Auto Dealer Services Company-Reynolds and Reynolds Second Quarter Results- Up 30%

Dayton, Ohio, April 24 The Reynolds and Reynolds Company today reported net income of $29 million or 39 cents per share for the second fiscal quarter ended March 31, 2002. Earnings per share exceeded consensus analysts' estimates and were 30 percent ahead of last year's 30 cents per share from continuing operations. Revenues of $245 million were slightly below last year, but ahead of the $240 million reported in the first fiscal quarter. ``Customer reception to our new Reynolds Generations Series(TM) solutions, which we introduced in mid-January, is strong,'' Lloyd ``Buzz'' Waterhouse, chief executive officer, chairman and president, said. ``Our initial release, which includes Web brand management, contact management and a full family of services offerings, provides the automotive retailing industry with customer relationship management (CRM) tools that are deeply integrated to the automotive retailers' systems. ``The return-on-investment analytics built into the Reynolds Generations Series family of solutions proves the value we are creating for our customers. Pilots are going well, orders are ahead of plan and general customer availability will begin, as planned, this month. Customers like the modularity of our approach and the way it protects their investment.'' The Reynolds Generations Series incorporates advanced CRM solutions and reporting tools that provide new customer insights and information when and where automotive retailers and car companies need it. Based on application service provider-based modules, these solutions are supported by a full complement of Reynolds' award-winning professional services, support and education. ``This was a good quarter. Profits were strong, revenues were up slightly over the first quarter and we're gaining momentum with the Reynolds Generations Series,'' Waterhouse said. ``We're seeing strength in our automotive documents business and the backlog for our services businesses grew during the quarter.'' Highlights From the Quarter * JM Lexus, the world's largest Lexus dealer, selected Reynolds solutions and services, further growing a relationship with JM Family Enterprises Inc., which also owns and operates Southeast Toyota Distributors LLC (SET). Reynolds provides a complete suite of integrated technology solutions and services to SET's network of 163 Toyota dealerships throughout the southeastern United States. * Reynolds and Kelley Blue Book announced a new version of kbb.com's popular Blue Book Classifieds, enabling automotive retailers to show consumers used cars they have for sale on the same day the dealers place the cars into their inventory, addressing the most common consumer complaint -- inaccurate inventory. Reynolds AutoMark Web Services will provide the technology for Blue Book Classifieds, as well as used vehicle listings from many of its nationwide network of dealer clients * ADESA Corporation signed a letter of intent with Reynolds to create a program called "Dealer2Net." The new agreement will allow ADESA- affiliated automotive retailers to create and maintain their own automotive Web sites. Reynolds Automark Web Services will develop and deliver customized Web site packages as well as dealer management system inventory integration, training and support services. * The company expanded its strategic partnership with the CarsDirect.com multi-branded new car buying service to include used car services. Reynolds will provide CarsDirect.com with technology integration, dealership training and operational support for the Used Car channel. * Reynolds and Reynolds (Canada) Ltd. Mississauga Technical Assistance Centre earned the prestigious Support Center Practices (SCP) Certification for the second consecutive year. Special Items During the quarter, the company recorded a $6 million net gain from a favorable tax settlement which had been contested for a number of years. The tax gain enabled the company to initiate cost reduction actions and provide certain technologies to facilitate customer adoption of the Reynolds Generations Series family of solutions which substantially offset the gain. Additionally, the company completed the sale of its investment in Kalamazoo Computer Group. A loss from that sale was offset by a tax benefit associated with the transaction. These special items added one cent per share to the company's earnings during the quarter. Also during the quarter, the company completed the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, ``Goodwill and Other Intangible Assets.'' This pronouncement requires that goodwill no longer be amortized, but instead tested for impairment at least annually. The company recorded a $37 million after-tax charge representing the cumulative effect of the accounting change and restated financial statements for the first quarter of fiscal year 2002 as required by the pronouncement. ``We exceeded earnings expectations for the quarter, even excluding the penny per share benefit from special items,'' Dale Medford, executive vice president and chief financial officer, said. ``The adoption of SFAS No. 142 had no effect on cash flow. During the quarter we took actions to lower our costs and strengthen customer and shareholder value.'' Share Repurchase The company repurchased 800,000 shares in the second quarter for $24 million ($29.64 per share). There are 2.4 million additional shares authorized for repurchase. Fiscal Year 2002 Expectations * Earnings per share to be in line with current analyst consensus estimates of $1.57, excluding the accounting change * Return on equity of approximately 20 percent, excluding the accounting change * Operating margins to be approximately 19 percent * Net capital expenditures and capitalized software to total approximately $53 million * Depreciation and amortization expense to total approximately $35 million * Research and development expenses to be approximately $70 million * Continuation of share repurchase throughout the year * Fully diluted shares to total approximately 75 million ``While revenues were flat as expected in the second quarter, we're anticipating a solid second half. The economy continues to be somewhat cautious, but new and used vehicle sales, as well as automotive retailer optimism are strong,'' Waterhouse said. ``Reynolds Generations Series is creating a lot of excitement within our company, and across the industry, as we remain committed to lead the transformation of automotive retailing.'' Reynolds and Reynolds, headquartered in Dayton, Ohio, is the leading provider of integrated information management solutions to the automotive retailing marketplace. The company's services include a full range of retail and enterprise management systems, networking and support, e-business applications, Web services, learning and consulting services, customer relationship management solutions, document management and leasing services. To find out more about the company, its vision, products and services, visit www.reyrey.com . Certain statements in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on current expectations, estimates, forecasts and projections of future company or industry performance based on management's judgment, beliefs, current trends and market conditions. Forward-looking statements made or to be made by or on behalf of the company may be identified by the use of words such as ``expects,'' ``anticipates,'' ``intends,'' ``plans,'' ``believes,'' ``seeks,'' ``estimates'' and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. See also the discussion of factors that may affect future results contained in the company's Current Report on Form 8-K filed with the SEC on August 7, 2001, which we incorporate herein by reference. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The Reynolds and Reynolds Company Segment Report (Unaudited) (In thousands except per share data) For The Periods Ended March 31 Second Quarter Six Months 2002 2001(a) Change 2002 2001(b) Change Consolidated Net Sales and Revenues $245,002 $250,094 -2% $485,111 $501,828 -3% Gross Profit $141,701 $136,603 4% $282,304 $278,603 1% Gross Margin 57.8% 54.6% 58.2% 55.5% Operating Income $36,511 $37,647 -3% $80,058 $78,139 2% Operating Margin 14.9% 15.1% 16.5% 15.6% Income Before Income Taxes $24,952 $37,043 -33% $66,429 $77,268 -14% Provision for (Benefit from) Income Taxes ($4,115) $14,844 $11,962 $31,190 Income from Continuing Operations $29,067 $22,199 31% $54,467 $46,078 18% Income from Discontinued Operations $0 $1,623 $0 $1,623 Income Before Cumulative Effect of Accounting Change $29,067 $23,822 22% $54,467 $47,701 14% Cumulative Effect of Accounting Change(b) $0 $0 ($36,563) $0 Net Income $29,067 $23,822 22% $17,904 $47,701 -62% Earnings Per Common Share (Diluted) Income From Continuing Operations $0.39 $0.30 30% $0.74 $0.61 21% Income from Discontinued Operations $0.00 $0.02 $0.00 $0.02 Income Before Cumulative Effect of Accounting Change $0.39 $0.32 22% $0.74 $0.64 16% Cumulative Effect of Accounting Change(b) $0.00 $0.00 ($0.50) $0.00 Net Income $0.39 $0.32 22% $0.24 $0.64 -63% Average Shares Outstanding 74,121 74,740 73,613 74,933 Software Solutions Net Sales and Revenues $153,804 $150,727 2% $304,761 $300,565 1% Gross Profit $95,153 $87,781 8% $190,751 $178,346 7% Gross Margin 61.9% 58.2% 62.6% 59.3% Operating Income $25,533 $25,562 0% $55,741 $52,640 6% Operating Margin 16.6% 17.0% 18.3% 17.5% Transformation Solutions Net Sales and Revenues $33,455 $41,225 -19% $68,017 $86,248 -21% Gross Profit $11,153 $14,061 -21% $22,599 $32,266 -30% Gross Margin 33.3% 34.1% 33.2% 37.4% Operating Income (Loss) ($3,847) ($4,204) ($5,517) ($4,381) Operating Margin -11.5% -10.2% -8.1% -5.1% Documents Net Sales and Revenues $47,171 $47,671 -1% $91,408 $94,326 -3% Gross Profit $27,340 $27,810 -2% $53,320 $54,559 -2% Gross Margin 58.0% 58.3% 58.3% 57.8% Operating Income $9,176 $10,377 -12% $18,590 $18,144 2% Operating Margin 19.5% 21.8% 20.3% 19.2% Financial Services Net Sales and Revenues $10,572 $10,471 1% $20,925 $20,689 1% Gross Profit $8,055 $6,951 16% $15,634 $13,432 16% Gross Margin 76.2% 66.4% 74.7% 64.9% Operating Income $5,649 $5,912 -4% $11,244 $11,736 -4% Operating Margin 53.4% 56.5% 53.7% 56.7% (a) Certain reclassifications were made to last year's financial statements to conform with the presentation used in the current year. (b) During the second quarter of fiscal year 2002, the company completed the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." The company recorded a $36,563 after-tax charge representing the cumulative effect of the accounting change and restated financial statements for the first quarter of fiscal year 2002 as required by the pronouncement.