Reynolds and Reynolds Reports Third Quarter Results
DAYTON, Ohio, July 21 -- The Reynolds and Reynolds Company today reported revenues of $243 million for the third fiscal quarter ended June 30, 2004, compared to $250 million a year ago. Net income was $22.0 million or 33 cents per share, compared to $26 million or 37 cents per share a year ago.
"Third quarter results were in line with guidance the company provided on June 24," Phil Odeen, chairman and acting CEO, said. "As we indicated in June, overall order rates were less than we expected. We've taken important steps to address these issues and sharpen our focus on our growth priorities, but our return to historic levels of sales growth won't happen overnight.
"Reynolds is operating from a position of strength -- excellent cash flows, a strong balance sheet, solid margins and the broadest portfolio of integrated solutions in the industry. Importantly, we are the market leader with the industry's highest customer satisfaction among the major dealer management system providers. We intend to build on that industry leadership and drive growth by selling more of our applications, extending our position in core platforms and continuing to grow our international customer base.
"Reynolds expects to build momentum through the upcoming releases of its ERA(R) XT platform and Applications on Demand(TM) architecture. We also anticipate growth from our expanding CRM application portfolio as well our Incadea platform for markets outside the U.S. and Canada. In addition, we believe that the Reynolds Generations Series Suite, the most advanced system available and the industry's only retail management system, will deliver long- term growth.
"While we are still completing our plans for fiscal year 2005, we expect that revenues and earnings will be flat to slightly up. At the same time, we'll continue investing in the business and returning cash to our shareholders through dividends and share repurchase," he said.
During the quarter, Reynolds:
-- Announced that CEO, Chairman and President Lloyd Waterhouse resigned
from the company and its board of directors. Philip Odeen was named
chairman and acting CEO. Odeen is the former chairman of TRW Inc. and
previously served as Lead Director of Reynolds' board of directors.
-- Announced Applications on Demand, a next-generation application
delivery framework offering automotive retailers simplified business
operations, unprecedented choices and robust control and protection in
how they access and use software applications to run their business.
Early adopters include several top-five auto groups and a nine-store
Midwestern auto group that is replacing its existing dealer management
system provider with Reynolds solutions delivered via Reynolds
Applications On Demand.
-- Was selected by a top-five auto group to shift its dealer network to
Reynolds Web Solutions.
-- Was one of two winners in the Best Customer Service Organization
category in the second annual American Business Awards program.
-- Teamed with Northwood University to provide online, automotive
certificate programs based on the job roles within the parts, service,
sales and accounting areas of the retail automotive dealership.
Northwood is a private university that prepares students for leadership
careers in business and management.
For the 2004 fiscal year, the company currently expects:
-- Fourth quarter earnings per share (EPS) to be 28 cents to 32 cents
reflecting 2 cents to fulfill contractual commitments related to Mr.
Waterhouse's resignation.
-- Full fiscal year EPS to be $1.34 to $1.38.
-- Return on equity of about 20 percent.
-- Operating margins to be between 15 percent and 16 percent.
-- Net capital expenditures of approximately $26 million.
-- Depreciation and amortization expenses of approximately $46 million.
-- Research and development expenses of approximately $93 million.
-- Estimated tax rate of 39 percent to 40 percent.
-- Continuation of its share repurchase plan.
-- Fully diluted shares used to calculate EPS to be approximately 68
million shares.
About Reynolds
Reynolds and Reynolds ( http://www.reyrey.com/ ) is the leading provider of integrated solutions that help automotive retailers manage change and improve their profitability. Serving the automotive retailing industry since 1927, Reynolds enables OEMs 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, Web and Customer Relationship Management solutions, learning and consulting services, documents, data management and integration, networking and support and leasing services. Reynolds serves more than 20,000 customers. They comprise nearly 90 percent of the automotive retailers and virtually all OEMs doing business in North America. The Reynolds International Division serves automotive retailers and OEMs through Incadea GmbH and its partner network as well as a worldwide consulting practice.
The Reynolds and Reynolds Company
Segment Report (Unaudited)
(In thousands except per share data)
For The Periods Third Quarter Nine Months
Ended June 30 2004 2003 (1) Change 2004 2003 (1) Change
Consolidated
Net Sales and
Revenues $242,830 $250,405 -3% $740,725 $752,152 -2%
Gross Profit $134,350 $138,762 -3% $413,894 $417,316 -1%
Gross Margin 55.3% 55.4% 55.9% 55.5%
Operating Income $38,222 $44,830 -15% $116,905 $129,468 -10%
Operating
Margin 15.7% 17.9% 15.8% 17.2%
Income Before
Income Taxes $38,234 $45,776 -16% $117,559 $132,332 -11%
Provision for
Income Taxes $16,215 $19,571 $45,361 $53,564
Net Income $22,019 $26,205 -16% $72,198 $78,768 -8%
Earnings Per
Common Share
(Diluted) $0.33 $0.37 -11% $1.05 $1.12 -6%
Average Shares
Outstanding 67,414 70,870 68,504 70,589
Software Solutions
Net Sales and
Revenues $132,157 $133,218 -1% $410,626 $404,819 1%
Gross Profit $88,534 $89,323 -1% $279,989 $270,914 3%
Gross Margin 67.0% 67.1% 68.2% 66.9%
Operating Income $30,854 $35,246 -12% $105,295 $102,706 3%
Operating
Margin 23.3% 26.5% 25.6% 25.4%
Services
Net Sales and
Revenues $63,017 $64,815 -3% $181,746 $191,099 -5%
Gross Profit $18,574 $19,597 -5% $50,435 $55,669 -9%
Gross Margin 29.5% 30.2% 27.8% 29.1%
Operating Loss ($3,613) ($2,638) ($19,876) ($10,379)
Operating
Margin -5.7% -4.1% -10.9% -5.4%
Documents
Net Sales and
Revenues $39,901 $43,498 -8% $123,847 $128,305 -3%
Gross Profit $21,229 $23,087 -8% $64,486 $69,718 -8%
Gross Margin 53.2% 53.1% 52.1% 54.3%
Operating Income $6,738 $7,481 -10% $17,404 $21,417 -19%
Operating
Margin 16.9% 17.2% 14.1% 16.7%
Financial Services
Net Sales and
Revenues $7,755 $8,874 -13% $24,506 $27,929 -12%
Gross Profit $6,013 $6,755 -11% $18,984 $21,015 -10%
Gross Margin 77.5% 76.1% 77.5% 75.2%
Operating Income $4,243 $4,741 -11% $14,082 $15,724 -10%
Operating
Margin 54.7% 53.4% 57.5% 56.3%
(1) Fiscal year 2003 results were restated to reclassify amounts between
segments for consistency with the current organizational structure
and to reflect the adoption of SFAS No. 123, "Accounting for Stock-
Based Compensation." Using the Retroactive Restatement Method
described in SFAS No. 148, "Accounting for Stock-Based Compensation-
Transition and Disclosure," the company recorded fiscal year 2003
stock-based compensation expense of $3,904 ($2,675 after-tax or $.04
per diluted share) in the first quarter, $3,740 ($2,536 after-tax or
$.04 per diluted share) in the second quarter, $3,591 ($2,045 after-
tax or $.03 per diluted share) in the third quarter and $3,206
($1,961 after-tax or $.03 per diluted share) in the fourth quarter.