CCC leases approximately 125,000 square feet of a multi-tenant facility as its principal office in Chicago, Illinois, under a lease expiring in 2008. CCC also leases approximately 84,000 square feet in Glendora, California, under a lease expiring in 2000. The Glendora facility consists of a satellite development and distribution center. CCC is currently negotiating a lease for approximately 30,000 additional square feet in a Chicago office facility separate from its principal office. This new space will house CCC's claims settlement services staff and enable the use of existing leased space at CCC's principal office for additional staff growth, particularly product development and programming staff.
Hanover leases approximately 20,500 square feet of space as its principal office and warehouse in Plymouth, Minnesota, under a lease expiring in 2001. Hanover also leases approximately 1,500 square feet of space as a showroom in New York, New York, under a lease expiring in 2001.
(c) White River commenced operations in its present form on September 24, 1993, concurrent with the Capitalization. See Note 1 to the consolidated financial statements for a discussion of the Capitalization.
(a) As discussed in Note 2 to the consolidated financial statements, White River adopted the provisions of SFAS No. 115, effective September 30, 1995.
Cash and cash equivalents as of December 31, 1996, totalled $188.4 million, as compared to $139.2 million as of December 31, 1995. White River's cash and cash equivalents, less the $9.4 million held by CCC, increased by $43.6 million during 1996 due primarily to the redemption of approximately 87% of the CCC Preferred stock held by White River and the disposition of certain investment securities. Substantially all of the cash and cash equivalent balances held by White River as of December 31, 1996, were deposited with several major banking institutions in interest-bearing accounts with maturities of six days or less. As of December 31, 1996, such deposits earned a weighted average interest rate of 5.4% per annum. The White River Board continues to consider the level of capital available to White River in light of its internal needs and the prospects for the acquisition of additional operating businesses. If, as the result of such analysis, it is determined that stockholder value would best be enhanced through the return of capital to stockholders, White River may distribute to stockholders, through share repurchases or other means approved by the White River Board, funds which the White River Board concludes are in excess of the current and projected capital needs of White River.
relating to such investments conformed to generally accepted accounting principles ("GAAP") for Investment Companies until such time as White River ceased to meet the definition of an Investment Company. White River ceased to meet the definition of an Investment Company effective September 30, 1995, and, accordingly, as discussed further in Note 2 to the consolidated financial statements, adopted the provisions of SFAS No. 115, as of such date. Under SFAS No. 115, changes in net unrealized investment gains and losses relating to White River's investment securities are reported net of tax as a separate component of stockholders' equity and, except for declines in value which are deemed to be other than temporary in nature, changes in net unrealized investment gains and losses relating to White River's other investments are not recognized until realized. As a result of the adoption of SFAS No. 115, pretax net unrealized gains of $17.0 million and $12.8 million were recorded directly to stockholders' equity during 1996 and 1995, respectively.
For the year ended December 31, 1996, pretax investment income totalled $9.0 million, including $7.9 million of interest income generated from the cash and cash equivalents balances held during 1996. Pretax investment income totalled $8.3 million for the year ended December 31, 1995, and $6.8 million for the year ended December 31, 1994. The 1994 amount includes $1.4 million relating to dividends in arrears which were paid during the first quarter upon the redemption of White River's interest in Lone Star Technologies, Inc. preferred stock.
White River's dispositions of investments totalled $21.2 million, $118.9 million and $86.7 million during the years ended December 31, 1996, 1995 and 1994, respectively. The 1995 investment dispositions included the transfer of $90.0 million of investments to Fund American in settlement of outstanding balances under the Credit Agreement, which resulted in pretax net investment gains of $11.0 million.
The common stock of Cross Timbers is traded on the New York Stock Exchange under the symbol "XTO", and during the 52-week period ended December 31, 1996, its daily closing market price ranged between a high of $28 3/4 and a low of $15 5/8 per share. The closing market price of such shares as of December 31, 1996, was $25 1/8 per share. In recognition of White River's demand registration rights with respect to its shares of Cross Timbers common stock, White River began carrying its interest in Cross Timbers at market value effective September 30, 1995, upon the adoption of SFAS No. 115. Accordingly, White River's interest in Cross Timbers was carried at $60.8 million and $47.3 million under the caption investment securities in the accompanying consolidated statement of financial condition as of December 31, 1996, and 1995, respectively.
White River acquired its interest in NWA Partners in connection with the Capitalization. White River's interest in NWA Partners represented approximately 21% of partnership assets as of December 31, 1996 and 1995. During the year ended December 31, 1995, White River received distributions totaling $3.5 million from NWA Partners, resulting in pretax net investment gains of $2.8 million. These distributions represented White River's share of the proceeds from the sale of a portion of NWA Partners' assets. As of December 31, 1996, NWA Partners' remaining assets consisted primarily of 4.7 million shares of Northwest Airlines Class A common stock, par value $0.01 per share (the "Northwest Common Stock"), 1,727 shares of Northwest Airlines Series B Preferred Stock, stated value $50,000 per share (the "Northwest Preferred Stock"), and approximately 0.7 million shares of Northwest Common Stock subject to a call option at a strike price of $18.75 per share, payable in shares of Northwest Preferred Stock. The Northwest Preferred Stock accrues dividends at 8% per annum. Payment of dividends that accrue through August 1998 is deferred until the final redemption of the Northwest Preferred Stock in August 2003.
Prior to the adoption of SFAS No. 115, White River valued its interest in NWA Partners based upon its estimate of fair value determined with due consideration given to the current market value of the unrestricted Northwest Common Stock and the estimated value of the Northwest Preferred Stock. To arrive at fair value, White River applied a significant discount to such values due to liquidity restrictions caused in part by restrictions on transfer imposed by the NWA Stockholders' Agreement as well as the partnership terms of NWA Partners. Upon the adoption of SFAS No. 115, White River began to carry its interest in NWA Partners at its adjusted cost, which was determined to be its carrying value at the date of adoption. Accordingly, the carrying value of White River's interest in NWA Partners as of December 31, 1996 and 1995, was $21.8 million, as compared to management's estimate of fair value which was $32.5 million and $27.3 million, respectively.
Revenues from insurance-related services totalled $131.0 million and $115.5 million for the years ended December 31, 1996 and 1995, and $53.9 million for the period from the date of the acquisition of CCC by White River (June 1994) through December 31, 1994. The 13.4% increase in CCC's revenues during 1996 reflects additional collision estimating software licensing, the processing of additional outsourced claims by new and existing customers, as well as higher demand for valuation services. CCC's revenues of $58.9 million for the last six months of 1995 represented an increase of 9.2% over the comparable period in 1994 due primarily to new customers for CCC's collision estimating software and network communications products, offset in part by a decrease in Total Loss valuation service revenues. The decline in Total Loss revenues in 1995 was partially attributable to the MacLean Hunter litigation.
On a stand-alone basis, CCC reported net income before accretion and dividends on preferred stock of $14.8 million and $1.3 million for the years ended December 31, 1996 and 1995, respectively. For the period from the date of the acquisition of CCC by White River through December 31, 1994, CCC reported net income from continuing operations before accretion and dividends on preferred stock of $1.7 million. The 1995 results include the $4.5 million pretax provision for loss relating to the MacLean Hunter litigation claim. White River's adjustment for the goodwill and purchased software related to the CCC acquisition, as well as the noncontrolling shareholders' interest in the earnings of CCC during the 1996 period, reduced net income by
As a result of the CCC IPO, White River recognized a noncontrolling interest in the net assets of CCC. As of December 31, 1996, such noncontrolling interest totalled $19.0 million. The minority interest in CCC as of December 31, 1995, represents a recoverable balance which was not reflected in the consolidated statements of financial condition at such date because the minority interest did not guarantee the obligations of CCC nor was it otherwise committed to provide further financial support.
As of December 31, 1993, White River had deferred tax assets totaling $16.6 million consisting primarily of the excess of White River's tax basis over its GAAP carrying value for certain investments. Due to the absence of capital gains (both realized and unrealized) which would allow recognition of such deferred tax benefits, management determined that a valuation allowance for the full amount of such deferred tax assets was necessary as of December 31, 1993. During 1994, White River recorded pretax net investment gains of $49.7 million. Accordingly, management determined that by December 31, 1994, a valuation allowance was no longer necessary thus reducing reported income taxes for the year ended December 31, 1994, by $16.6 million.
share of the reversal of these CCC tax benefits as a reduction of its goodwill relating to the CCC acquisition. CCC's remaining valuation allowance of $0.3 million as of December 31, 1996, pertains to capital loss carry forwards, the realization of which is not assured.
The White River Board has not declared, and currently does not intend to declare, ordinary periodic dividends on the Common Stock. However, the White River Board intends to reevaluate from time to time the declaration of dividends with due consideration given to the financial characteristics of White River's remaining investments, its continuing operations and the amount and regularity of its cash flows as of that time. There can be no assurance as to when or whether the White River Board will declare any such dividends.
As part of the Capitalization, White River issued to Fund American 7,000 shares of White River Series A Non-Participating Cumulative Preferred Stock, par value $1.00 per share (the "Redeemable Preferred Stock"), which are entitled to aggregate annual dividends of $0.5 million and must be redeemed during September 1998, at a redemption price of $1,000 per share. Fund American sold the Redeemable Preferred Stock to two unaffiliated institutional investors at the time of the Distribution.
CCC's primary source of cash includes receipts of customer billings, which are generally invoiced monthly in advance for EZEst units and Pathways subscriptions and monthly in arrears for Total Loss and EZNet transactions. During the year ended December 31, 1996, CCC generated net cash from operating activities of $20.3 million, net of contract funding revenue amortization of $3.3 million. CCC used $5.6 million, excluding noncash capital expenditures, to purchase equipment and software and invested $9.0 million in marketable securities.
On August 22, 1996, CCC secured a $20.0 million revolving credit facility through a new commercial bank (the "New CCC Facility"). There have been no borrowings under the New CCC Facility. Indebtedness under the New CCC Facility would bear interest at either of two rates as selected by CCC: the London Inter- Bank Offering Rate plus 1.5% per annum, or the prime rate. Following the offering, CCC's principal liquidity requirements include its operating activities, including product development, and its investments in internal and customer capital equipment.