Reynolds and Reynolds Reports First Quarter Results
DAYTON, Ohio, Jan. 20 -- The Reynolds and Reynolds Company today announced that net income of $21 million, or 33 cents per share for the first fiscal quarter ended December 31, 2004, compared to net income of $24 million or 34 cents per share a year ago, was in line with upwardly revised guidance the company provided on December 29. Net earnings during the quarter benefited from strong cost management, timing of expenses and foreign exchange gains. Revenues for the quarter were $239 million, down 4 percent from a year ago.
Revenues in the company's largest segment, Software Solutions, were $195 million, 3 percent lower than a year ago. The Documents segment revenues declined 5 percent to $37 million. Revenues in the Financial Services segment declined 18 percent to $7 million, primarily because of lower interest rates.
"We are very pleased with the results of our search for a chief executive officer," Phil Odeen, chairman, said. "Finbarr O'Neill has extensive experience in the automotive retailing industry and has an affinity for automobile dealers and a deep understanding of their business and their needs. He is exceptionally well equipped to lead this company and get Reynolds back on a growth track.
"We expect second fiscal quarter revenues will be essentially at current levels with modest growth coming in the second half of the year. Key to our success will be ERA XT which is built on the industry's leading dealer management system. ERA XT delivers a powerful new set of integrated customer relationship management tools and business analytics capabilities. It is a complete end-to-end solution that is superior to any competitive solution in the marketplace. By the end of the first quarter, we had taken orders from over 1,000 dealerships in the United States and Canada for the ERA XT system. This solution will deliver meaningful business results for our customers and growth for our company."
In addition to ERA XT, the company will exhibit a broad array of exciting new solutions at the National Automobile Dealers Association convention in New Orleans later this month. Applications on Demand, a powerful network computing environment hosted on remote servers that relieves our customers of staffing and maintaining a hardware infrastructure, will also be showcased. "Applications on Demand has received strong customer reception in the marketplace," said Odeen. "During the quarter, two multi-store groups, each with over 450 users went live on Applications on Demand. This month, we will install a 30-store group with over 1,500 users.
"We enter the convention with new leadership and a re-energized companywide focus on delivering value to our customers. We have an extremely powerful lineup of deeply integrated solutions that help dealers simplify their business, increase leads and closing rates, and improve the consumer experience in every area of the dealership," Odeen said. "Our goal is to create value for our customers. As we do that, we will create value for our shareholders and associates."
In the first fiscal quarter, the company repurchased 855,000 shares for $21 million at an average price of $24.26. Approximately 2 million shares remain authorized for repurchase. "We continue to generate solid cash flow - $38 million of operating cash flow during the quarter - demonstrating the fundamental strength of our business and financial model," Odeen said.
During the quarter, Reynolds:
* Appointed Finbarr J. O'Neill as the company's president and chief
executive officer. O'Neill had been president and CEO of Mitsubishi
Motors North America since 2003. From 1985 until 2003, O'Neill served
in a variety of executive positions with Hyundai Motor America. From
1998 until 2003, while serving as CEO of Hyundai Motor America, O'Neill
led a significant turnaround that resulted in a 400 percent increase in
profitable sales and measurable improvements in marketing and brand
image as well as consumer and dealer satisfaction. During that same
time period, sales of Hyundai vehicles soared nearly 300 percent from
just over 90,000 units to over 350,000 units.
* Announced that it is working with Ford Motor Company's FORDSTAR
organization and Ford and Lincoln-Mercury automotive retailers to shift
legacy satellite-based dealer data communication systems to an optional
Internet-based communication system under Ford's FordSecure initiative.
* Introduced Mobile Service Advisor, a powerful new software tool
connected via a Tablet PC and wireless network. Mobile Service Advisor
is designed to speed up service department repair order processes and
help improve the customer experience.
* Launched Reynolds University (RU) Online, a Web-based learning
environment. RU Online offers both free and low- cost training classes
via a virtual classroom, enabling dealerships to train new hires and
refresh current employees in utilizing the Reynolds dealer management
systems and other software applications.
* Announced that Networkcar(R), a Reynolds and Reynolds company and
automotive industry leader in remote vehicle diagnostics, vehicle
tracking and routing, was awarded a firm, fixed price indefinite-
delivery/indefinite-quantity (IDIQ) contract with the U.S. Marine Corps
to provide telematics units for vehicles at five Marine Corp locations
in California. Additionally, PHH, one of the world's leading vehicle
management companies, and Networkcar formed an alliance whereby PHH
will develop onboard technology products powered by Networkcar
capabilities, designed to help managed fleets operate more safely and
efficiently through the use of technology in the vehicle.
* Was recognized by the United States Distance Learning Association
(USDLA) with its "Excellence In Distance Learning Programming" award
within the Corporate/Business category.
* Was certified for the fifth time under the Support Center Practices
(SCP) Certification program for its Technical Assistance Center (TAC).
* Was recognized with a 2004 Service Quality Award from the Association
for Services Management International (AFSMI).
For the second fiscal quarter ending March 31, 2005 the company expects:
* Earnings per share between 32 cents and 36 cents.
For the 2005 fiscal year the company expects:
* Earnings per share between $1.37 and $1.45.
* Revenues to be essentially flat compared to fiscal 2004.
* Operating margins to be in the mid teens.
* Return on equity between 18 percent and 19 percent.
* Net capital expenditures of approximately $20 million.
* Depreciation and amortization of about $45 million.
* Research and development expenses of nearly $90 million.
* An estimated tax rate of about 42 percent.
* Continuation of its share repurchase plan.
* Fully diluted shares used to calculate EPS to be approximately 64
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. Reynolds serves automotive retailers and OEMs globally through its Incadea solution and a worldwide partner network, as well as through its consulting practice.
The Reynolds and Reynolds Company
Segment Report (Unaudited)
(In thousands except per share data)
First Quarter
For The Periods Ended December 31 2004 2003 Change
Consolidated
Net Sales and Revenues $239,322 $248,403 -4%
Gross Profit $129,581 $138,587 -6%
Gross Margin 54.1% 55.8%
Operating Income $35,604 $35,959 -1%
Operating Margin 14.9% 14.5%
Income Before Income Taxes $36,698 $36,224 1%
Provision for Income Taxes $15,344 $12,402
Net Income $21,354 $23,822 -10%
Earnings Per Common Share
(Diluted)
Net Income $0.33 $0.34 -3%
Average Shares Outstanding 65,366 69,446
Software Solutions
Net Sales and Revenues $194,867 $200,315 -3%
Gross Profit $102,425 $112,224 -9%
Gross Margin 52.6% 56.0%
Operating Income $24,933 $27,808 -10%
Operating Margin 12.8% 13.9%
Documents
Net Sales and Revenues $37,606 $39,688 -5%
Gross Profit $22,058 $19,880 11%
Gross Margin 58.7% 50.1%
Operating Income $7,462 $3,266 128%
Operating Margin 19.8% 8.2%
Financial Services
Net Sales and Revenues $6,849 $8,400 -18%
Gross Profit $5,098 $6,483 -21%
Gross Margin 74.4% 77.2%
Operating Income $3,209 $4,885 -34%
Operating Margin 46.9% 58.2%
(1) Fiscal year 2004 results were restated to reclassify amounts between
segments for consistency with the current organizational structure.