenses of $0.6 million due to
renegotiated rates and reduced usage.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased by 22.4% from $3.1 million, or 6.8% of revenues, for the three months
ended June 30, 2001, to $2.5 million, or 5.1% of revenues, for the three months
ended June 30, 2002. Depreciation and amortization decreased as a result of
fewer investments in computer equipment and our adoption in January 2002 of SFAS
142, which ceased the amortization of goodwill against earnings.

PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and
programming expenses decreased by 26.0% from $9.4 million, or 20.2% of revenues,
for the three months ended June 30, 2001, to $6.9 million, or 14.3% of revenues,
for the three months ended June 30, 2002. The decrease was due to lower
development expenses, resulting from the consolidation of our DriveLogic
business unit and the associated reduction-in-force.

RESTRUCTURING CHARGES. In June 2001, we announced a set of strategic
decisions as part of a company-wide effort to improve profitability. As a
result, we recorded a restructuring charge of $2.8 million, which consisted
primarily of severance and outplacement costs related to the termination of 130
employees. In addition, we recorded a charge of $3.4 million in June 2001
related to our decision to shut down CCC International in order to focus on U.S.
market opportunities. This charge consisted of a write-off of goodwill of $1.1
million, contractual commitments, including office space, of $0.5 million and
severance and related costs to terminate 39 employees of $1.8 million.

INTEREST EXPENSE. Interest expense decreased from $1.1 million for the
three months ended June 30, 2001 to $0.2 million for the three months ended June
30, 2002 driven by a lower level of borrowings, a decrease in interest rates
charged and lower amortization of deferred financing fees related to our Credit
Facility. The lower level of borrowings was due primarily to the utilization of
net proceeds of $18.1 million from a rights offering in December 2001 to reduce
our outstanding debt, in addition to the cash generated from operations
associated with increased profitability. In April 2002, we repaid the remaining
balance on our Credit Facility and had no borrowings during May and June of
2002.

MINORITY INTEREST EXPENSE. We recorded minority interest expense of
$0.5 million for the three months ended June 30, 2002 versus $0.3 million for
the same quarter last year. The interest is associated with the issuance on
February 23, 2001 of the Trust Preferred Securities to Capricorn Investors III,
L.P. The minority interest expense represents Capricorn Investors III, L.P.'s
share of CCC Trust's income.

LOSS ON INVESTMENT SECURITIES AND NOTE. We recorded a loss in the
second quarter of 2001 of approximately $27.6 million in connection with the
write-off of the investment in ChannelPoint, including a $4.9 million allowance
related to a note receivable plus accrued interest. This charge was based on our

16

evaluation of the collectibility of the note and the review of our carrying
value of the ChannelPoint common stock. Subsequently, in the fourth quarter of
2001, we received $0.5 million from ChannelPoint in full settlement of the loan
obligations outstanding.

EQUITY IN LOSSES OF CHOICEPARTS. We recorded a charge of $0.1 million
for the three months ended June 30, 2002 related to our 27.5% share of the
losses in ChoiceParts compared to a charge of $0.8 million for the same period
last year.

INCOME TAXES. Income taxes increased from a benefit of $18.0 million,
or 49.2% of the loss from continuing operations before taxes for the three
months ended June 30, 2001, to an income tax provision of $3.3 million, or 37.8%
of income before taxes for the same period this year. The dollar increase was
mainly attributable to higher pretax income.

EQUITY IN NET INCOME (LOSSES) OF AFFILIATE. In conjunction with our
decision to shut down CCC International, in May 2001, we ceased funding the
operating losses of Enterstand Limited ("Enterstand"), a joint venture
established in 1998 between Hearst Communications and CCC International. As a
result, the operations of Enterstand ceased and we stopped recording the losses
of Enterstand.

SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2001

The Company reported net income of $10.5 million, or $0.40 per share on
a diluted basis, for the six months ended June 30, 2002, versus a net loss of
$(28.3) million, or $(1.30) per share on a diluted basis, for the same period
last year. Included in the prior year net loss was the loss from discontinued
operations from the former CCC Consumer Services segment of $(7.0) million, net
of income taxes, or $(0.32) per share, the loss from the write-off of the
investment in ChannelPoint of $(27.6) million and the restructuring charge of
$(6.2) million.

OPERATING INCOME. Operating income increased period over period by
$23.6 million due to a decrease in expenses of $21.4 million and an increase in
revenues of $2.2 million. Our operating margin, (operating income (loss) as a
percentage of revenue), increased to 19.2% for the period ended June 30, 2002
compared to (5.6%) in 2001. The increase in operating income and margin for the
six months ended 2002 was due primarily to a continued improvement in
profitability resulting from our restructuring charge, which occurred in June
2001. As a result of the restructuring, the number of full-time employees has
decreased by approximately 29% in 2002 over the prior year. Operating income for
the six months ended June 30, 2001 included an operating loss of $(3.4) million
for CCC International, which was shut down in June 2001.

REVENUES. Revenues for the six months ended 2002 were $95.7 million
versus $93.5 million for the same period last year. Excluding revenues of $1.4
million from CCC International for the period ended June 30, 2001, revenues from
our U.S. business in the six months ended June 30, 2002 increased $3.6 million,
or 3.9%, compared to the same period last year.

Revenue by major product groups in the U.S. include:

17

Revenues from our PATHWAYS collision estimating products increased in
the six months ended June 30, 2002 by $3.8 million or 7.0% compared to the same
period of 2001. This was led by an increase in the number of units due to new
automotive collision repair customers and increased units from existing
insurance company customers and due to an increase in the number of PATHWAYS
DIGITAL IMAGING product units used by our automotive collision repair customers.

Revenues from our TOTAL LOSS valuation services decreased by $1.5
million or 6.2% from the six months ended June 30, 2001 compared to the same
period of 2002 due to lower transaction volumes.

Revenues from our workflow products, which includes our EZNET
communications network and our PATHWAYS APPRAISAL QUALITY SOLUTION, increased in
the six months ended June 30, 2002 by $1.7 million or 17.9% compared to the same
period of 2001. This was mainly due to increased transaction volume from several
new customers and existing insurance companies adding new direct repair
transactions to the EZNET communications network.

The decrease in revenues from our other products, including the
Computerized Automobile Rental System and the leasing of computer hardware, was
due to a decrease in transactions volume, a decrease in the number of units
leased and a reduced price negotiated for a customer leasing hardware.

PRODUCTION AND CUSTOMER SUPPORT. Production and customer support
expenses decreased by 18.0% from $17.9 million for the six months ended June 30,
2001, or 19.2% of revenues, to $14.7 million, or 15.4% of revenues. These
expenses decreased by $1.5 million as a result of our shut down of CCC
International, $1.3 million due to lower headcount and associated costs related
to improved efficiency in the customer support area, including the consolidation
of certain customer support functions and $0.4 million from the DriveLogic
support department eliminated in June 2001 as part of restructuring.

COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
were $5.0 million for both the six months ended June 30, 2002 and June 30, 2001.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses decreased by 16.3% from $46.3 million, or 49.5% of
revenues, for the six months ended June 30, 2001, to $38.7 million, or 40.5%, of
revenues for the six months ended June 30, 2002. These expenses decreased
primarily as a result of investments made in the first half of 2001 in
DriveLogic, when DriveLogic was operated as a separate business unit. Another
contributing factor was lower communication expenses of $0.9 million due to
renegotiated rates and reduced usage.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased by 22.2% from $6.2 million, or 6.7% of revenues, for the six months
ended June 30, 2001, to $4.9 million, or 5.1% of revenues, for the six months
ended June 30, 2002. Depreciation and amortization decreased as a result of
fewer investments in computer equipment and our adoption in January 2002 of SFAS
142, which ceased the amortization of goodwill against earnings.

PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and
programming expenses decreased by 18.1% from $17.1 million, or 18.2% of
revenues, for the six months ended June 30, 2001, to $14.0 million, or 14.6% of
revenues, for the six months ended June 30, 2002. The decrease was due to lower
development expenses, resulting from the consolidation of our DriveLogic
business unit and the associated reduction-in-force.

RESTRUCTURING CHARGES. In June 2001, we announced a set of strategic
decisions as part of a company-wide effort to improve profitability. As a
result, we recorded a restructuring charge of $2.8 million, which consisted
primarily of severance and outplacement costs related to the termination of 130
employees. In addition, we recorded a charge of $3.4 million in June 2001
related to our decision to shut down CCC International in order to focus on U.S.
market opportunities. This charge consisted of a write-off of goodwill of $1.1
million, contractual commitments, including office space, of $0.5 million and
severance and related costs to terminate 39 employees of $1.8 million.

18

INTEREST EXPENSE. Interest expense decreased from $2.4 million for the
six months ended June 30, 2001 to $0.4 million for the six months ended June 30,
2002 driven by a lower level of borrowings, a decrease in interest rates charged
and lower amortization of deferred financing fees related to our Credit
Facility. The lower level of borrowings was due primarily to the utilization of
net proceeds of $18.1 million from a rights offering in December 2001 to reduce
our outstanding debt, in addition to the cash generated from operations
associated with increased profitability. In April 2002, we repaid the remaining
balance on our Credit Facility and had no borrowings during May and June of
2002.

MINORITY INTEREST EXPENSE. We recorded minority interest expense of
$0.9 million for the six months ended June 30, 2002 versus $0.5 million for the
same period last year. The interest is associated with the issuance on February
23, 2001 of the Trust Preferred Securities to Capricorn Investors III, L.P. The
minority interest expense represents Capricorn Investors III, L.P.'s share of
CCC Trust's income.

LOSS ON INVESTMENT SECURITIES AND NOTE. We recorded a loss in the
second quarter of 2001 of approximately $27.6 million in connection with the
write-off of the investment in ChannelPoint, including a $4.9 million allowance
related to a note receivable plus accrued interest. This charge was based on our
evaluation of the collectibility of the note and the review of our carrying
value of the ChannelPoint common stock. Subsequently, in the fourth quarter of
2001, we received $0.5 million from ChannelPoint in full settlement of the loan
obligations outstanding.

EQUITY IN LOSSES OF CHOICEPARTS. We recorded a charge of $0.4 million
for the six months ended June 30, 2002 related to our 27.5% share of the losses
in ChoiceParts compared to a charge of $1.7 million for the same period last
year.

INCOME TAXES. Income taxes increased from a benefit of $18.1 million,
or 49.1% of the loss from continuing operations before taxes for the six months
ended June 30, 2001, to an income tax provision of $6.5 million, or 38.1% of
income before taxes for the same period this year. The dollar increase was
mainly attributable to higher pretax income.

EQUITY IN NET INCOME (LOSSES) OF AFFILIATE. In conjunction with our
decision to shut down CCC International, in May 2001, we ceased funding the
operating losses of Enterstand Limited ("Enterstand"), a joint venture
established in 1998 between Hearst Communications and CCC International. As a
result, the operations of Enterstand ceased and we stopped recording the losses
of Enterstand.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 2002, net cash provided by
operating activities was $9.7 million, proceeds received from the exercise of
stock options was $1.1 million and proceeds from the employee stock purchase
plan was $0.2 million. The Company used $6.5 million, net, for repayment of
CCC's Credit Facility, $4.3 million for the purchase of equipment and software,
and $0.3 million for an investment in ChoiceParts. As of June 30, 2002, the
Company is committed to fund an additional $1.7 million to ChoiceParts, and
while there are no specific plans to fund at this time, all or some of this
commitment may be funded in 2002.

Our principal liquidity requirements consist of our operating
activities, including product development, our investments in internal and
customer capital equipment and funding requirements for our ChoiceParts
investment. CCC has the ability to operate with a working capital deficit, as we
receive substantial payments from our customers for our services in advance of
recognizing the revenues and the costs incurred to provide such services. CCC
invoices each customer one month in advance for the following month's PATHWAYS
collision estimating software services. As such, CCC typically receives cash
from its customers prior to recognizing the revenue and incurring the expense
for the services provided. These amounts are reflected as deferred revenue in
the consolidated balance sheet until these amounts are earned and recognized as
revenues.

Management believes that cash flows from operations and borrowings
available under the Credit Facility will be sufficient to meet our liquidity
needs for the year ending December 31, 2002.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Our contractual obligations under capital leases, operating leases and a
financing agreement are summarized below:

19

FORWARD-LOOKING STATEMENTS

In addition to historical facts or statements of current condition,
this report contains forward-looking statements. Forward-looking statements
provide our current expectations or forecasts of future events. These may
include statements regarding market prospects for our products, sales and
earnings projections, and other statements regarding matters that are not
historical facts. Some of these forward-looking statements may be identified by
the use of words in the statements such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," or other words and terms of similar
meaning. Our performance and financial results could differ materially from
those reflected in these forward-looking statements due to general financial,
economic, regulatory and political conditions affecting the technology industry
as well as more specific risks and uncertainties such as those set forth above
and in this report. Given these risks and uncertainties, any or all of these
forward-looking statements may prove to be incorrect. Therefore, you should not
rely on any such forward-looking statements. Furthermore, we do not intend, nor
are we obligated, to update publicly any forward-looking statements. This
discussion is permitted by the Private Securities Litigation Reform Act of 1995.
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 SEC on August 16, 1996
and the Company's 2001 Annual Report on Form 10-K filed on March 26, 2002.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Due to the shut down of our operations in the United Kingdom, we no
longer believe our financial results will be affected by factors such as changes
in foreign currency exchange rates or weak economic conditions in the foreign
markets.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information provided in Note 14 to the financial statements
contained in Part I of this form 10-Q is incorporated herein by reference.

20

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The annual meeting of the stockholders of the Registrant was held
on May 16, 2002.

(b) The directors listed in the Registrant's Proxy Statement dated
April 17, 2002, were elected to serve until the earlier of the next
Annual Meeting of Stockholders or until their respective successors
have been elected and qualified, as follows:

(c) Appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors was approved. Voting by stockholders on the
proposal was 24,345,582 for, 228,983 against and 5,303 withheld.

21

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

11 Statement Re: Computation of Per Share Earnings

(b) Reports on Form 8-K

None.

22

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: August 14, 2002 CCC Information Services Group Inc.

By: /s/ Githesh Ramamurthy
----------------------
Name: Githesh Ramamurthy
Title: Chairman and Chief Executive Officer

By: /s/ Reid E. Simpson
----------------------
Name: Reid E. Simpson
Title: Executive Vice President
and Chief Financial Officer

23

EXHIBIT INDEX

11 Statement Re: Computation of Per Share Earnings

24