Reynolds and Reynolds Reports Record Third Quarter Revenues and Earnings
21 July 1999
Reynolds and Reynolds Reports Record Third Quarter Revenues and Earnings
DAYTON, Ohio, July 21 -- The Reynolds and Reynolds Company
today reported that quarterly revenues exceeded $400 million for
the first time in the company's history. Third quarter revenues of
$401.1 million were 8 percent higher than last year. Net income of
$31.3 million and earnings per share of 39 cents were also records and
represented increases over last year of 20 percent and 22 percent,
respectively.
"We're very pleased with our sustained momentum through the first nine
months and our prospects for continued strong performance through the
remainder of the fiscal year. Our Automotive Division continues to do very
well in the dynamic and exciting automotive retail channel. Our Business
Systems Division is closing in on its goal of achieving operating margins in
the 8 percent to 10 percent range. Additionally, the formation of the
eBusiness Group will enable us to aggressively leverage the Internet to
enhance our position in the automotive and document services markets.
Yesterday's introduction of our web-enabled automotive service marketing
program is the first of many similar e-business initiatives we're developing,"
said David R. Holmes, chairman and chief executive officer.
For the nine months, revenues were $1.15 billion compared with
$1.10 billion a year ago. Earnings per share rose 22 percent to $1.13.
Automotive.
Automotive Division revenues increased 9 percent to $204.8 million for the
quarter. Automotive computer systems and services revenues increased
12 percent for the quarter, while automotive forms revenues declined slightly.
Operating margins remained strong at 21.1 percent for the quarter.
"We continue to expand our relationships with national retailers, local
and regional dealer organizations and manufacturers. We're providing
measurable business results for our customers in virtually every segment of
the automotive retailing market," Holmes said.
Business Systems.
Business Systems Division third quarter revenues were $186.4 million
compared to $174.1 million last year. Operating income for the quarter was
$14.6 million, an operating margin of 7.9 percent. "Both revenues and
operating income continue to show strong improvement year over year, " said
Holmes.
"The Business Systems Division had a solid quarter, signing document
management contracts with a number of key accounts. Prospects for the
remainder of the year look solid. We're confident that we'll reach our goal
of 8 percent to 10 percent operating margins in this business by year end,"
Holmes said.
Formation of eBusiness Group.
During the quarter, the company announced the formation of the eBusiness
Group. The group will leverage the company's tangible assets which include
manufacturing strengths, efficient distribution networks, large bases of
satisfied customers, and clear market leadership by leading the company to the
next phase of the Internet revolution.
Reynolds already plays a key role in making Microsoft CarPoint the
automotive industry's leading car-buying site on the Internet (as ranked by
Media Metrix, the leading Internet audience usage measurement service).
Additionally, Reynolds' Customer Advantage Internet-based system for document
management gives users access to electronic print-on-demand and "fill-in"
forms through their web browsers. And earlier this year, Reynolds introduced
integrated voice and data services that will provide analysis and customized
Internet and infrastructure solutions to enhance automotive retailers' market
presence and productivity.
"The Internet is a means of enriching existing customer relationships and
attracting new customers. Our focused eBusiness Group will be a key component
of Reynolds' blueprint for growth. We'll focus on leveraging our internal
expertise with outside partnerships to introduce rapidly and regularly,
e-business services that create more value for our customers, shareholders and
associates," Holmes said.
Share repurchase.
The company repurchased 200,000 shares during the quarter at an average
price of $23.30 per share. Through nine months, the company repurchased 1.9
million shares for $38 million. Approximately 3.5 million shares remain
authorized for repurchase.
Balance Sheet.
The company's balance sheet remains exceptionally strong with cash
balances of $122 million. Debt to total capitalization at quarter end was
28.5 percent. The company generated $118 million of cash from operations for
the nine month period ending June 30, 1999.
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 reported
revenues of $1.53 billion for the 12 months ended June 30, 1999. For more
information on Reynolds and Reynolds, visit the company's World Wide Web site
at 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)
For The Periods Third Quarter Nine Months
Ended June 30 1999 1998 Change 1999 1998 Change
Consolidated
Net Sales and
Revenues $401,079 $371,231 8% $1,148,723 $1,102,605 4%
Gross Profit $183,510 $160,464 14% $515,855 $481,074 7%
Operating Income $54,310 $45,380 20% $150,214 $148,832 1%
Income From
Continuing
Operations $31,257 $28,171 11% $84,767 $83,138 2%
Discontinued
Operations $0 ($2,122) $5,785 ($6,981)
Net Income $31,257 $26,049 20% $90,552 $76,157 19%
Earnings Per
Common Share
(Diluted) $0.39 $0.32 22% $1.13 $0.93 22%
Average Shares
Outstanding 80,207 81,442 80,290 81,614
Automotive *
Net Sales and
Revenues $204,785 $188,593 9% $576,430 $540,855 7%
Gross Profit $112,659 $100,866 12% $314,212 $293,342 7%
Gross Margin 55.0% 53.5% 54.5% 54.2%
Operating Income $43,291 $36,742 18% $116,494 $116,307 0%
Operating
Margin 21.1% 19.5% 20.2% 21.5%
Business Systems
Net Sales and
Revenues $186,352 $174,088 7% $543,249 $536,738 1%
Gross Profit $70,851 $59,598 19% $201,643 $187,732 7%
Gross Margin 38.0% 34.2% 37.1% 35.0%
Operating Income $14,636 $7,820 87% $38,235 $31,616 21%
Operating
Margin 7.9% 4.5% 7.0% 5.9%
Financial Services
Net Sales and
Revenues $9,942 $8,788 13% $29,044 $25,455 14%
Operating Income $5,450 $4,682 16% $15,624 $12,417 26%
Operating
Margin 54.8% 53.3% 53.8% 48.8%
Corporate
Expenses ($9,067) ($3,864) ($20,139) ($11,508)
Elimination of
Intersegment Sales $0 ($238) $0 ($443)
* Automotive's nine month results include the effect of adopting the
AICPA's Statement of Position 97-2, Software Revenue Recognition. The
effect was to reduce net sales and revenues by $17,936, gross profit by
$11,205 and operating income by $10,624.
The Reynolds and Reynolds Company
Statements of Consolidated Income by Segment (Unaudited)
For the Three and Nine Months Ended June 30, 1999 and 1998
(In thousands except per share data)
Three Months
1999 1998
Amount Percent Amount Percent
Net Sales and Revenues
Information systems
Automotive $204,785 51.1% $188,593 50.8%
Business systems 186,352 46.5% 174,088 46.9%
Elimination of
intersegment sales 0 -0.1% (238) -0.1%
Total information
systems 391,137 97.5% 362,443 97.6%
Financial services 9,942 2.5% 8,788 2.4%
Total net sales
and revenues 401,079 100.0% 371,231 100.0%
Costs and Expenses
Information systems
Cost of sales
Automotive 92,126 45.0% 87,727 46.5%
Business systems 115,501 62.0% 114,490 65.8%
Elimination of
intersegment sales 0 (238)
Total cost of sales 207,627 53.1% 201,979 55.7%
Selling, general and
administrative expenses
Automotive 69,368 33.9% 64,124 34.0%
Business systems 56,215 30.1% 51,778 29.7%
Corporate expenses 9,067 3,864
Total selling, general
and administrative
expenses 134,650 34.4% 119,766 33.1%
Financial services 4,492 45.2% 4,106 46.7%
Total costs and expenses346,769 86.5% 325,851 87.8%
Gross Profit from
Information Systems
Sales (Memo Only)
Automotive 112,659 55.0% 100,866 53.5%
Business systems 70,851 38.0% 59,598 34.2%
Total gross profit
from sales 183,510 46.9% 160,464 44.3%
Operating Income (Loss)
Information systems
Automotive 43,291 21.1% 36,742 19.5%
Business systems 14,636 7.9% 7,820 4.5%
Corporate expenses (9,067) (3,864)
Total information
systems 48,860 12.5% 40,698 11.2%
Financial services 5,450 54.8% 4,682 53.3%
Total operating income 54,310 13.5% 45,380 12.2%
Other Charges (Income)
Interest expense 3,248 5,988
Interest income (1,955) (674)
Other (492) 493
Total other
charges (income) 801 0.2% 5,807 1.5%
Income Before
Income Taxes 53,509 13.3% 39,573 10.7%
Provision for
Income Taxes 22,252 5.5% 11,402 3.1%
Income from Continuing
Operations 31,257 7.8% 28,171 7.6%
Discontinued Operations 0 0.0% (2,122) -0.6%
Net Income $31,257 7.8% $26,049 7.0%
Basic Earnings per
Common Share
Income from
Continuing Operations $0.40 $0.35
Discontinued Operations $0.00 ($0.03)
Net Income $0.40 $0.33
Average Number of
Common Shares
Outstanding 78,014 79,435
Diluted Earnings
per Common Share
Income from Continuing
Operations $0.39 $0.35
Discontinued Operations $0.00 ($0.03)
Net Income $0.39 $0.32
Average Number of Common
Shares Outstanding 80,207 81,442
Basic Earnings per Common Share
Income from Continuing
Operations $1.08 $1.04
Discontinued Operations $0.07 ($0.09)
Net Income $1.16 $0.96
Average Number of
Common Shares
Outstanding 78,338 79,692
CONTINUED
The Reynolds and Reynolds Company
Statements of Consolidated Income by Segment (Unaudited)
For the Three and Nine Months Ended June 30, 1999 and 1998
(In thousands except per share data)
Nine Months
1999 1998
Amount Percent Amount Percent
Net Sales and Revenues
Information systems
Automotive $576,430 50.2% $540,855 49.1%
Business systems 543,249 47.3% 536,738 48.7%
Elimination of
intersegment sales 0 0.0% (443) -0.1%
Total information
systems 1,119,679 97.5% 1,077,150 97.7%
Financial services 29,044 2.5% 25,455 2.3%
Total net sales
and revenues 1,148,723 100.0% 1,102,605 100.0%
Costs and Expenses
Information systems
Cost of sales
Automotive 262,218 45.5% 247,513 45.8%
Business systems 341,606 62.9% 349,006 65.0%
Elimination of
intersegment sales 0 (443)
Total cost of sales 603,824 53.9% 596,076 55.3%
Selling, general
and administrative
expenses
Automotive 197,718 34.3% 177,035 32.7%
Business systems 163,408 30.1% 156,116 29.1%
Corporate expenses 20,139 11,508
Total selling, general
and administrative
expenses 381,265 34.1% 344,659 32.0%
Financial services 13,420 46.2% 13,038 51.2%
Total costs
and expenses 998,509 86.9% 953,773 86.5%
Gross Profit from
Information Systems
Sales (Memo Only)
Automotive 314,212 54.5% 293,342 54.2%
Business systems 37.1% 187,732 35.0%
Total gross profit
from sales 515,855 46.1% 481,074 44.7%
Operating Income (Loss)
Information systems
Automotive 116,494 20.2% 116,307 21.5%
Business systems 38,235 7.0% 31,616 5.9%
Corporate expenses (20,139) (11,508)
Total information
systems 134,590 12.0% 136,415 12.7%
Financial services 15,624 53.8% 12,417 48.8%
Total operating income 150,214 13.1% 148,832 13.5%
Other Charges (Income)
Interest expense 9,888 12,597
Interest income (4,895) (1,605)
Other 27 2,009
Total other
charges (income) 5,020 0.5% 13,001 1.2%
Income Before
Income Taxes 145,194 12.6% 135,831 12.3%
Provision for
Income Taxes 60,427 5.2% 52,693 4.8%
Income from Continuing
Operations 84,767 7.4% 83,138 7.5%
Discontinued Operations 5,785 0.5% (6,981) -0.6%
Net Income $90,552 7.9% $76,157 6.9%
Basic Earnings per
Common Share
Income from Continuing
Operations $1.08 $1.04
Discontinued Operations $0.07 ($0.09)
Net Income $1.16 $0.96
Average Number of
Common Shares
Outstanding 78,338 79,692
Diluted Earnings
per Common Share
Income from Continuing
Operations $1.06 $1.02
Discontinued Operations $0.07 ($0.09)
Net Income $1.13 $0.93
Average Number of
Common Shares
Outstanding 80,290 81,614
The Reynolds and Reynolds Company
Condensed Consolidated Balance Sheets (Unaudited)
As of June 30, 1999 and September 30, 1998
(In thousands)
6/30/99 09/30/98
Information Systems Assets
Current Assets
Cash and equivalents $122,981 $39,980
Accounts receivable 228,802 227,158
Inventories 73,647 66,196
Other current assets 33,479 38,713
Total current assets 458,909 372,047
Property, Plant and Equipment,
less accumulated depreciation of
$226,406 at 6/30/99 and
$215,208 at 9/30/98 182,690 174,226
Goodwill 67,542 82,280
Other Intangible Assets 19,606 17,327
Other Assets 98,937 100,681
Total Information Systems Assets 827,684 746,561
Financial Services Assets
Finance Receivables 421,104 408,765
Cash and Other Assets 891 2,394
Total Financial Services Assets 421,995 411,159
Total Assets $1,249,679 $1,157,720
Information Systems Liabilities
Current Liabilities $227,204 $198,208
Long-Term Debt 169,623 161,541
Other Liabilities 87,779 83,703
Total Information Systems Liabilities 484,606 443,452
Financial Services Liabilities
Notes Payable 211,878 210,561
Other Liabilities 101,329 99,256
Total Financial Services Liabilities 313,207 309,817
Shareholders' Equity
Capital Stock 74,543 58,235
Other Adjustments (9,094) (9,727)
Retained Earnings 386,417 355,943
Total Shareholders' Equity 451,866 404,451
Total Liabilities and
Shareholders' Equity $1,249,679 $1,157,720
The Reynolds and Reynolds Company
Five-Year Selected Financial Data
For the Fiscal Years 1995 - 1999
(In thousands except per share data)
Nine Months
6/30/99 6/30/98
Consolidated
Net Sales and Revenues
Information systems $1,119,679 $1,077,150
Financial services 29,044 25,455
Total net sales and revenues $1,148,723 $1,102,605
Income From Continuing Operations $84,767 $83,138
Basic Earnings per Common Share $1.08 $1.04
Diluted Earnings per Common Share $1.06 $1.02
Net Income $90,552 $76,157
Basic Earnings per Common Share $1.16 $0.96
Diluted Earnings per Common Share $1.13 $0.93
Return on Equity 27.1% 26.4%
Cash Dividends Declared
Per Class A Common Share $0.30 $0.27
Book Value Per Outstanding Common Share $5.79 $4.92
Assets
Information systems $827,684 $724,480
Financial services 421,995 397,493
Total assets $1,249,679 $1,121,973
Long-Term Debt
Information systems $169,623 $128,157
Financial services 146,907 147,728
Total long-term debt $316,530 $275,885
Number of Active Employees 9,062 9,075
Information Systems
(excluding financial services)
Current Ratio 2.02 1.52
Net Property, Plant and Equipment $182,690 $176,536
Total Debt $179,843 $173,417
Total Debt to Capitalization 28.5% 30.9%
CONTINUED
The Reynolds and Reynolds Company
Five-Year Selected Financial Data
For the Fiscal Years 1995 - 1999
(In thousands except per share data)
Fiscal Year
1998 1997 1996 1995
Consolidated
Net Sales and Revenues
Information
systems $1,451,466 $1,314,956 $1,033,369 $856,984
Financial services 34,497 30,383 26,263 22,311
Total net sales and
revenues $1,485,963 $1,345,339 $1,059,632 $879,295
Income From
Continuing Operations$113,556 $80,491 $99,100 $81,052
Basic Earnings
per Common Share $1.43 $0.99 $1.20 $0.97
Diluted Earnings
per Common Share $1.40 $0.96 $1.16 $0.95
Net Income $103,107 $59,219 $93,738 $78,594
Basic Earnings
per Common Share $1.30 $0.73 $1.14 $0.94
Diluted Earnings
per Common Share $1.27 $0.70 $1.10 $0.92
Return on Equity 26.8% 16.1% 26.6% 25.1%
Cash Dividends Declared
Per Class A
Common Share $0.36 $0.32 $0.25 $0.20
Book Value Per
Outstanding
Common Share $5.14 $4.55 $4.55 $4.01
Assets
Information systems $746,561 $729,335 $610,362 $489,501
Financial services 411,159 373,175 313,282 265,965
Total assets $1,157,720 $1,102,510 $923,644 $755,466
Long-Term Debt
Information
systems $161,541 $170,150 $84,601 $41,443
Financial services 145,460 137,455 93,589 92,425
Total long-term
debt $307,001 $307,605 $178,190 $133,868
Number of Active
Employees 9,152 9,138 7,544 6,036
Information Systems
(excluding financial services)
Current Ratio 1.88 1.57 1.62 1.50
Net Property, Plant
and Equipment $174,226 $188,501 $167,667 $128,462
Total Debt $168,366 $191,526 $99,092 $51,649
Total Debt to
Capitalization 29.4% 34.5% 21.0% 13.4%