Reynolds and Reynolds Reports Third Quarter Results
25 July 2000
Reynolds and Reynolds Reports Third Quarter Results
DAYTON, Ohio - The Reynolds and Reynolds Company today announced
considerable progress in transforming the company:
* The agreement to sell the Information Solutions Group, the proceeds
from which will fund investments in the automotive business as well
as share repurchase and other uses that will drive shareholder
value;
* A significant restructuring that cuts costs and simplifies the
organization to increase speed, innovation and execution;
* The recruitment of key executives in product development, services
and marketing;
* The completion of the HAC Group acquisition which significantly
expands Reynolds' customer relationship management and web services
capabilities;
* Successful pilots for the new ChoiceParts on-line parts exchange;
and
* Increasing the existing share repurchase authorization by 5 million
shares.
"We're taking significant steps to build on our leadership position as we
focus the organization on being a major force in the transformation of
automotive retailing," David R. Holmes, chairman and CEO, said.
Financial Results.
For the third quarter ending June 30, 2000, the company reported revenues
from continuing operations of $236 million, a nine percent increase over the
prior year. Net income for the quarter was
$25.3 million or 31 cents per share.
Continuing Operations.
Income from continuing operations was $21 million or 26 cents per share.
Income from continuing operations declined from the prior year due to
previously announced investments including ChoiceParts, the leading on-line
parts exchange, dilution from the acquisition of The HAC Group, higher
research and development expenses, re-organization costs associated with the
divestiture of the Information Solutions Group and losses from the company's
equity investment in UK-based Kalamazoo Computer Group.
Discontinued Operations.
On June 20, 2000 the company announced a definitive agreement to sell the
Information Solutions Group to The Carlyle Group for $360 million. The
Group's results were reported as discontinued operations in the third quarter.
Earnings from discontinued operations were $4.3 million or 5 cents per share.
Included in the results was the write-off of assets of an on-line printing
business, which was not included in the assets sold to The Carlyle Group.
Upon completion of the sale in the fourth quarter, the company expects to
receive net proceeds of approximately $275 million after income taxes and debt
reduction and expects to record an after-tax gain on the sale of approximately
$20 million.
Also on June 20, the board of directors authorized an additional 5 million
shares for repurchase, bringing the total authorized shares for repurchase to
6.7 million at June 30, 2000.
Research and Development Expenses.
Research and development expenses increased 52 percent during the quarter
to $20.2 million or 15 cents per share, compared to $13.3 million or 10 cents
per share in the prior year. "The increased R&D expenditures are focused on
the next generation of solutions for retail management, e-Business, e-CRM and
other initiatives that will drive future revenue growth," said Holmes.
Cash Flows.
Operating cash flows from continuing operations totaled $100.9 million for
the nine month period ending June 30, 2000. Debt to total capitalization,
excluding Financial Services, was 25 percent. Cash balances totaled
$36 million at the end of the quarter.
Outlook.
"Our outlook for the future is very upbeat. As we integrate the HAC Group
with our own Professional Services business to form Reynolds Transformation
Services, we'll significantly strengthen an important dimension of our
e-business services initiatives. These expanding services, in CRM and
e-Markets will be important to us as we accelerate our growth beyond our core
retail management systems. Our strong cash position and the savings from the
restructuring will allow us to invest in strategic growth initiatives going
forward. We are intent on leading the transformation of automotive
retailing," Holmes said.
Reynolds and Reynolds, headquartered in Dayton, Ohio, provides advanced
solutions for the worldwide automotive retailing marketplace.
The Reynolds and Reynolds Company
Segment Report (Unaudited)
(In thousands except per share data)
Third Quarter Nine Months
For The Periods Ended
June 30 2000 1999 Change 2000 1999 (1) Change
Consolidated
Net Sales and
Revenues $235,746 $216,166 9% $677,569 $609,460 11%
Gross Profit $126,516 $113,613 11% $366,468 $316,938 16%
Operating
Income $39,068 $40,052 -2% $124,192 $113,024 10%
Operating
Margin 16.6% 18.5% 18.3% 18.5%
Income From
Continuing
Operations $21,024 $23,437 -10% $69,631 $64,400 8%
Discontinued
Operations
Income from
Information
Solutions (2) $4,269 $7,820 -45% $19,930 $20,367 -2%
Gain on sale of
Healthcare
Systems (3) $0 $0 $0 $5,785
Net Income $25,293 $31,257 -19% $89,561 $90,552 -1%
Earnings Per
Common Share
(Diluted)
Income From
Continuing
Operations $0.26 $0.29 -10% $0.87 $0.80 9%
Discontinued
Operations
Income from
Information
Solutions (2) $0.05 $0.10 -50% $0.25 $0.26 -4%
Gain on sale of
Healthcare
Systems (3) $0.00 $0.00 $0.00 $0.07 -100%
Net Income $0.31 $0.39 -21% $1.12 $1.13 -1%
Average Shares
Outstanding 80,737 80,207 79,921 80,290
Automotive
Solutions
Net Sales and
Revenues $226,000 $206,224 10% $647,544 $580,416 12%
Gross Profit $126,516 $113,613 11% $366,468 $316,938 16%
Gross Margin 56.0% 55.1% 56.6% 54.6%
Operating
Income $33,471 $34,602 -3% $107,811 $97,400 11%
Operating
Margin 14.8% 16.8% 16.6% 16.8%
Financial
Services
Net Sales and
Revenues $9,746 $9,942 -2% $30,025 $29,044 3%
Operating
Income $5,597 $5,450 3% $16,381 $15,624 5%
Operating
Margin 57.4% 54.8% 54.6% 53.8%
(1) Reflects the company's adoption of AICPA Statement of Position 97-2,
"Software Revenue Recognition" which reduced Automotive Solutions'
revenues $17,936, gross profit $11,205, operating income $10,624
($.08 per share) for the six months ended March 31, 1999. The
company completed the transition period for the adoption of SOP 97-2
as of March 31, 1999, and there was no impact on the third quarter
of 1999's operating results.
(2) Represents the after-tax operating results of the company's
Information Solutions Group.
(3) Represents a gain of $.07 per share on the sale of the company's
Healthcare Systems segment.