Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2002
COMMISSION FILE NO. 1-10147
THE REYNOLDS AND REYNOLDS COMPANY
OHIO 31-0421120
(State of incorporation) (IRS Employer Identification No.)
115 SOUTH LUDLOW STREET
DAYTON, OHIO 45402
(Address of principal executive offices)
(937) 485-2000
(Telephone No.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
On August 8, 2002, 69,450,221 Class A common shares and 16,000,000 Class B
common shares were outstanding.
THE REYNOLDS AND REYNOLDS COMPANY
TABLE OF CONTENTS
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Consolidated Income
For the Three and Nine Months Ended June 30, 2002 and 2001 3
Condensed Consolidated Balance Sheets
As of June 30, 2002 and September 30, 2001 4
Condensed Statements of Consolidated Cash Flows
For the Nine Months Ended June 30, 2002 and 2001 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the Three and Nine Months Ended June 30, 2002 and 2001 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
2
THE REYNOLDS AND REYNOLDS COMPANY
STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands except per share data)
Three Months Nine Months
2002 2001 2002 2001
---------- ----------- ---------- ----------
Net Sales and Revenues
Services $153,807 $152,079 $452,661 $452,461
Products 86,065 87,720 251,397 268,477
Financial services 10,696 10,651 31,621 31,340
---------- ----------- ---------- ----------
Total net sales and revenues 250,568 250,450 735,679 752,278
---------- ----------- ---------- ----------
Cost of Sales
Services 52,767 55,504 156,723 168,008
Products 46,833 50,271 140,393 153,735
Financial services 2,760 3,224 8,051 10,481
---------- ----------- ---------- ----------
Total cost of sales 102,360 108,999 305,167 332,224
---------- ----------- ---------- ----------
Gross Profit 148,208 141,451 430,512 420,054
Selling, General and Administrative Expenses 99,200 95,158 301,446 295,622
---------- ----------- ---------- ----------
Operating Income 49,008 46,293 129,066 124,432
---------- ----------- ---------- ----------
Other Charges (Income)
Interest expense 1,137 1,390 2,698 4,401
Interest income (862) (1,594) (2,975) (6,640)
Equity in net losses (income) of affiliated companies (514) 5,091 13,731 8,630
Other 171 169 107 (464)
---------- ----------- ---------- ----------
Total other charges (income) (68) 5,056 13,561 5,927
---------- ----------- ---------- ----------
Income Before Income Taxes 49,076 41,237 115,505 118,505
Provision for Income Taxes 18,843 16,518 30,805 47,708
---------- ----------- ---------- ----------
Income from Continuing Operations 30,233 24,719 84,700 70,797
Income from Discontinued Operations 0 0 0 1,623
---------- ----------- ---------- ----------
Income Before Cumulative Effect of Accounting Change 30,233 24,719 84,700 72,420
Cumulative Effect of Accounting Change 0 0 (36,563) 0
---------- ----------- ---------- ----------
Net Income $30,233 $24,719 $48,137 $72,420
========== =========== ========== ==========
Basic Earnings Per Common Share
Income from Continuing Operations $0.43 $0.34 $1.19 $0.97
Income from Discontinued Operations $0.00 $0.00 $0.00 $0.02
Income Before Cumulative Effect of Accounting Change $0.43 $0.34 $1.19 $0.99
Cumulative Effect of Accounting Change $0.00 $0.00 ($0.52) $0.00
Net Income $0.43 $0.34 $0.68 $0.99
Average Number of Common Shares Outstanding 71,000 73,237 70,903 73,361
Diluted Earnings Per Common Share
Income from Continuing Operations $0.41 $0.33 $1.15 $0.94
Income from Discontinued Operations $0.00 $0.00 $0.00 $0.02
Income Before Cumulative Effect of Accounting Change $0.41 $0.33 $1.15 $0.97
Cumulative Effect of Accounting Change $0.00 $0.00 ($0.50) $0.00
Net Income $0.41 $0.33 $0.65 $0.97
Average Number of Common Shares Outstanding 74,191 75,033 73,805 74,966
Cash Dividends Declared Per Common Share $0.11 $0.11 $0.33 $0.33
See Notes to Condensed Consolidated Financial Statements.
3
THE REYNOLDS AND REYNOLDS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002 AND SEPTEMBER 30, 2001
(In thousands)
6/30/02 9/30/01
----------- ----------
AUTOMOTIVE SOLUTIONS ASSETS
Current Assets
Cash and equivalents $148,966 $110,511
Accounts receivable 130,460 124,954
Inventories 13,214 10,846
Other current assets 28,700 39,902
----------- ----------
Total current assets 321,340 286,213
Property, Plant and Equipment, less accumulated depreciation of
$156,841 at 6/30/02 and $179,062 at 9/30/01 161,963 159,051
Goodwill 28,256 34,663
Software Licensed to Customers 75,373 59,690
Other Intangible Assets 46,428 107,262
Other Assets 75,293 73,137
----------- ----------
Total Automotive Solutions Assets 708,653 720,016
----------- ----------
FINANCIAL SERVICES ASSETS
Finance Receivables 401,855 421,370
Cash and Other Assets 1,156 964
----------- ----------
Total Financial Services Assets 403,011 422,334
----------- ----------
TOTAL ASSETS $1,111,664 $1,142,350
=========== ==========
AUTOMOTIVE SOLUTIONS LIABILITIES
Current Liabilities
Current portion of long-term debt $6,061 $6,061
Accounts payable 43,805 44,638
Accrued liabilities 68,301 78,801
Deferred revenues 22,567 18,362
----------- ----------
Total current liabilities 140,734 147,862
Long-Term Debt 106,878 105,805
Other Liabilities 88,410 104,000
----------- ----------
Total Automotive Solutions Liabilities 336,022 357,667
----------- ----------
FINANCIAL SERVICES LIABILITIES
Notes Payable 206,347 203,512
Other Liabilities 105,037 104,388
----------- ----------
Total Financial Services Liabilities 311,384 307,900
----------- ----------
SHAREHOLDERS' EQUITY
Capital Stock 217,516 167,981
Other Comprehensive Income (Loss) (8,565) (9,547)
Retained Earnings 255,307 318,349
----------- ----------
Total Shareholders' Equity 464,258 476,783
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,111,664 $1,142,350
=========== ==========
See Notes to Condensed Consolidated Financial Statements.
4
THE REYNOLDS AND REYNOLDS COMPANY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands)
2002 2001
---------- ---------
AUTOMOTIVE SOLUTIONS
Cash Flows Provided By Operating Activities $115,444 $91,573
---------- ---------
Cash Flows Provided By (Used For) Investing Activities
Business combinations (11,684)
Capital expenditures (30,503) (39,540)
Net proceeds from asset sales 9,183 2,697
Capitalization of software licensed to customers (15,831) (12,453)
Repayments from (advances to) financial services 31,116 (977)
---------- ---------
Net cash flows used for investing activities (6,035) (61,957)
---------- ---------
Cash Flows Provided By (Used For) Financing Activities
Principal payments on debt (346) (2,165)
Cash dividends paid (23,404) (24,110)
Capital stock issued 48,158 29,281
Capital stock repurchased (96,343) (82,533)
---------- ---------
Net cash flows used for financing activities (71,935) (79,527)
---------- ---------
Effect of Exchange Rate Changes on Cash 981 (656)
---------- ---------
Net Cash Used for Discontinued Operations (35,083)
---------- ---------
Increase (Decrease) in Cash and Equivalents 38,455 (85,650)
Cash and Equivalents, Beginning of Period 110,511 205,455
---------- ---------
Cash and Equivalents, End of Period $148,966 $119,805
========== =========
FINANCIAL SERVICES
Cash Flows Provided By Operating Activities $18,163 $14,860
---------- ---------
Cash Flows Provided By (Used For) Investing Activities
Finance receivables originated (124,185) (134,330)
Collections on finance receivables 134,131 124,556
---------- ---------
Net cash flows provided by (used for) investing activities 9,946 (9,774)
---------- ---------
Cash Flows Provided By (Used For) Financing Activities
Additional borrowings 80,000 70,383
Principal payments on debt (77,165) (76,413)
Advances from (repayments to) automotive solutions (31,116) 977
---------- ---------
Net cash flows used for financing activities (28,281) (5,053)
---------- ---------
Increase (Decrease) in Cash and Equivalents (172) 33
Cash and Equivalents, Beginning of Period 441 456
---------- ---------
Cash and Equivalents, End of Period $269 $489
========== =========
See Notes to Condensed Consolidated Financial Statements.
5
THE REYNOLDS AND REYNOLDS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The balance sheet as of September 30, 2001 is condensed financial information
taken from the annual audited financial statements. The interim financial
statements are unaudited. In the opinion of management, the accompanying interim
financial statements contain all significant adjustments (which consist only of
normal recurring adjustments, except the cumulative effect of accounting change
discussed in Note 6) necessary to present fairly the company's financial
position, results of operations and cash flows for the periods presented.
(2) INVENTORIES
6/30/02 9/30/01
------------- -------------
Finished products $12,877 $10,271
Work in process 332 398
Raw materials 5 177
------------- -------------
Total inventories $13,214 $10,846
============= =============
(3) EQUITY INVESTMENT
During March 2002, the company sold its shares of Kalamazoo Computer Group plc
of the United Kingdom for cash of $1,636 and recorded a net gain of $103. The
company recorded a loss of $12,274, included with equity in net losses of
affiliated companies on the statement of consolidated income and income tax
benefits of $12,377 related to the sale of these shares, included in the
provision for income taxes on the statement of consolidated income.
(4) FINANCING ARRANGEMENTS
In the ordinary course of business, the company, or its affiliate Reyna Funding,
L.L.C., borrows cash to fund investments in finance receivables from the sale of
the company's products. The company attempts to limit its interest rate exposure
between the interest earned on fixed rate finance receivables and the interest
paid on variable rate financing agreements through the use of interest rate
management agreements. Interest rate swaps provide for interest to be received
on notional amounts at variable rates and provide for interest to be paid on the
same notional amounts at fixed rates. Fixed interest rates do not change over
the life of the agreements. Variable interest rates are reset at least every 90
days based on LIBOR and are settled with counterparties at that time. These
derivative instruments meet the criteria for cash flow hedge accounting.
On January 24, 2002, Reyna Funding, L.L.C., an affiliate of the company, entered
into a loan funding agreement, whereby Reyna Funding, L.L.C. may borrow up to
$100,000 using finance receivables purchased from Reyna Capital Corporation,
also an affiliate of the company, as security for the loan. The securitization
allows additional borrowings, up to the $100,000 limit, through January 23,
2003. This loan funding agreement is renewable annually through January 23,
2006. Any borrowings will be repaid as collections on finance receivables
balances are received. During the second quarter of fiscal year 2002, Reyna
Funding, L.L.C. borrowed $80,000 under this agreement. Proceeds received by
Reyna Capital Corporation from Reyna Funding L.L.C. were used to retire other
debt. During the second quarter of fiscal year 2002, Reyna Funding, L.L.C.
entered into $80,000 of interest rate swap agreements in connection with
obtaining this variable rate debt. These interest rate swap agreements meet the
criteria for cash flow hedge accounting.
The fair value of the company's cash flow derivative instruments was a $2,700
liability at June 30, 2002 and a $2,724 liability at September 30, 2001 and was
included in Financial Services' other liabilities on the condensed consolidated
balance sheets. The adjustments to record the net change in the fair value of
cash flow hedges during the periods presented was recorded, net of income taxes,
in other comprehensive income. Fluctuations in the fair value of the derivative
instruments are generally offset by changes in the value or cash flows of the
underlying exposure being hedged because of the high degree of effectiveness of
these cash flow hedges
During February 2002, the company entered into $100,000 of interest rate swaps
to reduce the effective interest expense on outstanding long-term debt. In this
transaction the company effectively converted 7% fixed rate debt into variable
rate debt. These interest rate swap agreements with total notional amounts of
$100,000 are designated as fair value hedges. As of June 30, 2002, the fair
value of these derivative instruments was an asset of $1,382 and was included in
6
Automotive Solutions' other liabilities on the condensed consolidated balance
sheet. The adjustments to record the net change in the fair value of fair value
hedges and related debt during the periods presented were recorded in income.
All existing fair value hedges were 100% effective. As a result, there was no
current impact to earnings because of hedge ineffectiveness.
(5) COMPREHENSIVE INCOME
THREE MONTHS NINE MONTHS
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Net income $30,233 $24,719 $48,137 $72,420
Foreign currency translation adjustment 1,214 944 981 (656)
Cumulative effect of accounting change 15
Net unrealized gains (losses) on derivative contracts (924) 75 1 (1,052)
-------------- -------------- -------------- --------------
Comprehensive income $30,523 $25,738 $49,119 $70,727
============== ============== ============== ==============
(6) ACCOUNTING CHANGE
In June 2001, the FASB voted in favor of Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142
requires that goodwill no longer be amortized, but instead tested for impairment
at least annually. The statement also requires recognized intangible assets with
finite useful lives to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The company elected to adopt the provisions of SFAS No 142 effective October 1,
2001. Accordingly, goodwill has not been amortized in the financial statements
for the periods ended June 30, 2002. This statement also required certain
intangible assets that did not meet the criteria for recognition apart from
goodwill, to be subsumed into goodwill. During the quarter ended December 31,
2001, the company subsumed into goodwill $54,531 of intangible assets
representing assembled workforce and a noncontractual customer relationship,
that did not meet the separability criteria under SFAS No. 141, "Business
Combinations."
SFAS No 142 also requires that goodwill be tested for impairment, initially as
of October 1, 2001, and thereafter at least annually. During the second quarter
of fiscal year 2002, the company completed the goodwill impairment test and
recorded impairment losses of $36,563 ($60,938 net of income tax benefits of
$24,375). These impairment losses were recorded effective October 1, 2001, as
the cumulative effect of the accounting change on the consolidated statement of
income. The company divided its four reporting segments into eight reporting
units for purposes of applying the provisions of this pronouncement. For each
reporting unit a fair value was determined based primarily on the present value
of discounted future cash flows. Other methods were considered to validate this
valuation method. Where initial impairment was indicated, the company hired an
outside appraisal firm to determine the fair value and allocate this fair value
among assets and liabilities. Based on this analysis two reporting units within
the Transformation Solutions reporting segment incurred impairment losses. The
customer relationship management consulting business, acquired in fiscal year
2000 as part of the HAC Group business combination, recorded an impairment loss
of $33,515 ($55,858 net of income tax benefits of $22,343). The company also
recorded an impairment loss of $3,048 ($5,080 net of income tax benefits of
$2,032) related to its Campaign Management Services reporting unit. These
impairment losses occurred because of discounting future cash flows to determine
the fair value of the reporting units. Under previous accounting standards,
future cash flows were not discounted in determining if impairment existed.
7
ACQUIRED INTANGIBLE ASSETS
Gross Accumulated Useful Life
Amount Amortization (years)
---------------- ---------------- ----------------
AS OF JUNE 30, 2002
Amortized intangible assets
Contractual customer relationship $33,100 $3,586 20
Customer contract 17,700 10,459 3.67
Trademarks 5,900 639 20
Other 3,005 2,751 3-7
---------------- ----------------
Subtotal 59,705 17,435
Software licensed to customers 4,579 4,298 5-7
---------------- ----------------
Total $64,284 $21,733
================ ================
AS OF SEPTEMBER 30, 2001
Amortized intangible assets
Intangible assets subsumed into goodwill 10/1/01 $56,948 $2,417 10-20
Contractual customer relationship 33,100 2,344 20
Customer contract 17,700 6,839 3.67
Trademarks 5,900 418 20
Other 2,987 2,602 3-7
---------------- ----------------
Subtotal 116,635 14,620
Software licensed to customers 14,621 14,279 5-7
---------------- ----------------
Total $131,256 $28,899
================ ================
Aggregate amortization expense was $1,760 and $5,279 for the three and nine
months ended June 30, 2002, respectively. Estimated amortization expense for the
years ended September 30, is $7,038 in 2002, $7,038 in 2003, $3,269 in 2004,
$2,032 in 2005 and $1,964 in 2006.
GOODWILL
Software Transform.
Solutions Solutions Documents Totals
------------- ------------- ------------- -------------
Balances as of September 30, 2001 $10,412 $21,374 $2,877 $34,663
Intangible assets subsumed
Noncontractual customer relationship 47,376 47,376
Assembled workforce 7,155 7,155
Cumulative Effect of Accounting Change (60,938) (60,938)
------------- ------------- ------------- -------------
Balances as of June 30, 2002 $10,412 $14,967 $2,877 $28,256
============= ============= ============= =============
8
PRO FORMA INCOME FROM CONTINUING OPERATIONS
The table below presents the pro forma effect on net income and earnings per
share from the adoption of SFAS Statement No. 142.
THREE MONTHS NINE MONTHS
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Income from continuing operations, as reported $30,233 $24,719 $84,700 $70,797
Goodwill amortization, net of taxes 2,130 6,211
Subsumed intangible assets amortization, net of taxes 655 1,964
-------------- -------------- -------------- --------------
Pro forma income from continuing operations $30,233 $27,504 $84,700 $78,972
============== ============== ============== ==============
Basic Earnings per Common Share
Income from continuing operations, as reported $0.43 $0.34 $1.19 $0.97
Pro forma income from continuing operations $0.43 $0.38 $1.19 $1.08
Diluted Earnings per Common Share
Income from continuing operations, as reported $0.41 $0.33 $1.15 $0.94
Pro forma income from continuing operations $0.41 $0.37 $1.15 $1.05
9
(7) CASH FLOW STATEMENTS
Reconciliation of net income to net cash provided by operating activities.
NINE MONTHS
2002 2001
---------------- ---------------
AUTOMOTIVE SOLUTIONS
Net Income $37,659 $61,901
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Cumulative effect of accounting change 36,563
Depreciation and amortization 22,723 36,729
Deferred income taxes 20,242 1,505
Deferred income taxes transferred to Financial Services (2,980) (3,263)
Income from discontinued operations (1,623)
Losses (gains) on sales of assets 1,050 (335)
Changes in operating assets and liabilities
Accounts receivable (356) 3,268
Inventories (2,368) 3,605
Prepaid expenses and other current assets 581 (9,329)
Intangible and other assets 12,757 (1,230)
Accounts payable (833) (4,140)
Accrued liabilities 4,577 41
Other liabilities (14,171) 4,444
---------------- ---------------
Net Cash Provided by Operating Activities $115,444 $91,573
================ ===============
FINANCIAL SERVICES
Net Income $10,478 $10,519
Deferred Income Taxes (9,524) (5,434)
Deferred Income Taxes Transferred from Automotive Solutions 2,980 3,263
Changes in Receivables, Other Assets and Other Liabilities 14,229 6,512
---------------- ---------------
Net Cash Provided by Operating Activities $18,163 $14,860
================ ===============
10
(8) BUSINESS SEGMENTS
Reclassifications were made to the prior year's segment information to conform
with the presentation used in fiscal year 2002. This presentation reflects the
current organizational structure of the company.
THREE MONTHS NINE MONTHS
2002 2001 2002 2001
-------------- -------------- -------------- --------------
NET SALES AND REVENUES
Software Solutions $158,943 $153,587 $463,704 $454,152
Transformation Solutions 36,261 39,745 104,278 125,993
Documents 44,668 46,467 136,076 140,793
Financial Services 10,696 10,651 31,621 31,340
-------------- -------------- -------------- --------------
Total Net Sales and Revenues $250,568 $250,450 $735,679 $752,278
============== ============== ============== ==============
OPERATING INCOME (LOSS)
Software Solutions $34,499 $33,771 $90,240 $86,411
Transformation Solutions 233 (3,145) (5,284) (7,526)
Documents 8,341 9,898 26,931 28,042
Financial Services 5,935 5,769 17,179 17,505
-------------- -------------- -------------- --------------
Total Operating Income $49,008 $46,293 $129,066 $124,432
============== ============== ============== ==============
6/30/02 9/30/01
-------------- --------------
ASSETS
Automotive Solutions $708,653 $720,016
Financial Services 403,011 422,334
-------------- --------------
Total Assets $1,111,664 $1,142,350
============== ==============
(9) CONTINGENCIES
The U.S. Environmental Protection Agency (EPA) has designated the company as one
of a number of potentially responsible parties (PRP) under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) at an
environmental remediation site. The EPA has contended that any company linked to
a CERCLA site is potentially liable for all response costs under the legal
doctrine of joint and several liability. This environmental remediation site
involves a municipal waste disposal facility owned and operated by four
municipalities. The company joined a PRP coalition and is sharing remedial
investigation and feasibility study costs with other PRPs. During fiscal year
1996, an agreement was reached whereby the state of Connecticut contributed
$8,000 towards remediation costs. Preliminary remediation continued during
fiscal year 2001, utilizing Connecticut's contribution. The EPA issued a Record
of Decision on September 28, 2001, which selects a remedy at the site involving
"monitored natural attenuation." The EPA's estimated future remedial costs are
approximately $2,000. The company was also named a defendant in a cost recovery
lawsuit in Dayton, Ohio, regarding another environmental remediation site.
Discovery in that lawsuit is in its early stages, too early to determine the
company's liability exposure. The company believes that the reasonably
foreseeable resolution of these two matters will not have a material adverse
effect on the financial statements.
(10) ACCOUNTING STANDARDS
In August 2001, the FASB issued SFAS No. 144, "Accounting for the impairment or
Disposal of Long-Lived Assets." This pronouncement establishes a single
accounting model, based on framework established in SFAS No. 121, for long-lived
assets to be disposed of by sale. The provisions of this statement are effective
for fiscal years beginning after December 15, 2001. Management does not believe
the adoption of this pronouncement will have a material impact on the company's
financial statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is
required to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. Management is currently assessing the impact of this
pronouncement and has not determined the impact on the company's financial
statements.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands except per share data)
Special items and the accounting change discussed in the following sections did
not have an impact on the third quarter of fiscal year 2002, but are disclosed
to aid in the understanding of financial results for the nine months ended June
30, 2002.
SPECIAL ITEMS
During the second quarter of fiscal year 2002, the company recorded several
items that when combined added $742 or $.01 per share to earnings. The company
settled a state income tax audit that covered fiscal years 1992 through 1998.
Based on the settlement, the company reduced interest and income tax accruals
for fiscal years 1999 through 2001. The company also filed amended returns in a
number of states to correct the apportionment and allocation of taxable income
among the states. The combination of audit settlements, accrual adjustments and
amended returns added $5,890 or $.08 per share of earnings in the second quarter
of fiscal year 2002. The income tax adjustments were recorded as follows: $2,310
in selling, general and administrative (SG&A) expenses, primarily for
professional fees associated with obtaining the income tax benefits, $1,709 for
the reversal of previously recorded interest expense, $819 of interest income on
tax refunds, $200 of other charges and $5,872 of income tax benefits. During the
second quarter of fiscal year 2002, the company also recorded $8,552 of expenses
($5,251 or $.07 per share after income taxes) for the following items: employee
termination benefits of $4,492 for 114 employees, communications software
distributed to customers of $2,500 and real estate costs of $1,560. These items
were recorded as follows: $2,000 in cost of sales, $6,552 in SG&A expenses and
related income tax benefits of $3,301. During March 2002, the company also sold
its shares of Kalamazoo Computer Group plc of the United Kingdom for cash of
$1,636 and recorded a net gain of $103. The company recorded a loss of $12,274,
included with equity in net losses of affiliated companies on the statement of
consolidated income and income tax benefits of $12,377 related to the sale of
these shares, included in the provision for income taxes on the statement of
consolidated income.
ACCOUNTING CHANGE
During the second quarter of fiscal year 2002 the company completed the adoption
of SFAS No. 142 and recorded a cumulative effect of the accounting change of
$36,563 ($60,938 net of income tax benefits of $24,375) effective October 1,
2001. The company restated its first quarter financial statements as prescribed
by the pronouncement. See Note 6 to the Consolidated Financial Statements for
additional discussion of this accounting change.
RESULTS OF OPERATIONS
CONSOLIDATED SUMMARY
Three Months Nine Months
--------------------------------------------- ---------------------------------------------
2002 2001 Change % Change 2002 2001 Change % Change
----------- ----------- -------- ------------ ---------- ---------- ----------- -----------
Net sales and revenues $250,568 $250,450 $118 0% $735,679 $752,278 ($16,599) -2%
Gross profit $148,208 $141,451 $6,757 5% $430,512 $420,054 $10,458 2%
% of revenues 59.1% 56.5% 58.5% 55.8%
SG&A expenses $99,200 $95,158 $4,042 4% $301,446 $295,622 $5,824 2%
% of revenues 39.5% 38.0% 41.0% 39.3%
Operating income $49,008 $46,293 $2,715 6% $129,066 $124,432 $4,634 4%
% of revenues 19.6% 18.5% 17.5% 16.5%
Income from Continuing Operations $30,233 $24,719 $5,514 22% $84,700 $70,797 $13,903 20%
Basic earnings per share $0.43 $0.34 $0.09 26% $1.19 $0.97 $0.22 23%
Diluted earnings per share $0.41 $0.33 $0.08 24% $1.15 $0.94 $0.21 22%
EXCLUDING SPECIAL ITEMS
Net sales and revenues $250,568 $250,450 $118 0% $735,679 $752,278 ($16,599) -2%
Gross profit $148,208 $141,451 $6,757 5% $432,512 $420,054 $12,458 3%
% of revenues 59.1% 56.5% 58.8% 55.8%
SG&A expenses $99,200 $95,158 $4,042 4% $292,584 $295,622 ($3,038) -1%
% of revenues 39.5% 38.0% 39.8% 39.3%
Operating income $49,008 $46,293 $2,715 6% $139,928 $124,432 $15,496 12%
% of revenues 19.6% 18.5% 19.0% 16.5%
Income from Continuing Operations $30,233 $24,719 $5,514 22% $83,958 $70,797 $13,161 19%
Basic earnings per share $0.43 $0.34 $0.09 26% $1.18 $0.97 $0.21 22%
Diluted earnings per share $0.41 $0.33 $0.08 24% $1.14 $0.94 $0.20 21%
12
Consolidated revenues were slightly ahead of last year for the third quarter,
but declined from last year for the nine month period, primarily because
CarPoint revenues declined about $6,000 and $19,000 for the three and nine
months, respectively. The CarPoint decline reflects a change in the CarPoint
business model. Year-to-date revenues were also impacted by an $8,000 decrease
in customer relationship management consulting revenues. Software Solutions'
recurring computer services revenues grew 9% in both the quarter and nine
months, as compared to last year, and offset a decline in Software Solutions'
computer systems products sales.
Excluding special items, consolidated gross profit and operating income
increased for both the three and nine months ended June 30, 2002, primarily as a
result of growth in Software Solutions' higher margin recurring revenues.
Research and development (R&D) expenses were $18,000 in the quarter, compared to
$15,000 last year and $50,000 for nine months, compared to $54,000 last year.
Last year's SG&A expenses included goodwill amortization of $2,896 in the third
quarter and $8,489 for nine months. In addition to the higher R&D expenses,
third quarter SG&A expenses reflected the following increased expenses over last
year: $1,400 of inventory obsolescence, $900 of bad debt expenses and higher
depreciation. Excluding special items recorded in the second quarter,
year-to-date SG&A expenses reflected the following items: $3,200 of higher bad
debt expenses, $3,000 of severance and termination benefits primarily associated
with a sales department reorganization in the first quarter of fiscal year 2002;
a $1,200 increase in the cost of the annual worldwide sales and service
conference and higher inventory obsolescence and depreciation expenses. Bad debt
expenses increased for both the third quarter and nine months because of higher
charge-offs.
Other charges declined from last year in the third quarter and year-to-date
(excluding special items) primarily because last year included losses from the
company's equity investment in Kalamazoo Computer Group plc (sold March 2002)
and the $3,200 write-off of the company's investment in Consumer Car Club Inc.
Interest income also declined from last year primarily because last year's
interest income reflected cash proceeds from the August 2000 sale of the
Information Solutions Group as well as higher interest rates. During February
2002, the company entered into $100,000 of interest rate swaps to reduce the
effective interest expense on outstanding long-term debt. In this transaction
the company effectively converted 7% fixed rate debt into variable rate debt.
Interest expense was $253 less than last year in the third quarter. Excluding
special items, the effective income tax rate declined to 38.4% year-to-date,
compared to 40.3% last year, because of higher R&D tax credits, lower goodwill
amortization expense and lower state tax rates.
SOFTWARE SOLUTIONS
Three Months Nine Months
--------------------------------------------- ---------------------------------------------
2002 2001 Change % Change 2002 2001 Change % Change
----------- ----------- -------- ------------ ----------- ---------- --------- ------------
Net sales and revenues $158,943 $153,587 $5,356 3% $463,704 $454,152 $9,552 2%
Gross profit $100,272 $92,847 $7,425 8% $291,023 $271,193 $19,830 7%
% of revenues 63.1% 60.5% 62.8% 59.7%
SG&A expenses $65,773 $59,076 $6,697 11% $200,783 $184,782 $16,001 9%
% of revenues 41.4% 38.5% 43.3% 40.7%
Operating income $34,499 $33,771 $728 2% $90,240 $86,411 $3,829 4%
% of revenues 21.7% 22.0% 19.5% 19.0%
EXCLUDING SPECIAL ITEMS
Net sales and revenues $158,943 $153,587 $5,356 3% $463,704 $454,152 $9,552 2%
Gross profit $100,272 $92,847 $7,425 8% $293,023 $271,193 $21,830 8%
% of revenues 63.1% 60.5% 63.2% 59.7%
SG&A expenses $65,773 $59,076 $6,697 11% $194,101 $184,782 $9,319 5%
% of revenues 41.4% 38.5% 41.9% 40.7%
Operating income $34,499 $33,771 $728 2% $98,922 $86,411 $12,511 14%
% of revenues 21.7% 22.0% 21.3% 19.0%
Software Solutions revenues increased over last year for both the third quarter
and nine months of fiscal year 2002 as growth in computer services revenues
offset declines in computer systems products sales. Recurring computer services
revenues, comprised predominately of recurring software support and equipment
maintenance revenues, grew 9% in both the third quarter and nine months,
primarily because of the increased number of ERA retail management systems
supported. The company also increased sales prices since last year to offset
inflation. Sales of computer systems products declined from last year for the
third quarter and nine months, primarily because of declines in the number of
IntelliPath, DocVantage and electronic parts catalog systems sold. Year-to-date
computer systems products sales also reflected a decline in the number of new
ERA retail management systems and the cancellation of a software development
contract last year. The backlog of new orders for computer systems products and
deferred revenues (orders shipped, but not yet recognized in revenues) was
$49,000 at June 30, 2002 compared to $40,000 at September 30, 2001. Gross profit
margins and operating margins increased over last year
13
primarily as a result of the growth in higher margin computer services revenues.
SG&A expenses, as a percentage of revenues, were consistent with prior quarters
of fiscal year 2002. Last year's SG&A expenses included goodwill amortization of
$1,074 in the third quarter and $2,803 for nine months. Operating margins
remained strong, exceeding 21% for both the third quarter and nine months. Last
year's operating income for nine months also included $4,228 of costs associated
with a work stoppage on the previously mentioned software development contract.
TRANSFORMATION SOLUTIONS
Three Months Nine Months
--------------------------------------------- ---------------------------------------------
2002 2001 Change % Change 2002 2001 Change % Change
---------- ---------- ---------- ------------ ---------- ---------- ----------- -----------
Net sales and revenues $36,261 $39,745 ($3,484) -9% $104,278 $125,993 ($21,715) -17%
Gross profit $14,844 $13,884 $960 7% $37,443 $46,150 ($8,707) -19%
% of revenues 40.9% 34.9% 35.9% 36.6%
SG&A expenses $14,611 $17,029 ($2,418) -14% $42,727 $53,676 ($10,949) -20%
% of revenues 40.3% 42.8% 41.0% 42.6%
Operating income (loss) $233 ($3,145) $3,378 ($5,284) ($7,526) $2,242
% of revenues 0.6% -7.9% -5.1% -6.0%
EXCLUDING SPECIAL ITEMS
Net sales and revenues $36,261 $39,745 ($3,484) -9% $104,278 $125,993 ($21,715) -17%
Gross profit $14,844 $13,884 $960 7% $37,443 $46,150 ($8,707) -19%
% of revenues 40.9% 34.9% 35.9% 36.6%
SG&A expenses $14,611 $17,029 ($2,418) -14% $41,405 $53,676 ($12,271) -23%
% of revenues 40.3% 42.8% 39.7% 42.6%
Operating income (loss) $233 ($3,145) $3,378 ($3,962) ($7,526) $3,564
% of revenues 0.6% -7.9% -3.8% -6.0%
Transformation Solutions revenues reflected the continued decline in CarPoint
revenues of $6,000 in the third quarter and $19,000 through nine months.
CarPoint revenues declined because of a change in the CarPoint business model
that occurred June 2001. The year-to-date decline was also impacted by a
slowdown in customer relationship management consulting revenues that began in
the third quarter of fiscal year 2001. Revenues for Automark Web Services grew
about $3,000 or 130% in the third quarter and caused gross margins to increase
over last year. SG&A expenses were less than last year for both the quarter and
nine months. SG&A expenses reflect lower selling, marketing and R&D expenses.
The elimination of goodwill amortization lowered SG&A expenses $1,502 in the
third quarter and $4,727 year-to-date, as compared to last year. Third quarter's
operating income represented the first profitable quarter since fiscal year
2000.
DOCUMENTS
Three Months Nine Months
--------------------------------------------- ---------------------------------------------
2002 2001 Change % Change 2002 2001 Change % Change
---------- ---------- ---------- ------------ ----------- ---------- --------- ------------
Net sales and revenues $44,668 $46,467 ($1,799) -4% $136,076 $140,793 ($4,717) -3%
Gross profit $25,156 $27,293 ($2,137) -8% $78,476 $81,852 ($3,376) -4%
% of revenues 56.3% 58.7% 57.7% 58.1%
SG&A expenses $16,815 $17,395 ($580) -3% $51,545 $53,810 ($2,265) -4%
% of revenues 37.6% 37.4% 37.9% 38.2%
Operating income $8,341 $9,898 ($1,557) -16% $26,931 $28,042 ($1,111) -4%
% of revenues 18.7% 21.3% 19.8% 19.9%
EXCLUDING SPECIAL ITEMS
Net sales and revenues $44,668 $46,467 ($1,799) -4% $136,076 $140,793 ($4,717) -3%
Gross profit $25,156 $27,293 ($2,137) -8% $78,476 $81,852 ($3,376) -4%
% of revenues 56.3% 58.7% 57.7% 58.1%
SG&A expenses $16,815 $17,395 ($580) -3% $50,767 $53,810 ($3,043) -6%
% of revenues 37.6% 37.4% 37.3% 38.2%
Operating income $8,341 $9,898 ($1,557) -16% $27,709 $28,042 ($333) -1%
% of revenues 18.7% 21.3% 20.4% 19.9%
Documents sales declined in both the third quarter and nine months as a result
of the continued decline in the number of business forms sold. Gross profit
margins were strong in fiscal year 2002, however, less than last year for both
the quarter and nine months. Gross profit margins were less than last year in
the third quarter of fiscal year 2002, primarily because of a higher mix of
purchased products which have lower margins than standard forms. Operating
income declined from last year reflecting both lower sales and gross margins.
SG&A expenses were less than last year for both the quarter and nine months. The
elimination of goodwill amortization lowered SG&A expenses $320 in the third
quarter and $959 year-to-date, as compared to
14
last year.
FINANCIAL SERVICES
Three Months Nine Months
--------------------------------------------- ---------------------------------------------
2002 2001 Change % Change 2002 2001 Change % Change
---------- ---------- --------- ------------- ---------- ---------- --------- -------------
Net sales and revenues $10,696 $10,651 $45 0% $31,621 $31,340 $281 1%
Gross profit $7,936 $7,427 $509 7% $23,570 $20,859 $2,711 13%
% of revenues 74.2% 69.7% 74.5% 66.6%
SG&A expenses $2,001 $1,658 $343 21% $6,391 $3,354 $3,037 91%
% of revenues 18.7% 15.5% 20.2% 10.7%
Operating income $5,935 $5,769 $166 3% $17,179 $17,505 ($326) -2%
% of revenues 55.5% 54.2% 54.3% 55.9%
EXCLUDING SPECIAL ITEMS
Net sales and revenues $10,696 $10,651 $45 0% $31,621 $31,340 $281 1%
Gross profit $7,936 $7,427 $509 7% $23,570 $20,859 $2,711 13%
% of revenues 74.2% 69.7% 74.5% 66.6%
SG&A expenses $2,001 $1,658 $343 21% $6,311 $3,354 $2,957 88%
% of revenues 18.7% 15.5% 19.9% 10.7%
Operating income $5,935 $5,769 $166 3% $17,259 $17,505 ($246) -1%
% of revenues 55.5% 54.2% 54.6% 55.9%
Financial Services revenues grew only slightly over last year for both periods
presented as a slight decline in average finance receivable balances was offset
by a slight increase in average interest rates earned on finance receivables.
Gross profit margins increased over last year as year-to-date interest rate
spreads increased to 4.9% compared to 3.3% last year, as a result of lower
borrowing costs. Borrowing costs declined because of greater use of lower rate
floating rate debt. These interest rate spreads represent historically high
margins for this segment. SG&A expenses increased over last year primarily
because of higher bad debt expenses, which increased $150 over last year for the
quarter and $2,350 year-to-date. Bad debt expenses reflected higher write-offs
than a year ago. Overall, operating margins remained strong for both the third
quarter and nine months.
The company has entered into various interest rate management agreements to
limit interest rate exposure on financial services variable rate debt. It is
important to manage this interest rate exposure because the proceeds from these
borrowings were invested in fixed rate finance receivables. The company believes
that over time it has reduced interest expense by using interest rate management
agreements and variable rate debt instead of directly obtaining fixed rate debt.
During the quarter ended March 31, 2002, Reyna Funding, L.L.C., an affiliate of
the company, entered into $80,000 of interest rate swaps in connection with
obtaining $80,000 of variable rate debt. See Note 4 to the Consolidated
Financial Statements for additional discussion of interest rate management
agreements.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The company's cash position remained strong, with cash balances of $148,966 as
of June 30, 2002. Cash flows from operating activities were $115,444 during the
first nine months of the fiscal year and resulted primarily from net income,
adjusted for non cash charges, primarily depreciation and amortization and the
cumulative effect of the accounting change. Cash flows provided by investing
activities included intercompany loan repayments and dividends from financial
services and proceeds from the sale of internally used computer equipment as
part of a computer services outsourcing arrangement. These operating and
investing cash flows funded the company's investments for normal operations
including capital expenditures of $30,503. Capital expenditures included about
$15,000 for the construction of a new office building near Dayton, Ohio. During
the first nine months of the fiscal year, the company also capitalized $15,831
of software licensed to customers. As of June 30, 2002, the balance of software
licensed to customers was $75,373. Most of the capitalized software development
costs related to Generations Series solutions scheduled for release in fiscal
year 2003 when the company will begin amortizing these costs. Fiscal year 2002
capital expenditures and capitalized software in the ordinary course of business
are anticipated to be about $50,000, net of proceeds from the sale of computer
equipment, and include about $17,000 for the new office building and related
contents.
Fiscal year 2001 cash flows for discontinued operations represent primarily the
payment of taxes associated with the August 2000 sale of the Information
Solutions segment.
Financial services operating cash flows, collections on finance receivables and
additional borrowings were invested in new finance receivables for the company's
automotive systems, used to make scheduled debt repayments and dividend payments
to
15
automotive solutions.
CAPITALIZATION
The company's ratio of total debt (total automotive solutions debt) to
capitalization (total automotive solutions debt plus shareholders' equity) was
19.6% as of June 30, 2002 and 19.0% as of September 30, 2001. Remaining credit
available under committed revolving credit agreements was $100,000 at June 30,
2002. In addition to committed credit agreements, the company also has a variety
of other short-term credit lines available. The company anticipates that cash
balances, cash flow from operations and cash available from committed credit
agreements will be sufficient to fund normal operations over the next year. Cash
balances are placed in short-term investments until such time as needed.
In August 1997, the company entered into an agreement with a trust for the
construction and lease of an office building near Dayton, Ohio. The trust was
formed by a consortium of institutional investors who purchased equity interests
in the trust and provided loans to the trust for the construction of the
building. This building was completed in 1999 at a cost of $28,800. This lease
is accounted for as an operating lease for financial reporting purposes.
Accordingly, neither the asset nor the related liability is reported on the
company's balance sheets. The company has guaranteed 80% of the trust's debt
related to the construction of the building. The company makes quarterly lease
payments based on the outstanding lease balance of $28,800. The original
five-year term was extended two years through August 2004. At the end of the
lease term, the company may either purchase the building for $28,800 or sell the
building on behalf of the lessor. If the building is sold and the proceeds from
the sale are insufficient to repay the investors, the company may be required to
make a payment to the lessor of up to 80% of the building's cost. Based on
appraised values, management does not believe any additional payments will be
required at the termination of the lease.
On January 24, 2002, Reyna Funding, L.L.C., a consolidated affiliate of the
company, entered into a loan funding agreement, whereby Reyna Funding, L.L.C.
may borrow up to $100,000 using finance receivables purchased from Reyna Capital
Corporation, also an affiliate of the company, as security for the loan. The
securitization allows additional borrowings, up to the $100,000 limit, through
January 23, 2003. This loan funding agreement is renewable annually through
January 23, 2006. Any borrowings will be repaid as collections on finance
receivables balances are received. During the second quarter of fiscal year
2002, Reyna Funding, L.L.C. borrowed $80,000 under this agreement. These
borrowings were included with Financial Services' notes payable on the
consolidated balance sheet. Proceeds received by Reyna Capital Corporation from
Reyna Funding L.L.C. were used to retire other debt.
The company has consistently produced strong operating cash flows sufficient to
fund normal operations. Strong operating cash flows are the result of stable
operating margins and a high percentage of recurring service revenues, which
require relatively low capital investment. Debt instruments have been used
primarily to fund business combinations and Financial Services receivables. As
of June 30, 2002, the company can issue an additional $130,000 of notes under a
shelf registration statement on file with the Securities and Exchange
Commission. Management believes that its strong balance sheet and cash flows
should help maintain an investment grade credit rating that should provide
access to capital sufficient to meet the company's cash requirements beyond the
next year.
SHAREHOLDERS' EQUITY
The company lists its Class A common shares on the New York Stock Exchange.
There is no principal market for the Class B common shares. During the second
quarter of fiscal year 2002, 4,000 Class B common shares were converted into 200
Class A common shares. The company also has an authorized class of 60,000
preferred shares with no par value. As of August 8, 2002, no preferred shares
were outstanding and there were no agreements or commitments with respect to the
sale or issuance of these shares, except for preferred share purchase rights
described in the company's annual report on Form 10-K for the fiscal year ended
September 30, 2001.
Dividends are typically declared each November, February, May and August and
paid in January, April, June and September. Dividends per Class A common share
must be twenty times the dividends per Class B common share and all dividend
payments must be simultaneous. The company has paid dividends every year since
the company's initial public offering in 1961.
During the nine months ended June 30, 2002, the company repurchased 3,600 Class
A common shares for $96,343 ($26.76 per share). As of June 30, 2002, the company
could repurchase an additional 1,100 Class A common shares under existing board
of directors' authorizations. On August 6, 2002, the board of directors approved
an increase of 5,000 shares to the company's share repurchase authorization.
16
MARKET RISKS
INTEREST RATES
The Automotive Solutions portion of the business borrows money, as needed,
primarily to fund business combinations. Generally the company borrows under
fixed rate agreements with terms of ten years or less. During February 2002, the
company entered into $100,000 of interest rate swaps to reduce the effective
interest expense on outstanding long-term debt. In this transaction the company
effectively converted 7% fixed rate debt into variable rate debt.
The Financial Services segment of the business, including Reyna Funding L.L.C.,
an affiliate of the company, obtains borrowings to fund the investment in
finance receivables. These fixed rate receivables generally have repayment terms
of five years. The company funds finance receivables with debt that has
repayment terms consistent with the maturities of the finance receivables.
Generally the company attempts to lock in the interest spread on the fixed rate
finance receivables by borrowing under fixed rate agreements or using interest
rate management agreements to manage variable interest rate exposure. The
company does not use financial instruments for trading purposes. See Note 4 to
the Consolidated Financial Statements for additional discussion of interest rate
management agreements.
Because the company's borrowings are generally under fixed rate debt
arrangements or its equivalent (variable rate debt that has been fixed with
interest rate swaps), management believes that a 100 basis point change in
interest rates would not have a material effect on the company's financial
statements.
FOREIGN CURRENCY EXCHANGE RATES
The company has foreign-based operations in Canada, which accounted for 6% of
net sales and revenues for the nine months ended June 30, 2002. In the conduct
of its foreign operations the company has intercompany sales, charges and loans
between the U.S. and Canada and may receive dividends denominated in different
currencies. These transactions expose the company to changes in foreign currency
exchange rates. At June 30, 2002, the company had no foreign currency exchange
contracts outstanding. Based on the company's overall foreign currency exchange
rate exposure at June 30, 2002, management believes that a 10% change in
currency rates would not have a material effect on the company's financial
statements.
ENVIRONMENTAL MATTER
See Note 9 to the Consolidated Financial Statements for a discussion of the
company's environmental contingencies.
ACCOUNTING STANDARDS
See Note 10 to the Consolidated Financial Statements for a discussion of the
effect of accounting standards that the company has not yet adopted.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements in this Management's Discussion and Analysis of the Financial
Condition and Results of Operations constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are based on current expectations, estimates,
forecasts and projections of future company or industry performance based on
management's judgment, beliefs, current trends and market conditions.
Forward-looking statements made by the company may be identified by the use of
words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions. Forward-looking statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions, which are difficult to predict. Actual outcomes and results may
differ materially from what is expressed, forecasted or implied in any
forward-looking statement. The company undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise. See also the discussion of factors that may affect future
results contained in the company's Current Report on Form 8-K filed with the SEC
on August 11, 2000, which we incorporate herein by reference.
17
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The company did not file any reports on Form 8-K during the
quarter ended June 30, 2002.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE REYNOLDS AND REYNOLDS COMPANY
Date August 12, 2002 /s/ Lloyd G. Waterhouse
----------------------- ------------------------------------
Lloyd G. Waterhouse
Chairman, President
and Chief Executive Officer
Date August 12, 2002 /s/ Dale L. Medford
----------------------- ------------------------------------
Dale L. Medford
Executive Vice President
and Chief Financial Officer
19