Reynolds and Reynolds Reports Record Second Quarter Results
EPS Increases 8 Percent
DAYTON, Ohio, April 23 -- The Reynolds and Reynolds Company today reported net income of $29.5 million or 42 cents per share for the second fiscal quarter ended March 31, 2003. Earnings per share were 8 percent ahead of last year's 39 cents per share and exceeded analysts' estimates. Revenues of $255.1 million were 4 percent higher than a year ago. Revenues and net income from continuing operations were second quarter records for the company.
The company's core Software Solutions segment grew revenues 11 percent. Tight spending on information technology, particularly on consulting services, created a decline in the company's Transformation Solutions segment. Revenues in the company's Documents segment were 6 percent lower than last year. Financial Services revenues declined primarily due to declining interest rates.
"In a generally cautious economy, we've continued to see quarter to quarter revenue improvement over the past five consecutive quarters," Lloyd "Buzz" Waterhouse, CEO, chairman and president, said. "We continue to be optimistic about the market's reception of our new Reynolds Generations Series(TM) platform.
"We enjoyed a great showing at the National Automobile Dealers Association convention in early February. Our order backlogs continue to be strong," Waterhouse said. "New customers are enthusiastic about our customer relationship management applications and we're aggressively driving those solutions across the marketplace."
During the quarter: * Networkcar Inc., a Reynolds and Reynolds company, obtained a patent for technology to collect, transmit and display information from vehicles with onboard diagnostics systems. * Networkcar(TM) also introduced Networkfleet(TM), a revolutionary fleet management technology enabling fleet managers, for the first time, to have on-line access to detailed vehicle performance indicators such as mileage, speed, speed history, malfunction indicator lamp status, fuel efficiency, diagnostic trouble code descriptions and more. * Reynolds acquired MSN Autos' Dealerpoint automotive lead management service, the leading provider of these services for the automotive industry and used by over 4,000 automotive retailers. * Kia Motors America selected Reynolds as its provider of complete networking services to its 628 retailers across the United States. * Dixon Odom PLLC named Reynolds a distributor of its Internet-based automotive retail accounting-related curriculum -- eautolearning.com. * The National Association of Minority Automobile Dealers (NAMAD) and Reynolds formed NAMAD University, the association's new education, training and consulting group. Reynolds will provide a full schedule of business management training to the association's 500-member dealer body aimed at improving overall dealership operations, and ultimately, enhancing their bottom lines. * NAMAD also exclusively selected Reynolds Automark(R) Web Services as its provider of Internet and Web services. * Enterprise Rent-A-Car and Reynolds announced the availability of a new industry application to make renting cars for service loaners easier for all Reynolds automotive retail customers. The application streamlines invoicing, manages rental costs and sends rental authorizations directly to the rental car company. * For the second time in three years, Reynolds' Technical Assistance Centers received the prestigious Team Excellence Award from the Help Desk Institute. The award is recognized as the gold medal of the customer support profession.
"We're pleased with our profitability this quarter," Dale Medford, executive vice president and chief financial officer, said. "Our associates have managed costs and allowed us to maintain strong profitability while developing and launching a range of new solutions. We are very focused on realizing the significant growth potential of these high-value solutions. Our strong operating cash flow enabled us to invest in our businesses, maintain a solid balance sheet and continue our share repurchase program."
During the quarter, the company repurchased 700,000 shares for $16.9 million, at an average price of $24.12. Year to date, the company has repurchased 2.3 million shares at an average price of $25.35. Approximately 2.6 million shares remain authorized for repurchase.
For the 2003 fiscal year the company currently expects:
* Third quarter earnings per share (EPS) to be approximately 43 cents.
* Full fiscal year EPS to be approximately $1.70.
* Return on equity in excess of 20 percent.
* Operating margins to be approximately 19 percent.
* Capital expenditures and capitalized software to total approximately
$40 million.
* Depreciation and amortization expense to total approximately
$40 million.
* Research and development expenses to be approximately $70 million.
* To continue its share repurchase plan throughout the year.
* Fully diluted shares used to calculate EPS to be approximately
70 million shares.
Reynolds and Reynolds ( www.reyrey.com ) is the leading provider of integrated solutions that help automotive retailers manage change and improve their profitability. With 75 years of experience serving automotive retailing, Reynolds enables car companies and retailers to work together to build the lifetime value of their customers. The company's award-winning product, service and training solutions 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 (CRM) solutions, data management and integration, and leasing services. Reynolds serves more than 20,000 customers. They comprise 90 percent of the automotive retailers and virtually all car companies doing business in North America. Its CRM consulting practices span more than 20 countries around the world.
The Reynolds and Reynolds Company
Segment Report (Unaudited)
(In thousands except per share data)
Second Quarter
For The Periods Ended March 31 2003 2002 (A) Change
Consolidated
Net Sales and Revenues $255,099 $245,002 4%
Gross Profit $142,078 $141,701
Gross Margin 55.7% 57.8%
Operating Income $46,520 $36,511 27%
Operating Margin 18.2% 14.9%
Income Before Income Taxes $48,092 $24,952 93%
Provision for (Benefit from) Income
Taxes $18,565 ($4,115)
Income Before Cumulative Effect of
Accounting Change $29,527 $29,067 2%
Cumulative Effect of Accounting
Change (B) $0 $0
Net Income $29,527 $29,067 2%
Earnings Per Common Share (Diluted)
Income Before Cumulative Effect
of Accounting Change $49,211.67 $46,656.50 5%
Cumulative Effect of Accounting
Change (B) $0.00 $0.00
Net Income $49,211.67 $46,656.50 5%
Average Shares Outstanding 70,017 74,121
Software Solutions
Net Sales and Revenues $166,817 $150,205 11%
Gross Profit $100,137 $93,636 7%
Gross Margin 60.0% 62.3%
Operating Income $40,324 $25,108 61%
Operating Margin 24.2% 16.7%
Transformation Solutions
Net Sales and Revenues $34,688 $37,054 -6%
Gross Profit $10,681 $12,670 -16%
Gross Margin 30.8% 34.2%
Operating Loss ($6,698) ($3,422)
Operating Margin -19.3% -9.2%
Documents
Net Sales and Revenues $44,179 $47,171 -6%
Gross Profit $24,106 $27,340 -12%
Gross Margin 54.6% 58.0%
Operating Income $7,724 $9,176 -16%
Operating Margin 17.5% 19.5%
Financial Services
Net Sales and Revenues $9,415 $10,572 -11%
Gross Profit $7,154 $8,055 -11%
Gross Margin 76.0% 76.2%
Operating Income $5,170 $5,649 -8%
Operating Margin 54.9% 53.4%
Six Months
For The Periods Ended March 31 2003 2002 (A) Change
Consolidated
Net Sales and Revenues $501,747 $485,111 3%
Gross Profit $281,389 $282,304
Gross Margin 56.1% 58.2%
Operating Income $92,281 $80,058 15%
Operating Margin 18.4% 16.5%
Income Before Income Taxes $94,199 $66,429 42%
Provision for (Benefit from) Income
Taxes $36,424 $11,962
Income Before Cumulative Effect of
Accounting Change $57,775 $54,467 6%
Cumulative Effect of Accounting
Change (B) $0 ($36,563)
Net Income $57,775 $17,904 223%
Earnings Per Common Share (Diluted)
Income Before Cumulative Effect
of Accounting Change $95,495.87 $86,181.96 11%
Cumulative Effect of Accounting
Change (B) $0.00 ($57,852.85)
Net Income $95,495.87 $28,329.11 237%
Average Shares Outstanding 70,566 73,613
Software Solutions
Net Sales and Revenues $329,168 $298,233 10%
Gross Profit $199,045 $188,339 6%
Gross Margin 60.5% 63.2%
Operating Income $78,903 $55,424 42%
Operating Margin 24.0% 18.6%
Transformation Solutions
Net Sales and Revenues $68,717 $74,545 -8%
Gross Profit $21,108 $25,011 -16%
Gross Margin 30.7% 33.6%
Operating Loss ($12,994) ($5,200)
Operating Margin -18.9% -7.0%
Documents
Net Sales and Revenues $84,807 $91,408 -7%
Gross Profit $46,976 $53,320 -12%
Gross Margin 55.4% 58.3%
Operating Income $15,295 $18,590 -18%
Operating Margin 18.0% 20.3%
Financial Services
Net Sales and Revenues $19,055 $20,925 -9%
Gross Profit $14,260 $15,634 -9%
Gross Margin 74.8% 74.7%
Operating Income $11,077 $11,244 -1%
Operating Margin 58.1% 53.7%
(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.