Reynolds and Reynolds Reports Record First Quarter Earnings
25 January 1999
Reynolds and Reynolds Reports Record First Quarter Earnings; Earnings Per Share Up 24% Over Prior Year
DAYTON, Ohio, Jan. 25 -- The Reynolds and Reynolds Company
today reported revenues of $371.3 million for the first fiscal
quarter ended December 31, 1998. Net income of $28.9 million for the quarter
was a record and represented an increase of 22 percent over the prior year.
Earnings per share (diluted) of 36 cents were also a record, and were
24 percent higher than the prior year.
"The strong results in the first quarter were driven by excellent
performance in our automotive division where we continue to expand our market
leading position," said David R. Holmes, chairman, president and CEO.
(Results exclude the impact of the adoption of AICPA Statement of Position
97-2, "Software Revenue Recognition"). A summary of the results follows:
Operating
Revenues Income EPS (Diluted)
First Quarter 1999 $355,550 $41,653 $0.36
Less Effect of
Accounting Change 15,736 9,992 0.07
Less Gain on Sale
of Discontinued Operations -- -- (0.07)
First Quarter 1999 excluding
Accounting Change
and Discontinued
Operations $371,286 $51,645 $0.36
First Quarter 1998 $357,818 $49,682 $0.29
% Change 4% 4% 24%
Automotive. Excluding the impact of AICPA Statement of Position (SOP)
97-2 "Software Revenue Recognition," Automotive Division revenues were
$191 million compared to $171.3 million in the prior year, an increase of
11.5 percent. Operating income was $41.4 million and operating margins for
the quarter were 21.7 percent. During the quarter, the division signed a
$26 million (U.S.) contract with Toyota Canada Inc. to supply its dealers with
the ERA2 information management system. This represents the largest systems
contract in the company's history.
"In a little over one week Reynolds will participate in the National
Automobile Dealers Association convention in San Francisco," Holmes said.
"We'll show how we've fully prepared our customers for the millennium with Y2K
qualified systems, and we'll introduce some exciting new solutions that will
drive strong business results for our customers," Holmes said.
Business Systems. Business Systems revenues were $170.9 million for the
quarter compared to $178.5 million in the prior year. Operating income was
$9.4 million and operating margins were 5.5 percent. Operating margins were
negatively impacted by start-up costs related to the Kaiser Permanente
account. During the quarter, the division signed several new accounts
including Huntington Bank and Scripps Hospitals and renewed and expanded an
existing contract with Mellon Bank.
"With our acquisition integration behind us, and a number of cost
improvement programs in place, we're well positioned to drive growth and
higher margins. We're focused on improving the operating margins of this
business to the 8 percent to 10 percent range by the end of the year," Holmes
said.
Offsetting Items. The adoption of AICPA SOP 97-2, which requires the
company to recognize software revenues and profits over the installation
period, will negatively impact revenues and profits during the first and
second fiscal quarters. The first quarter impact was offset by the gain
realized from the company's sale of the Healthcare Systems Division in
October, 1998.
Share Repurchase. During the quarter, the company repurchased
900,000 shares at an average price of $20.84 per share. Approximately
4.5 million shares remain authorized for repurchase.
Outlook. "Looking ahead, we expect another record year for revenues and
earnings, with return on equity above 20 percent," David R. Holmes, chairman,
president and CEO, said. Second fiscal quarter results will include about
2 cents per share of negative impact from the adoption of AICPA SOP 97-2. In
addition, the company will invest approximately 1 cent per share to bring the
Kaiser Permanente account on line. Nevertheless, the company expects second
fiscal quarter results to exceed the prior year.
Reynolds and Reynolds, headquartered in Dayton, Ohio, is a leading
provider of integrated information management systems and related value-added
services to automotive and general business markets. The company has reported
revenues of nearly $1.5 billion for the 12 months ended Dec. 31, 1998. For
more information on Reynolds and Reynolds, visit the company's World Wide Web
site on http://www.reyrey.com, or call The Reynolds and Reynolds Information
Hotline at 888-4REYREY.
The Reynolds and Reynolds Company
Segment Report (Unaudited)
(In thousands except per share data)
First Quarter
For The Periods Ended December 31 1998 1997 Change
Consolidated
Net Sales and Revenues $355,550 $357,818 -1%
Gross Profit $155,577 $156,197 0%
Operating Income $41,653 $49,682 -16%
Income From Continuing
Operations $23,081 $26,148 -12%
Discontinued Operations $5,785 ($2,400) --
Net Income $28,866 $23,748 22%
Earnings Per Common
Share (Diluted) $0.36 $0.29 24%
Average Shares Outstanding 80,499 81,644 --
Automotive *
Net Sales and Revenues $175,273 $171,295 2%
Gross Profit $93,652 $94,193 -1%
Gross Margin 53.4% 55.0% --
Operating Income $31,390 $39,190 -20%
Operating Margin 17.9% 22.9% --
Business Systems
Net Sales and Revenues $170,907 $178,533 -4%
Gross Profit $61,925 $62,004 0%
Gross Margin 36.2% 34.7% --
Operating Income $9,402 $10,778 -13%
Operating Margin 5.5% 6.0% --
Financial Services
Net Sales and Revenues $9,370 $8,097 16%
Operating Income $4,835 $3,469 39%
Operating Margin 51.6% 42.8% --
Corporate Expenses ($3,974) ($3,755) --
Elimination of
Intersegment Sales $0 ($107) --
* Automotive reduced revenues $15,736, gross profit $10,480 and operating
income $9,992 ($.07 per share) for the adoption of the AICPA's
Statement of Position 97-2, "Software Revenue Recognition."