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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 September 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 November 14, 2002, 26,042,152 shares of CCC Information Services Group
Inc. common stock, par value $0.10 per share, were outstanding.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page(s)
Item 1. Financial Statements
Consolidated Interim Statements of Operations (Unaudited) 3
Three Months and Nine Months Ended September 30, 2002 and 2001
Consolidated Interim Balance Sheets, 4
September 30, 2002 (Unaudited) and December 31, 2001
Consolidated Interim Statements of Cash Flows (Unaudited), 5
Nine Months Ended September 30, 2002 and 2001
Notes to Consolidated Interim Financial Statements (Unaudited) 6-12
Management's Discussion and Analysis 12-23
Item 2. of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
Item 4. Controls and Procedures 23-24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
CERTIFICATIONS 26-29
EXHIBIT INDEX 30
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -------------------
2002 2001 2002 2001
-------- ------- -------- ---------
REVENUES $47,797 $46,592 $143,475 $140,110
OPERATING EXPENSES:
Production and customer support 6,702 7,225 21,412 25,173
Commissions, royalties and licenses 2,767 2,528 7,758 7,536
Selling, general and administrative 19,635 23,120 58,370 69,381
Depreciation and amortization 2,295 2,895 7,147 9,133
Product development and programming 7,242 6,973 21,222 24,035
Restructuring charges 869 - 869 6,199
-------- -------- --------- ---------
Total operating expenses 39,510 42,741 116,778 141,457
-------- -------- --------- ---------
OPERATING INCOME (LOSS) 8,287 3,851 26,697 (1,347)
Interest expense (160) (1,145) (556) (3,584)
Other income 76 44 286 731
Loss on investment securities and note - - - (27,595)
CCC Capital Trust minority interest expense (475) (410) (1,384) (944)
Equity in income (losses) of ChoiceParts investment 47 (481) (295) (2,152)
-------- -------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND EQUITY INCOME (LOSSES) 7,775 1,859 24,748 (34,891)
Income tax (provision) benefit (754) (946) (7,215) 17,116
-------- -------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE EQUITY INCOME (LOSSES) 7,021 913 17,533 (17,775)
Equity in net income (losses) of affiliate - 259 - (2,354)
-------- -------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS 7,021 1,172 17,533 (20,129)
Income (loss) from discontinued operations, net of
income taxes 354 - 354 (6,982)
-------- -------- --------- ---------
NET INCOME (LOSS) $ 7,375 $ 1,172 $ 17,887 $(27,111)
======== ======== ========= =========
Per Share Data:
- ---------------
Income (loss) per common share - basic from:
Continuing operations $ 0.27 $ 0.05 $ 0.68 $ (0.92)
Discontinued operations 0.01 - 0.01 (0.32)
-------- -------- --------- ---------
Income (loss) per common share - basic $ 0.28 $ 0.05 $ 0.69 $ (1.24)
======== ======== ========= =========
Income (loss) per common share - diluted from:
Continuing operations $ 0.26 $ 0.05 $ 0.65 $ (0.92)
Discontinued operations 0.01 - 0.01 (0.32)
-------- -------- --------- ---------
Income (loss) per common share - diluted $ 0.27 $ 0.05 $ 0.66 $ (1.24)
======== ======== ========= =========
Weighted average shares outstanding:
Basic 25,873 21,821 25,800 21,794
Diluted 26,904 21,895 26,912 21,794
The accompanying notes are an integral part of these
consolidated financial statements.
3
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
September 30, December 31,
2002 2001
--------------- --------------
ASSETS
Current assets:
Cash $ 24,210 $ 766
Accounts receivable (net of reserves of $2,404 and $2,288
at September 30, 2002 and December 31, 2001, respectively) 12,514 11,346
Income tax receivable 1,617 -
Current portion of deferred income taxes - 5,322
Other current assets 7,371 6,461
--------------- --------------
Total current assets 45,712 23,895
Property and equipment (net of accumulated depreciation of $32,546
and $25,376 at September 30, 2002 and December 31, 2001, respectively) 10,661 13,487
Goodwill 4,896 4,896
Deferred income taxes (net of valuation allowance of $11,599 and $11,489
at September 30, 2002 and December 31, 2001, respectively) 12,590 18,587
Investments 282 302
Other assets 739 1,027
Net assets of discontinued operations 20 -
--------------- --------------
TOTAL ASSETS $ 74,900 $ 62,194
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Book overdraft $ - $ 1,205
Accounts payable 7,269 7,658
Accrued expenses 25,696 28,570
Income taxes payable 4,661 -
Current portion of deferred revenues 5,903 6,297
Other current liabilities 470 421
--------------- --------------
Total current liabilities 43,999 44,151
Long-term debt - 6,500
Deferred revenues 23 66
Other liabilities 3,660 4,382
Net liabilities of discontinued operations - 536
--------------- --------------
Total Liabilities 47,682 55,635
--------------- --------------
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely company-guaranteed debentures 13,649 13,370
--------------- --------------
Common stock ($0.10 par value, 40,000,000 shares authorized, 25,888,981 and
25,503,567 shares outstanding at September 30, 2002 and
December 31, 2001, respectively) 2,987 2,967
Additional paid-in capital 125,695 124,188
Accumulated deficit (67,700) (85,587)
Accumulated other comprehensive loss (10) (10)
Note receivable from officer (1,200) -
Treasury stock, at cost ($0.10 par value, 4,094,665 and 4,286,665 shares
in treasury at September 30, 2002 and December 31, 2001, respectively) (46,203) (48,369)
--------------- --------------
Total stockholders' equity (deficit) 13,569 (6,811)
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 74,900 $ 62,194
=============== ==============
The accompanying notes are an integral part of these
consolidated financial statements.
4
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended
September 30,
--------------------
2002 2001
--------- ---------
Cash flows from operating activities:
Net income (loss) $ 17,887 $(27,111)
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities:
(Income) loss from discontinued operations, net of income taxes (354) 6,982
Loss on investment securities and note receivable - 27,595
Restructuring charges 869 6,199
Equity in losses of ChoiceParts 295 2,152
Equity in losses of Enterstand - 2,354
Depreciation and amortization of property and equipment 7,147 8,149
Amortization of goodwill - 993
CCC Capital Trust minority interest expense 1,384 944
Deferred income tax provision (benefit) 11,319 (16,243)
Other, net 341 (332)
Changes in operating assets and liabilities:
Accounts receivable, net (1,168) 3,624
Income tax receivable (1,617) -
Other current assets (321) 438
Other assets 288 425
Accounts payable (1,594) (10,576)
Accrued expenses (1,763) (6,226)
Current income taxes 4,594 3,096
Deferred revenues (437) 1,257
Other liabilities (1,233) 318
--------- ---------
Net cash provided by (used for) operating activities:
Continuing operations 35,637 4,038
Discontinued operations 10 (3,279)
--------- ---------
Net cash provided by operating activities 35,647 759
--------- ---------
Cash flows from investing activities:
Capital expenditures (4,981) (2,590)
Investment in affiliates (275) (5,163)
Proceeds from sale of discontinued businesses - 657
Decrease in long-term notes receivable - 18
Other, net - 102
--------- ---------
Net cash used for investing activities (5,256) (6,976)
--------- ---------
Cash flows from financing activities:
Principal repayments on long-term debt (28,500) (44,540)
Proceeds from borrowings on long-term debt 22,000 37,540
Proceeds from exercise of stock options 1,270 38
Proceeds from employee stock purchase plan 284 423
Trust preferred and equity issuance costs - (2,500)
Issuance of trust preferred securities and warrants - 15,000
CCC Capital Trust note interest payment (1,103) -
Principal repayments of short-term note (588) -
Principal repayments of capital lease obligations (310) (174)
--------- ---------
Net cash provided by (used for) financing activities (6,947) 5,787
--------- ---------
Net increase (decrease) in cash 23,444 (430)
Cash:
Beginning of period 766 912
--------- ---------
End of period $ 24,210 $ 482
========= =========
Supplemental Disclosures:
- -------------------------
Cash (paid) received:
Interest (1,408) (3,025)
Income tax refunds, net of payments 7,411 3,981
The accompanying notes are an integral part of these
consolidated 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 824 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 and independent appraisers, 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 nine months ended September 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. The
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 nine months ended September 30, 2002, options and warrants to
purchase a weighted average number of 320,626 and 921,780 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 September 30, 2002 cannot currently be
reasonably determined.
6
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. The adoption of SFAS 142 reduced amortization expense for the
three and nine months ended September 30, 2002, by $0.2 million and $0.6
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 each of the three months ended March
31, 2001, June 30, 2001 and September 30, 2001 and the nine months ended
September 30, 2001, adjusted to eliminate the historical amortization of
goodwill, is as follows (in thousands except per share data):
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------- -----------------
MARCH 31, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2001 2001 2001
----------- ---------- -------------- --------------
Net income (loss):
As reported. . . . . . . . . . . $ (9,802) $ (18,481) $ 1,172 $ (27,111)
Goodwill amortization. . . . . . 440 311 242 993
----------- ---------- -------------- ---------------
Adjusted net income (loss). $ (9,362) $ (18,170) $ 1,414 $ (26,118)
=========== ========== ============== ===============
Income (loss) per share - basic:
As reported. . . . . . . . . . . $ (0.45) $ (0.85) $ 0.06 $ (1.24)
Goodwill amortization. . . . . . 0.02 0.02 0.01 0.05
----------- ---------- -------------- ---------------
Adjusted basic. . . . . . . $ (0.43) $ (0.83) $ 0.07 $ (1.19)
=========== ========== ============== ===============
Income (loss) per share - diluted:
As reported. . . . . . . . . . . $ (0.45) $ (0.85) $ 0.06 $ (1.24)
Goodwill amortization. . . . . . 0.02 0.02 0.01 0.05
----------- ---------- -------------- ---------------
Adjusted diluted. . . . . . $ (0.43) $ (0.83) $ 0.07 $ (1.19)
=========== ========== ============== ===============
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS
- --------------------------------------
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.
On October 1, 2002, the FASB issued Statement of Financial Accounting
Standards No. 147, "Acquisitions of Certain Financial Institutions" ("SFAS
147"). SFAS 147 provides guidance on the accounting for the acquisition of a
financial institution. The Company anticipates that the adoption of SFAS 147
will not have a significant effect on the Company's results of operations or its
financial position.
7
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:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- ------------------
2002 2001 2002 2001
-------- ------- ------- ---------
(IN THOUSANDS)
Net income (loss) . . . . . . . . . . . $ 7,375 $1,172 $17,887 $(27,111)
Foreign currency translation adjustments. (100) - (258)
-------- ------- ------- ---------
Comprehensive income (loss) . . . . . . .$ 7,375 $1,072 $17,887 $(27,369)
======== ======= ======= =========
NOTE 6 - 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 original $5.5 million
commitment was still outstanding as of September 30, 2002 and there are no
specific plans to fund this commitment at this time. The Company applies the
equity method of accounting for its investment in ChoiceParts and recorded a
benefit of $0.1 million and a charge of $(0.3) million related to the Company's
share of the income (losses) in ChoiceParts for the three months and nine months
ended September 30, 2002, respectively. Based on the nature of the Company's
investment, the Company has recorded a related income tax benefit on its share
of the losses.
Summary financial information for ChoiceParts for the three and nine month
periods ended September 30, 2002 and 2001 was as follows:
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------- ------------------
2002 2001 2002 2001
------- -------- -------- ---------
(IN THOUSANDS)
Revenues . . . . . . . . . . . $ 3,518 $ 3,777 $10,786 $11,244
======= ======== ======== ========
Income (loss) from operations. $ 211 $(1,782) $(1,087) $(7,998)
======= ======== ======== ========
Net income (loss). . . . . . . $ 221 $(1,752) $(1,065) $(7,827)
======= ======== ======== ========
NOTE 7 - 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 nine
months ended September 30, 2002, the Company paid $0.1 and $0.5 million,
respectively, for the remaining severance and outplacement costs.
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. During the third quarter of 2002, the Company recorded an
additional charge of $0.9 million to revise the original expected future
sublease income from $3.2 million to $2.3 million as a result of the current
weak conditions of the real estate market. If the Company has not sublet the
office space by September 30, 2003, it will need to reevaluate the amount
recorded, at that time. The lease for this office space expires March 31, 2006.
8
NOTE 8 - 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.
During the fourth quarter of 2001, the Company and Superior Insurance
Group, Inc. ("Superior") reached an agreement to settle litigation for a payment
to the Company by Superior in the amount of $0.2 million. During the third
quarter of 2002 the Company recorded the benefit of $0.2 million, which was
fully reserved for. In September 2002, the Company also reviewed its remaining
obligations related to the disposal of this segment, and as a result, recorded a
favorable adjustment of $0.4 million from the prior estimates.
Revenues and income (loss) from discontinued operations were as follows:
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- --------------------
2002 2001 2002 2001
------------------- --------------------
(In thousands) (In thousands)
Revenues. . . . . . . . . . . . . . . . . . $ - $ - $ - $ 4,587
======== ======== ======== =========
Income (loss) before income taxes . . . . . $ - $ - $ - $(1,920)
Income tax (provision) benefit. . . . . . . - - - 931
-------- -------- -------- ---------
Income (loss) from operations . . . . . . . - - - (989)
-------- -------- -------- ---------
Gain (loss) on disposal . . . . . . . . . . 566 - 566 (7,700)
Income tax (provision) benefit. . . . . . . (212) - (212) 1,707
-------- -------- -------- ---------
Net gain (loss) on disposal . . . . . . . . 354 - 354 (5,993)
-------- -------- -------- ---------
Income (loss) from discontinued operations,
net of tax . . . . . . . . . . . . . . . $ 354 $ - $ 354 $(6,982)
======== ======== ======== =========
The net assets (liabilities) of discontinued operations as of September 30,
2002 and December 31, 2001 consisted of the following:
SEPTEMBER 30, DECEMBER 31,
2002 2001
-------------- --------------
(IN THOUSANDS)
Accounts receivable . . . . . . . . . . . . . . . . $ 220 $ 114
Accounts payable and accruals . . . . . . . . . . . (200) (650)
--------------- --------------
Net assets (liabilities) of discontinued operations $ 20 $ (536)
=============== ==============
9
NOTE 9 - LONG TERM DEBT
- -----------------------
On November 30, 2001, CCC entered into a $30 million credit facility
agreement ("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 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. As of September 30, 2002 the Company has no advances under the Credit
Facility.
NOTE 10 - 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
mandatorily 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, revised from the original exercise price of $10.00 per share,
to Capricorn Investors III, L.P. ("Capricorn"), one of our existing
stockholders. CCCG and CCC Trust received an aggregate purchase price of $15.0
million from the sale of these securities.
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. The Company
has paid $0.4 million and $1.1 million for the three months and nine months
ended September 30, 2002, respectively, for interest payments.
On October 21, 2002, the Company agreed to purchase the outstanding Trust
Preferred Securities from Capricorn. The purchase price of $16.3 million
represents the par value of all Trust Preferred Securities outstanding plus
accrued but unpaid distributions. During the fourth quarter of 2002, the Company
will record a $2.5 million pre-tax charge, or $(0.06) per share, resulting from
the difference between the par value and the accreted value and accrued but
unpaid distributions on the Trust Preferred Securities on October 21, 2002.
10
NOTE 11 - INCOME TAXES
- ----------------------
SEPTEMBER 30, DECEMBER 31,
2002 2001
--------------- -------------
(IN THOUSANDS)
Income tax receivable. . . . . . . . . . . . . . $ 1,617 $ -
Current portion of deferred income taxes . . . . - 5,322
--------------- -------------
Total current income tax assets. . . . . . . . . $ 1,617 $ 5,322
Deferred income tax assets . . . . . . . . . . . $ 24,189 $ 30,076
Valuation allowance. . . . . . . . . . . . . . . (11,599) (11,489)
--------------- --------------
Total deferred income tax asset. . . . . . . . . 12,590 18,587
--------------- --------------
Total income tax assets, current and non-current $ 14,207 $ 23,909
=============== ==============
Total current income taxes payable . . . . . . . $ 4,505 $ -
=============== ==============
During the second quarter of 2002, the Company recorded $13.1 million as a
current income tax asset partially 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. The total amount represented the
expected refund of taxes paid in 1996, 1997, 1998 and 1999 when operating losses
incurred in 2001 were carried back to those years. During the third quarter of
2002, the Company received this $13.1 million refund.
During the third quarter of 2002, the Company filed amended returns to
claim research and tax credits. The Company recorded a credit, to income tax
expense, of $2.0 million of taxes paid for the years 1998, 1999 and 2000.
Included in income taxes receivable is a refund of $1.1 million of the expected
credit. Current income taxes payable is also net of $0.9 million in research tax
credits being carried forward. The remaining balance of $0.5 million in income
taxes receivable represents expected state tax refunds.
NOTE 12 - 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 service 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 as well as the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 2002 and the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 2002.
In BEARDEN v. CCC INFORMATION SERVICES INC., Civil Action No. 01CV22114
(Superior Court of Floyd County, Georgia) (filed May 21, 2001), on August 28,
2002, the court granted CCC's motion to dismiss plaintiff's amended complaint.
In BARBER v. STATE AUTO INSURANCE CO., SONNY J. SMITH, EVERS AND
ASSOCIATES, INC., BRIAN SIGMON, CCC INFORMATION SERVICES INC., and TIM GAINER,
Case No. CV-02-B-0531-X (United States District Court for the Northern District
of Alabama) (filed February 28, 2002), the plaintiff has filed an appeal from
the district court's April 26, 2002, order dismissing plaintiff's claims against
CCC with prejudice. Plaintiff's appeal is fully briefed and pending before the
United States Court of Appeals for the Eleventh Circuit.
11
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), the plaintiff filed a notice of appeal from
the circuit court's June 28, 2002, order dismissing the plaintiff's claims with
prejudice. Plaintiff's appeal is pending before the Illinois Appellate Court
for the First District.
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, Illinois) (filed October 19, 1999), on October 3, 2002, the plaintiff
filed a second amended complaint. The plaintiff's first amended complaint had
been dismissed on June 28, 2002, for failure to state a claim for relief.
In WHITWORTH v. NATIONWIDE MUTUAL INS. CO. and CCC INFORMATION SERVICES
INC., Case No. CVH-0806980 (Court of Common Pleas, Franklin County, Ohio) (filed
August 2, 2000), on November 1, 2002, the court granted final approval of the
class action settlement described in the Company's Report on Form 10-K for the
period ended December 31, 2001. Pursuant to the settlement, the claims asserted
in WHITWORTH have been dismissed.
In CCC INFORMATION SERVICES INC. v. SUPERIOR INSURANCE GROUP, INC., Case
No. 01L6337 (Circuit Court of Cook County, Illinois) (filed May 30, 2001), the
settlement described in the Company's Report on Form 10-K for the period ended
December 31, 2001 has been finalized, and the action was dismissed in its
entirety on October 22, 2002.
CCC intends to vigorously defend its interests in all of the above-
described lawsuits. 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 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. As of
September 30, 2002, the Company believes that the charge recorded is an
appropriate estimate for the settlement of the claims covered by the anticipated
settlement. As additional information is gathered and the litigations (both
those covered by the anticipated settlement, as well as others) proceed, CCC
will continue to assess their potential impact.
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.
12
PATHWAYS COLLISION ESTIMATING AND PATHWAYS 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.
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.
COMMERCIAL AND RECREATIONAL VEHICLE Valuation Services ("CRV") is the
Company's TOTAL LOSS valuation service for commercial and recreational vehicles.
CRV determines the most accurate values on specialty vehicles including trucks,
semi-trailers, marine craft, motorcycles, recreational vehicles and
pre-fabricated housing.
We sell TOTAL LOSS and CRV 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.
13
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, one of the
industry's largest and most robust claims networks, 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.
CCC AUTOVERSE CLAIM MANAGEMENT. During the third quarter of 2002 we
launched CCC AUTOVERSE CLAIM MANAGEMENT, which is a web-based workflow solution
that allows the exchange of claims information derived from using our PATHWAYS
collision estimating software and PATHWAYS APPRAISAL QUALITY SOLUTION products
and our competitors' collision estimating systems. In addition to our PATHWAYS
customer base, CCC AUTOVERSE CLAIM MANAGEMENT allows us to process transactions
generated from users of competitors' systems and provide these non-PATHWAYS
users access to our management tools.
The CCC AUTOVERSE CLAIM MANAGEMENT product is sold to our customers on a
per transaction basis. Customers are billed in the month following the
transaction.
OTHER PRODUCTS AND SERVICES
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.
Some of our other principal products and services include our Computerized
Automobile Rental System and the leasing and selling of computer hardware.
14
PRO FORMA FINANCIAL RESULTS
We prepare and release quarterly unaudited financial statements prepared in
accordance with generally accepted accounting principles ("GAAP"). We also
disclose and discuss certain pro forma financial information in the related
earnings release and investor conference call. We believe the disclosure of the
pro forma financial information helps investors more meaningfully evaluate the
results of our ongoing operations. This pro forma financial information excludes
certain non-cash and special charges, consisting primarily of the shut down and
sale of certain business segments, the amortization of deferred financing costs,
impairment of notes receivable and equity investments and restructuring, lease
abandonment and litigation costs. We urge investors to carefully review the
GAAP financial information included as part of our Quarterly Reports on Form
10-Q, or Annual Reports on Form 10-K, and our quarterly earnings releases and
compare that GAAP financial information with the pro forma financial results
disclosed in our quarterly earnings releases and investor calls.
PREPARATION OF FINANCIAL INFORMATION
The company believes that the application of accounting standards are as
important as a company's reported financial position, results of operations and
cash flows. The company believes that its accounting policies are prudent and
provide a clear view of the company's financial performance. The company has
formed a disclosure committee, composed of senior management, including senior
financial and legal personnel, to help ensure the completeness and accuracy of
the company's financial results and disclosures. In addition, prior to the
release of the company's financial results, the company's key management reviews
the company's annual and quarterly results, along with key accounting policies
and estimates, with its audit committee.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2001
The Company reported net income of $7.4 million, or $0.27 per share on a
diluted basis, for the three months ended September 30, 2002, versus net income
of $1.2 million, or $0.05 per share on a diluted basis, for the same quarter
last year. Income from continuing operations was $7.0 million, or $0.26 per
share on a diluted basis, for the third quarter of 2002, versus income from
continuing operations of $1.2 million, or $0.05 per share on a diluted basis,
for the same quarter last year. Included in net income is a $2.0 million benefit
related to research and development tax credits associated with prior years.
Also included in net income is a pre-tax charge of $0.9 million reflecting a
delay in subletting excess office space.
OPERATING INCOME. Operating income increased quarter over quarter by $4.4
million, to $8.3 million, due to a decrease in expenses of $3.2 million and an
increase in revenues of $1.2 million. Our operating margin, (operating income as
a percentage of revenue) increased to 17.3% for the quarter ended September 30,
2002 compared to 8.3% in 2001. The increase in operating income and margin for
the third quarter of 2002 was due primarily to a continued improvement in
profitability resulting from our restructuring, which occurred in June 2001. As
a result of the restructuring, the number of full-time employees has decreased
by approximately 30% in 2002 over the prior year. Operating income for the third
quarter last year also included an operating loss of $(0.3) million for CCC
International, which was shut down in June 2001.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA").
The Company evaluates operating performance based on several factors, including
its primary financial measure of operating income (loss) before non-cash
depreciation of tangible assets and amortization of intangible assets
(''EBITDA''). The Company considers EBITDA an important indicator of the
operational strength and performance of its business. The term EBITDA does not
have a standardized meaning prescribed by generally accepted accounting
principles and therefore may not be comparable to similarly titled measures
presented by other publicly traded companies.
15
As a result of the factors mentioned above, in "Operating Income",
consolidated earnings before interest, taxes, depreciation and amortization
increased to $10.6 million for the third quarter of 2002 compared to an adjusted
EBITDA of $7.0 million for the same quarter of 2001, excluding CCC
International. Excluding the office space charge, the adjusted EBITDA for the
third quarter of 2002 was $11.5 million.
The reconciliation of GAAP financial information to EBITDA and adjusted
EBITDA is as follows:
THREE MONTHS ENDED
SEPTEMBER 30,
---------------
2002 2001
------- -------
Operating income per GAAP financial statements $ 8,287 $3,851
Add: Depreciation and amortization . . . . . . 2,295 2,895
------- -------
EBITDA . . . . . . . . . . . . . . . . . . . . 10,582 6,746
Add: Exited International Segment loss . . . . - 284
Add: Office space charge . . . . . . . . . . . 869 -
------- -------
Adjusted EBITDA. . . . . . . . . . . . . . . . $11,451 $7,030
======= =======
REVENUES. Revenues for the third quarter of 2002 were $47.8 million versus
$46.6 million for the same quarter last year. Excluding revenues of $0.3
million from CCC International for the quarter ended September 30, 2001,
revenues from our U.S. business in the third quarter 2002 increased $1.5
million, or 3.2%, compared to the same quarter last year.
Revenues by major product groups in the U.S. include:
THREE MONTHS ENDED
SEPTEMBER 30,
----------------
2002 2001
------- -------
PATHWAYS Collision Estimating and Appraisal Solution Products $29,419 $27,741
TOTAL LOSS Valuation Services . . . . . . . . . . . . . . . . 11,262 11,947
Information Services Products . . . . . . . . . . . . . . . . 288 130
Workflow Products . . . . . . . . . . . . . . . . . . . . . . 5,332 4,578
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,496 1,932
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $47,797 $46,328
======= =======
Revenues from our PATHWAYS collision estimating products increased in the
third quarter of 2002 by $1.7 million or 6.0% compared to the third quarter last
year. This was led by an increase in the number of new automotive collision
repair customers, an increase in units from existing insurance company customers
and 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 $0.7 million
or 5.7% from the third quarter of 2001 to the third quarter of 2002 due to lower
transaction volumes.
Revenues from our workflow products, which includes our EZNET
communications network, our PATHWAYS APPRAISAL QUALITY SOLUTION and our CCC
AUTOVERSE CLAIM MANAGEMENT solution, increased in the third quarter of 2002 by
$0.8 million or 16.4% compared to the third 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.
16
The decrease in revenues from our other products and services, including
our Computerized Automobile Rental System and the leasing and selling of
computer hardware, was due to a decrease in 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 7.2% from $7.2 million for the three months ended September 30,
2001, or 15.5% of revenues, to $6.7 million, or 14.0% of revenues. These
expenses decreased by $0.2 million as a result of our shut down of CCC
International and $0.3 million due to renegotiated reduced rates for
telecommunication, service bureau and network costs.
COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
expenses increased by 9.4% from $2.5 million for the three months ended
September 30, 2001, or 5.4% of revenues, to $2.8 million, or 5.8% of revenues
compared to the third quarter of 2002. These expenses increased as a result of
new agreements with a vendor to provide us with enhanced recycled parts data for
our RECYCLED PARTS SERVICES product.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased by 15.1% from $23.1 million, or 49.6% of revenues, for the
three months ended September 30, 2001, to $19.6 million, or 41.1% of revenues,
for the three months ended September 30, 2002. These expenses decreased
primarily as a result of the benefits of the restructuring and profit
improvement initiatives in 2001. Other contributing factors were lower
communication expenses, lower web-hosting fees and reduced conferences held in
2002.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased by 20.1% from $2.9 million, or 6.2% of revenues, for the three months
ended September 30, 2001, to $2.3 million, or 4.8% of revenues, for the three
months ended September 30, 2002. Depreciation and amortization decreased as a
result of fewer investments in software and customer leased computer equipment
and our adoption in January 2002 of SFAS 142, which ceased the amortization of
goodwill.
PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming
expenses increased by 3.9% from $7.0 million, or 15.0% of revenues, for the
three months ended September 30, 2001, to $7.2 million, or 15.2% of revenues,
for the three months ended September 30, 2002. The increase was due primarily to
additional staff being hired and additional consulting work for increased
product development efforts.
RESTRUCTURING CHARGES. 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. During the third quarter of 2002, the
Company recorded an additional $0.9 million to revise the estimated future
sublease income from $3.2 million to $2.3 million as a result of the current
weak conditions of the real estate market. If the Company has not sublet the
office space by September 30, 2003, it will need to reevaluate the amount
recorded, at that time. The lease for this office space expires March 31, 2006.
INTEREST EXPENSE. Interest expense decreased from $1.1 million for the
three months ended September 30, 2001 to $0.2 million for the three months ended
September 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 have had no borrowings since that
time.
17
MINORITY INTEREST EXPENSE. We recorded minority interest expense of $0.5
million for the three months ended September 30, 2002 versus $0.4 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 ("Capricorn"). The minority interest expense represents Capricorn's share of
CCC Trust's income. In October of 2002 we purchased the outstanding Trust
Preferred Securities from Capricorn, and as a result will not have any interest
expense relating to these securities beyond October 2002. The Company expects
the impact of the purchase of the outstanding Trust Preferred Securities to
reduce interest expense as follows:
REMAINING
TOTAL 2002 2003 2004 2005 2006
Interest expense savings $ 7,989 382 2,107 2,392 2,695 413
EQUITY IN INCOME (LOSSES) OF CHOICEPARTS. We recorded income of $0.1
million for the three months ended September 30, 2002 related to our 27.5% share
of the income (losses) in ChoiceParts compared to a charge of $(0.5) million for
the same period last year.
INCOME TAXES. Income taxes decreased from a provision of $0.9 million, or
50.9% of income from continuing operations before income taxes for the three
months ended September 30, 2001, to an income tax provision of $0.8 million, or
9.7% of income from continuing operations before income taxes for the same
period this year. The decrease in the effective tax rate is primarily due to
research tax credits of $2.0 million, or 26.1% of income from continuing
operations before income taxes, applied for in the third quarter of 2002.
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.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2001
The Company reported net income of $17.9 million, or $0.66 per share on a
diluted basis, for the nine months ended September 30, 2002, versus a net loss
of $(27.1) million, or $(1.24) per share on a diluted basis, for the same period
last year. Included in the current year net income is the income from
discontinued operations of $0.4 million, net of income taxes, or $0.01 per
share. 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, or $(1.27) per share and the
restructuring charge of $(6.2) million, or $(0.28) per share.
OPERATING INCOME. Operating income increased period over period by $28.0
million, to $26.7 million, due to a decrease in expenses of $24.7 million and an
increase in revenues of $3.3 million. Our operating margin, (operating income
(loss) as a percentage of revenue), increased to 18.6% for the period ended
September 30, 2002 compared to (1.0%) in 2001. The increase in operating income
and margin for the nine months ended 2002 was due primarily to a continued
improvement in profitability resulting from our restructuring, which occurred in
June 2001. As a result of the restructuring, the number of full-time employees
has decreased by approximately 30% in 2002 over the prior year. Operating income
for the nine months ended September 30, 2001 included a restructuring charge of
$(6.2) million and an operating loss of $(3.6) million for CCC International,
which was shut down in June 2001.
18
EARNINGS BEFORE INTEREST ,TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA").
The Company evaluates operating performance based on several factors, including
its primary financial measure of operating income (loss) before non-cash
depreciation of tangible assets and amortization of intangible assets
(''EBITDA''). The Company considers EBITDA an important indicator of the
operational strength and performance of its business. The term EBITDA does not
have a standardized meaning prescribed by generally accepted accounting
principles and therefore may not be comparable to similarly titled measures
presented by other publicly traded companies.
As a result of the factors mentioned above, in "Operating Income",
consolidated earnings before interest, taxes, depreciation and amortization
increased to $33.8 million for the nine months ended September 30, 2002 compared
to an adjusted EBITDA of $11.4 million for the same period of 2001, excluding
CCC International. Excluding the office space charge of $0.9 million, adjusted
EBITDA for the third quarter of 2002 is $34.7 million.
The reconciliation of GAAP financial information to EBITDA and adjusted
EBITDA is as follows:
NINE MONTHS ENDED
SEPTEMBER 30,
----------------
2002 2001
------- --------
Operating income (loss) per GAAP financial statements $26,697 $(1,347)
Add: Depreciation and amortization. . . . . . . . . . 7,147 9,133
------- --------
EBITDA. . . . . . . . . . . . . . . . . . . . . . . . 33,844 7,786
Add: Exited International Segment loss. . . . . . . . - 3,638
Add: Office space charge. . . . . . . . . . . . . . . 869 -
------- --------
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . $34,713 $11,424
======= ========
REVENUES. Revenues for the nine months ended 2002 were $143.5 million
versus $140.1 million for the same period last year. Excluding revenues of $1.6
million from CCC International for the period ended September 30, 2001, revenues
from our U.S. business in the nine months ended September 30, 2002 increased
$5.0 million, or 3.6%, compared to the same period last year.
Revenue by major product groups in the U.S. include:
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
2002 2001
-------- --------
PATHWAYS Collision Estimating and Appraisal Solution Products $ 87,131 $ 81,689
TOTAL LOSS Valuation Services . . . . . . . . . . . . . . . . 34,099 36,281
Information Services Products . . . . . . . . . . . . . . . . 858 377
Workflow Products . . . . . . . . . . . . . . . . . . . . . . 16,337 13,914
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,050 6,222
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $143,475 $138,483
======== ========
Revenues from our PATHWAYS collision estimating products increased in the
nine months ended September 30, 2002 by $5.4 million or 6.7% compared to the
same period of 2001. This was led by an increase in the number of new
automotive collision repair customers, an increase in units from existing
insurance company customers and an increase in the number of PATHWAYS DIGITAL
IMAGING product units used by our automotive collision repair customers.
19
Revenues from our TOTAL LOSS valuation services decreased by $2.2 million
or 6.0% from the nine months ended September 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, our PATHWAYS APPRAISAL QUALITY SOLUTION and our CCC
AUTOVERSE CLAIM MANAGEMENT solution, increased in the nine months ended
September 30, 2002 by $2.4 million or 17.4% 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 14.9% from $25.2 million for the nine months ended September 30,
2001, or 18.0% of revenues, to $21.4 million, or 14.9% of revenues. These
expenses decreased by $1.7 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, $0.4 million from the DriveLogic support
department eliminated in June 2001 as part of restructuring and $0.3 million due
to renegotiated reduced rates for telecommunication, service bureau and network
costs.
COMMISSION, ROYALTIES AND LICENSES. Commission, royalties and licenses
expenses increased by 2.9% from $7.5 million for the nine months ended September
30, 2001, or 5.4% of revenues, to $7.8 million, or 5.4% of revenues compared to
the same period of 2002. These expenses increased as a result of new agreements
with a vendor to provide us with enhanced recycled parts data for our RECYCLED
PARTS SERVICES product.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased by 15.9% from $69.4 million, or 49.5% of revenues, for the
nine months ended September 30, 2001, to $58.4 million, or 40.7%, of revenues
for the nine months ended September 30, 2002. These expenses decreased primarily
as a result of the benefits of the restructuring and profit improvement
initiatives in 2001. Other contributing factors were lower communication
expenses, lower web-hosting fees and reduced conferences held in 2002.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased by 21.7% from $9.1 million, or 6.5% of revenues, for the nine months
ended September 30, 2001, to $7.1 million, or 5.0% of revenues, for the nine
months ended September 30, 2002. Depreciation and amortization decreased as a
result of fewer investments in software and customer leased computer equipment
and our adoption in January 2002 of SFAS 142, which ceased the amortization of
goodwill.
PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming
expenses decreased by 11.7% from $24.0 million, or 17.2% of revenues, for the
nine months ended September 30, 2001, to $21.2 million, or 14.8% of revenues,
for the nine months ended September 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 partially offset by hiring
additional staff and additional consulting work for increased product
development efforts.
20
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. 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.
During the third quarter of 2002, the Company recorded an additional $0.9
million to revise the estimated future sublease income from $3.2 million to $2.3
million as a result of the current weak conditions of the real estate market. If
the Company has not sublet the office space by September 30, 2003, it will need
to reevaluate the amount recorded, at that time. The lease for this office space
expires March 31, 2006.
INTEREST EXPENSE. Interest expense decreased from $3.6 million for the nine
months ended September 30, 2001 to $0.6 million for the nine months ended
September 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 have had no borrowings since that
time.
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.
MINORITY INTEREST EXPENSE. We recorded minority interest expense of $1.4
million for the nine months ended September 30, 2002 versus $0.9 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
("Capricorn"). The minority interest expense represents Capricorn's share of CCC
Trust's income. In October of 2002 we purchased the outstanding Trust Preferred
Securities from Capricorn, and as a result will not have any interest expense
relating to these securities beyond October 2002. The Company expects the impact
of the purchase of the outstanding Trust Preferred Securities to reduce interest
expense as follows:
REMAINING
TOTAL 2002 2003 2004 2005 2006
Interest expense savings $ 7,989 382 2,107 2,392 2,695 413
EQUITY IN INCOME (LOSSES) OF CHOICEPARTS. We recorded a charge of $(0.3)
million for the nine months ended September 30, 2002 related to our 27.5% share
of the losses in ChoiceParts compared to a charge of $(2.2) million for the same
period last year.
INCOME TAXES. Income taxes increased from an income tax benefit of $17.1
million, or 49.1% of the loss from continuing operations before income taxes for
the nine months ended September 30, 2001, to an income tax provision of $7.2
million, or 29.2% of income from continuing operations before taxes for the same
period this year. The dollar increase was mainly attributable to higher pretax
income partially offset by research tax credits of $2.0 million applied for in
the third quarter of 2002.
21
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.
OUTLOOK
Revenue for the fourth quarter should grow in the 1-2% range, as we work
closely with our customers to promote adoption of our new products. Revenue
growth from Pathways Collision Estimating is expected to be in the 3-4% range
over prior year. Revenues from Total Loss Valuation Services are expected to
decline approximately 2% for the fourth quarter versus prior year. Revenue from
our workflow products are expected to remain stable in the fourth quarter of
2002 compared to prior year, as a result of increased conversion and volume
increases from certain customers in the fourth quarter of 2001. Information
service revenue is also expected to remain stable for the fourth quarter of 2002
compared to the third quarter of 2002. Operating performance in the fourth
quarter should approximate the underlying performance during the third quarter.
For the full year 2002, operating income target range is $35-$36 million and
depreciation and amortization is expected to be approximately $9 million. The
adjusted EBITDA target range, excluding the office space charge of $0.9 million
(described under "Restructuring Charges"), is $45-$46 million for the full year
2002.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 2002, net cash provided by
operating activities was $35.6 million, proceeds received from the exercise of
stock options was $1.3 million, and proceeds from the employee stock purchase
plan was $0.3 million. The Company used $6.5 million, net, for repayment of
CCC's Credit Facility, $5.0 million for the purchase of equipment and software,
$1.1 million for interest payments on a CCC Capital Trust note, $0.9 million for
repayment on a short-term note and capital lease obligations, and $0.3 million
for an investment in ChoiceParts. As of September 30, 2002, the Company is
committed to fund an additional $1.7 million to ChoiceParts. There are no
specific plans to fund this commitment at this time. On October 21, 2002, the
Company also purchased the Trust Preferred Securities for $16.3 million.
Our principal liquidity requirements consist of our operating activities,
including product development, our investments in internal and customer capital
equipment and potential funding requirements for our ChoiceParts investment.
Management believes that cash flows from operations and borrowings available
under the Credit Facility will be sufficient to meet our liquidity needs for the
foreseeable future.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Our contractual obligations under capital and operating leases are as
follows:
REMAINING
TOTAL 2002 2003 2004 2005 2006 THEREAFTER
------- -------- ------ ------ ------ ------ -----------
Capital lease
obligations $ 757 111 488 158 - - -
Operating
leases. . . $28,231 2,613 8,605 6,108 3,342 2,668 4,895
22
The Company has an agreement with Hearst Communications Inc. ("Hearst") to
acquire the assets or common stock of a third party software provider before
January 5, 2003. The decision whether or not to acquire the target company is
dependent upon the completion of due diligence work and other analysis factors.
If the Company decides to acquire the target, the business combination would be
accounted for by the purchase method and recorded at cost. If a decision not to
complete the acquisition is reached, and all terms of the agreement have
complied with, a one-time payment of $0.5 million is due to Hearst and the
related charge will be recorded at that time.
RISKS RELATING TO OUR BUSINESS
The additional risk factors identified this quarter 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 SEC.
The Company relies on specific third party vendors for access to data that
is used in certain of our products and services. While the Company is not
experiencing any difficulty obtaining this data, the profitability and financial
position of the Company may be adversely affected by any changes in its
relationships with these vendors. To ensure continued access to the data used in
our products and services, we are currently investigating other sources for this
data. We believe that current providers will continue to supply data or that we
will obtain access to alternative sources that provide comparable information,
however, there can be no assurance that the current data suppliers will continue
to supply data.
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 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.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Based on their evaluation as of a date within 90 days of the filing date of
this Quarterly Report on Form 10-Q, the Company's principal executive officer
and principal financial officer have concluded that the Company's disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act") are effective to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.
23
Changes in internal controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation. There were no significant deficiencies or material
weaknesses, and therefore there were no corrective actions taken.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information provided in Note 12 to the financial statements contained
in Part I, Note 12 of this Form 10-Q are incorporated herein by reference.
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
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement Re: Computation of Per Share Earnings
(b) Reports on Form 8-K
We filed a Current Report on Form 8-K, dated August 14, 2002, on August 14,
2002, to file the certification of the Chief Executive Officer and the
certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1850,
as created by Section 906 of the Sarbanes-Oxley Act of 2002.
24
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 14, 2002 CCC Information Services Group Inc. (Registrant)
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
25
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Githesh Ramamurthy, Chairman and Chief Executive Officer of CCC Information
Services Group Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCC Information
Services Group Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
26
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 14, 2002 By: /s/Githesh Ramamurthy
----------------------
Name: Githesh Ramamurthy
Title: Chairman and
Chief Executive Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Githesh Ramamurthy, Chairman and Chief Executive Officer of CCC Information
Services Group Inc. (the "COMPANY"), hereby certify that, to my knowledge:
1. The Quarterly Report on Form 10-Q of the Company for the quarterly
period ended September 30, 2002 (the "REPORT") fully complies with the
requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: November 14, 2002 By: /s/Githesh Ramamurthy
----------------------
Name: Githesh Ramamurthy
Title: Chairman and
Chief Executive Officer
27
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Reid E. Simpson, Executive Vice President and Chief Financial Officer of CCC
Information Services Group Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of CCC Information
Services Group Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
28
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 14, 2002 By: /s/Reid E. Simpson
--------------------
Name: Reid E. Simpson
Title: Executive Vice President
and Chief Financial Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Reid E. Simpson, Executive Vice President and Chief Financial Officer of CCC
Information Services Group Inc. (the "COMPANY"), hereby certify that, to my
knowledge:
1. The Quarterly Report on Form 10-Q of the Company for the quarterly
period ended September 30, 2002 (the "REPORT") fully complies with the
requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: November 14, 2002 By: /s/Reid E. Simpson
--------------------
Name: Reid E. Simpson
Title: Executive Vice President
and Chief Financial Officer
29
EXHIBIT INDEX
Exhibit Number Exhibit Description
- --------------- --------------------
11 Statement Re: Computation of Per Share Earnings
30