**UNITED
STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
D.C. 20549**





**FORM
10-K**





**ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
THE SECURITIES EXCHANGE ACT OF 1934**





**For
the fiscal year ended December 31, 2004**





Commission
File Number: 000-28600





**CCC
INFORMATION SERVICES GROUP INC.**


(Exact
name of registrant as specified in its charter)





**Delaware**
      (State
      or other jurisdiction of
      incorporation
      or organization)
    **54-1242469**
      (I.R.S.
      Employer
      Identification
      Number)


****


**World
Trade Center Chicago**


**444
Merchandise Mart, Chicago, Illinois 60654**


(Address
of principal executive offices, including zip code)





**Registrant's
telephone number, including area code:**


**(312)
222-4636**





**Securities
registered pursuant to Section 12(b) of the Act:**


**NONE**





**Securities
registered pursuant to Section 12(g) of the Act:**


Common
Stock, $0.10 par value





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  [
 ]





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [  ]





Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes [X]
No  [ 
]





As of
June 30, 2004, the aggregate market value of the registrant's common stock held
by non-affiliates was approximately $156,215,860, based upon the closing sales
price of the registrant's common stock reported for such date on the NASDAQ
National Market. For purposes of this calculation, all directors, executive
officers and holders of more than 5% of the registrant's outstanding common
stock as of such date were deemed to be "affiliates" of the
registrant.





As of
March 11, 2005, 16,299,433 shares of the registrant's common stock, par value
$0.10 per share, were outstanding.





**DOCUMENTS
INCORPORATED BY REFERENCE**





Part III
of this Annual Report on Form 10-K incorporates by reference portions of
the registrant's Notice of 2005 Annual Meeting of Stockholders and Proxy
Statement.











**CCC
INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES**





**ANNUAL
REPORT ON FORM 10-K**


**FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2004**




**TABLE
OF CONTENTS**


**Page****PART
      I**Item
      1.
    Business
    1Organization
    1Public
      Filings
    1Employees
    1Products
      and Services
    2Sales
      and Marketing
    6Training
      and Support
    6Customers
    6ChoiceParts
      Joint Venture
    6Intellectual
      Property and Licenses
    7Competition
    8Regulation
    8Research
      and Development
    9Certain
      Risks Related to Our Business
    9Item
      2.
    Properties
    11Item
      3.
    Legal
      Proceedings
    12Item
      4.
    Submission
      of Matters to a Vote of Security Holders
    12**PART
      II**Item
      5.
    Market
      for Registrant's Common Equity and Related Stockholder
    Matters
    12Item
      6.
    Selected
      Financial Data
    13Item
      7.
    Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
    14Item
      7A.
    Quantitative
      and Qualitative Disclosure about Market Risk
    26Item
      8.
    Financial
      Statements and Supplementary Data
    26Item
      9.
    Changes
      in and Disagreements with Auditors on Accounting and Financial
      Disclosure
    26Item
      9A.
    Controls
      and Procedures
    27Item
      9B.
    Other
      Information
    27**PART
      III**Item
      10.
    Directors
      and Executive Officers of the Registrant
    28Item
      11.
    Executive
      Compensation
    28Item
      12.
    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholders Matters
    28Item
      13.
    Certain
      Relationships and Related Transactions
    28Item
      14.
    Principal
      Accounting Fees and Services
    28**PART
      IV**Item
      15.
    Exhibits
      and Financial Statement Schedules
    29Signatures
    65Directors
      and Executive Officers
    66Corporate
      Information
    67


****CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**
****
******


**Forward-Looking
Statements**




*In
addition to historical facts or statements of current conditions, this Annual
Report on Form 10-K for the year ended December 31, 2004 ("Form 10-K") contains
forward-looking statements. Forward-looking statements provide our current
expectations or forecasts of future events. These may include statements
regarding market prospects of 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 and insurance industries as well
as more specific risks and uncertainties such as those set forth elsewhere in
the Form 10-K. 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. Risks that
we anticipate are discussed in more detail in the section entitled Item 1.
“Business - Certain Risks Related to Our Business." This discussion is permitted
by the Private Securities Litigation Reform Act of 1995.*




**PART
I**




**Item
1. Business**




**Organization**




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




**Public
Filings**




Our
principal executive office is located at World Trade Center Chicago, 444
Merchandise Mart, Chicago, Illinois 60654. Our telephone number is (312)
222-4636 and our Internet home page is located at www.cccis.com; however, the
information in, or that can be accessed through, our home page is not part of
this report. Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to such reports, if any, are
available free of charge on our Internet home page as soon as reasonably
practicable after we electronically file such material with, or furnish it to,
the Securities and Exchange Commission ("SEC").




**Employees**




We
employed 766 full-time and 354 part-time employees at December 31, 2004. This is
compared to 895 full-time and 338 part-time employees at the end of
2003.






1


****


**Products
and Services**




**Overview**




Our
products and services fall into five categories or “suites”: CCC Pathways®
Products and Services, CCC Valuescope® Products and Services, Workflow Products,
Information Services and Other Products and Services. Each of these product and
service suites is described below. Our principal products and services are CCC
Pathways collision estimating software, CCC Valuescope Claim Services and
Workflow Products. Revenues from CCC Pathways represented 62.8%, 61.1% and 60.6%
of our consolidated revenues for the years ended December 31, 2004, 2003, and
2002, respectively. Revenues from CCC Valuescope represented 21.0%, 21.8% and
23.7% of our consolidated revenues for the years ended December 31, 2004, 2003
and 2002, respectively. Revenues from Workflow Products represented 13.0%, 13.5%
and 11.8% of our consolidated revenues for the years ended December 31, 2004,
2003 and 2002, respectively.




CCC has
long been a leader and innovator in the automotive claims and collision repair
market. CCC customers include approximately 21,000 collision repair-facilities,
located in all 50 states, and over 350 insurance company installations in the
United States. We have also pioneered value-added network communications between
industries involved in claims settlement, and today our EZNet® communications
network handles an average of over 1 million claims-related transactions each
business day. CCC Valuescope is also an established market leader. We continue
to seek products and services to anticipate and respond to changing demands in
the auto-claims industry.




**CCC
Pathways**





This
suite consists of our collision estimating products:




·
    CCC Pathways® Registered Appraisal Solution
      (for insurance customers);


·
    CCC Pathways®  Registered Estimating
      Solution (for collision repair facility
customers);
 ·
    CCC Pathways®  Registered Independent
      Appraiser Solution (for independent appraisers);
 ·
    CCC Pathways® Digital
Imaging;
 ·
    Recycled Parts Services;
and
 ·
    Comp-EstTM Estimating
Solution


*CCC
Pathways Solutions* 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 CCC
Pathways platform allows customers to integrate our other services, including
CCC Pathways Digital Imaging, Recycled Parts Services and CCC Valuescope, in
order to organize individual claim information in electronic workfiles, which
can be stored either via our EZNet communications network or our CCC Autoverse®
workflow solution, both of which are described later in this section under
"Workflow Products."




CCC
Pathways gives
customers access to the MOTOR Crash Estimating Guides prepared by Motor
Information Systems, a unit of Hearst Business Publishing, Inc. ("Hearst").
These guides provide pricing, labor and refinishing information for original
equipment manufacturer parts and recycled assemblies and we use it to create a
database of parts, price and labor time for various repairs. An exclusive
license from Hearst that expires in 2021 permits us to publish these guides
electronically, which is an integral component of CCC Pathways. For more
information about this license, please see the description later in this section
under Item 1. “Business - Intellectual Property and Licenses."




2





Customers
also use CCC Pathways to access **** databases
of information gathered from various vendors. These databases include a
compilation of data from
over 1,693 sources on local
part availability and price information on aftermarket and reconditioned parts,
as well as information on pricing and availability of over 17,495 tire models
from 24 different manufacturers. Customers using CCC Pathways with Recycled
Parts Services also have access to a database that provides local part
availability and price information on over 32.2
million available recycled
or salvaged parts. For example, a customer may access the database of recycled
or salvaged parts to determine if a specific recycled part is available from an
identified vendor in his region and to ascertain the price of that part. If the
customer selects that part for use in the repair process, CCC Pathways
integrates that choice into the estimate workfile.




We sell Recycled
Parts Services to our customers under
multi-year agreements. Customers are either billed on a per-transaction basis at
the beginning of the month following the transactions or on a monthly
subscription basis  one month
in advance.




We
provide updates to the MOTOR Crash Estimating Guides and the other
integrated databases used by CCC Pathways for our customers monthly via a
CD-ROM, except for the Recycled Parts Services database, which our vendor
updates electronically on a daily basis.




We
license CCC Pathways to automobile insurance companies, collision repair
facilities and independent appraisers under multi-year contracts and bill
customers on a monthly subscription basis one month in advance.




*CCC
Pathways Digital Imaging.*  Imaging
integration allows automobile insurance companies, collision repair facilities
and independent appraisers to attach digital images of damaged vehicles to the
CCC Pathways estimate workfile and transmit images with the workfile. These
electronic images can be accessed by any authorized participant in the
automobile claim process at any time and from any web enabled location. CCC
Pathways ** Digital
Imaging reduces the need for onsite inspections and eliminates film, photo
processing, travel and overnight delivery costs.




We sell
CCC Pathways Digital Imaging to our customers under multi-year contracts and
bill our customers on a monthly subscription basis one month in
advance.




*Comp-Est*  *Estimating
Solution* is our
collision estimating software that targets smaller repair facilities that do not
communicate electronically with insurance companies. This product also allows
our customers to access the MOTOR Crash Estimating Guides and provides
them with the ability to generate estimates and supplements. We sell Comp-Est
Estimating Solution to our customers generally under annual contracts and bill
them on a monthly subscription basis one month in advance.




**CCC
Valuescope**




*CCC
Valuescope* . Our CCC
Valuescope services are used primarily by automobile insurance companies and
independent appraisers in processing claims involving private passenger 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 or independent appraiser with the local market value of the
vehicle to assist in processing the claim. Our
values are based on local market data that identifies the location and price of
comparable vehicles. To compile this data, CCC representatives survey over 4,400
car dealerships in more than 350 markets at least twice each month to obtain
detailed information about the vehicles on the dealerships' used car lots. We
also subscribe to more than 1,800 local newspapers and other publications and
use information from the classified advertisements to provide additional
information on vehicle availability and pricing. We believe our CCC Valuescope
database is among the most current and comprehensive vehicle databases in North
America. Each CCC Valuescope market report also includes a vehicle
identification search under VINguard *,* which
matches a current vehicle claim against our database of previously totaled or
stolen vehicles to identify potential duplication or possible fraud.




3





Customers
of CCC Valuescope who are also customers of CCC Pathways may access the CCC
Valuescope program electronically using CCC Pathways software. Customers may
also obtain CCC Valuescope valuations from us by telephone, e-mail or facsimile.
Our TL2000 Solution® product allows customers to submit CCC Valuescope valuation
requests and retrieve CCC Valuescope market valuation reports through the
Internet via secured access. In addition, our customers' insureds and claimants
can access their own vehicle valuation reports via the Internet. Customers may
store CCC Valuescope valuations on our EZNet communications network as part of a
claims workfile.




*Commercial
and Recreational Vehicle*  *Valuation
Services ("CRV")* . CRV is
the Company's CCC
Valuescope valuation service for commercial and recreational vehicles. CRV provides
valuations for specialty vehicles including trucks, semi-trailers, marine craft,
motorcycles, recreational vehicles and pre-fabricated housing.




We sell CCC
Valuescope and CRV
to our customers, including those who are CCC Pathways customers, on a
per-transaction basis under multi-year contracts. Customers are generally billed
in the month following the transactions.




**Workflow
Products**




*CCC
Autoverse.* Our CCC
Autoverse® products include CCC
Autoverse® Claim Management (for insurance customers), CCC Autoverse Repair
Management (for multiple-location repair facilities) and CCC Autoverse®
Appraiser Management (for independent appraiser customers). CCC Autoverse is a
web-based open workflow solution that allows for the exchange of claims
information derived from using CCC Pathways products as well as other
established collision estimating systems that meet the Collision Industry
Electronic Commerce Association Estimating Management System standard. CCC
Autoverse products facilitate the secure flow of information between those who
write damage estimates and insurers who process claims.




CCC
Autoverse Claim Management enables an insurance adjuster to review estimates as
well as digital images, supplements, claim summary reports and other documents
associated with the claim. In addition, CCC Autoverse Claim Management allows
the insurance adjuster to review events, enter new assignments and request and
record payment information. CCC Autoverse Claim Management also provides
reporting for assignment status.




CCC
Autoverse Repair Management enables a CCC Pathways user or non-user repair
facility operator to receive assignments into a central location from multiple
insurance carriers. Through the CCC Autoverse dispatch feature, multi-location
repair facilities are able to balance workloads among numerous locations. This
permits a multi-location operator to reduce its cycle time and improve shop
utilization.




We sell
CCC Autoverse products to our customers on a per-transaction basis under
multi-year agreements. Customers are billed at the beginning of the month
following the transactions.




*EZNet
Communications Network.* Our
EZNet communications network is a secure network that allows clients to
communicate estimates and claim information electronically. Our customers can
access our EZNet communications network in various ways, including dedicated
data lines and/or telephone lines via modems, as well as over the Internet. We
also use our EZNet communications network to offer to our customers various
electronic direct repair services such as dispatch of assignment information,
estimate and supplement retrieval and electronic review of automobile
appraisals. The network allows customers to electronically communicate claim
information, including assignments, workfiles, estimates, images and auditable
estimate data, internally and among insurance company appraisers, collision
repair facilities, independent appraisers, insurance company reinspectors and
other parties involved in the automobile claims process. The EZNet
communications network allows customers to share information and review claims,
regardless of their location and provides them with an electronic library to
catalog, organize and store completed claims files.




4





After
completing an estimate, the customer may store the estimate information on our
EZNet communications network in the electronic library. For example, a remote
claims adjuster in New York may prepare an estimate using CCC Pathways and store
the completed estimate on EZNet. The adjuster's supervisor and other members of
the claim team in California can access the estimate through our EZNet
communications network on a confidential basis using a claim reference number.




We sell
EZNet services to our customers under multi-year contracts and bill them on a
per-transaction basis. Customers are billed at the beginning of the month
following the transactions.




*CCC
Accumark* TM *Reinspection.* CCC
Accumark Reinspection allows for online access to automobile repair estimates
and other claim folder contents to perform reinspections. CCC Accumark
Reinspection enables insurance companies to establish sophisticated filters,
customized to their business, to prioritize claim files for review and assist
the reinspector in monitoring compliance with the insurance company’s
reinspection objectives. Additionally, the reinspector can redline the estimate
and communicate with the estimate writer to facilitate corrections to the
estimate.




We sell
CCC Accumark Reinspection to our customers under
multi-year agreements. Customers are either billed on a per-transaction basis at
the beginning of the month following the transactions or on a monthly
subscription basis  one month
in advance.




*CCC
Pathways Quality Advisor* and *Quality Advisor Appraisal Review (QAAR PlusTM).* QAAR
Plus allows for electronic audits 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. In addition, CCC Pathways
Quality Advisor allows automobile insurance companies to use available
historical data to track the performance of appraisers and provides a mechanism
to establish and monitor compliance with certain reinspection objectives
developed by the automobile insurance company. For example, CCC Pathways Quality
Advisor allows an insurance company to establish certain criteria for reviewing
the preparation of estimates, which in turn allows the insurance company to
determine if an appraiser prepared an estimate that meets insurance
company's guidelines.




We sell
CCC Pathways Quality Advisor and QAAR Plus to our customers under
multi-year agreements. Customers are either billed on a per-transaction basis at
the beginning of the month following the transactions or on a monthly
subscription basis  one month
in advance.




**Information
Services Products**




*CCC
Intellisphere* TM. CCC
Intellisphere is our next generation, online web-based information service that
provides access to create and distribute industry and company claims data. CCC
Intellisphere provides our customers with flexible methods to access claims data
and analyze certain key performance metrics, including parts and labor usage,
adherence to company established estimating guidelines, valuation results and
vehicle disposition.




*ClaimScope®
Navigator.* ClaimScope
Navigator is our online, web-based information service that provides a
comprehensive method to create management reports comparing industry and company
performance using CCC Pathways and CCC Valuescope 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.




We sell
CCC Intellisphere and ClaimScope Navigator services on a subscription
basis under multi-year agreements, which are billed to customers one month in
advance.




5


****


**Other
Products and Services**




*Pathways
Enterprise Solution®* and *Pathways
Professional Advantage®.* Pathways
Enterprise Solution is an automotive repair facility management software system
that allows multiple location collision repair facilities to manage accounts,
prepare employee schedules and perform various other management functions.
Pathways Professional Advantage, similar to Pathways Enterprise Solution, is a
repair facility management software system for a single store location.




We sell
Pathways Professional Advantage and Pathways Enterprise Solution to our
customers under multi-year contracts and bill them on a monthly subscription
basis one month in advance.




*CARS®* was a
multi-vendor, online car rental reservation and management system, which allowed
insurers control over car class selection, rates and extensions. We discontinued
this service in the third quarter of 2004.




**Sales
and Marketing**




All of
our services are currently sold throughout the United States. Our sales and
marketing strategy is to strengthen our relationships with existing customers
and to expand our current customer base by providing efficient, integrated and
value-added services in the automobile claims industry. We utilize approximately
150 sales and service professionals to market and implement our services.




**Training
and Support**




Our
training and support staff, which consists of approximately 100 employees,
provides basic training in the field, advanced training courses, telephonic
technical support and implementation services. Our training and support staff
consists of individuals with technical knowledge relating not only to CCC
software and services, operating systems and network communications, but also to
new and used automobile markets and collision repair. We routinely analyze
customer calls to modify services or training and, whenever necessary, will
dispatch a field representative to a customer's location.




**Customers**




We
provide our products and services primarily to automobile insurance companies
and collision repair facilities. Our insurance company customers include most of
the largest United States automobile insurance companies and small to medium
size automobile insurance companies serving regional or local markets. CCC
services approximately 21,000 collision repair-facilities, located in all 50
states, and over 350 insurance company installations in the United States. We
bill our customers for our products and services based on either a monthly
subscription or a per-transaction basis. No single customer accounted for more
than 5.0% of our total revenues in any of the last three fiscal
years.




**ChoiceParts
Joint Venture**




On May 4,
2000, we formed an independent company, ChoiceParts, LLC ("ChoiceParts") with
Automatic Data Processing Inc. ("ADP") and The Reynolds and Reynolds
Company ("Reynolds") to provide electronic parts location and procurement
services to collision repair facilities. We have a 27.5% equity interest in
ChoiceParts. See Note 6, "Investment in ChoiceParts, LLC" in our consolidated
financial statements.




6


****


**Intellectual
Property and Licenses**




Our
competitive advantage primarily depends on our proprietary technology. We rely
on a combination of patents, contracts, intellectual property laws,
confidentiality agreements and software security measures to protect our
proprietary rights. We distribute our services under written license agreements,
which grant our customers a license to use our products and services and contain
provisions to protect our ownership and the confidentiality of the underlying
technology. We also require all of our employees and other parties with access
to our confidential information to sign agreements prohibiting the unauthorized
use or disclosure of our technology.




We have
registered names, trademarks and slogans used in connection with virtually all
of our products and services, which we use in the advertising and marketing of
our products and services. CCC Pathways and CCC are well-known marks within the
automobile insurance and collision repair industries. We have patents for our
collision estimating service pertaining to the comparison and analysis of the
"repair or replace" and the "new or used" parts decisions. In 1999, we received
a patent covering the CCC Pathways method for managing insurance claim
processing. Although we do not have a patent concerning the CCC Valuescope
calculation process, the processes involved in this program are our trade
secrets and are essential to our CCC Valuescope business. Despite these
precautions, we believe that existing laws provide only limited protection for
our technology. A third party may misappropriate our technology or independently
develop similar technology. Additionally, it is possible other companies could
successfully challenge the validity or scope of our patents, diminishing the
competitive advantage that our patents may provide.




We
license certain data used in our services from third parties to whom we pay
royalties. With the exception of the MOTOR Crash Estimating Guides, which we
license from a unit of Hearst, we do not believe that our services are
significantly dependent upon licensed data that cannot be obtained from other
vendors. Although we have licensed the estimating guides from Hearst through
2021, we do not have access to an alternative database that would provide
comparable information in the event the license is terminated. Hearst may
terminate the license if any of the following events occur: (1) we fail to
make payment of license fees, royalties and other charges due under the
agreement; (2) we do not comply with the material terms and conditions of
the agreement; (3) we become bankrupt or insolvent and we are unable to
perform our obligations under the agreement; or (4) upon two years' notice,
if Hearst discontinues or abandons publication of the estimating guides.




Any
interruption of our access to the MOTOR Crash Estimating Guides provided by a
unit of Hearst could have a material adverse effect on our business, financial
condition and results of operations.




In
addition, we license data used in the Recycled Parts Services database. We have
a data supply agreement with a provider of recycled parts data,
Car-Part.com, which expires in June 2005.  We are currently negotiating a
renewal of the existing data supply agreement and considering alternative
sources of obtaining this data, if necessary. Any interruption of our access to
the data contained in the Recycled Parts Services database could have a material
adverse effect on our business.




We are
not engaged in any material disputes with other parties that challenge our
ownership or use of our proprietary technology. We cannot assure you that other
parties will not assert technology infringement claims against us in the future.
Defending any such claim may involve significant expense and management time.
Moreover, if any such claim were successful, we could be required to pay
monetary damages, refrain from distributing the infringing product or obtain a
license from the party asserting the claim, which may not be available on
commercially reasonable terms. In addition, we cannot assure you that we will
not have to take legal action in the future to enforce our intellectual property
rights, as we have done in the action we filed against Mitchell International
Inc. ("Mitchell") described in Item 3, "Legal Proceedings."  Any action we
may take to enforce our intellectual property rights may involve significant
expense and management time and the outcome is uncertain.




7


****


**Competition**




The
industry in which we participate is highly competitive. We compete by offering
value-added products and services that we believe are unique and by providing
what we believe is superior customer service for these solutions. Historically,
our principal competitors have included the Claims Services Group of ADP and
Mitchell. The Claims Services Group of ADP offers a collision estimating and
digital imaging system and a vehicle valuation service to the automobile
insurance industry and a collision estimating and digital imaging system and a
shop management system to the collision repair industry. Mitchell publishes
crash guides for both the automobile insurance and collision repair industries
and markets collision estimating, shop management and imaging products. In
addition, we face competition from several new companies, many of which focus on
the delivery of services over the Internet. We experience steady competitive
price pressure.




We intend
to address competitive price pressures by providing higher quality
value-added products and services that offer more advanced features to our
customers. We also intend to continue to develop unified, user-friendly claim
services that incorporate our comprehensive proprietary inventory of data. We
expect that CCC Pathways will continue to provide a unique service for our
insurance and collision repair facility customers and allow us to effectively
address competitive price pressures.




Some
insurance companies have entered into agreements with CCC or our competitors
that provide that the insurance companies will use either CCC’s or the
competitor’s product or service exclusively or designate CCC or a competitor as
its preferred provider of that product or service. If the agreement is
exclusive, the insurance company requires that collision repair facilities,
independent appraisers and regional offices use the particular product or
service. If the company is simply a preferred provider, the collision repair
facilities, independent appraisers and regional offices are encouraged to use
one of the approved products, but may choose any other vendor's product or
service. Being included on the approved list of an insurance company or having a
product that is endorsed by the insurance company provides certain benefits,
including immediate customer availability and an advantage over competitors who
may not have such approval. To the extent an insurance company has endorsed ADP,
Mitchell or another competitor, but not us, we may experience a competitive
disadvantage.




Additionally,
the Company sometimes pays a new customer for the remaining commitment of its
previous contract with third parties as an incentive. The amount paid by the
Company is deferred and amortized over the term of the contract negotiated with
the Company. See Note 11, "Other Current Assets" to our consolidated financial
statements.




**Regulation**




The
Company’s insurance company customers are subject to laws of and regulation by
individual state insurance regulatory agencies. In many states, those agencies
have promulgated regulations governing the settlement of total loss insurance
claims, and the Company monitors these regulations and their impact on CCC
Valuescope. A large portion of the revenue from CCC Valuescope during the year
ended December 31, 2004 came from those states with the largest number of
registered vehicles, such as California, Florida, Illinois, New York,
Pennsylvania, Ohio, New Jersey, Georgia and Texas, with no specific state
accounting for more than approximately 17% of the Company’s volume for CCC
Valuescope.




CCC
Valuescope has been expressly approved for use by regulators in some states. In
most states, however, there is no formal approval process for total loss
valuation products, but CCC Valuescope is indirectly affected by the actions of
insurance regulators because the Company’s customers are subject to regulation.




Periodically,
the Company or its customers receive inquiries from state insurance regulators
regarding various aspects of CCC Valuescope. Most such inquiries are of a
routine nature and are addressed in the ordinary course of business. From time
to time, however, individual state departments of insurance have taken positions
as to whether the use of CCC Valuescope valuations is in compliance with a
state’s claim handling regulations.




8





The
Company is aware that since 2002 the California Department of Insurance has
advised some of the Company's customers (which management estimates to be
approximately 14% of the total revenue earned in 2004 from the Company's CCC
Valuescope valuation product and service) that the Department believed that
their use of CCC Valuescope had not been in compliance with the California
insurance regulations in effect prior to October 4, 2004, with respect to
certain components of the product’s methodology. The Company believes the
product was in compliance with the applicable California regulations.




On April
24, 2003, the California Department of Insurance formally adopted new
regulations that required the Company to change its methodology for computing
total loss valuations in California. Before those regulations were implemented,
however, the Superior Court of the State of California for the County of Los
Angeles enjoined their implementation and enforcement in a case captioned
PERSONAL INSURANCE FEDERATION OF CALIFORNIA, et al. v. JOHN GARAMENDI, INSURANCE
COMMISSIONER OF THE STATE OF CALIFORNIA, Case No. BC298284 (filed July 1, 2003).
CCC is not a party to that suit. A partial settlement was subsequently reached
in that litigation among the parties thereto, and the Department of Insurance
was allowed to implement and enforce certain provisions of the proposed
amendments to the Fair Claims Settlement Practices Regulations as of October 4,
2004. CCC implemented the necessary changes to comply with the new requirements
prior to that effective date, and the Company believes the product is in
compliance with applicable California regulations. The Department of Insurance
may implement further amendments, and to the extent any such amendments require
the Company to change its methodology, such modifications will be made prior to
the effective date of any amendments.




**Research
and Development**




For the
years 2004, 2003 and 2002 we incurred costs related to research and development
of new software products and services of $8.4 million, $6.3 million and $7.6
million, respectively, which were included as part of product development and
programming in our consolidated statement of operations.




**Certain
Risks Related to Our Business**




Set forth
below and elsewhere in this report and in other documents we file with the SEC
are certain risks and uncertainties that we believe could cause actual results
to differ materially from the results contemplated by the forward-looking
statements contained in this report.




*We
may not be able to successfully develop new products and services, which may
adversely affect our business.*




The
markets in which we compete are increasingly characterized by technological
change. The introduction of competing products and services incorporating new
technologies could render some or all of our products and services unmarketable.
We believe that our future success depends on our ability to enhance current
products and services and to develop new products and services that address the
increasingly sophisticated needs of our customers. As a result, we have
committed in the past and intend to continue to commit substantial resources to
product development and programming. The development of new products and
services may result in unanticipated expenditures and capital costs, which may
not be recovered in the event one or more of our products is unsuccessful. Our
failure to develop and introduce new or enhanced products and services in a
timely and cost-effective manner in response to changing technologies or
customer requirements would have a material adverse effect on our business,
financial condition and results of operations.




*Our
ability to provide collision estimating services to our customers could be
severely limited if access to data is interrupted.*




A
substantial portion of the data utilized in our collision estimating products is
derived from the MOTOR Crash Estimating Guides, which are published by a
unit of Hearst. We have an exclusive license to use the MOTOR Crash Estimating
Guides' data under an agreement with Hearst, which expires in 2021. Hearst may
terminate the license if any of the following events occur: (1) we fail to
make payment of license fees, royalties and other charges due under the
agreement; (2) we do not comply with the material terms and conditions of
the agreement; (3) we become bankrupt or insolvent and we are unable to
perform our obligations under the agreement; or (4) upon two years' notice,
if Hearst discontinues or abandons publication of the estimating guides.




9





We do not
believe that we have access to an alternative database that would provide
comparable information. Any interruption of our access to the MOTOR Crash
Estimating Guides' data could have a material adverse effect on our business,
financial condition and results of operations.




In
addition, we license data used in the Recycled Parts Services database. We have
a data supply agreement with a provider of recycled parts data,
Car-Part.com, which expires in June 2005.  We are currently negotiating a
renewal of the existing data supply agreement and considering alternative
sources of obtaining this data, if necessary.  Any interruption of our
access to the data contained in the Recycled Parts Services database could have
a material adverse effect on our business. There can be no assurance that we
will be able to renew this agreement on economic terms that are beneficial to
us, or at all.




*If we
are unable to protect our trade secrets, intellectual property and other
proprietary information, our ability to compete effectively could be adversely
impacted.*




We regard
the technology underlying our products and services as proprietary. We rely
primarily on a combination of intellectual property laws, patents, trademarks,
confidentiality agreements and contractual provisions to protect our proprietary
rights. We have registered certain of our trademarks. Our CCC Valuescope
calculation process is not patented; however, the underlying methodology and
processes are trade secrets and are essential to our CCC Valuescope business.
Existing trade secrets and copyright laws afford us limited protection. Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy aspects of our software, implement our proprietary patented technology
or obtain and use information that we regard as proprietary. Policing
unauthorized use of our software is difficult. There can be no assurance that
the obligations to maintain the confidentiality of our trade secrets and
proprietary information will effectively prevent disclosure of our confidential
information or provide meaningful protection for proprietary patent rights and
our confidential information, or that our trade secrets or proprietary
information will not be independently developed by our competitors. There can be
no assurance that our trade secrets, patent rights, copyrights or proprietary
information will provide competitive advantages or will not be challenged or
circumvented by our competitors. We may be required to litigate to defend
against claims of infringement, to protect our intellectual property rights,
which could result in substantial cost to, and diversion of efforts by, us.
There can be no assurance that we would prevail in any such litigation. If we
are unable to protect our proprietary rights in our intellectual property, it
could have a material adverse effect on our business, financial condition and
results of operations.




*We
are involved in legal proceedings that, if adversely adjudicated or settled,
could materially impact our financial condition.*




We are
currently involved in several legal proceedings that may result in substantial
payments by the Company. We currently are defendants in 11 class action suits
regarding CCC Valuescope. If we were to face a full court trial and be held
liable in any of the actions (or otherwise determine that it is in our best
interests to settle any of them), we could incur significant legal expenses and
be required to pay monetary damages (or settlement payments) that may have a
significant negative impact on our financial condition. In addition, the Company
has recorded a net pre-tax charge of $6.2 million as an estimate of the amount
that CCC will contribute toward the potential settlement of certain of the CCC
Valuescope lawsuits. See Note 9, "Litigation Settlements" to our consolidated
financial statements. The
consummation of the settlement with the plaintiffs and the amount of CCC's
contribution to the proposed settlement, however, remain subject to a number of
significant contingencies, including, among other things, the extent of
participation on the part of CCC's insurance company customers, the negotiation
of settlement terms between the plaintiffs and those of CCC's customers that are
participating in the settlement negotiations, as well as judicial approval of
any proposed settlement agreement. As a result, at this time, there is no
assurance that the settlement will be successfully consummated or, if completed,
that the final settlement will be on the same terms or levels of participation.
There is also no assurance that existing or potential claims arising out of the
remainder of CCC's total loss transaction volume could be settled on comparable
terms. See Note
27, "Legal Proceedings" to our consolidated financial statements.




10


**


*We
have incurred operating losses in the past and our future profitability is not
assured.*




We have
an accumulated net deficit from inception of approximately $121.9 million
through December 31, 2004 primarily as a result of our $210.0 million
self-tender offer in the third quarter of 2004 as well as historical operating
losses incurred in certain years prior to 2004, including 2001 and 2000. Losses
in those years resulted principally from costs incurred in product acquisition
and development, our former international operations in the United Kingdom, from
servicing of indebtedness and from general and administrative costs. Although we
increased our revenue in each of the years since 1999 and generated operating
income of $32.8 million and $40.5 million in 2004 and 2003, respectively, there
can be no assurance that we will be able to sustain this revenue growth or
achieve or maintain profitability in the future.




*If we
are unable to generate sufficient cash flow to service our indebtedness or other
obligations or find alternative financing sources, our business may be adversely
affected.*




Our
ability to make payments on our indebtedness and other obligations and to fund
planned expenditures depends on our ability to generate future cash flow. This,
to some extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. In
addition, our ability to borrow additional funds under our $30.0 million
Revolving Loan to meet our cash requirements depends on our ability to satisfy
various covenants under our Credit Agreement. As of December 31, 2004, we were
in compliance with all covenants.




We cannot
assure you that our business will generate cash flow from operations or that
future borrowings will be available to us under the Revolving Loan or otherwise.
In addition, we can give no assurances as to whether we will be able to obtain
additional financing from other sources. Inability to obtain financing from
alternative sources may have an adverse effect on our financial position,
results of operations and cash flow.




*Changes
in various state laws and regulations governing the use of CCC Valuescope by
insurance companies could restrict our ability to sell CCC Valuescope or require
us to incur significant expenses.*




Changes
in the content or interpretation of state laws or regulations in a way that
restricts the use of CCC Valuescope by insurance companies could restrict our
ability to sell CCC Valuescope in certain jurisdictions or require us to incur
significant expenses to modify and maintain the product. In addition, changes in
interpretation of existing laws or regulations could expose the Company or its
customers to lawsuits or regulatory action relating to past usage of the
product. These consequences of changes in content or interpretation of state
laws or regulations may have a material adverse effect on our business,
financial condition and results of operations. See the section entitled Item 1.
“Business - Regulation" for additional information.




*Terrorist
acts and acts of war may seriously impede our ability to operate, which could
adversely impact financial condition and results of
operations.*




Terrorist
acts or acts of war may cause damage or disruption to CCC, our employees,
facilities, suppliers, or customers, which could significantly impact our
revenue, costs and expenses and financial condition. The potential for future
terrorist attacks, the national and international responses to terrorist attacks
or perceived threats to national security, and other acts of war or hostility
have created many economic and political uncertainties that could adversely
affect our business and results of operations in ways that cannot presently be
predicted.




**Item
2. Properties**




Our
corporate office is located in Chicago, Illinois, where we lease approximately
104,000 square feet in a multi-tenant facility. This lease expires in
November 2008. In Glendora, California, we lease approximately 42,000
square feet of a facility under a lease expiring in June 2012, where a satellite
development center and distribution center are housed. We own a 50,000 square
foot facility in Sioux Falls, South Dakota, used primarily for certain customer
service and claims processing operations. During 2001, we vacated approximately
34,000 feet in a multi-tenant facility in Chicago previously occupied by our
discontinued DriveLogic business segment under a lease expiring in
March 2006. We have subleased the premises through the end of the term on
the existing lease. During 2003, we also entered into a lease, expiring in
September 2006, of approximately 12,000 square feet in Itasca, Illinois, for a
customer service and telesales center. We believe that our existing facilities
are adequate to meet our requirements for the foreseeable future.




11


****


**Item
3. Legal Proceedings**





The
information provided in Note 27, "Legal Proceedings" in our consolidated
financial statements contained in Item 15(a) 1 of this Form 10-K is incorporated
herein by reference.





On April
22, 2003, the Company filed a patent infringement lawsuit against Mitchell
International, Inc. in the United States District Court for the Northern
District of Illinois (Eastern Division).  In the complaint CCC alleges that
Mitchell is infringing CCC's patent entitled "system and method for managing
insurance claim processing", U.S. Patent No. 5,950,169 (" '169 Patent"). 
The '169 Patent includes coverage for the parts comparison feature in CCC
Pathways collision estimating software.  In
addition to a judicial determination that Mitchell infringed the '169 Patent,
CCC is seeking preliminary and permanent injunctions enjoining Mitchell from
further acts of infringement of the '169 Patent, triple monetary damages for
willful infringement, disgorgement of all profits resulting from the
infringement of the '169 Patent and attorneys fees.  On July
3, 2003, Mitchell filed an answer to the lawsuit, denying that it is infringing
the '169 Patent.  Mitchell also seeks a declaration from the Court that the
'169 Patent is invalid.  On July
2, 2004, Mitchell International Inc. filed a Motion for Summary Judgment in the
patent infringement lawsuit brought by the Company in the United States District
Court for the Northern District of Illinois (Eastern Division).  CCC filed
its response to Mitchell’s Motion for Summary Judgment on August 6, 2004, and
Mitchell filed a reply to CCC's response on August 20, 2004.  The Court has
not yet issued a ruling on Mitchell's motion.


****


**Item
4. Submission of Matters to a Vote of Security Holders**




None.





**PART
II**




**Item
5. Market for Registrant's Common Equity and Related Stockholder
Matters**




Our
common stock is traded on the NASDAQ National Market under the symbol "CCCG."
The following table sets forth the high and low closing sales prices per share
of our common stock for the fiscal periods indicated:





**2004**
    
    **2003****High**
    
    **Low**
    
    **High**
    
    **Low**First
      Quarter
    
    $
    20.20
    
    $
    16.55
    
    $
    21.60
    
    $
    15.97Second
      Quarter
    
    $
    18.05
    
    $
    13.86
    
    $
    18.19
    
    $
    13.92Third
      Quarter
    
    $
    18.56
    
    $
    14.77
    
    $
    16.76
    
    $
    12.37Fourth
      Quarter
    
    $
    22.69
    
    $
    17.80
    
    $
    17.20
    
    $
    16.55





Since our
initial public offering of common stock in August of 1996, we have not paid
any dividends. Our policy has been to retain cash to fund future growth.
However, in August 2004, the Company initiated a self-tender offer for 11.2
million of its shares for a price of $18.75/share using cash on-hand and a Term
B loan. As of March 11, 2005, there were 16,299,433 shares of common stock
outstanding and 58 stockholders of record.





12


****


**Item
6. Selected Financial Data**




Below are
the Company's condensed consolidated statements of operations and selected
balance sheet information for the five years ended December 31, 2004. This
information should be read in conjunction with the Consolidated Financial
Statements, which are included elsewhere in this Annual Report on Form
10-K.


**Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**
    
    **2001**
    
    **2000****(In
      Thousands, Except Per Share Data)****Consolidated
      Statement of Operations:**Revenues
    
    $
    198,653
    
    $
    193,352
    
    $
    191,860
    
    $
    187,941
    
    $
    184,641Expenses:Production
      and customer support
    
    
    32,315
    
    
    31,866
    
    
    28,376
    
    
    32,498
    
    
    41,449Commissions,
      royalties and licenses
    
    
    12,541
    
    
    11,713
    
    
    10,411
    
    
    10,129
    
    
    13,512Selling,
      general and administrative
    
    
    71,895
    
    
    68,089
    
    
    77,449
    
    
    90,892
    
    
    86,663Depreciation
      and amortization
    
    
    7,465
    
    
    7,923
    
    
    9,069
    
    
    11,820
    
    
    11,499Product
      development and programming
    
    
    30,164
    
    
    32,234
    
    
    28,383
    
    
    30,429
    
    
    27,895Stock
      compensation, non-cash
    
    
    13,139
    
    
    —
    
    
    —
    
    
    —
    
    
    —Restructuring
      charges
    
    
    886
    
    
    1,061
    
    
    869
    
    
    10,499
    
    
    6,017Litigation
      settlements
    
    
    (2,586
    )
    
    —
    
    
    —
    
    
    4,250
    
    
    2,375Total
      operating expenses
    
    
    165,819
    
    
    152,886
    
    
    154,557
    
    
    190,517
    
    
    189,410Operating
      income (loss)
    
    
    32,834
    
    
    40,466
    
    
    37,303
    
    
    (2,576
    )
    
    (4,769
    )Interest
      expense
    
    
    (3,986
    )
    
    (392
    )
    
    (708
    )
    
    (5,680
    )
    
    (3,135
    )Other
      income (expense), net
    
    
    552
    
    
    272
    
    
    455
    
    
    (248
    )
    
    5,101Gain
      on exchange of investment securities, net
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    18,437Loss
      on investment securities and notes
    
    
    —
    
    
    —
    
    
    —
    
    
    (28,267
    )
    
    —CCC
      Capital Trust minority interest expense
    
    
    —
    
    
    —
    
    
    (3,984
    )
    
    (1,371
    )
    
    —Equity
      in net income (losses) of ChoiceParts
    
    
    513
    
    
    (21
    )
    
    (291
    )
    
    (2,486
    )
    
    (2,071
    )Income
      (loss) from continuing operations before income taxes
    
    
    29,913
    
    
    40,325
    
    
    32,775
    
    
    (40,628
    )
    
    13,563Income
      tax (provision) benefit
    
    
    (11,340
    )
    
    (14,285
    )
    
    (10,420
    )
    
    18,329
    
    
    (3,452
    )Income
      (loss) from continuing operations before equity losses
    
    
    18,573
    
    
    26,040
    
    
    22,355
    
    
    (22,299
    )
    
    10,111Equity
      in net losses of affiliates
    
    
    —
    
    
    —
    
    
    —
    
    
    (2,354
    )
    
    (15,650
    )Income
      (loss) from continuing operations
    
    
    18,573
    
    
    26,040
    
    
    22,355
    
    
    (24,653
    )
    
    (5,539
    )Income
      (loss) from discontinued operations, net of income taxes
    
    
    —
    
    
    —
    
    
    354
    
    
    (5,972
    )
    
    (3,704
    )Net
      income (loss)
    
    $
    18,573
    
    $
    26,040
    
    $
    22,709
    
    $
    (30,625
    )
    $
    (9,243
    )**Income
      (loss) per common share****—****basic**Income
      (loss) from continuing operations
    
    $
    0.81
    
    $
    0.99
    
    $
    0.86
    
    $
    (1.12
    )
    $
    (0.25
    )Income
      (loss) from discontinued operations
    
    
    —
    
    
    —
    
    
    0.01
    
    
    (0.27
    )
    
    (0.17
    )Net
      income (loss)
    
    $
    0.81
    
    $
    0.99
    
    $
    0.87
    
    $
    (1.39
    )
    $
    (0.42
    )**Income
      (loss) per common share****—****diluted**Income
      (loss) from continuing operations
    
    $
    0.77
    
    $
    0.94
    
    $
    0.83
    
    $
    (1.12
    )
    $
    (0.25
    )Income
      (loss) from discontinued operations
    
    
    —
    
    
    —
    
    
    0.01
    
    
    (0.27
    )
    
    (0.17
    )Net
      income (loss)
    
    $
    0.77
    
    $
    0.94
    
    $
    0.84
    
    $
    (1.39
    )
    $
    (0.42
    )Weighted
      average shares outstanding:Basic
    
    
    22,993
    
    
    26,243
    
    
    25,850
    
    
    21,967
    
    
    21,851Diluted
    
    
    24,258
    
    
    27,655
    
    
    26,904
    
    
    21,967
    
    
    21,851
   13


**December
      31,****2004**
    
    **2003**
    
    **2002**
    
    **2001**
    
    **2000****(In
      Thousands)****Selected
      Consolidated Balance Sheet Data:**Cash
      and short-term investments
    
    $
    19,958
    
    $
    27,759
    
    $
    20,200
    
    $
    766
    
    $
    912Working
      capital
    
    
    6,290
    
    
    14,287
    
    
    (4,444
    )
    
    (20,256
    )
    
    (24,886
    )Total
      assets
    
    
    83,633
    
    
    86,735
    
    
    67,843
    
    
    62,194
    
    
    94,688Long-term
      debt, excluding current maturities
    
    
    169,613
    
    
    —
    
    
    —
    
    
    7,145
    
    
    42,000Stockholders'
      equity (deficit)
    
    
    (121,875
    )
    
    51,583
    
    
    21,184
    
    
    (6,811
    )
    
    2,118




**Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations**




The
following discussion should be read together with the Company's consolidated
financial statements and notes thereto, appearing elsewhere in this Form 10-K.
This discussion contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in such
forward-looking statements as a result of many factors, including, but not
limited to, those discussed in Item 1. “Business - Certain Risks Related to Our
Business."




**Critical
Accounting Policies and Estimates**




Management's
Discussion and Analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States,
or "GAAP." **** We review
the accounting policies used in reporting our financial results, including those
described in the notes to the consolidated financial statements, on a regular
basis. The preparation of these financial statements requires us to make
estimates, assumptions and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to our accounts receivable, income taxes, goodwill, intangibles,
software development, fair value of financial instruments and commitments and
contingencies. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities. Different assumptions or conditions can have a
significant impact on our results of operations and financial position, and
actual results may differ from these estimates. Our senior management has
reviewed the critical accounting policies and related disclosures summarized
below with the Audit Committee of our Board of Directors and the Disclosure
Committee. See "Preparation of Financial Information" in this section for
further discussion of the Disclosure Committee. We believe that the following
significant accounting policies and assumptions can have a significant impact on
our results of operations, financial position and disclosures and may involve a
higher degree of judgment and complexity than others.




*Revenue
Recognition.* Our
c ustomers
are either billed on a per-transaction basis at the beginning of the month
following the transactions or on a monthly subscription basis  one month
in advance. Revenues
are recognized only after services are provided, when persuasive evidence of an
arrangement exists, the fee is fixed and determinable and when collection is
probable. Revenue is deferred until all of these criteria are met. Revenues are
reflected net of customer sales allowances, which are based on both specific
identification of certain accounts and a predetermined percentage of revenue
based on historical experience.




*Accounts
Receivable, Net.* Accounts
receivable as presented in our consolidated balance sheet are net of reserves
for customer sales allowances and doubtful accounts. In addition to the sales
allowance, discussed above, we determine allowances for doubtful accounts based
on specific identification of customer accounts and the application of a
predetermined percentage, based on historical experience, to the remaining
accounts receivable balance. Our assessment of doubtful accounts includes using
historical information, current economic trends and the probability of
collection from customers. If there is a deterioration of a major customer's
credit worthiness or actual defaults are higher than our historical experience,
the recoverability of amounts due could be adversely affected. Reserves for
sales allowances and doubtful accounts were $2.4 million in 2004 compared to
$2.9 million in 2003. The decrease of $0.5 million from 2003 was the result of
an improvement in the overall aging of the Company's accounts
receivable.




14


**


*Income
Taxes.* Deferred
income taxes are recognized for the future tax effects of temporary differences
between financial and income tax reporting using tax rates in effect for the
years in which the differences are expected to reverse. Such deferred income
taxes primarily relate to the timing of recognition of certain revenue and
expense items, the timing of the deductibility of certain reserves and accruals
for income tax purposes. We establish a tax valuation allowance to the extent
that it is more likely than not that deferred tax assets will not be realizable
against future taxable income. In determining the need for valuation allowances,
we consider future market growth, forecasted earnings, future taxable income and
the mix of earnings in the jurisdictions in which we operate and prudent and
feasible tax planning strategies. In the event we were to determine that we
would not be able to realize all or part of our net deferred tax assets in the
future, an adjustment to the deferred tax assets would be charged to earnings in
the period such determination is made. Likewise, if we later determine that it
is more likely than not that the deferred tax assets would be realized, the
previously provided valuation allowances would be reversed. The Company believes
that it is more likely than not that the capital loss arising from a write-off
of its investment in ChannelPoint in 2001 will not be realized; therefore, a
valuation allowance of $7.4 million has been established for this item. We also
have foreign net operating losses from prior years related to CCC's
international operations, which were shut down in 2001. We have established a
valuation allowance of $4.2 million for the foreign net operating losses because
realization of these assets is doubtful.




In 2002,
the Company filed amended income tax returns for tax years 1998, 1999 and 2000
to claim research and experimentation tax credits for those years. As a result
of these amended returns, we recorded an estimated research and experimentation
credit of $2.0 million in 2002. We recorded an additional $1.1 million credit
related to these amended returns in 2003 as a result of the completion of an
Internal Revenue Service audit of those returns.




The
Company has recorded research and experimentation credits of $0.6 million, $0.1
million and $0.4 million for the years 2004, 2003 and 2002,
respectively.




*Goodwill
and Intangibles* *.* Under the
provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141
“Business Combinations” the purchase method of accounting is used for all
business combinations. The purchase method of accounting requires that the
excess of purchase price paid over the estimated fair value of identifiable
tangible and intangible net assets of acquired businesses is recorded as
goodwill. Under the provisions of SFAS No. 142 “Goodwill and Intangible Assets”
(“SFAS No. 142”), goodwill is no longer amortized. Under SFAS No. 142, goodwill
is reviewed for impairment on at least an annual basis, and when events or
changes in circumstances indicate that the carrying value of such assets may not
be recoverable. Recoverability of goodwill is evaluated using a two-step
process. The first step involves a comparison of the fair value of a reporting
unit with its carrying value. If the carrying value of the reporting unit
exceeds its fair value, the second step of the process involves a comparison of
the implied fair value and carrying value of the goodwill of that reporting
unit. If the carrying value of the goodwill exceeds the implied fair value of
that goodwill, an impairment loss is recognized in an amount equal to the
excess.




The
goodwill balance as of December 31, 2004 was $15.7 million. The balance includes
goodwill of $4.9 million from the 1988 acquisition that included the CCC
Valuescope service and goodwill of $10.8 million from the Comp-Est acquisition
completed at the end of February 2003. See Note
4, "Acquisition” to our consolidated financial statements. We
performed our annual impairment analysis during the second quarter of 2004.
Additionally, another valuation was performed in December 2004, which reaffirmed
there was no impairment of goodwill as of December 31, 2004.




Intangible
assets as of December 31, 2004 include $0.7 million for customer relationships
and $0.3 million for acquired software, both of which are being amortized on a
straight-line basis over a period of three years. Also included in intangible
assets is a trademark valued at $0.3 million that is not being amortized. There
have been no events or changes in circumstances that indicate that the values of
such assets are not recoverable.




15


**


*Software
Development Costs* . The
Company expenses research and development costs as they are incurred. The
Company evaluates the establishment of technological feasibility of its software
products in accordance with SFAS No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed." The Company sells
its software products in a market that is subject to rapid technological change,
new product development and changing customer needs. Accordingly, technological
feasibility of the Company's software products is generally not established
until the development of the software product is nearly complete. The Company
defines technological feasibility as the completion of a working model. The
period of time during which costs should be capitalized, from the point of
reaching technological feasibility until the time of general product release,
has historically been very short and, consequently, amounts subject to
capitalization have not been significant. Should our development process change
significantly, the Company would reevaluate the impact of SFAS No.
86.




*Fair
Value of Financial Instruments.* The
carrying amount of our financial instruments approximates their estimated fair
value based upon market prices for the same or similar type of financial
instruments. We perform an impairment review whenever events or changes in
circumstances indicate that the carrying value of these investments and notes
receivable may not be recoverable. Factors we consider important which could
trigger an impairment review include market conditions, valuations for similar
companies, financial performance and going concern risks.




*Commitments
and Contingencies.* Loss
contingencies are recorded as liabilities when it is probable that a liability
has been incurred and the amount of the loss can be reasonably estimated.
Contingent liabilities are often resolved over long time periods. Estimating
probable losses requires analysis of multiple factors that often depend on
judgments about potential actions by third parties such as regulators. We
regularly evaluate current information available to us to determine whether such
accruals should be adjusted.




During
2001, CCC 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 the potential settlement of certain lawsuits in which the
plaintiffs allege that their insurers using valuation reports prepared by CCC,
offered an inadequate amount for their total loss vehicles. In 2004, the charge
was increased by a net amount of $1.9 million to $6.2 million. This increase was
due to several factors, including the growth that has occurred in the size of
the putative classes of insureds over time, participation in the potential
settlement by an additional customer of CCC, increases in certain costs
associated with the settlement and changes in the terms of the settlement
between CCC and its participating customers. Additionally, the expected
insurance reimbursement has been reduced from $2.0 million to $1.8 million. The
Company continues to believe that the current recorded reserve is necessary and
appropriate.




**Preparation
of Financial Information**




We
believe that the application of accounting standards is as important as the
underlying financial data in reporting our financial position, results of
operations and cash flows. We believe that our accounting policies are prudent
and provide a clear view of our financial performance. In 2002, we formed a
Disclosure Committee, composed of senior management, including senior financial
and legal personnel, to help ensure the completeness and accuracy of our
financial results and disclosures. In addition, prior to the release of our
financial results, key management reviews our annual and quarterly results,
along with key accounting policies and estimates, with the Audit Committee of
our Board of Directors.




16





**2004
Compared with 2003**




*Operating
Income.* Operating
income decreased year over year by $7.6 million, to $32.8 million. An increase
in revenues of $5.3 million was more than offset by an increase in expenses of
$12.9 million, which included the effect of a non-cash stock compensation charge
of $13.1 million. Operating margins (operating income as a percentage of
revenue) decreased to 16.5% for the year ended 2004 compared to 20.9% in 2003.




*Revenues.* Revenue
by product suite is as follows (dollars in thousands):




**Variance****2004**
    
    **2003**
    
    **Increase
      (Decrease)**CCC
      Pathways
    
    $
    124,726
    
    
    62.8
    %
    $
    118,190
    
    
    61.1
    %
    $
    6,536
    
    
    5.5
    %CCC
      Valuescope
    
    
    41,642
    
    
    21.0
    %
    
    42,187
    
    
    21.8
    %
    
    (545
    )
    
    (1.3
    )%Workflow
      Products
    
    
    25,873
    
    
    13.0
    %
    
    26,107
    
    
    13.5
    %
    
    (234
    )
    
    (0.9
    )%Information
      Services Products
    
    
    2,016
    
    
    1.0
    %
    
    1,708
    
    
    0.9
    %
    
    308
    
    
    18.0
    %Other
      Products and Services
    
    
    4,396
    
    
    2.2
    %
    
    5,160
    
    
    2.7
    %
    
    (764
    )
    
    (14.8
    )%Total
      Revenue
    
    $
    198,653
    
    
    100.0
    %
    $
    193,352
    
    
    100.0
    %
    $
    5,301
    
    
    2.7
    %




Revenues
from CCC Pathways increased for the year ended 2004 by $6.5 million, or 5.5%,
compared to the same period of 2003. Unit
growth in CCC Pathways and Pathways Digital Imaging in the collision repair
channel were the primary drivers of growth over the prior year. Additional
revenue growth came from a full year of revenue from Comp-Est, which was
acquired at the end of February 2003.




Revenues
from CCC Valuescope ** decreased
by $0.5 million, or 1.3%, for the year ended December 31, 2004 compared to 2003.
Revenues from higher transaction volumes in 2004 were offset by a decline in
average pricing related to recent contract renewals.




Revenues
from our workflow products and services decreased in 2004 by $0.2 million, or
0.9%, compared to the prior year. We realized growth in the CCC Autoverse
product from new business, increased volumes from existing customers and the
conversion of certain customers from EZNet services. The CCC Autoverse product
revenue growth was partially offset by a decline in EZNet services revenues.




Revenue
from information services increased $0.3 million, or 18.0%, due to an increased
number of subscriptions at both insurance companies and collision repair
facilities.




Revenues
from our other products and services decreased by $0.8 million, or 14.8%, as a
result of lower hardware leasing revenues from insurance customers and
discontinuance of our CARS service in 2004.




17





*Operating
Expenses.* Operating expenses as a percentage of revenues are summarized as follows (in
thousands):


**Variance****2004**
    
    **2003**
    
    **Increase
      (Decrease)**Revenues
    
    $
    198,653
    
    
    100.0
    %
    $
    193,352
    
    
    100.0
    %
    $
    5,301
    
    
    2.7
    %Production
      and customer support
    
    
    32,315
    
    
    16.3
    %
    
    31,866
    
    
    16.5
    %
    
    449
    
    
    1.4
    %Commissions,
      royalties and licenses
    
    
    12,541
    
    
    6.3
    %
    
    11,713
    
    
    6.1
    %
    
    828
    
    
    7.1
    %Selling,
      general and administrative
    
    
    71,895
    
    
    36.2
    %
    
    68,089
    
    
    35.2
    %
    
    3,806
    
    
    5.6
    %Depreciation
      and amortization
    
    
    7,465
    
    
    3.8
    %
    
    7,923
    
    
    4.1
    %
    
    (458
    )
    
    (5.8
    )%Product
      development and programming
    
    
    30,164
    
    
    15.2
    %
    
    32,234
    
    
    16.7
    %
    
    (2,070
    )
    
    (6.4
    )%Stock
      compensation, non-cash
    
    
    13,139
    
    
    6.6
    %
    
    —
    
    
    —
    
    
    13,139
    
    
    —Restructuring
      charges
    
    
    886
    
    
    0.4
    %
    
    1,061
    
    
    0.5
    %
    
    (175
    )
    
    (16.5
    )%Litigation
      settlements
    
    
    (2,586
    )
    
    (1.3
    )%
    
    —
    
    
    —
    
    
    (2,586
    )
    
    —Total
      operating expenses
    
    $
    165,819
    
    
    83.5
    %
    $
    152,886
    
    
    79.1
    %
    $
    12,933
    
    
    8.5
    %


*Production
and Customer Support.* Production and customer support increased by $0.4 million, or 1.4%, due
mainly to higher than anticipated training and transition costs in the beginning
of 2004. These costs were needed to complete the implementation of a new
customer support model put in place in the fourth quarter of 2003. We also
incurred higher costs related to implementing and training both new customers
and existing customers with additional products and services.




*Commissions,
Royalties and Licenses.* Commissions, royalties and licenses increased by $0.8 million, or 7.1%. The
increase was the result of a full year of MOTOR license fees related to
Comp-Est, which was acquired in February 2003, and higher data license fees
related to CCC Pathways.




*Selling,
General and Administrative.* Selling,
general and administrative expenses increased by $3.8 million, or 5.6%. The
increase was driven by higher incentive compensation in 2004 tied to business
performance of $1.0 million, additional consulting and audit fees of
approximately $1.4 million in connection with implementation and compliance with
the new Sarbanes-Oxley requirements and a charge of $0.8 million related to
non-discrimination testing for the CCC Information Services Inc. 401(k)
Retirement Savings & Investment Plan for prior years. The higher expenses
were partially offset by savings generated from a realignment of our
organization that took place during the second quarter of 2004.




*Depreciation
and Amortization.* Depreciation and amortization decreased by $0.5 million, or
5.8%, as a
result of lower spending on internal use software and computer equipment leased
to insurance customers. The decrease was partially offset by a full year of
amortization related to Comp-Est’s intangible assets, which were acquired in
February 2003.




*Product
Development and Programming.* Product
development and programming decreased by $2.1 million, or 6.4%, related to
the realignment of our organization that took place during the second quarter of
2004 and the completion of development work on several new
products.




*Stock
Compensation Expense Non-Cash.* The
non-cash stock compensation charge of $13.1 million resulted from the exercise
of employee stock options in connection with the Company’s self-tender offer.
The Company permitted employee stock option holders to participate in the
self-tender offer using a stock-for-stock cashless exercise. This triggered
variable stock compensation accounting for the 1997 and 2000 Stock Incentive
Plans, which resulted in a non-cash stock compensation charge. T he stock-for-stock cashless
exercise was only allowed for purposes of participating in the self-tender
offer. Pursuant to stock
compensation accounting requirements, the charge covered all vested employee
stock options, including those that were not tendered and those that were unable
to be exercised due to the 44% pro-ration factor. All stock option holders
received the same terms and conditions for their shares as shareholders and
warrant holders.




18


**


*Restructuring
Charges.* In the
second quarter of 2004, the Company recorded a charge of $0.9 million for a
realignment of the organization, which primarily related to severance costs for
40 former employees. With the restructuring, the Company has streamlined its
customer implementation process and improved sales and support execution. The
restructuring has resulted in expense savings over the second half of 2004 and
is expected to generate annual savings in excess of $4.0 million. In 2003, we
recorded an additional charge of $1.1 million related to excess office space in
Chicago, which was occupied by our former DriveLogic business.




*Litigation
Settlements.* During
the third quarter of 2004, the Company received $4.8 million as a result of the
settlement of a lawsuit filed by certain of the Company's insurers in which the
insurers sought a declaration that there was no insurance coverage under certain
policies for the pending litigation involving the Company's vehicle valuation
product, CCC Valuescope. Partially offsetting this favorable settlement was
a net charge of $1.9 million to increase the CCC Valuescope litigation
settlement reserve from $4.3 million to $6.2 million and legal fees associated
with the litigation settlement of $0.3 million.




*Interest
Expense.* The
increase in interest expense was driven by a new Credit Agreement we entered
into in August
2004, in conjunction with the self-tender offer. The new Credit Agreement
consisted of a Term Loan of $177.5 million and a Revolving Loan of $30.0
million. All
borrowings under the Credit Agreement bear interest, at CCC's election, at the
London Interbank Offered Rate ("LIBOR") or the prime rate in effect from time to
time, plus a variable spread based on our leverage ratio. Additionally, the
Company entered into an interest rate swap agreement to hedge cash flows on its
interest payments. See Note 2, "Significant Accounting Policies - Derivatives"
to our consolidated financial statements.




*Equity
in Income of ChoiceParts.* The
Company recorded income of $0.5 million for the year ended December 31, 2004
related to our 27.5% share of ChoiceParts' income compared to a charge of $21
thousand for 2003. See Note
6, “ Investment
in ChoiceParts LLC” to our
consolidated financial statements.




*Income
Taxes.* The
income tax provision decreased from $14.3 million, or 35.4% of income before
taxes in 2003, to $11.3 million, or 37.9% of income before taxes, in 2004. In 2003,
the Company reviewed its tax reserves in conjunction with the completion of the
Internal Revenue Service tax audit and recorded a favorable adjustment of $1.1
million, which lowered the income tax provision and effective tax rate for the
year. In 2004, however, lower income before income taxes, primarily the result
of a non-cash stock compensation charge of $13.1 million, drove the decline in
the 2004 tax provision compared to the prior year.




*Diluted
Shares.* Weighted
average diluted shares outstanding declined by 3.4 million shares due to the
purchase by the Company of 11.2 million shares pursuant to its self-tender offer
in the third quarter of 2004. See Note
19, “Self-Tender Offer ” to our
consolidated financial statements.




**2003
Compared with 2002**




*Operating
Income.* Operating
income increased year over year by $3.2 million, to $40.5 million, in 2003, due
to an increase in revenues of $1.5 million and a decrease in expenses of $1.7
million. Operating margins (operating income as a percentage of revenue)
increased to 20.9% for the year ended 2003 compared to 19.4% in 2002.




19





*Revenues.* Revenue
by product suite is as follows (dollars in thousands):




**Variance****2003**
    
    **2002**
    
    **Increase
      (Decrease)**CCC
      Pathways
    
    $
    118,190
    
    
    61.1
    %
    $
    116,231
    
    
    60.6
    %
    $
    1,959
    
    
    1.7
    %CCC
      Valuescope
    
    
    42,187
    
    
    21.8
    %
    
    45,463
    
    
    23.7
    %
    
    (3,276
    )
    
    (7.2
    )%Workflow
      Products
    
    
    26,107
    
    
    13.5
    %
    
    22,602
    
    
    11.8
    %
    
    3,505
    
    
    15.5
    %Information
      Services Products
    
    
    1,708
    
    
    0.9
    %
    
    1,134
    
    
    0.6
    %
    
    574
    
    
    50.6
    %Other
      Products and Services
    
    
    5,160
    
    
    2.7
    %
    
    6,430
    
    
    3.3
    %
    
    (1,270
    )
    
    (19.8
    )%Total
      Revenue
    
    $
    193,352
    
    
    100.0
    %
    $
    191,860
    
    
    100.0
    %
    $
    1,492
    
    
    0.8
    %





Revenues
from CCC Pathways increased for the year ended 2003 by $2.0 million, or 1.7%,
compared to the same period of 2002.  The
automotive channel continued to be the key growth driver in this suite as we
benefited from our first quarter 2003 acquisition of Comp-Est Inc. and both CCC
Pathways and CCC Pathways Digital Imaging sales in this channel remained strong.
This growth was partially offset as the insurance channel revenue was down
versus the prior year primarily due to lost volume of one customer. Contract
renewal rates remain strong with our existing customers and we are seeing
increased demand in the mid-market.




Revenues
from CCC Valuescope ** decreased
by $3.3 million, or 7.2%, for the year ended December 31, 2003 compared to the
prior year primarily as a result of lost business, driven by a number of issues, including
the decision by one of our larger customers to transition most of its valuation
services to an in-house solution during late 2002. We have seen customers move
to other providers for a variety of reasons, including workflow issues, where
certain customers using a competitive estimating platform have decided to switch
to the competitor’s valuation product. In other cases, regulatory issues have
had an impact, as well as industry consolidation of the customer base. See Item 1.
“Business - Regulation.”




Revenues
from our workflow products increased in 2003 by $3.5 million, or 15.5%, compared
to the prior year mainly due to the continued adoption of the CCC Autoverse
products. We continue to focus on the implementation and acceptance process with
our customers to help accelerate this suite’s revenue growth even further.




Revenue
from information services increased $0.6 million, or 50.6%, due to an increased
number of subscriptions and more favorable prices.




Revenues
from our other products and services decreased by $1.3 million, or 19.8%, mainly
attributable to a continued decrease in hardware revenue, as the number of
computer units leased by our customers has declined.




*Operating
Expenses.* Operating expenses as a percentage of revenues are summarized as follows (in
thousands):




**Variance****2003**
    
    **2002**
    
    **Increase
      (Decrease)**Revenues
    
    $
    193,352
    
    
    100.0
    %
    $
    191,860
    
    
    100.0
    %
    $
    1,492
    
    
    0.8
    %Production
      and Customer Support
    
    
    31,866
    
    
    16.5
    %
    
    28,376
    
    
    14.8
    %
    
    3,490
    
    
    12.3
    %Commissions,
      Royalties and Licenses
    
    
    11,713
    
    
    6.1
    %
    
    10,411
    
    
    5.4
    %
    
    1,302
    
    
    12.5
    %Selling,
      General and Administrative
    
    
    68,089
    
    
    35.2
    %
    
    77,449
    
    
    40.4
    %
    
    (9,360
    )
    
    (12.1
    )%Depreciation
      and Amortization
    
    
    7,923
    
    
    4.1
    %
    
    9,069
    
    
    4.7
    %
    
    (1,146
    )
    
    (12.6
    )%Product
      Development and Programming
    
    
    32,234
    
    
    16.7
    %
    
    28,383
    
    
    14.8
    %
    
    3,851
    
    
    13.6
    %Restructuring
      Charges
    
    
    1,061
    
    
    0.5
    %
    
    869
    
    
    0.5
    %
    
    192
    
    
    22.1
    %Total
      Operating Expenses
    
    $
    152,886
    
    
    79.1
    %
    $
    154,557
    
    
    80.6
    %
    $
    (1,671
    )
    
    (1.1
    )%




20


**


*Production
and Customer Support.* Production and customer support increased by $3.5 million, or 12.3%, due to
increased costs associated with the acquired Comp-Est business and an investment
in our technical support area to move to a universal service representative
model, which was completed during the fourth quarter of 2003.




*Commissions,
Royalties and Licenses.* Commissions, royalties and licenses increased by $1.3 million, or 12.5%, due to
additional license fees, which resulted from the acquisition of repair facility
customers through the Comp-Est acquisition completed during the first quarter of
2003.




*Selling,
General and Administrative.* Selling,
general and administrative expenses decreased by $9.4 million, or 12.1%,
primarily as a result of lower incentive compensation costs tied to business
performance. The reduced compensation costs reflected reductions in bonus
payments of approximately $6.6 million for 2003. The reductions represent
adjustments made to align projected payouts with our final financial results. We
have also continued to focus on controlling expenses, specifically in the
management information systems area, including the consolidation of our data
center operations. The savings described above were also partially offset by
operating expenses related to the Comp-Est acquisition.




*Depreciation
and Amortization.* Depreciation and amortization decreased by $1.1 million, or
12.6%, as a
result of fewer investments in internal-use software and customer leased
computer equipment as well as using fully amortized software. This was partially
offset by the amortization recorded on the intangible assets acquired from the
Comp-Est acquisition.




*Product
Development and Programming.* Product
development and programming increased by $3.9 million, or 13.6%, due to
development projects related to our existing workflow and information products,
as well as work being done under a new multi-customer contract. In 2003, we
expensed $0.6 million of research and development funding made to a third-party
software development company. We are currently in the process of establishing a
formal research and development agreement.




*Restructuring
Charges.* In 2002,
we recorded an additional charge of $0.9 million related to the excess office
space in Chicago, formerly occupied by our DriveLogic business. The charge was
incurred as a result of revising the original expected future sublease income
due to weak conditions of the real estate market. During 2003, we recorded a
final charge of $1.1 million to revise the original expected future sublease
income as a result of entering into a sublease agreement with a third party. The
sublease is for the duration of the existing term remaining on the current
lease, which is through March 31, 2006. See Note
7, “ Restructuring
Charges ” to our
consolidated financial statements.




*Interest
Expense.* Interest
expense decreased from $0.7 million in 2002 to $0.4 million in 2003 as
a result of recording a favorable adjustment upon the completion of the Internal
Revenue Service tax audit. See Note
10, “Income Taxes ” to our
consolidated financial statements for further discussion.




*Minority
Interest Expense.* We
recorded minority interest expense of $4.0 million for the year ended December
31, 2002, which was associated with the issuance on February 23, 2001 of the
Trust Preferred Securities to Capricorn Investors III, L.P and represents
Capricorn Investors III, L.P.'s share of CCC Capital Trust's income. In October
of 2002 we purchased the outstanding Trust Preferred Securities from Capricorn,
and as a result have not had any interest expense relating to these securities
since November 2002. See Note
16, “CCC Capital Trust ” to our
consolidated financial statements.




*Equity
in Losses of ChoiceParts.* We
recorded a charge of $0.3 million for the year ended December 31, 2002 related
to our 27.5% share of the losses in ChoiceParts compared to a charge of $21
thousand for 2003. See Note
6 , “Investment in ChoiceParts LLC ” to our
consolidated financial statements.




21





*Income
Taxes.* Income
taxes increased from a provision of $10.4 million, or 31.8% of income from
continuing operations before taxes, in 2002, to a tax provision of
$14.3 million, or 35.4% of income from continuing operations before taxes,
in 2003. The 2002 provision was offset by research and experimentation tax
credits of $2.4 million. During
the fourth quarter of 2003, the Company recorded an additional
research and experimentation tax credit of $0.1 million. The Company also
reviewed its tax reserves in conjunction with the completion of the Internal
Revenue Service tax audit and recorded a favorable adjustment of $1.1
million.




**Quarterly
Results of Operations/Supplementary Financial Information**




The
following table sets forth unaudited condensed consolidated statements of
operations for the quarters in 2004 and 2003. These condensed quarterly
statements of operations have been prepared on a basis consistent with the
audited financial statements. They include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the quarterly
results of operations, when such results are read in conjunction with the
audited consolidated financial statements and the notes thereto. The operating
results for any quarter are not necessarily indicative of results for any future
period. Amounts are in thousands, except for per share data.




**Three
      Months Ended****Mar.
      31,**
    
    **June
      30,**
    
    **Sept.
      30,**
    
    **Dec.
      31,**
    
    **Mar.
      31,**
    
    **June
      30,**
    
    **Sept.
      30,**
    
    **Dec.
      31,****2003**
    
    **2003**
    
    **2003**
    
    **2003**
    
    **2004**
    
    **2004**
    
    **2004**
    
    **2004**Revenues
    
    $
    47,732
    
    $
    48,097
    
    $
    48,621
    
    $
    48,902
    
    $
    49,603
    
    $
    49,473
    
    $
    49,092
    
    $
    50,485Expenses:Production
      and customer support
    
    
    7,344
    
    
    7,754
    
    
    8,279
    
    
    8,489
    
    
    8,349
    
    
    7,807
    
    
    7,976
    
    
    8,183Commissions,
      royalties and licenses
    
    
    2,417
    
    
    3,013
    
    
    3,184
    
    
    3,099
    
    
    3,174
    
    
    3,145
    
    
    3,166
    
    
    3,056Selling,
      general and administrative
    
    
    18,566
    
    
    17,150
    
    
    16,699
    
    
    15,674
    
    
    17,930
    
    
    19,105
    
    
    17,086
    
    
    17,774Depreciation
      and amortization
    
    
    1,930
    
    
    2,014
    
    
    1,944
    
    
    2,035
    
    
    2,103
    
    
    1,805
    
    
    1,719
    
    
    1,838Product
      development and programming
    
    
    7,696
    
    
    8,156
    
    
    7,838
    
    
    8,544
    
    
    8,037
    
    
    8,089
    
    
    7,175
    
    
    6,863Stock
      compensation, non-cash
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    13,139
    
    
    —Restructuring
      charges
    
    
    —
    
    
    1,061
    
    
    —
    
    
    —
    
    
    —
    
    
    886
    
    
    —
    
    
    —Litigation
      settlements
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (2,586
    )
    
    —Total
      operating expenses
    
    
    37,953
    
    
    39,148
    
    
    37,944
    
    
    37,841
    
    
    39,593
    
    
    40,837
    
    
    47,675
    
    
    37,714Operating
      income
    
    
    9,779
    
    
    8,949
    
    
    10,677
    
    
    11,061
    
    
    10,010
    
    
    8,636
    
    
    1,417
    
    
    12,771Interest
      income (expense)
    
    
    (222
    )
    
    (165
    )
    
    (169
    )
    
    164
    
    
    (146
    )
    
    (126
    )
    
    (1,199
    )
    
    (2,515
    )Other
      income (expense)
    
    
    89
    
    
    67
    
    
    45
    
    
    71
    
    
    87
    
    
    80
    
    
    265
    
    
    120Equity
      in income (loss) of ChoiceParts
    
    
    (6
    )
    
    12
    
    
    (150
    )
    
    123
    
    
    109
    
    
    94
    
    
    161
    
    
    149Income
      before income taxes
    
    
    9,640
    
    
    8,863
    
    
    10,403
    
    
    11,419
    
    
    10,060
    
    
    8,684
    
    
    644
    
    
    10,525Income
      tax provision
    
    
    (3,669
    )
    
    (3,369
    )
    
    (4,052
    )
    
    (3,195
    )
    
    (3,853
    )
    
    (3,341
    )
    
    (161
    )
    
    (3,985
    )Net
      income
    
    $
    5,971
    
    $
    5,494
    
    $
    6,351
    
    $
    8,224
    
    $
    6,207
    
    $
    5,343
    
    $
    483
    
    $
    6,540**Per
      Share Data:**Net
      Income per common share—basic
    
    $
    0.23
    
    $
    0.21
    
    $
    0.24
    
    $
    0.31
    
    $
    0.23
    
    $
    0.20
    
    $
    0.02
    
    $
    0.41Net
      Income per common share—diluted.
    
    $
    0.22
    
    $
    0.20
    
    $
    0.23
    
    $
    0.30
    
    $
    0.22
    
    $
    0.19
    
    $
    0.02
    
    $
    0.38Weighted
      average shares outstanding:Basic
    
    
    26,156
    
    
    26,224
    
    
    26,256
    
    
    26,338
    
    
    26,472
    
    
    26,643
    
    
    22,965
    
    
    15,995Diluted
    
    
    27,741
    
    
    27,630
    
    
    27,484
    
    
    27,752
    
    
    27,927
    
    
    27,824
    
    
    24,161
    
    
    17,171




22


**Outlook
for 2005**




The
fourth quarter earnings release issued on February 16, 2005, included the
following guidance for the full year and first quarter of 2005, as
follows.




For the
full year, the Company expects to report earnings per share of $1.25 - $1.35,
assuming 17.5 million shares outstanding on a fully diluted basis. This is a
change to the guidance included in our third quarter press release for the full
year and first quarter of 2005, principally due to the inclusion of a non-cash
charge of $3.0 million or $0.11 per share for performance based restricted stock
grants for senior managers. These grants, which are being expensed over two
years, vest at the end of 2006 based on 2006 earnings performance. The Company
expects the annual charges from these grants to be comparable to what it has
historically granted in options and disclosed in Note 2,
"Significant Accounting Policies" in our
consolidated financial statements. The Company also expects additional charges
from the adoption of FAS 123R beginning July 1, 2005. This new accounting
standard will require the Company to expense the value of previously granted
stock options that remain unvested at July 1, 2005. As the Company has not yet
fully evaluated its FAS 123R adoption and valuation alternatives and related
financial statement impact, the above guidance excludes the effect of FAS 123R
for existing stock options.




On an
operating basis, guidance includes revenue growth in the low to mid single digit
range, which remains unchanged from the Company’s prior guidance. Growth will
occur largely in the second half of the year as the Company completes the
implementation of customer wins from 2004.




Full year
operating income is expected to be in the range of $46.0 to $49.0 million.
Again, this includes a non-cash charge of $3.0 million, spread ratably
throughout the year, for the Company’s restricted stock incentive plan. The
major non-operating items are interest expense and taxes. The Company expects
interest for the full year to be around $11.0 million and the tax rate to be
approximately 38%.




For the
first quarter of 2005, the Company expects relatively flat revenue compared to
the first quarter last year, but improved operating margins due to the benefit
from the expense reduction program put in place last June. Earnings per share
for the first quarter should range from $0.26 to $0.29 per share, which includes
a $0.03 per share impact for non-cash stock compensation expense.




**Liquidity
and Capital Resources**




During
the year ended December 31, 2004, net cash provided by operating activities
was $38.9 million. Additionally, the Company received proceeds of $177.5
million from the issuance of long-term debt, $7.0 million from the maturation of
short-term investments and $3.9 million from the exercise of stock options. The
Company used $210.0 million for the purchase of 11.2 million shares of common
stock pursuant to a self-tender offer in the third quarter of 2004, $7.9 million
for payments on long-term debt, which included a prepayment of $7.4 million,
$6.0 million for the purchase of equipment and software, $3.6 million for fees
related to the issuance of debt and $0.9 million for fees related to the
self-tender offer.




*Credit
Agreement*




On August
20, 2004, in conjunction with the self-tender offer, CCC entered into a new
credit agreement ("Credit Agreement") replacing CCC's former credit facility.
The new agreement consisted of a term loan ("Term Loan") of $177.5 million and a
revolving loan ("Revolving Loan") of $30.0 million. As of December 31, 2004 the
Company has had no advances under the Revolving Loan. As compared to the former
credit facility, the Credit Agreement provides CCC with improved terms and
additional flexibility. The Credit Agreement contains covenants that, among
other things, restrict CCC's ability to sell or transfer assets, make certain
investments and make capital expenditures in addition to certain financial
covenants. CCC is also required to provide the lender with quarterly and annual
financial reports. The Credit Agreement is guaranteed by CCCG and is secured by
a blanket first priority lien on substantially all of the assets of CCCG and its
subsidiaries.




23





The
Revolving Loan matures on August 20, 2009 and the Term Loan matures on August
20, 2010. The quarterly scheduled principal payments on the Term Loan are
approximately $0.4 million through June 30, 2010, with the next scheduled
payment due on March 31, 2006 and the final payment of $161.9 million due at
maturity. Due to a prepayment in 2004, there are no scheduled payments due under
the Term Loan in 2005. All advances under the Credit Agreement bear interest, at
CCC's election, at LIBOR 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 Revolving Loan.




For 2004,
the weighted average interest rate was 5.1%. CCC made cash principal and
interest payments under the Term Loan of $7.9 million and $3.2 million,
respectively, for the year ended December 31, 2004. The principal payment
included voluntary prepayments of $7.4 million and scheduled payments of $0.5
million.




*Self-Tender*




During
the third quarter of 2004, the Company’s Board of Directors authorized a
self-tender offer to purchase up to $210.0 million of its common stock at a
price of $18.75 per share. The tender was fully subscribed and 11.2 million
shares were purchased. The purchase was made through a fixed price tender offer
in which all of CCC’s stockholders, vested option holders and warrant holders,
including employee benefit plans, were given the opportunity to sell a portion
of their shares at a price of $18.75 per share, without incurring any brokerage
fees or commissions. This represented a premium of approximately 26% over the
closing stock price of $14.90 per share on July 21, 2004, the day before the
tender was announced. Since the number of shares tendered was greater than 11.2
million, purchases were made based on a proration factor of 44.1049 percent. The
self-tender offer was funded by a Term Loan facility of $177.5 million and $32.5
million of cash on hand. The shares that were purchased were
retired.




*Liquidity
Requirements*




The
Company's principal liquidity requirements consist of operating activities,
including product development, investments in capital equipment and other
business development activities and scheduled repayments on our long-term debt.
Working capital requirements are minimal as payments are typically received from
customers in advance of the services being provided. In addition, management
believes that cash flows from operations and availability of funds under our new
$30.0 million Revolving Loan will be sufficient to meet our liquidity needs for
the foreseeable future.  There can
also be no assurances that we will be able to satisfy our liquidity needs in the
future without engaging in financing activities beyond those described above. As
of December 31, 2004, we were in compliance with all covenants under the Credit
Agreement and have had no advances under the Revolving Loan.




**Off-Balance
Sheet Arrangements**




We are
not party to any transactions, arrangements or other relationships with
unconsolidated entities or other persons that are reasonably likely to have a
current or future material effect on our financial condition, results of
operations, liquidity, capital expenditures or capital resources. In the normal
course of business, we are party to a variety of agreements pursuant to which we
may be obligated to indemnify the other party with respect to certain matters.
We evaluate estimated losses for such indemnifications on a regular basis. To
date, we have not encountered material costs as a result of such obligations,
and we do not currently believe that we are likely to incur any material costs
relating to such indemnifications. See Note
2, “ Significant
Accounting Policies” to our
consolidated financial statements.




**Effects
of Transactions with Related and Certain Other Parties**




In 2000,
the Company received a promissory note from the Chief Executive Officer and
Chairman of the Board in the amount of $0.2 million to exercise options granted
to him by the Company. In 2002, the Company received a second promissory note
from the same officer in the amount of $1.2 million, accruing interest at 6.75%,
for the purchase of 192,000 treasury shares at a price of $6.25 per share, which
was the fair value of the Company's stock at that date. During the second
quarter of 2003, both notes, along with accrued interest, were repaid in full.
As of December 31, 2004 and 2003, there were no notes receivable from
officers.




24





A portion
of the compensation paid by the Company to members of the Audit Committee of the
Board of Directors is paid in the form of restricted stock grants. In 2003, the
Company issued a total of 8,000 restricted shares with a fair market value of
$14.93 per share to two members of the Audit Committee, each of whom received
4,000 shares. In lieu of restricted shares, a third member of the Audit
Committee was granted the right to receive annual cash payments that, in the
aggregate, are approximately equal in value to, and are paid on the same vesting
schedule as, the restricted shares granted to the other two Audit Committee
members. In 2004, two new members joined the Audit Committee, and the Company
issued 4,000 restricted shares to each, for a total of 8,000 shares issued. The
fair market value of the shares issued in 2004 was $17.85 per share and $21.48
per share. All restricted shares issued to Audit Committee members were issued
under the Company’s 2000 Stock Incentive Plan (2004 Restatement) and vest over a
period of four years, although accelerated vesting is provided in certain
instances. Compensation expense related to restricted stock awards was based
upon market prices at the date of grant and was charged to earnings on a
straight-line basis over the period of restriction. A former member of the Audit
Committee will receive compensation annually in the form of cash. The total fair
value of the restricted stock on the dates of grant was approximately $0.3
million. Total compensation expense recognized in relation to the restricted
stock issued and the cash payment in lieu of restricted stock for the years
ended December 31, 2004 and 2003, was approximately $54 thousand and $16
thousand, respectively.




***Contractual
Obligations***




The
following summarizes our significant contractual obligations and commitments as
of December 31, 2004 (in
thousands):





**Less
      than**
    
    **1-3**
    
    **4-5**
    
    **More
      than**
    
    **No
      Specific****Total**
    
    **1
      Year**
    
    **Years**
    
    **Years**
    
    **5
      Years**
    
    **Date**Operating
      lease obligations
    
    $
    15,512
    
    $
    3,252
    
    $
    6,502
    
    $
    3,819
    
    $
    1,939
    
    $
    —ChoiceParts
      Investment
    
    
    1,788
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    1,788Capital
      lease obligations
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —Long-term
      debt obligations
    
    
    169,613
    
    
    —
    
    
    3,444
    
    
    3,444
    
    
    162,725
    
    
    —Purchase
      obligations
    
    
    165,956
    
    
    19,304
    
    
    20,613
    
    
    18,951
    
    
    107,088
    
    
    —Other
      long-term liabilities
    
    
    1,130
    
    
    898
    
    
    232
    
    
    —
    
    
    —
    
    
    —Total
    
    $
    353,999
    
    $
    23,454
    
    $
    30,791
    
    $
    26,214
    
    $
    271,752
    
    $
    1,788





*Operating
Leases.* The
Company leases certain of its facilities and equipment under non-cancelable
operating leases with terms ranging from 3 to 15 years.




*ChoiceParts
Investment.* The
Company has approximately $1.8 million of the original $5.5 million ChoiceParts
capital funding commitment still outstanding as of December 31, 2004. Currently,
there are no specific plans on the timing of when CCC will be required to fund
this commitment.




*Purchase
Obligations* . The
Company has long-term agreements with suppliers and other parties related to
licensing data used in our products and services, outsourced web-hosting and
data center, disaster recovery and business continuity services and
telecommunication services. Purchase obligations also include a data license for
the MOTOR Crash Estimating Guides, which we license from a unit of Hearst, which
is under a long-term contract that expires in 2021.




25





**Item
7A. Quantitative and Qualitative Disclosure About Market
Risk**




*Interest
Rate Risk*




As a
result of borrowing made under the Term Loan, the Company is exposed to the risk
that its earnings and cash flows could be adversely impacted by fluctuations in
interest rates. In November 2004, the Company entered into an interest rate swap
agreement to hedge the cash flow risk associated with interest payments on
one-half of our indebtedness under the Term Loan. As part of the swap agreement,
the Company has agreed to pay a fixed interest rate and will receive LIBOR on a
notional principal balance of $88.8 million for a three-year term expiring on
November 29, 2007. Given that the long-term debt bears interest at floating
interest rates and taking into account the interest rate swap agreement on $88.8
million of the outstanding debt, a hypothetical increase or decrease in interest
rates of 1.0% would result in a corresponding increase or decrease in annual
interest expense of approximately $0.8 million.




**Expected
      Maturity Date****Interest
      Rate Derivatives**
    
    **2005**
    
    **2006**
    
    **2007**Interest
      Rate SwapVariable
      to Fixed
    
    $
    88,750
    
    $
    88,750
    
    $
    88,750Average
      pay rate
    
    
    3.53
    %
    
    3.53
    %
    
    3.53
    %Average
      receive rate
    
    
    3.33
    %
    
    4.20
    %
    
    4.40
    %




*Foreign
Currency Risk*




Due to
the shut down of our international operations in the United Kingdom in 2001, we
no longer believe our financial results will be significantly affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets.




**Item
8. Financial Statements and Supplementary Data**





The
financial statements and supplementary data required with respect to this Item 8
are listed in Item 15(a)(1) and 15(a)(2) included elsewhere in this
filing.





**Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure**





None.


26


**Item
9A. Controls and Procedures**




*Evaluation
of Disclosure Controls and Procedures*




The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company's reports under the
Securities Exchange Act of 1934 as amended ("Exchange Act") is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to the Company's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls
and procedures.




Also, the
Company has investments in certain unconsolidated entities. As the Company does
not control or manage these entities, its disclosure controls and procedures
with respect to such entities are necessarily substantially more limited
than those it maintains with respect to its consolidated
subsidiaries.




As
required by Exchange Act Rule 13a-15(b), the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures as of the end of the period covered by this report.
Based upon that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective.




*Management's
Report on Internal Control over Financial Reporting*




Management
is responsible for establishing and maintaining adequate internal control over
financial reporting for the Company. The Company's internal control over
financial reporting was designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.




Management
has assessed the effectiveness of the Company's internal control over financial
reporting as of December 31, 2004, based on the criteria described in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on its assessment, management
concluded that the Company's internal control over financial reporting was
effective as of December 31, 2004.




Our
management's assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2004 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in its Report of Independent Registered Public Accounting Firm which is
included in Item 15. "Exhibits and Financial Statement Schedules", pages
30-31.




*Changes
in Internal Control over Financial Reporting*




There
were no changes in the Company's internal control over financial reporting, as
defined in Exchange Act Rules 13a-15(f) or 15d-15(f) that occurred during the
fourth quarter that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial
reporting.




**Item
9B. Other Information**




None.




27


**PART
III**




**Item
10. Directors and Executive Officers of the Registrant**




The
information required by this item will be included in our definitive proxy
statement, which is to be filed with the Securities and Exchange Commission
within 120 days of the Company's fiscal year ended December 31, 2004 and such
information is incorporated herein by reference.




**Item
11. Executive Compensation**




The
information required by this item will be included in our definitive proxy
statement, which is to be filed with the Securities and Exchange Commission
within 120 days of the Company's fiscal year ended December 31, 2004 and such
information is incorporated herein by reference .




**Item
12. Security Ownership of Certain Beneficial Owners and
Management** **and Related Stockholders Matters**




The
information required by this item will be
included in our
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days of the Company's fiscal year ended December
31, 2004 and such
information is incorporated herein by reference .




**Item
13. Certain Relationships and Related Transactions**




The
information required by this item will be
included in our
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days of the Company's fiscal year ended December
31, 2004 and such
information is incorporated herein by reference .




**Item
14. Principal Accounting Fees and Services**




The
information required by this item will be
included in our
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days of the Company's fiscal year ended December
31, 2004 and such
information is incorporated herein by reference .


28





**PART
IV**





**Item
15. Exhibits and Financial Statement Schedules**





(a) Index to
Consolidated Financial Statements and Schedule





1.
    Consolidated
      Financial Statements


**Page**Report
      of Independent Registered Public Accounting Firm
    30Consolidated
      Financial Statements:Consolidated
      Statements of Operations
    32Consolidated
      Balance Sheets
    33Consolidated
      Statements of Cash Flows
    34Consolidated
      Statements of Stockholders' (Deficit) Equity
    36Notes
      to Consolidated Financial Statements
    37


2.
    Financial
      Statement Schedule




Schedule
      II Valuation and Qualifying Accounts
    61





All other schedules have been omitted because the required information is
included in the financial statements or notes thereto or because they are not
required.   3.
    Exhibits





The
      exhibits required by this item are set forth on the exhibit index attached
      hereto
    62




(b)  Reports
on Form 8-K




We filed
a Current Report on Form 8-K on October 20, 2004, to report that the Company had
issued a press release announcing that it had delayed its third quarter 2004
earnings release, which had been scheduled for 11:00am EST on October 20,
2004.




We filed
a Current Report on Form 8-K on October 28, 2004, to report that the Company had
issued a press release announcing that it rescheduled its third quarter 2004
earnings release for Monday, November 1, 2004.




We filed
a Current Report on Form 8-K on November 1, 2004, to report that the Company had
issued a press release announcing its financial results for the third quarter of
2004.




We filed
a Current Report on Form 8-K on November 9, 2004, to report that the Company had
appointed a new member to the Board of Directors to fill a vacancy created when
the size of the board was expanded from seven to eight members.




We filed
a Current Report on Form 8-K on December 10, 2004, to report that the Company
had issued restricted stock under the Company's 2000 Stock Incentive Plan to a
new member of the Audit Committee of the Board of Directors.




29





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders


of CCC
Information Services Group Inc.:




We have
completed an integrated audit of CCC Information Services Group Inc.'s 2004
consolidated financial statements and of its internal control over financial
reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits,
are presented below.




Consolidated
financial statements and financial statement schedule




In our
opinion, the consolidated financial statements listed in the index appearing
under Item 15(a)(1) present fairly, in all material respects, the financial
position of CCC Information Services Group Inc. and Subsidiaries at December 31,
2004 and 2003, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a)(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.




Internal
control over financial reporting




Also, in
our opinion, management’s assessment, included in Management's Report on
Internal Control over Financial Reporting appearing under Item 9A, that the
Company maintained effective internal control over financial reporting as of
December 31, 2004 based on criteria established in *Internal
Control - Integrated Framework* issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
is fairly stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004,
based on criteria established in *Internal Control - Integrated
Framework* issued by the COSO. The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express opinions on management’s assessment and on the
effectiveness of the Company’s internal control over financial reporting based
on our audit. We conducted our audit of internal control over financial
reporting in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial reporting,
evaluating management’s assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.




30





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.









PricewaterhouseCoopers
LLP


Chicago,
Illinois


March 11,
2005




31
  **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**CONSOLIDATED
STATEMENTS OF OPERATIONS**
**(In
Thousands, Except Per Share
Amounts)**





**Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Revenues
    
    $
    198,653
    
    $
    193,352
    
    $
    191,860Expenses:Production
      and customer support
    
    
    32,315
    
    
    31,866
    
    
    28,376Commissions,
      royalties and licenses
    
    
    12,541
    
    
    11,713
    
    
    10,411Selling,
      general and administrative
    
    
    71,895
    
    
    68,089
    
    
    77,449Depreciation
      and amortization
    
    
    7,465
    
    
    7,923
    
    
    9,069Product
      development and programming
    
    
    30,164
    
    
    32,234
    
    
    28,383Stock
      compensation, non-cash
    
    
    13,139
    
    
    —
    
    
    —Restructuring
      charges
    
    
    886
    
    
    1,061
    
    
    869Litigation
      settlements
    
    
    (2,586
    )
    
    —
    
    
    —Total
      operating expenses
    
    
    165,819
    
    
    152,886
    
    
    154,557Operating
      income
    
    
    32,834
    
    
    40,466
    
    
    37,303Interest
      expense
    
    
    (3,986
    )
    
    (392
    )
    
    (708
    )Other
      income, net
    
    
    552
    
    
    272
    
    
    455CCC
      Capital Trust minority interest expense
    
    
    —
    
    
    —
    
    
    (3,984
    )Equity
      in income (losses) of ChoiceParts
    
    
    513
    
    
    (21
    )
    
    (291
    )Income
      from continuing operations before income taxes
    
    
    29,913
    
    
    40,325
    
    
    32,775Income
      tax provision
    
    
    (11,340
    )
    
    (14,285
    )
    
    (10,420
    )Income
      from continuing operations
    
    
    18,573
    
    
    26,040
    
    
    22,355Income
      from discontinued operations, net of income taxes
    
    
    —
    
    
    —
    
    
    354Net
      income
    
    $
    18,573
    
    $
    26,040
    
    $
    22,709**Per
      Share Data:**Income
      per common share - basic from:Income
      from continuing operations
    
    $
    0.81
    
    $
    0.99
    
    $
    0.86Income
      from discontinued operations
    
    
    —
    
    
    —
    
    
    0.01Income
      per common share—basic
    
    $
    0.81
    
    $
    0.99
    
    $
    0.87Income
      per common share - diluted from:Income
      from continuing operations
    
    $
    0.77
    
    $
    0.94
    
    $
    0.83Income
      from discontinued operations
    
    
    —
    
    
    —
    
    
    0.01Income
      per common share—diluted
    
    $
    0.77
    
    $
    0.94
    
    $
    0.84Weighted
      average shares outstanding:Basic
    
    
    22,993
    
    
    26,243
    
    
    25,850Diluted
    
    
    24,258
    
    
    27,655
    
    
    26,904




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





32
  **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**CONSOLIDATED
STATEMENTS OF BALANCE SHEETS**
**(In
Thousands, Except Per Share
Amounts)**


**December
      31,****2004**
    
    **2003****ASSETS**Cash
      and cash equivalents
    
    $
    19,958
    
    $
    20,755Short-term
      investments
    
    
    —
    
    
    7,004Accounts
      receivable, net
    
    
    12,721
    
    
    10,247Other
      current assets
    
    
    7,790
    
    
    8,369Total
      current assets
    
    
    40,469
    
    
    46,375Property
      and equipment, net
    
    
    12,151
    
    
    12,776Intangible
      assets, net
    
    
    1,298
    
    
    2,153Goodwill
    
    
    15,747
    
    
    15,747Deferred
      income taxes, net
    
    
    9,420
    
    
    9,127Investments
    
    
    778
    
    
    265Other
      assets
    
    
    3,770
    
    
    292Total
      assets
    
    $
    83,633
    
    $
    86,735**LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)**Accounts
      payable
    
    $
    7,728
    
    $
    5,937Accrued
      expenses
    
    
    19,468
    
    
    16,522Income
      taxes payable
    
    
    97
    
    
    1,602Current
      portion of deferred revenues
    
    
    6,886
    
    
    7,930Other
      current liabilities
    
    
    —
    
    
    97Total
      current liabilities
    
    
    34,179
    
    
    32,088Long-term
      debt
    
    
    169,613
    
    
    —Other
      liabilities
    
    
    1,716
    
    
    3,064Total
      liabilities
    
    
    205,508
    
    
    35,152Commitments
      and contingencies (Notes 24 and 27)Preferred
      Stock ($1.00 par value, 100 shares authorized, issued and
      outstanding)
    
    
    —
    
    
    —Common
      stock ($0.10 par value, 40,000,000 shares authorized, 16,144,124 and
      26,376,839 shares outstanding at December 31, 2004 and 2003,
      respectively)
    
    
    1,614
    
    
    3,034Additional
      paid-in capital
    
    
    7,006
    
    
    131,590Other
      comprehensive income
    
    
    72
    
    
    —Accumulated
      deficit
    
    
    (78,315
    )
    
    (36,838
    )Treasury
      stock, at cost (4,460,501 and 4,094,665 common shares in treasury at
      December 31, 2004 and December 31, 2003)
    
    
    (52,252
    )
    
    (46,203
    )Total
      stockholders' (deficit) equity
    
    
    (121,875
    )
    
    51,583Total
      liabilities and stockholders' (deficit) equity
    
    $
    83,633
    
    $
    86,735




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


33
 
  **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
 **(In
Thousands)**





**Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Operating
      Activities:Net
      income
    
    $
    18,573
    
    $
    26,040
    
    $
    22,709Adjustments
      to reconcile net income to net cash provided by operating
      activities:Income
      from discontinued operations, net of income taxes
    
    
    —
    
    
    —
    
    
    (354
    )Equity
      in (income) losses of ChoiceParts
    
    
    (513
    )
    
    21
    
    
    291Depreciation
      and amortization of property and equipment
    
    
    6,609
    
    
    7,210
    
    
    9,069Amortization
      of intangible assets
    
    
    856
    
    
    713
    
    
    —Deferred
      income tax (benefit) provision
    
    
    (293
    )
    
    1,327
    
    
    13,456Restructuring
      charges
    
    
    886
    
    
    1,061
    
    
    869Restricted
      stock compensation, non-cash
    
    
    41
    
    
    16
    
    
    —Stock
      compensation, non-cash
    
    
    13,139
    
    
    —
    
    
    —Income
      tax benefit related to exercise of stock options
    
    
    1,250
    
    
    533
    
    
    704Interest
      on notes receivable from officer
    
    
    —
    
    
    —
    
    
    (106
    )Other,
      net
    
    
    88
    
    
    78
    
    
    191Changes
      in:Accounts
      receivable, net
    
    
    (2,474
    )
    
    928
    
    
    1,065Other
      current assets
    
    
    579
    
    
    135
    
    
    (1,649
    )Other
      assets
    
    
    144
    
    
    335
    
    
    400Accounts
      payable
    
    
    1,791
    
    
    (2,542
    )
    
    (437
    )Accrued
      expenses
    
    
    1,694
    
    
    (8,891
    )
    
    (2,021
    )Income
      taxes payable
    
    
    (1,504
    )
    
    (966
    )
    
    2,755Other
      current liabilities
    
    
    445
    
    
    (62
    )
    
    —Deferred
      revenues
    
    
    (1,044
    )
    
    178
    
    
    153Other
      liabilities
    
    
    (1,348
    )
    
    (1,102
    )
    
    (1,543
    )Net
      cash provided by operating activities:Continuing
      operations
    
    
    38,919
    
    
    25,012
    
    
    45,552Discontinued
      operations
    
    
    —
    
    
    —
    
    
    30Net
      cash provided by operating activities
    
    
    38,919
    
    
    25,012
    
    
    45,582Investing
      Activities:Capital
      expenditures
    
    
    (6,014
    )
    
    (7,491
    )
    
    (8,609
    )Acquisition
      of Comp-Est Inc.
    
    
    —
    
    
    (13,205
    )
    
    (193
    )Purchase
      of short-term investments
    
    
    —
    
    
    (7,004
    )
    
    —Proceeds
      from sale of short-term investments
    
    
    7,004
    
    
    —
    
    
    —Investment
      in affiliates
    
    
    —
    
    
    —
    
    
    (275
    )Issuance
      of warrants to Hearst
    
    
    —
    
    
    —
    
    
    318Net
      cash provided by (used for) investing activities
    
    
    990
    
    
    (27,700
    )
    
    (8,759
    )




34
 
  **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)**
 **(In
Thousands)**





**Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Financing
      Activities:Proceeds
      from exercise of stock options
    
    
    3,903
    
    
    1,825
    
    
    3,112Payment
      of principal and interest on notes receivable from officer
    
    
    —
    
    
    1,506
    
    
    —Proceeds
      from employee stock purchase plan
    
    
    422
    
    
    399
    
    
    377Proceeds
      from borrowings on long-term debt
    
    
    177,500
    
    
    —
    
    
    22,000Principal
      repayments on long-term debt
    
    
    (7,888
    )
    
    —
    
    
    (28,500
    )Self-tender
      offer of common stock
    
    
    (210,000
    )
    
    —
    
    
    —Payment
      of debt issuance and self-tender offer costs
    
    
    (4,485
    )
    
    —
    
    
    —Purchase
      of Trust Preferred Securities
    
    
    —
    
    
    —
    
    
    (13,369
    )Principal
      repayments of capital lease obligations
    
    
    (158
    )
    
    (487
    )
    
    (421
    )Principal
      repayments on short term note
    
    
    —
    
    
    —
    
    
    (588
    )Net
      cash provided by (used for) financing activities
    
    
    (40,706
    )
    
    3,243
    
    
    (17,389
    )Net
      increase (decrease) in cash and cash equivalents
    
    
    (797
    )
    
    555
    
    
    19,434Cash
      and cash equivalents:Beginning
      of year
    
    
    20,755
    
    
    20,200
    
    
    766End
      of year
    
    $
    19,958
    
    $
    20,755
    
    $
    20,200





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




35
 
  **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)**
 **(In
Thousands, Except Number
of Shares)**


**Accumulated**
    
    **Notes**
    
    
    
    **Total****Outstanding
      Common Stock**
    
    **Additional**
    
    
    
    **Other**
    
    **Receivable**
    
    **Treasury
      Stock**
    
    **Stockholders'****Number
      of Shares**
    
    **Par
      Value**
    
    **Paid-in
      Capital**
    
    **Accumulated
      Deficit**
    
    **Comprehensive
      Loss (Income)**
    
    **from**
      **Officer**
    
    **Number
      of Shares**
    
    **Cost**
    
    **Equity
      (Deficit)**December 31,
      2001
    
    
    25,503,567
    
    $
    2,967
    
    $
    124,188
    
    $
    (85,587
    )
    $
    (10
    )
    $
    —
    
    
    4,286,665
    
    $
    (48,369
    )
    $
    (6,811
    )Issuance of warrants to
      Hearst
    
    
    —
    
    
    —
    
    
    793
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    793Treasury stock
      purchases
    
    
    192,000
    
    
    —
    
    
    (966
    )
    
    —
    
    
    —
    
    
    (1,200
    )
    
    (192,000
    )
    
    2,166
    
    
    —Interest on notes receivable from
      officer
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (106
    )
    
    —
    
    
    —
    
    
    (106
    )Stock
      options exercised including income tax benefit
    
    
    334,402
    
    
    35
    
    
    3,781
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    3,816Employee stock purchase
      plan
    
    
    44,920
    
    
    3
    
    
    374
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    377Tax
      benefit related to issuance costs of Trust Preferred
      Securities
    
    
    —
    
    
    —
    
    
    399
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    399Translation
    adjustment
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    10
    
    
    —
    
    
    —
    
    
    —
    
    
    10Other
    
    
    —
    
    
    —
    
    
    197
    
    
    —
    
    
    —
    
    
    (200
    )
    
    —
    
    
    —
    
    
    (3
    )Net income
    
    
    —
    
    
    —
    
    
    —
    
    
    22,709
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    22,709Comprehensive
      income
    
    
    —
    
    
    —
    
    
    —
    
    
    22,709
    
    
    10
    
    
    —
    
    
    —
    
    
    —
    
    
    22,719December
      31, 2002
    
    
    26,074,889
    
    $
    3,005
    
    $
    128,766
    
    $
    (62,878
    )
    $
    —
    
    $
    (1,506
    )
    
    4,094,665
    
    $
    (46,203
    )
    $
    21,184Stock
      options exercised including income tax benefit
    
    
    262,639
    
    
    28
    
    
    2,330
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    2,358Employee stock purchase
      plan
    
    
    31,311
    
    
    1
    
    
    398
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    399Interest on notes receivable from
      officer
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (47
    )
    
    —
    
    
    —
    
    
    (47
    )Payment
      of principal and interest on notes receivable from officer
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    1,553
    
    
    —
    
    
    —
    
    
    1,553Restricted
      stock compensation, non - cash
    
    
    8,000
    
    
    —
    
    
    16
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    16Other
    
    
    —
    
    
    —
    
    
    80
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    80Net income
    
    
    —
    
    
    —
    
    
    —
    
    
    26,040
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    26,040Comprehensive
      income
    
    
    —
    
    
    —
    
    
    —
    
    
    26,040
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    26,040December
      31, 2003
    
    
    26,376,839
    
    $
    3,034
    
    $
    131,590
    
    $
    (36,838
    )
    $
    —
    
    $
    —
    
    
    4,094,665
    
    $
    (46,203
    )
    $
    51,583Warrants
      and stock options exercised including income tax benefit
    
    
    921,368
    
    
    92
    
    
    13,278
    
    
    (1,771
    )
    
    —
    
    
    —
    
    
    365,836
    
    
    (6,446
    )
    
    5,153Employee stock purchase
      plan
    
    
    29,326
    
    
    3
    
    
    419
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    422Self -tender offer, including
      costs
    
    
    —
    
    
    —
    
    
    (935
    )
    
    —
    
    
    —
    
    
    —
    
    
    11,200,000
    
    
    (210,000
    )
    
    (210,935
    )Treasury shares
      retired
    
    
    (11,200,000
    )
    
    (1,120
    )
    
    (150,599
    )
    
    (58,281
    )
    
    —
    
    
    —
    
    
    (11,200,000
    )
    
    210,000
    
    
    —Stock compensation,
      non-cash
    
    
    —
    
    
    —
    
    
    13,139
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    13,139Restricted
      stock compensation, non - cash
    
    
    13,000
    
    
    2
    
    
    39
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    41Other
    
    
    3,591
    
    
    (397
    )
    
    75
    
    
    2
    
    
    72
    
    
    —
    
    
    —
    
    
    397
    
    
    149Net income
    
    
    —
    
    
    —
    
    
    —
    
    
    18,573
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    18,573Comprehensive
      income
    
    
    —
    
    
    —
    
    
    —
    
    
    18,573
    
    
    72
    
    
    —
    
    
    —
    
    
    —
    
    
    18,645December
      31, 2004
    
    
    16,144,124
    
    $
    1,614
    
    $
    7,006
    
    $
    (78,315
    )
    $
    72
    
    $
    —
    
    
    4,460,501
    
    $
    (52,252
    )
    $
    (121,875
    )






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




36
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATMENTS**


**NOTE
1** **—** **DESCRIPTION
OF BUSINESSES AND ORGANIZATION**





CCC
Information Services Group Inc. ("CCCG"), incorporated in Delaware in 1983 and
headquartered in Chicago, Illinois, is a holding company, which operates through
its wholly owned subsidiary, CCC Information Services Inc. ("CCC"). CCC and CCCG
are collectively referred to herein as the "Company" or "we." We employed 766
full-time employees at December 31, 2004, compared to 895 at this time in 2003.
We automate the process of evaluating and settling automobile claims, which
allows our customers to integrate estimate information, labor time and cost,
recycled parts and various other calculations derived from our extensive
databases, electronic images, documents and related information into organized
electronic workfiles. We develop, market and supply a variety of automobile
claim products and services which enable customers in the automobile claims
industry, including automobile insurance companies, collision repair facilities,
independent appraisers and automobile dealers, to manage the automobile claim
and vehicle restoration process. Our principal products and services are CCC
Pathways® collision estimating software ("CCC Pathways"), which provides our
customers with access to various automobile information databases and claims
management software, and CCC Valuescope ® Claim
Services ("CCC Valuescope"), which is used by automobile insurance companies and
independent appraisers in processing claims involving private passenger vehicles
that have been heavily damaged or stolen.





As of
December 31, 2004, White River Ventures Inc. ("White River") held approximately
31% of our outstanding common stock. In June 1998, White River Corporation, the
sole shareholder of White River, was acquired by Demeter Holdings Corporation,
which is solely controlled by the President and Fellows of Harvard College, a
Massachusetts educational corporation and title holding company for the
endowment fund of Harvard University. Charlesbank Capital Partners LLC serves as
the investment manager with respect to the investment of White River in the
Company.




**NOTE
2** **—** **SIGNIFICANT
ACCOUNTING POLICIES**





*Basis
of Consolidation*




The
accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries, which are currently wholly owned.




*Financial
Statement Preparation*




The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts and the disclosures
of contingent amounts in the Company's financial statements and the accompanying
notes. Actual results could differ from those estimates. Certain prior year
amounts have been reclassified to conform to the current year presentation.




*Cash
and Cash Equivalents*




The
Company considers all highly liquid investments purchased with an original
maturity of three months or less at the date of purchase to be cash equivalents.
Cash equivalents are comprised of commercial paper and certificates of deposit.
All cash equivalents are carried at cost, which approximates fair value due to
the short maturities of these instruments. Any realized gains or losses are
shown in the accompanying consolidated statements of operations in other income
or expense.


37
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


*Short-Term
Investments*




The
Company considers all investments purchased with an original maturity of greater
than three months and less than one year to be short-term investments. All
short-term investments are carried at cost, which approximates fair value. Any
realized gains or losses are shown in the accompanying consolidated statements
of operations in other income or expense.




*Revenue
Recognition*




Our
c ustomers
are either billed on a per-transaction basis at the beginning of the month
following the transactions or on a monthly subscription basis  one month
in advance. Revenues
are recognized only after services are provided, when persuasive evidence of an
arrangement exists, the fee is fixed and determinable and when collection is
probable. Revenue is deferred until all of these criteria are met. Revenues are
reflected net of customer sales allowances, which are based on both specific
identification of certain accounts and a predetermined percentage of revenue
based on historical experience.




*Accounts
Receivable, Net*




Accounts
receivable as presented in our consolidated balance sheets are net of reserves
for customer sales allowances and doubtful accounts. In addition to the sales
allowance, discussed above, we determine allowances for doubtful accounts based
on specific identification of customer accounts and the application of a
predetermined percentage, based on historical experience, to the remaining
accounts receivable balance. Our assessment of doubtful accounts includes using
historical information, current economic trends and the probability of
collection from customers. As of December 31, 2004 and 2003, $2.4 million
and $2.9 million, respectively, has been applied as a reduction of accounts
receivable.




Activity
in the allowance accounts is as follows (in thousands):







**Description**
    
    **Balance
      at Beginning of Period**
    
    **Charged
      to Revenue or Expense**
    
    **Charged
      to Other Accounts**
    
    **Write-offs
      net of Recoveries**
    
    **Balance
      at End of Period**2002
      Sales Allowances and Doubtful Accounts
    
    $
    2,288
    
    
    1,755
    
    
    26
    
    
    (1,756
    )
    $
    2,3132003
      Sales Allowances and Doubtful Accounts
    
    $
    2,313
    
    
    2,093
    
    
    (68
    )
    
    (1,395
    )
    $
    2,9432004
      Sales Allowances and Doubtful Accounts
    
    $
    2,943
    
    
    1,629
    
    
    (15
    )
    
    (2,200
    )
    $
    2,357


Sales
allowances were charged to revenue, doubtful accounts were charged to selling,
general and administration expense in the consolidated statement of
operations.




*Software
Development Costs*




The
Company expenses research and development costs as they are incurred. The
Company has evaluated the establishment of technological feasibility of its
software products in accordance with Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed." The Company sells its products in a market that
is subject to rapid technological change, new product development and changing
customer needs. Accordingly, technological feasibility of the Company's products
is generally not established until the development of the product is nearly
complete. The Company defines technological feasibility as the completion of a
working model. The period of time during which costs could be capitalized, from
the point of reaching technological feasibility until the time of general
product release, has historically been very short and, consequently, amounts
subject to capitalization have not been significant. For the years 2004, 2003
and 2002, research and development costs of approximately $8.4 million,
$6.3 million and $7.6 million, respectively, were
included as part of product development and programming in our consolidated
statement of operations .




38
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**


*Property
and Equipment*




Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation
of equipment is computed on a straight-line basis over estimated useful lives.
The Company uses a 2-3 year life for computer equipment; 2-3 year life for
purchased software, licenses and databases; 5 year life for furniture and other
equipment; the term of the lease, ranging from 3 to 15 years for leasehold
improvements; the term of the lease for capital leases and 20 year life for
buildings.




*Goodwill
and Intangibles*




Under the
provisions of SFAS No. 141 “Business Combinations” the purchase method of
accounting is used for all business combinations. The purchase method of
accounting requires that the excess of purchase price paid over the fair value
of identifiable tangible and intangible net assets of acquired businesses be
recorded as goodwill. Under the provisions of SFAS No. 142 “Goodwill and
Intangible Assets” ("SFAS No. 142"), goodwill is no longer amortized. Under SFAS
No. 142, goodwill is reviewed for impairment on at least an annual basis, when
events or changes in circumstances indicate that the carrying value of such
assets may not be recoverable. Recoverability of goodwill is evaluated using a
two-step process. The first step involves a comparison of the fair value of a
reporting unit with its carrying value. If the carrying value of the reporting
unit exceeds its fair value, the second step of the process involves a
comparison of the implied fair value and carrying value of the goodwill of that
reporting unit. If the carrying value of the goodwill exceeds the implied fair
value of that goodwill, an impairment loss is recognized in an amount equal to
the excess. The goodwill balance as of December 31, 2004 was $15.7 million,
which includes goodwill of $4.9 million from the 1988 acquisition that included
the CCC Valuescope service and goodwill of $10.8 million from the Comp-Est
acquisition completed in February 2003. See Note
4, “ Acquisition” to our
consolidated financial statements . We have
reviewed the recoverability of the goodwill balance as of December 31, 2004 and
have concluded the balance was not impaired.




Intangible
assets as of December 31, 2004 include $0.7 million for customer relationships
and $0.3 million for acquired software, both of which are being amortized on a
straight-line basis over a period of three years. Also included in intangible
assets is a trademark valued at $0.3 million that is not being amortized. There
have been no events or changes in circumstances that indicate that the values of
such assets are impaired.




*Deferred
Financing Costs*




Deferred
financing costs are capitalized and amortized over the life of the underlying
financing agreement. As of December 31, 2004 and 2003, deferred financing
costs, net of accumulated amortization, of $3.3 million and
$0.3 million, respectively, were included in other assets in the Company's
consolidated balance sheet. In August 2004, we entered into a new credit
facility agreement. The costs that were incurred related to this facility were
$3.6 million.




39
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


*Derivatives*




The
Company’s strategy is to hedge the floating LIBOR interest payments on at least
50% of the Term debt for the first three years of the six-year term of the
underlying Term Loan debt. The company entered into an interest rate swap
agreement, designated as a cash flow hedge, in which the Company will pay a
fixed interest rate and receive LIBOR on a notional principal balance of $88.8
million for the three-year term expiring on November 29, 2007. The company is
accounting for this interest rate swap under SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities" as a cash flow hedge. The hedge
was evaluated and considered effective at December 31, 2004 and, as such, the
current gain on the effective portion of the hedge of $72 thousand was
classified as 'other comprehensive income' in the stockholders' deficit section
of the balance sheet.




*Income
Taxes*




Deferred
income taxes are recognized for the future tax effects of temporary differences
between financial and income tax reporting using tax rates in effect for the
years in which the differences are expected to reverse. Such deferred income
taxes primarily relate to the timing of recognition of certain revenue and
expense items, the timing of the deductibility of certain reserves and accruals
for income tax purposes. We establish a tax valuation allowance to the extent
that it is more likely than not that deferred tax assets will not be realizable
against future taxable income.




*Fair
Value of Financial Instruments*




The
carrying amount of the Company's financial instruments approximates its
estimated fair value based upon market prices for the same or similar type of
financial instruments. The Company performs an impairment review whenever events
or changes in circumstances indicate that the carrying value of investments may
not be recoverable. Factors the Company considers important, which could trigger
an impairment review include market conditions, valuations for similar
companies, financial performance and going concern risks.




*Stock
Based Compensation*




The
Company follows SFAS No. 123, "Accounting for Stock Based Compensation"
("SFAS No. 123"). As allowed by SFAS No. 123, the Company has elected to
continue to account for its stock based compensation programs according to the
provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has adopted the
disclosure provisions required by SFAS No. 123.




The
Company applies APB No. 25 in accounting for its stock option plans and
employee stock purchase plan and, accordingly, has not recognized compensation
cost in the accompanying consolidated statement of operations. Had compensation
cost been recognized based on fair value as of the grant dates as prescribed by
SFAS No. 123, the Company's net income and related per share amounts would have
been impacted as indicated below (in thousands, except per share data):




**2004**
    
    **2003**
    
    **2002**Net
      income:As
      reported
    
    $
    18,573
    
    $
    26,040
    
    $
    22,709Pro
      forma
    
    $
    16,756
    
    $
    23,570
    
    $
    20,638Per
      share net income assuming dilution:As
      reported
    
    $
    0.77
    
    $
    0.94
    
    $
    0.84Pro
      forma
    
    $
    0.69
    
    $
    0.85
    
    $
    0.77





40
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**





The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model. The principal determinants of option pricing
are: fair market value of the Company's common stock at the date of grant,
expected volatility, risk-free interest rate, expected option lives and dividend
yields. Weighted average assumptions employed by the Company were: expected
volatility of 71%, 72% and 74% for 2004, 2003 and 2002, respectively; and a
risk-free interest rate of 2.8%, 3.2% and 4.1% for 2004, 2003 and 2002,
respectively. In addition, the Company assumed an expected option life of 5.5
years for 2004, 2003 and 2002. No dividend yield was assumed for all years.




On
December 16, 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 (revised 2004),"Share-Based Payment," which is a revision of SFAS No.
123. Generally, the approach in SFAS No. 123(R) is similar to the approach
described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative, as SFAS No. 123(R) must be adopted no
later than July 1, 2005. The Company expects to adopt SFAS No. 123(R) in the
third quarter of 2005. The company is still assessing the appropriate transition
method and the impact the adoption of this standard will have on the results of
operations and financial position.




*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 stock method. See
Note 23, “Earnings Per Share ” to our
consolidated financial statements . **




*New
Accounting Pronouncements*




In
December 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities."  This standard clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," and addresses consolidation by business enterprises of variable
interest entities (also known as Special Purpose Entities or SPE's). For public
entities that are not small business issuers, the provisions of FIN No. 46(R)
are effective no later than the end of the first reporting period that ends
after March 15, 2004. If the variable interest entity is considered to be a
special-purpose entity, FIN No. 46(R) shall be applied no later than the first
reporting period that ends after December 15, 2003. The Company does not have
any investments it believes are variable interest entities for which the Company
is a primary beneficiary. As such, there was no impact of FIN 46 on the
Company's results of operations or our financial position during
2004.




In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets,
an amendment of APB Opinion No. 29." The revised guidance is based on the
principle that exchanges of nonmonetary assets should be measured according to
the fair value of such assets. The guidance, whose provisions will be applied
prospectively, is effective for nonmonetary asset exchanges that take place in
fiscal periods beginning after June 15, 2005. The Company believes that the
adoption of SFAS No. 153 will not have a significant impact on the Company's
results of operations or our financial position.




See
discussion included in this note under "Stock Based Compensation" concerning
FASB issuance of SFAS No. 123(R) in December 2004.


41
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


*Indemnification
Disclosure*




In the
normal course of business, the Company is a party to a variety of agreements
pursuant to which CCC may be obligated to indemnify the other party with respect
to certain matters. Generally, these obligations arise in the context of
agreements entered into by the Company, under which we customarily agree to hold
the other party harmless against losses arising from a breach of representations
and covenants related to such matters as title to assets sold, certain
intellectual property rights and, in certain circumstances, specified
environmental matters. These terms are common in the industry in which we
conduct business. In each of these circumstances, payment by us is subject to
certain monetary and other limitations and is conditioned on the other party
making an adverse claim pursuant to the procedures specified in the particular
agreement, which typically allow us to challenge the other party's
claims.




We
evaluate estimated losses for such indemnifications under SFAS No. 5,
"Accounting for Contingencies," as interpreted by FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN 45"). We consider such
factors as the degree of probability of an unfavorable outcome and the ability
to make a reasonable estimate of the amount of loss. To date, we have not
encountered material costs as a result of such obligations and as of December
31, 2004, have not recorded any liabilities related to such indemnifications in
our financial statements, as we do not believe the likelihood of a material
obligation is probable.




**NOTE
3** **—** **SHORT-TERM
INVESTMENTS**




During
2003 we purchased short-term investments, which are investments with maturities
longer than 90 days but shorter than 12 months. These investments matured in
early 2004 and the proceeds and other available cash were invested in
instruments with maturities of three months or less during 2004. The
held-to-maturity securities, recorded at cost, consisted of the following (in
thousands):




**December
      31,****2004**
    
    **2003**Commercial
      paper
    
    $
    —
    
    $
    4,504Certificates
      of deposit
    
    
    —
    
    
    2,500Total
    
    $
    —
    
    $
    7,004





**NOTE
4** **—** **ACQUISITION**




On
February 26, 2003, we acquired Comp-Est, Inc. ("Comp-Est") from the Motor
Information Systems Division of Hearst Business Publishing, Inc. ("Hearst").
Immediately prior to our acquisition of Comp-Est from Hearst, Hearst acquired
the selected net assets from Comp-Est pursuant to an Option and Acquisition
Agreement, dated February 6, 1998, by and among Hearst, Comp-Est and the
Comp-Est stockholders named therein. Comp-Est provides automotive estimating
software applications to primarily single-location repair facilities.





The
results of Comp-Est have been included in the consolidated financial statements
from the date of acquisition. Pro forma results of operations have not been
presented because the effects of the transaction were not material to our
results. The purchase price, including capitalized acquisition costs, of
approximately $13.4 million was paid in cash and was allocated to identifiable
assets and liabilities and to intangible assets at their estimated fair values
at the date of acquisition. The fair values of the intangible assets acquired
were based on independent appraisals. The excess of the purchase price of $13.4
million paid over the estimated fair value of the assets acquired and the
liabilities assumed of $2.5 million represent goodwill of $10.9
million.





42
  **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**





The
following table summarizes the estimated fair value of the assets acquired and
the liabilities assumed at the acquisition date (in thousands):





**February
      26,****2003**Current
      assets
    
    $
    44Property
      and equipment
    
    
    86Intangible
      assets
    
    
    ****2,867Total
      assets acquired
    
    
    2,997Current
      liabilities
    
    
    450Net
    
    $
    2,547





See Note
13, “Intangible Assets ” to our
consolidated financial statements .





**NOTE
5** **—** **ENTERSTAND
JOINT VENTURE**





In 1998,
the Company and Hearst Communications, Inc. ("Hearst Communications")
established a joint venture, Enterstand Limited ("Enterstand"), in Europe to
develop and market claims processing tools to insurers and collision repair
facilities. In 2002, CCC International and Hearst Communications terminated this
joint venture agreement, CCC International purchased Hearst Communications'
interest in the venture for a nominal sum. In addition, CCCG issued a warrant to
Hearst Communications, exercisable for five years, to purchase up to 250,000
shares of the common stock of CCCG for a price of $12.00 per share. These
warrants are still outstanding at December 31, 2004.





**NOTE
6** **—** **INVESTMENT
IN CHOICEPARTS, LLC**





In 2000,
the Company formed an independent company, ChoiceParts, LLC ("ChoiceParts") with ADP and The
Reynolds and Reynolds Company to
provide electronic parts location and procurement services to collision repair
facilities. The
Company has a 27.5% equity interest in ChoiceParts, which the Company accounts
for by applying the equity method thereby recording its share of income or loss. Approximately
$1.8 million of the original $5.5 million capital funding commitment was still
outstanding as of December 31, 2004 and there are no specific plans that require
CCC to fund this commitment at this time. Based on the nature of our investment
and ChoiceParts having a different fiscal year, we have recorded a deferred
income tax provision on our share of the income.




**NOTE
7** **—RESTRUCTURING
CHARGES**




In 2001,
the Company recorded a charge of $4.3 million to write off excess office space
occupied by its former DriveLogic business. The charge included future rent
commitments and a write-off of leasehold improvements, net of expected future
sublease income. In 2002, the Company recorded an additional charge of $0.9
million related to a delay in sublease income as a result of weak real estate
market conditions. During 2003, the Company recorded a final charge of $1.1
million related to this excess office space as a result of an adjustment to the
expected future sublease income. A sublease agreement with a third party was
signed in 2003 and is for the duration of the current lease, which expires on
March 31, 2006.




In the
second quarter of 2004, we recorded a charge of $0.9 million primarily related
to severance costs for 40 former employees. As part of the restructuring, the
Company has streamlined its customer implementation process and improved sales
and support execution. The restructuring has resulted in expense savings over
the second half of 2004 and is expected to generate annual savings in excess of
$4.0 million. At December 31, 2004, all the expenditures related to this charge
had been completed.




43
  **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**





The
following summarizes the activity in the remaining restructuring accrual related
to our excess office space (in thousands):




**Excess****Facilities**Balance
      at December 31, 2003
    
    $
    1,830Cash
      payments
    
    
    (1,284
    )Sub-let
      rent received
    
    
    580Balance
      at December 31, 2004
    
    $
    1,126





**NOTE
8** **—DISCONTINUED
OPERATIONS**





In 2001,
the Company discontinued the operations of its CCC Consumer Services Inc.
segment. There were no revenues or operations related to the discontinued
operations after 2001. In 2002, the Company made adjustments to reserves it had
established as part of its expected loss on disposal primarily based on the
settlement of a disputed account receivable, which had been fully reserved.
Total discontinued operations income reported in the statement of operations in
2002 was $0.4 million, net of a tax provision of $0.2 million.





**NOTE
9** **—** **LITIGATION
SETTLEMENTS**





In August
2004, the Company settled a dispute that had been pending between the Company
and certain of its insurers that had issued insurance policies to the Company.
Under the terms of the settlement, the insurers paid the Company approximately
$4.8 million, and the parties agreed to dismiss the legal proceedings relating
to this matter and to provide mutual releases. The settlement involved a lawsuit
filed by the Company’s insurers in which they sought a declaration that there
was no insurance coverage under certain policies for the pending litigation
involving the Company’s vehicle valuation product and service, now known as CCC
Valuescope. The
benefit shown in the Company's Statement of Operations from this settlement was
offset by $0.3 million for defense and settlement costs and the $1.9 million
increase in the CCC Valuescope litigation accrual discussed below.




During
2001, CCC 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 the potential settlement of certain of the CCC Valuescope
lawsuits. In 2004, the charge was increased by a net amount of $1.9 million to
$6.2 million. This increase was due to several factors, including the growth
that has occurred in the size of the putative classes of insureds over time, participation
in the potential settlement by an additional customer of CCC, **** increases
in certain costs associated with the settlement, and changes in the terms of the
settlement between CCC and its participating customers. Additionally, the
expected insurance reimbursement has been reduced from $2.0 million to $1.8
million. The Company continues to believe that the current recorded reserve is
necessary and appropriate. See Note
27, “ Legal
Proceedings ” to our
consolidated financial statements.




**NOTE
10** **—** **INCOME
TAXES**





Income
taxes applicable to income from continuing operations consisted of the following
(in thousands):





44
  **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**




**Year
      Ended December 31****2004**
    
    **2003**
    
    **2002**Current
      (provision) benefit:Federal
    
    $
    (9,935
    )
    $
    (13,527
    )
    $
    (6,540
    )State
    
    
    (1,698
    )
    
    (719
    )
    
    (1,037
    )Foreign
    
    
    —
    
    
    20
    
    
    3Total
      current (provision) benefit
    
    
    (11,633
    )
    
    (14,226
    )
    
    (7,574
    )Deferred
      (provision) benefit:Federal
    
    
    262
    
    
    139
    
    
    (3,471
    )State
    
    
    31
    
    
    (198
    )
    
    625Total
      deferred (provision) benefit
    
    
    293
    
    
    (59
    )
    
    (2,846
    )Total
      income tax provision
    
    $
    (11,340
    )
    $
    (14,285
    )
    $
    (10,420
    )





The
Company's effective income tax rate applicable to continuing operations differs
from the federal statutory rate as follows (in thousands, except percentages):





**Year
      Ended December 31****2004**
    
    **2003**
    
    **2002**Federal
      income tax provision at statutory rate
    
    $
    (10,470
    )
    
    (35.0
    )%
    $
    (14,134
    )
    
    (35.0
    )%
    $
    (11,471
    )
    
    (35.0
    )%State
      and local taxes, net of federal income tax effect and before valuation
      allowances
    
    
    (1,084
    )
    
    (3.6
    )%
    
    (1,197
    )
    
    (3.0
    )%
    
    (1,073
    )
    
    (3.3
    )%Change
      in valuation allowance
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (110
    )
    
    (0.4
    )%Nondeductible
      expenses
    
    
    (165
    )
    
    (0.6
    )%
    
    (131
    )
    
    (0.3
    )%
    
    (140
    )
    
    (0.4
    )%Write-off
      of foreign investments
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    132
    
    
    0.4
    %Research
      and experimentation credits
    
    
    628
    
    
    2.1
    %
    
    91
    
    
    0.2
    %
    
    2,383
    
    
    7.3
    %Reduction
      of tax reserves upon resolution of tax uncertainties
    
    
    —
    
    
    —
    
    
    1,111
    
    
    2.8
    %
    
    —
    
    
    —Other,
      net
    
    
    (249
    )
    
    (0.8
    )%
    
    (25
    )
    
    (0.1
    )%
    
    (141
    )
    
    (0.4
    )%Income
      tax provision
    
    $
    (11,340
    )
    
    (37.9
    )%
    $
    (14,285
    )
    
    (35.4
    )%
    $
    (10,420
    )
    
    (31.8
    )%




In 2002,
the Company filed amended income tax returns for tax years 1998, 1999 and 2000
to claim research and experimentation tax credits for those years. As a result
of these amended returns, we recorded an estimated research and experimentation
credit of $2.0 million in 2002. Further, in 2003, we recorded an additional $1.1
million credit related to these amended returns in conjunction with the
completion of an Internal Revenue Service audit of those returns.




The
Company has recorded research and experimentation credits to income tax expense
of $0.6 million, $0.1 million and $0.4 million for the years 2004, 2003 and
2002, respectively




In 2002, the
Company received a refund of $13.1 million, of which $7.8 million was
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 refund of taxes paid in 1996,
1997, 1998 and 1999 when net operating losses incurred in 2001 were carried back
to those years. The Company also made income tax payments, net of refunds, of
$7.9 million in 2002.




45
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**





The
Company has made income tax payments, net of refunds, of $11.4 million and $13.1
million, in 2004 and 2003, respectively.




In
conjunction with the exercise of certain stock options, the Company has reduced
current income taxes payable with an offsetting credit to paid-in-capital for
the tax benefit of these option exercises. For the years 2004, 2003 and 2002,
these tax benefits totaled $1.3 million, $0.5 million and $0.7 million,
respectively.




The
approximate income tax effect of each type of temporary difference giving rise
to deferred income tax assets and liabilities was as follows (in
thousands) :




**December
      31,****2004**
    
    **2003**Deferred
      income tax assets (liabilities):Capital
      loss carryforward
    
    $
    7,390
    
    $
    7,390Foreign
      net operating losses
    
    
    4,209
    
    
    4,209Litigation
      settlement
    
    
    2,636
    
    
    2,694Stock
      option compensation
    
    
    2,614
    
    
    —Lease
      termination
    
    
    1,243
    
    
    1,563Depreciation
      and amortization
    
    
    950
    
    
    836Bad
      debt expense
    
    
    888
    
    
    1,100Rent
    
    
    556
    
    
    805Intangible
      amortization
    
    
    449
    
    
    883Accrued
      compensation
    
    
    206
    
    
    290State
      research credits
    
    
    —
    
    
    120Deferred
      revenue
    
    
    (508
    )
    
    (22
    )Other,
      net
    
    
    386
    
    
    858Subtotal
    
    
    21,019
    
    
    20,726Valuation
      allowance
    
    
    (11,599
    )
    
    (11,599
    )Total
      deferred income tax assets
    
    $
    9,420
    
    $
    9,127





The
Company has established a valuation allowance for certain tax assets that are
not expected to be realized. This allowance is comprised of two items, capital
losses arising from a write-off of its investment in ChannelPoint in 2001 and
foreign net operating losses





46
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**NOTE
11** **—** **OTHER
CURRENT ASSETS**





Other
current assets consisted of the following (in thousands):





**December
      31,****2004**
    
    **2003**Prepaid
      data royalties
    
    $
    1,853
    
    $
    1,948Insurance
      reimbursement for litigation settlement
    
    
    1,800
    
    
    2,000Prepaid
      equipment maintenance
    
    
    1,141
    
    
    1,261Deferred
      contract buyouts
    
    
    978
    
    
    —Prepaid
      insurance
    
    
    820
    
    
    1,080Income
      tax receivable - research and experimentation credits
    
    
    295
    
    
    750Other
    
    
    903
    
    
    1,330Total
    
    $
    7,790
    
    $
    8,369





The
Company has an expected insurance reimbursement related to its CCC Valuescope
litigation settlement of $1.8 million. See Note 27, “Legal Proceedings” to our
consolidated financial statements for a further discussion of the CCC Valuescope
litigation settlement and expected insurance reimbursement.




The
Company sometimes pays a new customer for the remaining commitment of its
previous contract with third parties as an incentive. The amount paid by the
Company is deferred and amortized over the term of the contract negotiated with
the Company. At December 31, 2004, approximately $1.0 million of these payments
are included as deferred contract buyouts within 'other current assets' in our
consolidated balance sheet.




**NOTE
12** **—** **PROPERTY
AND EQUIPMENT**




Property
and equipment consisted of the following (in thousands):




**December
      31,****2004**
    
    **2003**Purchased
      software, licenses and databases
    
    $
    21,655
    
    $
    20,070Computer
      equipment
    
    
    14,625
    
    
    14,715Leasehold
      improvements
    
    
    7,190
    
    
    7,067Furniture
      and other equipment
    
    
    4,415
    
    
    5,339Building
      and land
    
    
    1,796
    
    
    1,796Total,
      cost
    
    
    49,681
    
    
    48,987Less
      accumulated depreciation and amortization
    
    
    (37,530
    )
    
    (36,211
    )Total,
      net
    
    $
    12,151
    
    $
    12,776





As a
result of a review of the Company's computer equipment and software in 2004 and
2003, the Company wrote-off out-of-service fully depreciated assets totaling
$2.6 million and $0.8 million, respectively.




As of
December 31, 2004 and 2003, computer equipment, net of accumulated
depreciation, that is on lease to certain insurance customers under operating
leases of $0.1 million and $0.2 million, respectively, is included in
computer equipment. Future minimum rentals under non-cancelable customer leases
aggregate approximately $0.1 million in 2005.




47
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**





In 2001,
the Company entered into two separate agreements to lease software licenses.
These leases, which were for 36 months and expired in early 2004, were
classified as capital leases. As of December 31, 2004, the capital leases of
$1.9 million were fully amortized, however, the software under these leases was
still in service. The Company made payments of $0.2 million and $0.6 million in
2004 and 2003, respectively. Included in the payments made in each of the years
2004 and 2003 was interest of $5 thousand and $0.1 million, respectively. There
are no future minimum lease payments under these capital leases.




**NOTE
13** **—INTANGIBLE
ASSETS**




In
conjunction with the February 2003 acquisition of Comp-Est, intangible assets
related to customer relationships, acquired software and a trademark were
recorded. The intangible assets related to customer relationships and acquired
software are being amortized over three years; however, the trademark is not
being amortized. Intangible asset amortization expense was $0.9 million and $0.7
million in 2004 and 2003, respectively. Expected amortization in 2005 and 2006
for the intangible assets being amortized is $0.9 million and $0.1 million,
respectively. There have been no events or changes in circumstances that
indicate the values of such assets are impaired.




Intangible
assets consisted of the following (in thousands):




**December
      31,****2004**
    
    **2003**Cost:Customer
      relationships
    
    $
    1,883
    
    $
    1,883Acquired
      software
    
    
    684
    
    
    684Trademark
    
    
    300
    
    
    300Total,
      cost
    
    
    2,867
    
    
    2,867Less
      accumulated amortization:Customer
      relationships
    
    
    (1,151
    )
    
    (524
    )Acquired
      software
    
    
    (418
    )
    
    (190
    )Trademark
    
    
    —
    
    
    —Total
      accumulated amortization
    
    
    (1,569
    )
    
    (714
    )Total,
      net
    
    $
    1,298
    
    $
    2,153


48
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**




**NOTE
14** **—** **ACCRUED
EXPENSES**




Accrued
expenses consisted of the following (in thousands):





**December
      31,****2004**
    
    **2003**Litigation
      settlements
    
    $
    8,101
    
    $
    6,475Compensation
    
    
    5,725
    
    
    4,468Health
      insurance
    
    
    1,347
    
    
    1,256Restructuring
      charges
    
    
    921
    
    
    860Sales
      tax
    
    
    842
    
    
    933Professional
      fees
    
    
    655
    
    
    843Other,
      net
    
    
    1,877
    
    
    1,687Total
    
    $
    19,468
    
    $
    16,522





**NOTE
15** **—OTHER
LIABILITIES**





Other
liabilities consisted of the following (in thousands):





**December
      31,****2004**
    
    **2003**Deferred
      rent
    
    $
    1,466
    
    $
    2,140Other,
      net
    
    
    250
    
    
    924Total
    
    $
    1,716
    
    $
    3,064





**NOTE
16** **—** **CCC
CAPITAL TRUST**




In 2001,
CCC Capital Trust ("CCC Trust"), a business trust controlled by CCCG,
issued 15,000 Trust Preferred Securities, which were presented on the
consolidated 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., one of our existing stockholders.
CCCG and CCC Trust received an aggregate purchase price of $15.0 million
from the sale of these securities. Each share of the Series F Preferred
Stock entitles Capricorn Investors III, L.P. to 12,000 votes and expires on
the earlier of (i) the date the warrants are exercised in full or (ii) the
warrant expiration date, which is February 23, 2006.




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 was the
Increasing Rate Note and any interest accrued thereon. The interest payment
dates on the Increasing Rate Note corresponded to the distribution dates on the
Trust Preferred Securities. The Trust Preferred Securities were to mature
simultaneously with the Increasing Rate Note. The Company had unconditionally
guaranteed all of the Trust Preferred Securities to the extent of the assets of
CCC Trust.




49
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**





The
Increasing Rate Note was subordinated to the Company's bank debt. Cumulative
distributions on the Trust Preferred Securities accrued 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 were mandatorily redeemable on
February 23, 2006. In addition, all or any portion of the outstanding Trust
Preferred Securities could have been 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 was equal to the liquidation
amount of the Trust Preferred Securities plus accrued but unpaid distributions.
The Company issued payment-in-kind notes for quarterly interest payments due in
2001 for a total of $1.3 million.




On
November 30, 2001, the Indenture relating to the Trust Preferred Securities was
amended to permit the Company to conduct a rights offering and enter into a new
bank credit facility. In consideration for certain waivers and amendments that
allowed the Company to conduct a rights offering and execute a new credit
facility, warrants of 1,200,000 issued to Capricorn Investors III, L.P. were
amended to reduce the exercise price from $10.00 per share to $6.875 per share.
Using the Black-Scholes pricing model, the fair value of this reduction in
exercise price was approximately $0.7 million. These warrants were still
outstanding as of December 31, 2004.




On
October 21, 2002, the Company agreed to purchase the outstanding Trust Preferred
Securities from Capricorn Investors III, L.P. The purchase price of $16.3
million represented the par value of all Trust Preferred Securities outstanding
plus accrued but unpaid distributions. The Company also recorded a $2.5 million
pre-tax charge, resulting from the difference between the par value and the
accreted value and $0.4 million of accrued but unpaid distributions on the Trust
Preferred Securities on October 21, 2002. **** Following
the closing of the purchase, CCC Capital Trust was dissolved.




**NOTE
17** **—RIGHTS
OFFERING**




The
Company completed a rights offering on December 31, 2001. Three of CCCG's
largest institutional stockholders, White River Ventures, Inc. and Capricorn
Investors II and III L.P., agreed to purchase their pro-rata share of the rights
offering, as well as all of the shares not subscribed for by CCCG's other
stockholders or warrant holders, up to an aggregate of $20 million. In
consideration for this, the Company issued these stockholders 293,000 warrants
to purchase shares of its common stock at a price of $5.50 per share with an
expiration date of November 30, 2005. As of December 31, 2004, warrants totaling
239,764 shares were outstanding.




**NOTE
18** **—** **LONG-TERM
DEBT**




On August
20, 2004, in conjunction with a self-tender offer, CCC entered into a new credit
agreement ("Credit Agreement") replacing CCC's former credit facility. The new
agreement consisted of a term loan ("Term Loan") of $177.5 million and a
revolving loan ("Revolving Loan") of $30.0 million. Through December 31, 2004,
the Company had no advances under the Revolving Loan. As
compared to the former credit facility, the Credit Agreement provides CCC with
improved terms and additional flexibility. The
Credit Agreement contains covenants that, among
other things, restrict CCC's ability to sell or transfer assets, make certain
investments and make capital expenditures in addition to certain financial
covenants. CCC is also required to provide the lender with quarterly and
annual financial reports. The Credit Agreement is guaranteed by CCCG and is
secured by a blanket first priority lien on substantially all of the assets of
CCCG and its subsidiaries. In accordance with the terms of the Credit Agreement,
the Company entered into a hedging agreement that resulted in at least 50% of
the aggregate principal amount borrowed under the Term Loan, or $88.8 million,
being effectively subject to a fixed or maximum interest rate. See Note
2, “ Significant
Accounting Policies - Derivatives” to our
consolidated financial statements for
further discussion of the interest rate hedge.




50
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**





The
Revolving Loan matures on August 20, 2009 and t he Term
Loan matures on August 20, 2010. **** The
quarterly scheduled principal payments on the Term Loan are approximately $0.4
million through June 30, 2010, with the next scheduled payment due on March 31,
2006. Due to a prepayment in 2004, there are no scheduled payments due under the
Term Loan in 2005. The final payment of $161.9 million is due at maturity. All
advances under the Credit Agreement bear interest, at CCC's election, LIBOR 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 0.5% on any unused portion of the Revolving
Loan .




In
connection with the new Credit Agreement, the Company incurred financing costs
of approximately $3.6 million. These costs have been capitalized and have been
classified as 'other assets' on the balance sheet. These costs will be amortized
as interest expense over the term of the underlying Credit
Agreements.




During
the years ended December 31, 2004 and 2002, the weighted average interest
rates were 5.1% and 4.0%, respectively. The Company had no borrowing outstanding
during 2003. CCC made cash interest payments of $3.3 million,
$0.2 million and $0.2 million, during the years ended
December 31, 2004, 2003 and 2002, respectively. The interest paid in 2003
represents a commitment fee of 0.5% on the unused portion of the former Credit
Facility. During
2002, CCC had net repayments under the line of credit of $6.5 million, resulting
from draws under the Credit Facility of $22.0 million and repayments of $28.5
million. In 2004, CCC made a scheduled principal payment of $0.5 million and
voluntary prepayments of $7.4 million on the Term Loan. As of December 31, 2004,
the Term Loan outstanding balance was $169.6 million.




**NOTE
19—SELF-TENDER OFFER**




During
the third quarter of 2004, the Company’s Board of Directors authorized
a self-tender offer to purchase up to $210.0 million of its common stock at a
price of $18.75 per share. The tender was fully subscribed and 11.2 million
shares were purchased. The purchase was made through a fixed price tender offer
in which all of CCC’s stockholders, vested option holders and warrant holders,
including employee benefit plans, were given the opportunity to sell a portion
of their shares at a price of $18.75 per share, without incurring any brokerage
fees or commissions. This represented a premium of approximately 26% over the
closing stock price of $14.90 per share on July 21, 2004, the day before the
tender was announced. Since the number of shares tendered was greater than 11.2
million,  purchases
were made based on a proration factor of 44.1049 percent. The shares that were
purchased were retired. The self-tender offer was funded by a term loan facility
of $177.5 million and $32.5 million of cash on hand.




The
non-cash stock compensation charge of $13.1 million resulted from the exercise
of employee stock options in connection with the Company’s self-tender offer.
The Company permitted employee stock option holders to participate in the
self-tender offer using a stock-for-stock cashless exercise. This triggered
variable stock compensation accounting for the 1997 and 2000 Stock Incentive
Plans, which resulted in a non-cash stock compensation charge. T he stock-for-stock cashless
exercise was only allowed for purposes of participating in the self-tender
offer. Pursuant to stock
compensation accounting requirements, the charge covered all vested employee
stock options, including those that were not tendered and those that were unable
to be exercised due to the 44.1049 percent pro-ration factor. All stock option
holders received the same terms and conditions for their shares as shareholders
and warrant holders.




The
amount remaining on the balance sheet for additional paid-in capital subsequent
to the self-tender offer primarily relates to the warrants that were issued as
part of the rights offering completed in 2001 and that remain unexercised and
paid-in capital related to option exercises since the retirement of the shares
purchased as part of the self-tender offer.


51
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**NOTE
20** **—** **TREASURY
STOCK**




In 2002,
the Company received a promissory note from the Chief Executive Officer and
Chairman of the Board in the amount of $1.2 million, accruing interest at 6.75%,
for the purchase of 192,000 treasury shares at a price of $6.25 per share, which
was the fair value of the Company's stock at that date. During the second
quarter of 2003, the note, along with accrued interest, was repaid in full. As
of December 31, 2004 and 2003, there were no notes receivable from
officers.




In
conjunction with the self-tender offer, vested option and warrant holders were
allowed to perform a stock-for-stock cashless exercise in which shares valued at
the closing market price of $17.72 on August 30, 2004, the date the tender offer
closed, were withheld to cover the exercise price of options and warrants, as
well as withholding taxes, which resulted in an increase to treasury stock of
365,836 shares.




**NOTE
21** **—** **EMPLOYEE
BENEFIT PLANS**




*Defined
Contribution Savings and Investment Plan*




The
Company sponsors a tax-qualified defined contribution savings and investment
plan, CCC Information Services Inc. 401(k) Retirement Savings & Investment
Plan" ("Savings Plan"). Participation in the Savings Plan is voluntary, with
substantially all employees eligible to participate. Expenses related to the
Savings Plan consist primarily of Company contributions that are based on
percentages of certain employees' contributions. Defined contribution expense
for the years ended December 31, 2004, 2003 and 2002 was $1.8 million,
$0.9 million and $1.7 million, respectively. Included in the 2002
defined contribution expense is an additional discretionary contribution of $0.6
million made by the Company in February 2003, into the Savings Plan for all
eligible employees, for the purchase of Company stock.




In 2004,
the Company recorded a charge of approximately $0.8 million for additional
Company contributions in order to meet the non-discrimination test for the years
1999 through 2002. The Company changed its administrator of the Savings Plan at
the end of 2003. The new administrator of the Savings Plan performed the
non-discrimination test for 1999 through 2002 and concluded the test had
previously been performed incorrectly.




*Employee
Stock Purchase Plan*




In 1998,
the Company established an employee stock purchase plan that enables eligible
employees to purchase shares of the Company's common stock at the lesser of
(i) 85 percent of the fair market value of the Company's stock on the
applicable grant date (February 1, May 1, August 1, or
November 1) or (ii) 85 percent of the fair market value of the
Company's stock on the last day of that month during the offering period. Under
the employee stock purchase plan, 500,000 shares have been authorized for
issuance and 88,081 are available for issuance at December 31, 2004. During
2004, 2003 and 2002, the Company issued 29,326, 31,311 and 44,920 shares
pursuant to the employee stock purchase plan at prices ranging from $12.28 to
$15.87, $9.72 to $16.04 and $5.10 to $15.60, respectively. See Note
2, “ Significant
Accounting Policies” to our
consolidated financial statements for pro
forma results had compensation expense been recognized based on fair value as of
the grant dates as prescribed by SFAS No. 123.


52
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**NOTE
22** **—** **STOCK
OPTION AND STOCK INCENTIVE PLANS**




In 1997,
the Company adopted a stock option plan (“1997 Plan”), which provided for the
issuance of up to 675,800 shares of common stock pursuant to the exercise of
stock options exercisable within five years of grant. The 1997 Plan was amended
in 1998 to increase the maximum number of shares available for grant to
1,500,000 shares and to lengthen the term of new option grants from five to ten
years. In 1998, the maximum number of shares available for grant was increased
to 2,500,000 shares.




In 2000,
the Company amended and restated the 1997 Plan by adopting a new stock incentive
plan (“2000 Plan"). The terms of the 2000 Plan were applied to all outstanding
options under the 1997 Plan and no further grants were made under the 1997 Plan.
The 2000 Plan increased the maximum number of shares available for grant to
3,900,000, including any shares that were available for grant under the 1997
Plan. This limit was increased to 4,308,060 when the 2000 Plan was amended in
2004. At December 31, 2004, 898,037 shares remained available for future grants
under the 2000 Plan. In the event of any lapse, expiration, termination,
forfeiture or cancellation of any outstanding stock incentive without the
issuance of shares or payment of cash, the shares reserved for such incentive
again become available for future grants. See Note
26, "Restricted Stock" to our
consolidated financial statements for
additional share-based incentives that were issued pursuant to the 2000
Plan.




Option
activity during 2004, 2003 and 2002 is summarized below:




**2004**
    
    **2003**
    
    **2002****Weighted**
    
    
    
    **Weighted**
    
    
    
    **Weighted****Average**
    
    
    
    **Average**
    
    
    
    **Average****Exercise**
    
    
    
    **Exercise**
    
    
    
    **Exercise****Shares**
    
    **Price**
    
    **Shares**
    
    **Price**
    
    **Shares**
    
    **Price**Options
      Outstanding:Beginning
      of year
    
    
    3,147,106
    
    $
    10.67
    
    
    2,922,270
    
    $
    9.12
    
    
    3,005,452
    
    $
    9.31Granted
    
    
    7,500
    
    $
    18.92
    
    
    561,325
    
    $
    17.29
    
    
    547,500
    
    $
    9.75Exercised
    
    
    (1,134,427
    )
    $
    8.41
    
    
    (262,639
    )
    $
    6.97
    
    
    (334,402
    )
    $
    9.26Forfeited
      and Expired
    
    
    (293,698
    )
    $
    12.57
    
    
    (73,850
    )
    $
    13.08
    
    
    (296,280
    )
    $
    11.97End
      of year
    
    
    1,726,481
    
    $
    11.86
    
    
    3,147,106
    
    $
    10.67
    
    
    2,922,270
    
    $
    9.12Options
      exercisable at year-end
    
    
    1,125,821
    
    $
    11.09
    
    
    1,708,676
    
    $
    9.51
    
    
    1,316,658
    
    $
    9.08Weighted
      average grant date fair value of options granted during the
      year
    
    
    
    
    $
    11.54
    
    
    
    
    $
    11.12
    
    
    
    
    $
    6.40





The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model. The principal determinants of option pricing
are: fair market value of the Company's common stock at the date of grant,
expected volatility, risk-free interest rate, expected option lives and dividend
yields. Weighted average assumptions employed by the Company were: expected
volatility of 71%, 72% and 74% for 2004, 2003 and 2002, respectively; and a
risk-free interest rate of 2.8%, 3.2% and 4.1% for 2004, 2003 and 2002,
respectively. In addition, the Company assumed an expected option life of 5.5
years for 2004, 2003 and 2002. No dividend yield was assumed for all
years.


53
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


The
following table summarizes information about fixed stock options outstanding at
December 31, 2004:


**Options
      Outstanding**
    
    **Options
      Exercisable****Weighted****Average**
    
    **Weighted**
    
    
    
    **Weighted****Remaining**
    
    **Average**
    
    
    
    **Average****Contractual**
    
    **Exercise**
    
    
    
    **Exercise****Range
      of Exercise Prices**
    
    **Shares**
    
    **Life**
    
    **Price**
    
    **Shares**
    
    **Price**$5.75
      to $6.75
    
    
    31,799
    
    
    6.56
    
    $
    6.47
    
    
    11,830
    
    $
    6.58$6.88
      to $6.88
    
    
    17,500
    
    
    1.22
    
    $
    6.88
    
    
    17,500
    
    $
    6.88$7.50
      to $8.90
    
    
    605,215
    
    
    6.58
    
    $
    8.51
    
    
    357,309
    
    $
    8.56$9.00
      to $11.13
    
    
    368,530
    
    
    5.28
    
    $
    10.53
    
    
    367,780
    
    $
    10.53$12.13
      to $16.63
    
    
    288,978
    
    
    4.48
    
    $
    13.48
    
    
    278,291
    
    $
    13.41$17.20
      to $19.15
    
    
    414,459
    
    
    8.19
    
    $
    17.44
    
    
    93,111
    
    $
    17.43$5.75
      to $19.15
    
    
    1,726,481
    
    
    6.28
    
    $
    11.86
    
    
    1,125,821
    
    $
    11.09


****


**NOTE
23** **—** **EARNINGS
PER SHARE**




A summary
of the calculation of basic and diluted earnings per share for the years ended
December 31, 2004, 2003 and 2002, is presented below (in thousands, except
per share data):




**Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Net
      income
    
    $
    18,573
    
    $
    26,040
    
    $
    22,709Weighted
      average common shares
    
    
    22,993
    
    
    26,243
    
    
    25,850Effect
      of common stock options and warrants
    
    
    1,265
    
    
    1,412
    
    
    1,054Weighted
      average diluted shares
    
    
    24,258
    
    
    27,655
    
    
    26,904Income
      per common share—basic:Income
      from continuing operations
    
    $
    0.81
    
    $
    0.99
    
    $
    0.86Income
      from discontinued operations
    
    
    —
    
    
    —
    
    
    0.01Income
      per common share—basic
    
    $
    0.81
    
    $
    0.99
    
    $
    0.87Income
      per common share—diluted:Income
      from continuing operations
    
    $
    0.77
    
    $
    0.94
    
    $
    0.83Income
      from discontinued operations
    
    
    —
    
    
    —
    
    
    0.01Income
      per common share—diluted
    
    $
    0.77
    
    $
    0.94
    
    $
    0.84




Options
to purchase a weighted average number of 38,373 shares, 466,809 shares and
365,602 shares of common stock for 2004, 2003 and 2002, respectively, were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price of the common shares
during those periods. The exercise price of these options and warrants ranged
from $17.73 to $19.15 per share.


54
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**NOTE
24** **—** **COMMITMENTS
AND CONTINGENCIES**




The
Company leases facilities and office equipment under non-cancelable operating
lease agreements that expire at various dates through 2012. As of
December 31, 2004, future minimum cash lease payments were as follows (in
thousands):




**Total**
    
    **2005**
    
    **2006**
    
    **2007**
    
    **2008**
    
    **2009**
    
    **Thereafter**Operating
      leases
    
    $
    15,512
    
    
    3,252
    
    
    3,274
    
    
    3,228
    
    
    3,082
    
    
    737
    
    
    1,939





During
2004, 2003 and 2002, operating lease rental expense was $4.3 million,
$5.2 million and $6.3 million, respectively.




*ChoiceParts
Investment.* The
Company has approximately $1.8 million of the original $5.5 million ChoiceParts
capital funding commitment still outstanding as of December 31, 2004. Currently,
there are no specific plans on the timing of when CCC will be required to fund
this commitment.




*Purchase
Obligations* . The
Company has long-term agreements with suppliers and other parties related to
licensing data used in our products and services, outsourced web-hosting and
data center, disaster recovery and business continuity services and
telecommunication services. Purchase obligations also include a data license for
the MOTOR Crash Estimating Guides, which we license from a unit of Hearst, which
is under a long-term contract that expires in 2021. Under the terms of these
agreements with suppliers, the Company has minimum obligations of $19.3 million
in 2005, $11.0 million in 2006, $9.6 million in 2007, $9.7 million in 2008, $9.3
million in 2009 and $107.1 million thereafter.




**NOTE
25** **—** **BUSINESS
SEGMENTS**




Statement
of Financial Accounting Standards No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS No. 131"), establishes standards
for reporting information about operating segments. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.




We
currently operate our business as one segment. Our products and services
facilitate the processing of automobile physical damage claims and help to
improve decision-making and communication between various parties, such as
automobile insurance companies and collision repair facilities, involved in the
automobile insurance claims process. We market
our products and services through one sales and service organization. Our
management team evaluates resource allocation decisions and our performance
based on financial information on a total company profit level and at the
product revenue level, accompanied by disaggregated information about revenues
by geographic regions.


55
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


Revenue
by suites is as follows (dollars in thousands):




**Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**CCC
      Pathways
    
    $
    124,726
    
    $
    118,190
    
    $
    116,231CCC
      Valuescope
    
    
    41,642
    
    
    42,187
    
    
    45,463Workflow
      Products
    
    
    25,873
    
    
    26,107
    
    
    22,602Information
      Services Products
    
    
    2,016
    
    
    1,708
    
    
    1,134Other
      Products and Services
    
    
    4,396
    
    
    5,160
    
    
    6,430Total
      revenue
    
    $
    198,653
    
    $
    193,352
    
    $
    191,860





**NOTE
26** **—RESTRICTED
STOCK**




During
the third quarter of 2003, the Company issued, as compensation, a total of 8,000
shares of restricted stock, under the 2000 Stock Incentive Plan, with a fair
market value of $14.93 per share to two members of the Audit
Committee of the Board of Directors ("Audit Committee"), each of
whom received 4,000 shares. In 2004, restricted stock was issued to two new
members of the Audit Committee, each of whom received 4,000 shares for a total
of 8,000 shares. The fair market value of shares issued in 2004 was $17.85/share
and $21.48/share. The shares vest over a period of four years from issuance,
although accelerated vesting is provided in certain instances. Compensation
expense related to restricted stock awards is based upon market prices at the
date of grant and is charged to earnings on a straight-line basis over the
period of restriction. A third member of the Audit Committee will receive
compensation annually in the form of cash. The total fair value of the
restricted stock on the dates of grant was approximately $0.3 million. Total
compensation expense recognized in relation to the restricted stock issued and
the cash payment in lieu of restricted stock for the years ended December 31,
2004 and 2003, was approximately $54 thousand and $16 thousand,
respectively.




**NOTE
27** **—** **LEGAL
PROCEEDINGS**




The
Company has pending against it certain putative class actions and individual
actions in which the plaintiffs allege that their insurers, using valuation
reports prepared by CCC, offered them an inadequate amount for their total loss
vehicles. The caption and other relevant information concerning each such case
is set forth below.




**Pending
Class Actions**




*LANCEY
v. COUNTRY MUTUAL INS. CO., COUNTRY CASUALTY INS. d/b/a COUNTRY COMPANIES, and
CCC INFORMATION SERVICES INC., Case No. 01 L 113 (filed January
29, 2001);* *KMUCHA
v. COLONIAL PENN INSURANCE a/k/a GE PROPERTY AND CASUALTY INSURANCE COMPANY and
CCC INFORMATION SERVICES INC., Case No. 03 L 1267 (filed September 18,
2003)* ; and *JACKSON
v. ATLANTA CASUALTY COMPANY and INFINITY PROPERTY & CASUALTY CORPORATION and
CCC INFORMATION SERVICES INC., Case No. 03 L 1266 (filed September 18,
2003)* . These
cases were filed in the Circuit Court of Madison County, Illinois by the same
group of plaintiffs’ lawyers who filed the COOK lawsuit discussed below. In each
case, the plaintiff seeks certification of a plaintiff class and asserts various
common law claims against CCC and seeks an unspecified amount of compensatory
and punitive damages, attorneys’ fees and costs. The
LANCEY case also seeks certification of a defendant class consisting of all insurance companies who used CCC's valuation reports to
determine the "actual cash value" of totaled vehicles.




*MYERS
v. TRAVELERS PROPERTY CASUALTY CORP., THE TRAVELERS INDEMNITY COMPANY OF
AMERICA, and CCC INFORMATION SERVICES INC., No. 99 CH 2793 (filed February 22,
2000) and STEPHENS v. PROGRESSIVE CORP., PROGRESSIVE PREFERRED INS. CO. and CCC
INFORMATION SERVICES INC., No. 99 CH 15557 (filed October28,
1999)* . These
two cases assert claims and seek relief substantially similar to the cases
pending in Madison County, Illinois described above. Each of these cases was
dismissed with prejudice by the trial court and appealed to the Illinois
Appellate Court for the First District. On April 30, 2004, the Appellate Court
of Illinois for the First Judicial District issued an opinion in each of these
cases reversing, in part, the Circuit Court’s prior rulings dismissing
plaintiffs’ claims against CCC. In particular, in each case, the Appellate Court
reversed the Circuit Court’s ruling that the Illinois Consumer Fraud and
Deceptive Business Practices Act does not apply to non-Illinois resident
plaintiffs. That issue is currently before the Illinois Supreme Court in a
separate case to which CCC is not a party. Both cases were remanded to the
Circuit Court of Cook County for further proceedings.




56
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**


*ROGAN
v. FARMERS INSURANCE GROUP, FARMERS INSURANCE EXCHANGE, and CCC INFORMATION
SERVICES INC., Case No. SC076462 (filed March 24, 2003 in the Superior Court of
the State of California, County of Los Angeles County)* .
Plaintiff asserts various common law and statutory claims against his insurance
company and against CCC, including a claim under California Business &
Professions Code Section 17200, et seq. Plaintiff seeks recovery of unspecified
damages, an accounting, restitution and disgorgement, on his own behalf and on
behalf of the general public, punitive damages, and an award of attorneys' fees.
At a hearing on January 29, 2004, the court sustained CCC’s demurrer to all
claims against CCC except for the Section 17200 claim, which the court stayed
pending a separate action to which CCC is not a party. The court also granted a
motion to compel an appraisal of plaintiffs’ claims.




*STATE
OF CALIFORNIA EX REL. JOHN METZ V. CCC INFORMATION SERVICES INC.* , *Case
No. RG04153363 (filed April 29, 2004in the Superior Court of the State of
California, County of Alameda)* . The
case was initially filed on April 29, 2004, but CCC was not served with the
original complaint and was not served with the amended complaint until November
12, 2004. In the first amended complaint, plaintiff John Metz purports to sue
CCC on behalf of the State of California pursuant to Section 1871.7 of the
California Insurance Code. Plaintiff alleges that CCC's total loss vehicle
valuation methodology violates Section 1871.7, and on that basis, plaintiff
seeks to recover, on behalf of the State, unspecified civil penalties and
assessments under Section 1871.7. Plaintiff also seeks an award of between 40%
and 50% of any such civil penalties and assessments, as well as an award of
attorneys' fees and costs.




CCC and
certain of its insurance company customers have been engaged in settlement
discussions with the plaintiffs' attorneys who filed the above-referenced cases
in Madison County, Illinois and COOK, which was filed in Johnson County,
Illinois. As negotiations have progressed, the number of participants and the
cost of the proposed settlement have fluctuated. Based on the current status of
those discussions, the Company anticipates completing an initial settlement that
would resolve potential claims arising out of approximately 29% of the Company’s
total transaction volume for valuations involving first party claims during the
time period covered by the lawsuits, and it would also resolve a number of the
putative class action suits currently pending against CCC and certain of its
customers. These settlement negotiations are ongoing, but at this time, CCC and
certain of its insurance company customers have reached an agreement in
principle as to CCC's proposed contribution to the potential settlement. Upon
completion of the anticipated settlement, CCC would agree to enter into the
settlement for the purpose of avoiding the expense and distraction of protracted
litigation, without any express or implied acknowledgment of any fault or
liability to the plaintiff, the putative class or anyone else.




During
2001, CCC 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 the potential settlement of certain of these lawsuits.
During the third quarter of 2003, that charge was increased by a net amount of
$1.9 million to $6.2 million. This increase was due to several factors,
including the growth that has occurred in the size of the putative classes of
insureds over time, participation
in the potential settlement by an additional customer of CCC, **** increases
in certain costs associated with the settlement, and changes in the terms of the
settlement as between CCC and its participating customers. Additionally, the
expected insurance reimbursement has been reduced from $2.0 million to $1.8
million. The Company continues to believe that the current recorded reserve is
necessary and appropriate.




57
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


****


**Class
Action Dismissals Pending on Appeal**




*McGOWAN
v. PROGRESSIVE CASUALTY INS. CO., PROGRESSIVE INS. CO., and CCC INFORMATION
SERVICES INC., Case No. 00VS006525 (filed June 16, 2000 in the State Court
of Fulton County, Georgia), DASHER v. ATLANTA CASUALTY CO. and CCC INFORMATION
SERVICES INC., Case No. 00VS006315 (filed June 16, 2000 in the State Court of
Fulton County, Georgia) and WALKER v. STATE FARM MUTUAL AUTOMOBILE INS. CO. and
CCC INFORMATION SERVICES INC., Case No. 00VS007964 (filed August 2, 2000 in
the State Court of Fulton County, Georgia).* The
plaintiffs in these three cases, each of whom seeks to represent a nationwide
class of insureds against CCC and the named insurance company defendant, allege
that CCC’s Valuescope valuation product and service provides values that do not
comply with applicable state regulations governing total loss claims
settlements. Plaintiffs assert various common law and statutory claims against
CCC and the insurance company defendants, including claims under the Georgia
RICO statute. Plaintiffs seek unspecified compensatory, treble and punitive
damages, attorneys' fees and expenses. Each plaintiff’s claims were dismissed
with prejudice by the trial court, and each plaintiff has appealed those
dismissals to the Georgia Court of Appeals, where the cases are now
pending.




*SUSANNA
COOK v. DAIRYLAND INS. CO., SENTRY INS. and CCC INFORMATION SERVICES INC., No.
2000 L-1 (filed January 31, 2000 in the Circuit Court of Johnson County,
Illinois)* . The
plaintiff in COOK seeks certification of a plaintiff class as well as a
defendant class consisting of all insurance companies who used CCC's valuation
reports to determine the "actual cash value" of totaled vehicles. Plaintiff
asserts various common law claims against CCC and seeks an unspecified amount of
compensatory and punitive damages, attorney's fees and costs. Plaintiff’s claims
were dismissed with prejudice by the trial court, and the plaintiff has appealed
that dismissal to the Illinois Appellate Court for the Fifth District, where the
case is now pending.




**Individual
Cases Against CCC**




*HECKLER
v. PROGRESSIVE EXPRESS INSURANCE COMPANY, PROGRESSIVE AMERICAN INSURANCE COMPANY
and CCC INFORMATION SERVICES INC* ., *Case
No.*  *00003573
(filed against CCC on November 5, 2001 in the Circuit Court of the Thirteenth
Judicial Circuit, in and for Hillsborough County, Florida).* The
plaintiff in HECKLER asserts claims substantially similar to the above-described
cases, and also alleges that CCC’s Valuescope valuation service provides values
that do not comply with applicable state regulations governing total loss claims
settlements. Plaintiff seeks an award of unspecified compensatory and punitive
damages, attorneys' fees, interest and costs. The HECKLER case is pled as an
individual action.




*TAYLOR
v. SOUTHERN FARM BUREAU CAS. INS. CO., and CCC INFORMATION SERVICES INC.,* No.
2004-0095 (filed April 8, 2004 in the Circuit Court of Tunica County,
Mississippi). Plaintiff alleges certain claims against her purported insurer,
Southern Farm Bureau Casualty Insurance Company, and CCC arising from the total
loss of her vehicle. Against CCC, the plaintiff asserts claims for conspiracy to
commit fraud in violation of the Mississippi Consumer Protection Act and
conspiracy to commit common law fraud.




**Actions
Dismissed During the Fourth Quarter of 2004**




*TRAVIS
v. KEMPER CASUALTY INS. CO. d/b/a KEMPER INSURANCE and CCC INFORMATION SERVICES
INC., Case No. 01 L 290 (filed February 16,
2001).* This
case was filed in the Circuit Court of Madison County, Illinois by the same
plaintiffs’ lawyers who filed the other Madison County, Illinois cases described
above and asserts claims and seeks relief substantially similar to those cases.
On December 29, 2004, the court entered an order dismissing with prejudice the
claims of the named plaintiff and dismissing without prejudice the claims of any
other putative class members.




58
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**

**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**


*GILKERSON
V. NATIONWIDE MUT. INS. CO., and CONSOLIDATED COLLATERAL CO.,* No.
04-C-2147 (filed August 3, 2004 in the Circuit Court of Kanawha County, West
Virginia). Plaintiff alleges four counts against her purported insurer,
Nationwide Mutual Insurance Company ("Nationwide"), and CCC arising from the
total loss of her vehicle: breach of contract; common law fraud and intentional
infliction of emotional distress; violation of common law duty of good faith and
fair dealing; and fraud in violation of the West Virginia Unfair Trade Practices
Act. Nationwide removed the case to the U.S. District Court for the Southern
District of West Virginia, No. 2:04-0957, on August 31, 2004. CCC
resolved the claims asserted against it in this case for an amount that did not have a
material adverse effect on CCC's business, financial condition or results of
operations, and the case was dismissed with prejudice on November 29,
2004.




*WILLIAMS
v. NATIONWIDE MUTUAL INSURANCE COMPANY, NATIONWIDE MUTUAL FIRE INSURANCE
COMPANY, NATIONWIDE PROPERTY AND CASUALTY INSURANCE COMPANY, and CCC INFORMATION
SERVICES INC., Civil Action No. CV-2002-094 (filed November 12, 2002 in the
Circuit Court of Barbour County, Alabama)* . The
plaintiff in WILLIAMS asserted claims substantially similar to the
above-described cases, and also alleged that CCC 's Valuescope valuation service provides values that do not comply with applicable
state regulations governing total loss claims settlements. Plaintiff sought an
award of unspecified compensatory and punitive damages, attorneys ' fees,
interest and costs, although plaintiff alleged that her compensatory and
punitive damages, exclusive of interest and fees, did not exceed $75,000. The
WILLIAMS case was pled as an individual action. CCC resolved the claims asserted
against it in this case for an amount that did not have a
material adverse effect on CCC's business, financial condition or results of
operations. The final order of dismissal was entered by the Court in April 2004,
although CCC did not receive a copy of the order until February
2005.




**Other
Matters**




CCC is
aware of two class certification rulings in cases involving CCC's Valuescope
valuation service, to which CCC is not a party. In *JOSEPH
JOHNSON ET AL. v. FARMERS INSURANCE EXCHANGE, NO. D035649 (SUPERIOR COURT NO.
726452)* , the
California Court of Appeal reversed an order by the San Diego County Superior
Court denying class certification. The Court of Appeal ordered the Superior
Court to certify a class consisting of all California residents insured under a
Farmers California private party passenger vehicle policy who, from December 10,
1994 through the present, received a first party total loss settlement or
settlement offer that was less than the CCC base value because of a deduction
for one or more condition adjustments, and whose overall vehicle condition was
at least average and up to, but not including, "dealer ready." CCC is not a
party to the JOHNSON case but has become aware of the Court of Appeal's class
certification ruling.




In *PAK,
ET AL. v FARMERS GROUP, INC. AND FARMERS INSURANCE EXCHANGE, CASE NO.
CV98-04873* , the
Second Judicial District Court of the State of Nevada in and for Washoe County
has certified a class of Nevada customers insured by Farmers whose total loss
claims were paid on the basis of valuations prepared by CCC. CCC is not a party
to the PAK case but has become aware of the court's class certification ruling.




In *SINGLETON
AND*  *BILLUPS
v. GEICO, CASE NO. 01L159,* the
Circuit Court for Madison County, Illinois on November 12, 2004, certified, for
purposes of pursuing a breach of contract claim against GEICO, a nationwide
class of customers insured by GEICO whose total loss claims were paid on the
basis of valuations prepared by a third party computer report. The court also
certified, for purposes of pursuing a statutory consumer fraud claim against
GEICO, a similar class consisting only of Illinois customers insured by GEICO.
CCC is not a party to SINGLETON case but has become aware of the court’s class
certification ruling.




59





Four of
CCC's automobile insurance company customers have made contractual and (in some
cases) also common law indemnification claims against CCC for litigation costs,
attorneys' fees, settlement payments and other costs allegedly incurred by them
in connection with litigation relating to their use of CCC's Valuescope
valuation product and service.




CCC
intends to vigorously defend its interests in all of the above described pending
matters 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 was 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. CCC is unable to estimate the magnitude of its exposure, if any, at
this time. As additional information is gathered and the lawsuits proceed, CCC
will continue to assess its potential impact.




60
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**


**Supplemental
Financial Statement Schedules**


**Schedule
II** **—** **Valuation
and Qualifying Accounts**


**(In
Thousands)**





**Balance
      at**
    
    **Charged
      to**
    
    **Charged**
    
    
    
    **Balance****Beginning
      of**
    
    **Costs
      and**
    
    **to
      Other**
    
    **Additions/**
    
    **at
      End****Description**
    
    **Period**
    
    **Expenses**
    
    **Accounts**
    
    **Deductions**
    
    **of
      Period**2002
      Sales Allowances and Doubtful Accounts
    
    $
    2,288
    
    
    1,755(a
    )
    
    26
    
    
    (1,756)(b
    )
    $
    2,3132003
      Sales Allowances and Doubtful Accounts
    
    $
    2,313
    
    
    2,093(a
    )
    
    (68
    )
    
    (1,395)(b
    )
    $
    2,9432004
      Sales Allowances and Doubtful Accounts
    
    $
    2,943
    
    
    1,629(a
    )
    
    (15
    )
    
    (2,200)(b
    )
    $
    2,3572002
      Deferred Income Tax Valuation Allowance
    
    $
    11,489
    
    
    —
    
    
    —
    
    
    110(c
    )
    $
    11,5992003
      Deferred Income Tax Valuation Allowance
    
    $
    11,599
    
    
    —
    
    
    —
    
    
    —
    
    $
    11,5992004
      Deferred Income Tax Valuation Allowance
    
    $
    11,599
    
    
    —
    
    
    —
    
    
    —
    
    $
    11,599





(a)
    Sales
      allowances were charged to revenue, doubtful accounts were charged to
      selling, general and administration expense in our consolidated statement
      of operations.


(b)
    Accounts
      receivable write-offs, net of recoveries.


(c)
    Additional
      valuation allowance for capital loss on sale of CCC Southeast assets
      (goodwill).




61
 
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**
 ****
 ****
 **EXHIBIT
INDEX**




3.1
    Amended
      and Restated Certificate of Incorporation of the Company (incorporated
      herein by reference to Exhibit 3.1 of the Company's 2000 Annual Report on
      Form 10-K, as amended, Commission File Number 000-28600 filed on April 17,
      2001)3.2
    Certificate
      of Amendment of Amended and Restated Certificate of Incorporation for the
      Company (incorporated herein by reference to Exhibit 3.2 of the Company's
      2000 Annual Report on Form 10-K, as amended, Commission File Number
      000-28600 filed on April 17, 2001)3.3
    Second
      Amended and Restated Bylaws of the Company (incorporated herein by
      reference to Exhibit 3.2 of the Company's 1996 Annual Report on Form 10-K,
      as amended, Commission File Number 000-28600 filed on March 14,
      1997)4.1
    Credit
      Agreement dated August 20, 2004 among CCC Information Services Inc., the
      Company, the lenders named therein and Credit Suisse First Boston
      (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
      Report on Form 10-Q, Commission File Number 000-28600 filed on November 1,
      2004)4.2
    Guarantee
      and Collateral Agreement dated August 20, 2004 among the Company, CCC
      Information Services Inc., the subsidiaries of CCC Information Services
      identified therein and Credit Suisse First Boston (incorporated by
      reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q,
      Commission File Number 000-28600 filed on November 1,
  2004)10.1
    Purchase
      Agreement, dated as of November 29, 2001, between CCC Information Services
      Group Inc., White River Ventures, Inc., Capricorn Investors II, L.P. and
      Capricorn Investors III, L.P. (incorporated herein by reference to Exhibit
      10.1 of the Company's Current Report on Form 8-K, as amended, Commission
      File Number 000-28600 filed on December 3, 2001)10.2
    Agreement,
      dated as of November 30, 2001, between CCC Information Services Group Inc.
      and Capricorn Investors III, L.P.(incorporated
      herein by reference to Exhibit 10.5 of the Company's Current Report on
      Form 8-K, as amended, Commission File Number 000-28600 filed on December
      3, 2001)10.3
    Indenture,
      dated as of February 13, 2001, by and between CCC Information Services
      Group Inc. and Wilmington Trust Company (incorporated herein by reference
      to Exhibit 4.22 of the Company's Registration Statement on Form 3,
      Commission File Number 333-64132 filed on June 29,
2001)10.4
    Supplemental
      Indenture, dated as of November 30, 2001, by and between CCC Information
      Services Group Inc. and Wilmington Trust Company (incorporated herein by
      reference to Exhibit 10.4 of the Company's Current Report on Form 8-K, as
      amended, Commission File Number 000-28600 filed on December 3,
      2001)10.5
    Securities
      Purchase Agreement dated as of February 23, 2001 Among CCC
      Information Services Group Inc., CCC Capital Trust and Capricorn Investors
      III, L.P.(incorporated
      herein by reference to Exhibit 10.14 of Company's 2000 Annual Report on
      Form 10-K, as amended, Commission File Number 000-28600 filed on April 17,
      2001)10.6
    Agreement
      dated as of February 23, 2001 between CCC Information Services Group
      Inc. and Capricorn Investors III, L.P.(incorporated
      herein by reference to Exhibit 10.17 of Company's 2000 Annual Report on
      Form 10-K, as amended, Commission File Number 000-28600 filed on April 17,
      2001)10.7
    Registration
      Rights Agreement dated as of February 23, 2001 Between CCC
      Information Services Group Inc. and Capricorn Investors III, L.P.(incorporated
      herein by reference to Exhibit 10.15 of Company's 2000 Annual Report on
      Form 10-K, as amended, Commission File Number 000-28600 filed on April 17,
      2001)10.8
    Warrant
      dated as of February 23, 2001 issued by CCC Information Services
      Group Inc. for the benefit of Capricorn Investors III, L.P.(incorporated
      herein by reference to Exhibit 10.16of Company's 2000 Annual Report on
      Form 10-K, as amended, Commission File Number 000-28600 filed on April 17,
      2001)10.9
    First
      Amendment and Waiver, dated as of November 30, 2001, to the Warrant dated
      as of February 23, 2001, issued by CCC Information Services Group Inc. for
      the benefit of Capricorn Investors III, L.P.(incorporated herein by reference to Exhibit 10.3 of the Company's Current
      Report on Form 8-K, as amended, Commission File Number 000-28600 filed on
      December 3, 2001)


62
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**





10.10
    Purchase
      and Waiver Agreement, dated as of October 21, 2002, by and among the
      Company, CCC Capital Trust and Capricorn Investors III, L.P. (incorporated
      herein by reference to Exhibit 10.1 of the Company's Current Report on
      Form 8-K, Commission File Number 000-28600 filed on October 28,
      2002)10.11
    Amended
      and Restated MOTOR Crash Estimating Guides Database License Agreement
      (incorporated herein by reference to Exhibit 10.16 of Company's 2001
      Annual Report on Form 10-K, Commission File Number 000-28600 Filed on
      March 26, 2002)10.12
    ChoiceParts,
      LLC Members' Agreement By and Among ChoiceParts, LLC, ADP, Inc., CCC
      Information Services, Inc. and the Reynolds and Reynolds Company dated May
      4, 2000 (incorporated herein by reference to Exhibit 10.13 of Company's
      2000 Annual Report on Form 10-K, as amended, Commission File Number
      000-28600 filed on April 17, 2001)10.13
    2000
      Stock Incentive Plan (2004 Restatement) (incorporated herein by reference
      to Annex A of the Company’s Proxy Statement on Schedule 14A filed on April
      23, 2004)10.14
    Form
      of Stock Option Agreement (Time Vested) for grants under the 2000 Stock
      Incentive Plan (2004 Restatement), as amended (incorporated by reference
      to Exhibit 10.1 to Current Report on Form 8-K, Commission File Number
      000-28600, filed March 2, 2005)10.15
    Form
      of Restricted Stock Agreement (Time Vested) for grants to directors under
      the 2000 Stock Incentive Plan (2004 Restatement), as amended (incorporated
      by reference to Exhibit 10.2 to Current Report on Form 8-K, Commission
      File Number 000-28600, filed March 2, 2005)10.16
    Form
      of Restricted Stock Agreement (Time Vested) for grants to eligible
      grantees (other than directors) under the 2000 Stock Incentive Plan (2004
      Restatement), as amended (incorporated by reference to Exhibit 10.3 to
      Current Report on Form 8-K, Commission File Number 000-28600, filed March
      2, 2005)10.17
    Form
      of Restricted Share Agreement (Performance Vested Based on Earnings Per
      Share) for grants under the 2000 Stock Incentive Plan (2004 Restatement),
      as amended (incorporated by reference to Exhibit 10.4 to Current Report on
      Form 8-K, Commission File Number 000-28600, filed March 2,
      2005)10.18
    Form
      of Restricted Share Agreement (Performance Vested Based on Stock Price)
      for grants under the 2000 Stock Incentive Plan (2004 Restatement), as
      amended (incorporated by reference to Exhibit 10.5 to Current Report on
      Form 8-K, Commission File Number 000-28600, filed March 2,
      2005)10.19
    Restricted
      Stock Agreement between the Company and John D. Collins (incorporated by
      reference to Exhibit 99.1 to Current Report on Form 8-K, Commission File
      Number 000-28600, filed December 10, 2004)10.20*
    Management
      Incentive Plan—Plan Summary10.21*
    Executive
      Severance Policy10.22*
    Summary
      of Board of Directors and Committee Compensation
    Arrangements10.23*
    Summary
      of Named Executive Officer Compensation Arrangements10.24
    Employment
      Agreement, effective July 1, 2001, by and between CCC Information Services
      Inc. and Githesh Ramamurthy (management contract required to be filed
      pursuant to Item 601 of Regulation S-K) (incorporated herein by reference
      to Exhibit 10.23 of Company's 2001 Annual Report on Form 10-K, Commission
      File Number 000-28600 Filed on March 26, 2002)10.25
    Executive
      Loan Arrangement by and between CCC Information Services Inc. and
      Charlesbank Capital Partners dated July 16, 2001 (incorporated herein by
      reference to Exhibit 10.24 of Company's 2001 Annual Report on Form 10-K,
      Commission File Number 000-28600 Filed on March 26,
  2002)10.26
    Option
      and Acquisition Agreement dated February 6, 1998 by and among Hearst
      Business Publishing, Inc. and Comp-Est, Inc.10.24
    First
      Amendment to Option and Acquisition Agreement dated February 26, 2003 by
      and among the Motor Information Systems Division of Hearst Business
      Publishing, Inc. and Comp-Est, Inc.10.27
    Option
      Agreement dated February, 1998 between Motor Information Systems Division
      of Hearst Business Publishing, Inc. and CCC Information Service
      Inc.21
      *
    List
      of Subsidiaries
  63
 **CCC
INFORMATION SERVICES GROUP INC.**
**AND
SUBSIDIARIES**
    23.1
      *
    Consent
      of PricewaterhouseCoopers LLP
 31.1
      *
    Rule
      13a-14(a) Certification of Chief Executive Officer31.2
      *
    Rule
      13a-14(a) Certification of Chief Financial Officer32.1
      *
    Section
      1350 Certifications of Chief Executive and Financial
    Officers








***** Filed
herewith.


64
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**





**SIGNATURES**





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





Date:
      March 16, 2005
    
    CCC
      Information Services Group Inc.By:
    /s/*Githesh
      Ramamurthy*
    
    By:
    /s*/
      Thomas L. Kempner*Name:
    Githesh
      Ramamurthy
    
    Name:
    Thomas
      L. KempnerTitle:
    Chairman
      and Chief Executive Officer
    
    Title:
    DirectorBy:
    /s/*Andrew G. Balbirer*
    
    By:
    */s/
      J. Roderick Heller III*Name:
    Andrew
      G. Balbirer
    
    Name:
    J.
      Roderick Heller, IIITitle:
    Executive
      Vice President and Chief Financial Officer
    
    Title:
    DirectorBy:
    /s/*John
      D. Collins*
    
    By:
    /s/*Mark A. Rosen*Name:
    John
      D. Collins
    
    Name:
    Mark
      A. RosenTitle:
    Director
    
    Title:
    DirectorBy:
    /s/*Morgan
      W. Davis*
    
    By:
    /s/*Herbert
      S. Winokur Jr.*Name:
    Morgan
      W. Davis
    
    Name:
    Herbert
      S. Winokur Jr.Title:
    Director
    
    Title:
    DirectorBy:
    /s/*Michael
      R. Eisenson*Name:
    Michael
      R. EisensonTitle:
    Director




65
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 Directors and Executive
Officers


**Directors**
    John
      D. Collins
      Partner
      (Retired)
      KPMG
      LLPMorgan
      W. Davis
      Managing
      Director
      One
      Beacon Insurance GroupMichael
      R. Eisenson
      Managing
      Director and Chief Executive Officer
      Charlesbank
      Capital Partners LLCThomas
      L. Kempner
      Chairman
      and Chief Executive Officer
      Loeb
      Partners CorporationJ.
      Roderick Heller III
      Chairman
      and Chief Executive Officer
      Carnton
      Capital AssociatesGithesh
      Ramamurthy
      Chairman
      and Chief Executive Officer
      CCC
      Information Services Group Inc.Mark
      A. Rosen
      Managing
      Director
      Charlesbank
      Capital Partners LLCHerbert
      S. "Pug" Winokur Jr.
      Chairman
      and Chief Executive Officer
      Capricorn
      Holdings, Inc.**Executive
      Officers**
    Githesh
      Ramamurthy
      Chairman
      and Chief Executive OfficerJ.
      Laurence Costin Jr.
      Vice
      ChairmanMary
      Jo Prigge
      President,Service
      OperationsAndrew
      G. Balbirer
      Executive
      Vice President and Chief Financial OfficerJames
      T. Beattie
      Executive
      Vice Presidentand Chief Technology OfficerRobert
      S. Guttman
      Senior
      Vice President, General Counsel and SecretaryJames
      A. Dickens
      Senior
      Vice President, SalesOliver
      G. Prince, Jr.
      Senior
      Vice President, Human Resources




66
 **CCC
INFORMATION SERVICES GROUP INC.**
 **AND
SUBSIDIARIES**
 
 Corporate
Information





**Corporate
Office**


World
Trade Center Chicago


444
Merchandise Mart


Chicago,
Illinois 60654


(312)
222-4636


www.cccis.com




**Transfer
Agent Registrar for Common Stock**


Computershare
Investor Services LLC


Shareholder
Inquiries


P.O. Box
A3504


Chicago,
Illinois 60602


(312)
588-4990


(312)
461-5633 (TDD)




**Stockholder
Services**


You
should contact the Transfer Agent for the stockholder services listed below:


Change of
Mailing Address


Consolidation
of Multiple Accounts


Elimination
of Duplicate Report Mailings


Lost or
Stolen Certificates


Transfer
Requirements


Duplicate
1099 Forms


Please be
prepared to provide your tax identification or social security
number,


description
of securities and address of record.




**Stock
Listing and Trading Symbol**


Our
common stock is listed on the NASDAQ National Market System under the trading
symbol CCCG.




**Registered
Public Accounting Firm**


PricewaterhouseCoopers
LLP


One North
Wacker Drive


Chicago,
Illinois 60606




**Stockholder
and Investment**


**Community
Inquiries**


Written
inquiries should be sent to our corporate office to the attention of Investor
Relations.


Please
visit the investor relations section of our website to make
inquiries.




**Additional
Information**


This
Annual Report on Form 10-K provides all annual information filed with the
Securities and Exchange Commission, except for exhibits. A listing of exhibits
appears on pages 62-64 of this Form 10-K. Copies of exhibits will be
provided upon request for a nominal charge. Written requests should be directed
to the Investor Relations Department at our corporate office.







67