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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. [FEE REQUIRED]
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FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. [NO FEE REQUIRED]
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FOR THE TRANSITION PERIOD FROM _______________ TO _______________.
COMMISSION FILE NO. 0-132
THE REYNOLDS AND REYNOLDS COMPANY
(Exact name of registrant as specified in its charter)
OHIO 31-0421120
(State of Incorporation) (IRS Employer Identification No.)
115 SOUTH LUDLOW STREET
DAYTON, OHIO 45402
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (513) 443-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
CLASS A COMMON SHARES PAR VALUE $.625 PER SHARE NEW YORK STOCK EXCHANGE
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(Title of class) (Exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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(Title of class)
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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in PART III of this
Form 10-K or any amendment to this Form 10-K. X
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The aggregate market value of the Class A Common Shares held by
non-affiliates of the registrant, as of December 1, 1994, was $915,886,966.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of December 1, 1994:
Class A Common Shares: 41,452,637 (exclusive of 4,774,451 Treasury shares)
Class B Common Shares: 10,000,000
DOCUMENTS INCORPORATED BY REFERENCE
Part III -- Portions of Proxy Statement for 1995 Annual Meeting of
Shareholders.
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PART I
(DOLLARS IN THOUSANDS)
ITEM 1. BUSINESS
GENERAL
The Reynolds and Reynolds Company (the "Company"), an Ohio corporation,
incorporated in 1889, operates principally in two business segments -- business
forms and computer systems.
BUSINESS FORMS
The business forms segment offers its products and services to the
automotive, healthcare and general business markets.
In the automotive market, the segment markets its products and services
to sales, parts, accounting and administrative departments of automobile, truck
and recreational vehicle dealerships, as well as related-automotive businesses
such as repair garages, auto parts stores and body shops. Products include
standard and custom single (uniset) forms, continuous forms, stationery,
envelopes, paper floor mats, promotional items and forms management services.
In the healthcare market, the segment markets standard and custom forms
and forms management services to hospitals and large healthcare organizations.
In the general business market, the segment offers a wide variety of
paper and electronic custom business forms both continuous and snap-out, as
well as stock continuous computer forms, stationery, envelopes, desktop
compatibles, checks, labels and tickets. Electronic forms, on- demand printing
and broad security feature capability are also offered as an integrated part of
this segment's overall document solutions offering. Forms management services
such as forms survey and analysis, inventory management and reporting systems,
cost center reporting, low stock reporting and pick-pack distribution help the
Company's general business customers manage their business forms needs.
One-write pegboard accounting systems are sold primarily to smaller businesses
through a network of office supply dealers and independent forms distributors.
The business forms segment operates 11 manufacturing facilities in the
United States and Canada.
COMPUTER SYSTEMS
The computer systems segment offers its products and services to the
automotive and healthcare markets.
The automotive group markets turnkey information management systems and
professional services primarily to automobile dealers. The hardware sold is
purchased from computer hardware manufacturers which specialize in platforms
for the UNIX operating system. With a few minor exceptions, the application
software products are owned by the Company and licensed to users. Some of the
software products offered include standard programs for accounting, payroll,
vehicle and parts inventory control and billing, service merchandising,
scheduling and billing, leasing, finance and insurance and manufacturer
communications.
Hardware maintenance, software support and training and other
professional services are integral parts of the Company's turnkey approach to
marketing computer systems. These services are provided by over 1,200 service
and support personnel located in nearly 175 offices in principal cities in
North America.
The Company also markets computer products and services directly to
automobile manufacturers.
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With the November, 1994 acquisition of PD Medical Systems, the Company
expanded its array of turnkey computer systems offered to medical practices.
That acquisition has been combined with the former subsidiary, NMC Services,
and together they now operate as Reynolds and Reynolds Healthcare Systems. (See
Management Discussion and Analysis, Page 8).
FINANCING SUBSIDIARIES -- Various subsidiaries provide financing
primarily for the Company's computer systems through non-cancellable finance
leases.
Financial information about industry segments is included in Notes 5
and 11 on pages 31-32 and 39-40, respectively. Financial services operating
results are included in the computer systems information.
Further information concerning the Company's business follows.
NEW PRODUCTS
The Company continued to enhance its computer systems product line for
automobile dealers. New software releases included numerous information
service applications to further develop this major new area of recurring
revenue. Among the releases are applications which link: dealerships to
service bureaus to determine consumer credit worthiness; process and approve
actual credit documentation; and process vehicle registrations by electronic
data interface with state authorities (Maryland, Virginia).
The Company acquired the One Touch parts locator business, the most
frequently used repair parts, marketing and locator service in North America.
The Company also acquired the exclusive rights to Document Management software,
to enable the integrated storage and retrieval of source documents and ProDesk
profit manager software which enables the marketing of leased vehicles and
integrates with other dealer management system applications.
In addition, the Company also introduced new image-based electronic
parts and service applications for parts and service departments in automobile
dealerships.
The Company also enhanced its document solutions capability by
extending its security features offering, and integrating electronic forms and
on-demand capability into its broad forms management offering.
RAW MATERIALS
An adequate supply of paper products is essential to the Company's
business forms segment. The Company obtains those products from a variety of
sources and, historically has not experienced any difficulty in obtaining them.
However, during October and November 1994 (fiscal year 1995), the Company
experienced higher prices and lower supplies of form bond paper. Some
manufacturers are placing their customers on allocations for this product. The
Company expects to be able to continue to acquire a sufficient supply of such
paper at higher prices, which, the Company believes, can be passed through to
the end-user customers.
Computer hardware is essential to the Company's computer systems
segment. This hardware comes from a variety of sources, principally Silicon
Graphics, Inc., and historically the Company has experienced an ample supply.
In the opinion of the Company, loss of one or more if its present
suppliers of either paper products or computer hardware would not have a
significant impact on the Company's operations because of the general
availability of alternate sources.
PATENTS, TRADEMARKS AND RELATED RIGHTS
Except as described below, the Company does not have any patents,
trademarks, licenses, franchises or concessions which are material to an
understanding of the Company's business.
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The Company's trademark REYNOLDS + REYNOLDS(R) is associated with many
goods and services provided by the Company.
In the computer systems segment, the Company has a number of
distribution and licensing arrangements with equipment and software vendors
relating to certain components of Reynolds' products, including a distribution
license for UNIX operating systems (a product and trademark of Bell
Laboratories). Such arrangements are in the aggregate, but not individually
(except for UNIX), material to Reynolds' business.
COMPETITION
Both in the provision of computer systems products and services and in
the manufacture and sale of business forms, the Company is subject to
competition from a number of other business organizations, some of which have
substantially greater assets and financial resources than the Company. The
Company believes that it competes by producing high-quality products and by
continually upgrading its computer systems and services to utilize the most
recent technology and developments in the industry. The Company has
specialized in selected markets and has emphasized service and long-term
relationships to meet customer needs more effectively. While no single
customer represents 5% or more of the revenues of either principal business
segment, the Company does have several significant customers whose loss, in the
aggregate, could be material to the business forms segment. The Company
believes that the likelihood of losing all of such customers is remote.
BACKLOG
BUSINESS FORMS: The Company manufactures several thousand different
types of standard and custom business forms. The dollar value of the printing
backlog as of December 1, 1994, is estimated to be $17,263 compared with
$19,382 at December 1, 1993.
COMPUTER SYSTEMS: Units in the backlog consist of the number of
unbilled computer systems or terminals which have been approved but not yet
shipped or for which signed contracts are pending credit investigation. The
dollar value of the backlog as of December 1, 1994, is estimated to be $36,626
including software license fees, compared with $35,830 at December 1, 1993.
RESEARCH AND DEVELOPMENT
During fiscal 1994, the Company continued its research and development
of in-house computer systems, terminal products, electronic image-based systems
and printing plant automation. In addition to those programs, the Company also
had several other development projects of lesser magnitude. Expenditures for
all such activities were approximately $18,100 in 1994, $12,400 in 1993 and
$9,600 in 1992.
ENVIRONMENTAL PROTECTION
The Company believes that it is in substantial compliance with all
applicable federal, state and local statutes concerning environmental
protection. The Company has not experienced any material costs in this regard.
The U.S. Environmental Protection Agency has designated the Company as one of a
number of potentially responsible parties under the Comprehensive Environmental
Response, Compensation and Liability Act at three environmental remediation
sites. (See Note 12, pages 40-41.)
EMPLOYEES
On December 1, 1994, the Company and its subsidiaries had 5,478
employees. It is party to a number of collective bargaining agreements with
union locals which represent an aggregate of approximately 336 employees at its
Dayton, Ohio, Hagerstown, Maryland, North Hollywood, California and Lebanon,
Indiana plants.
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ITEM 2. PROPERTIES
As of September 30, 1994, the Company operated ten forms manufacturing
plants in the United States and one in Canada encompassing approximately 1.2
million square feet. Of those, more than 1 million square feet are owned
outright by the Company. The remaining .2 million square feet are leased.
Corporate headquarters and the respective headquarters of the business forms
segment and the computer systems segment are located in Dayton, Ohio in several
buildings owned by the Company which contain more than .5 million square feet.
In addition, the Company leases approximately 150 sales offices and more than
fourteen warehouses throughout the country. The Company believes its
facilities are suitable and adequate for its current business needs.
The Company has no encumbrances securing long-term debt as of September
30, 1994 on its owned facilities.
Substantially all printing and other equipment used in the manufacture
of business forms and systems is owned by the Company and its subsidiaries.
The Company believes its properties are in good condition and adequate
for current activities.
ITEM 3. LEGAL PROCEEDINGS
Relevant information appears in Note 12 to the Financial Statements on
pages 40 and 41.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
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PART II
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Shares are listed on the New York Stock
Exchange. There is no principal market for the Class B Common Shares. The
Company also has an authorized class of 60 million preferred shares with no par
value. The Company currently has no agreements or commitments with respect to
the sale or issuance of the preferred shares.
Information on market prices and dividends is set forth below:
CLASS A COMMON SHARES SALE PRICES*
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1994 1993
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Fiscal Quarter High Low High Low
- - ------------------------------------------------------------------------------------------------------------------------
First $22.81 $19.06 $12.78 $10.38
Second $24.63 $21.19 $17.63 $12.06
Third $25.38 $19.88 $19.25 $16.00
Fourth $26.50 $22.50 $21.81 $18.38
CASH DIVIDENDS PAID*
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Class A Common Class B Common
--------------------------- --------------------------
Months 1994 1993 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------
January $.075 $.065 $.00375 $.00325
April $.085 $.065 $.00425 $.00325
June $.085 $.065 $.00425 $.00325
September $.085 $.065 $.00425 $.00325
* Reflects the two-for-one stock split of the Company's Common Shares effective March 1, 1994.
As of December 1, 1994, there were approximately 2,160 holders of
record of Class A Common Shares and one holder of record of Class B Common
Shares. See Note 6 on page 32 and 33 regarding the amount of retained earnings
available for dividends.
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ITEM 6. SELECTED FINANCIAL DATA
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
FIVE-YEAR SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
FOR THE YEARS ENDED SEPTEMBER 30 1994 1993 1992 1991 1990
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CONSOLIDATED
Net Sales and Revenues:
Information systems $789,306 $677,748 $625,634 $614,679 $615,545
Financial services 19,488 19,218 19,190 17,320 14,365
-------- -------- -------- -------- --------
Total net sales and revenues $808,794 $696,966 $644,824 $631,999 $629,910
======== ======== ======== ======== ========
Income Before Effect of Accounting
Changes $66,204 $52,522 $38,092 $24,634 $26,841
Effect of Accounting Changes(1) (19,106) 1,100
------- ------- ------- ------- -------
Net Income $66,204 $33,416 $39,192 $24,634 $26,841
======= ======= ======= ======= =======
Earnings Per Common Share:
Income before effect of accounting
changes $1.51 $1.20 $.81 $.54 $.58
Effect of accounting changes(1) (.44) .03
------- ----- ---- ---- ----
Net income $1.51 $ .76 $.84 $.54 $.58
===== ===== ==== ==== ====
Return on Equity:
Income before effect of accounting
changes 23.8% 20.2% 14.8% 9.9% 11.4%
Net income 23.8% 12.9% 15.3% 9.9% 11.4%
Cash Dividends Per Class A Common Share $.33 $.26 $.225 $.21 $.20
Book Value Per Outstanding Common Share 6.94 6.15 5.90 5.64 5.30
Assets:
Information systems $430,592 $407,761 $366,173 $375,535 $394,867
Financial services 204,107 162,790 155,672 159,582 140,147
-------- -------- -------- -------- --------
Total assets $634,699 $570,551 $521,845 $535,117 $535,014
======== ======== ======== ======== ========
Long-Term Debt:
Information systems $ 41,301 $ 40,000 $37,713 $ 53,990 $ 93,694
Financial services 102,363 87,688 56,500 56,796 38,929
-------- -------- ------- -------- --------
Total long-term debt $143,664 $127,688 $94,213 $110,786 $132,623
======== ======== ======= ======== ========
Number of Employees 5,478 5,636 4,995 5,225 5,507
INFORMATION SYSTEMS (with financial services on an equity basis)
Current Ratio 2.27 2.21 2.23 2.37 2.44
Net Property, Plant and Equipment $117,485 $111,177 $105,014 $107,191 $113,350
Total Debt 41,301 40,000 37,713 54,573 96,223
Total Debt to Capitalization 12.4% 13.2% 12.8% 17.5% 28.4%
(1) Represents the cumulative effect of accounting changes for
the adoption of Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1993
and SFAS No. 109, "Accounting for Income Taxes" in 1992.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in thousands except per share data)
BUSINESS ENVIRONMENT
The business environment for the company's automobile dealership customers
improved greatly in 1994 as the automotive market experienced an excellent
year. Analysts project new vehicle sales to be over 15 million in calendar
year 1994. Those analysts also project continued strength of new vehicle sales
in 1995. This represents a significant increase over the last three years
(13.9 million in 1993, 12.9 million in 1992 and 12.3 million in 1991). Aided
by this improved business environment, automobile dealerships purchased the
company's ERA computer systems in record numbers in 1994. The company also has
significant recurring service revenues and business forms sales to automobile
dealerships. These revenues do not fluctuate significantly with new vehicle
sales.
In 1994, overall economic conditions improved and the economy, as measured by
gross domestic product, grew at its fastest rate since 1988. The company's
overall paper cost remained relatively stable in fiscal 1994 because of lower
costs earlier in the year. In the second half of the year, increased demand
for paper allowed paper manufacturers to raise prices. In 1995, the company
expects higher average paper costs than in 1994. Accordingly, the company
intends to raise prices to offset these increased costs.
The overall healthcare market remained difficult in fiscal 1994 as the
uncertainty surrounding healthcare reform caused many medical practices to
postpone investments in computer systems. Recently, the company's healthcare
computer systems sales orders have improved and the order backlog at year-end
was at its highest level since 1992. In November 1994, the company acquired PD
(Poorman-Douglas) Medical Systems, a provider of information management systems
to medical practices. PD Medical Systems has annual revenues of about $8,000.
Managed care is undergoing rapid growth throughout the country and PD Medical
Systems has the industry's most complete managed care system for medical
practices. This acquisition strengthens the company's healthcare business and
should contribute to improved operating results in 1995.
SIGNIFICANT EVENTS
BUSINESS FORMS RESTRUCTURING
During the third quarter of 1994, the company recorded a $12,400 restructuring
charge for costs to be incurred in the disposal of part of its stock tab
product line and the consolidation of certain custom business forms printing
operations. The general printing business was restructured to focus on
value-added solutions for customers and to improve profitability. The company
discontinued the manufacture of certain low-margin stock tab products and
closed its Chambersburg, Pennsylvania plant. To facilitate this process, the
company sold a minority interest in a subsidiary to Willamette Industries Inc.,
a leading supplier of stock tab products. Willamette and the company will
jointly own and operate this subsidiary during the transition of manufacturing
operations to ensure continuous quality customer service. After this
transition period (anticipated to be less than one year), the company will
liquidate this subsidiary with no effect on net income. This transaction
generated $11,500 of income tax benefits which more than offset the negative
after-tax effect of the restructuring charge. This transaction will also
generate $24,000 of cash from tax benefits and reductions in accounts
receivable and inventories. In addition to closing several distribution
facilities and sales offices, the company also closed its custom business forms
plant in Chestertown, Maryland and consolidated operations primarily into its
Hagerstown, Maryland plant. When fully implemented, it is anticipated that
this restructuring will increase operating income by $4,300. See Note 2 to the
Consolidated Financial Statements for additional disclosures related to the
restructuring.
BUSINESS CHANGES
In 1994, the company continued its practice of supplementing existing
businesses with strategic acquisitions. During the year Law Printing Company,
Formcraft Inc. and Management Computer Services (MCS) Inc. were acquired. Law
Printing was a west-coast manufacturer of business forms and related products
primarily for automobile dealerships. This purchase, combined with the 1992
pooling of interests with Norick Brothers Inc., significantly
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grew the company's position in this important market. Formcraft is a
Houston-based manufacturer of general business forms with strong forms
management services. In 1993, the company purchased Woodbury Business Systems,
another regional provider of forms management services. The acquisition of MCS,
a leading provider of parts locator services, under the name of One Touch,
expanded the company's computer-based products offered to automobile
dealerships. In 1993, the company acquired COIN Inc., which had one of the
larger installed bases of customers in the automobile dealership industry and
had historically been a leader in automating the finance and insurance function
of automobile dealerships.
During the third quarter of 1994, the company sold its French automotive
computer systems subsidiary because the European market is very fragmented and
does not currently present an attractive growth opportunity. This subsidiary
reported sales of $10,000 in 1994 and $18,000 in 1993. See Note 3 of the
Consolidated Financial Statements for additional disclosures about the
company's business changes.
STOCK SPLIT
On February 17, 1994, the board of directors approved a two-for-one common
stock split. As a result of the split, on March 15, 1994, common shareholders
received one additional share for each share held as of March 1, 1994. This
split was the second such split since November 1992 and the sixth split since
the company's initial public offering in 1961. All share and per share
information presented in this annual report was restated to reflect the stock
splits.
RESULTS OF OPERATIONS
CONSOLIDATED
Consolidated net sales and revenues increased $111,828 or 16% to an all-time
record of $808,794 in 1994. Computer systems revenues grew $82,243 and
business forms sales rose $29,315. The net effect of acquisitions and
divestitures increased 1994 sales $36,323. In 1993, consolidated net sales and
revenues of $696,966 increased $52,142 or 8% as computer systems revenues
increased 11% and business forms sales increased 7%. In 1993, acquisitions
contributed $29,466 of the sales increase.
Consolidated operating income of $98,067 represented an increase of $6,970 or
8% in 1994. Consolidated operating income increased $22,163 or 24%, excluding
business forms $12,400 restructuring charge, $1,043 of restructuring related
expenses already incurred and $1,750 of environmental expenses. See Note 12
to the Consolidated Financial Statements for a discussion of the company's
environmental contingencies. Operating income increased 34% for computer
systems, 24% for financial services and 12% for business forms, excluding the
previously mentioned charges. In 1993, operating income grew $23,767 or 35% as
computer systems, financial services and business forms all reported
substantial increases. As a percentage of sales, operating income was 12% in
1994, 13% in 1993 and 10% in 1992. Excluding the previously mentioned charges,
operating income represented 14% of revenues in 1994.
Net interest expense and other income was $745 in 1994, $1,813 in 1993 and
$2,894 in 1992. In 1994, other income included an $817 pre-tax gain on the
sale of the French subsidiary. In 1992, interest expense was higher because of
higher average debt balances.
The effective income tax rate was 32.0% in 1994 compared to 41.2% in 1993 and
40.9% in 1992. In 1994, the company recorded an $11,500 tax benefit associated
with the stock tab divestiture. The company also recorded $581 of tax expense
related to the sale of the French subsidiary. The 1994 effective tax rate was
41.8%, excluding the effect of the stock tab and French divestitures. The
increase over 1993 resulted from an increase in non-deductible goodwill
amortization and the 1993 tax law changes. In 1993, the effective tax rate
increased because of the tax law changes effective for part of the year. The
1993 favorable settlement of 1984 through 1989 federal tax audits largely
offset the effects of the tax law changes.
Income before the effect of accounting changes of $66,204 or $1.51 per share,
increased $13,682 or 26% in 1994. The effect of the restructuring charge,
restructuring related and environmental expenses, net of associated tax
benefits, was to increase income by $840 or $.02 per share in 1994. In 1993,
income before accounting changes of $52,522 represented an increase of $14,430
or 38% over 1992. In 1994, return on average shareholders' equity (ROE) was
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23.8%. In 1993 and 1992, ROE, calculated using income before accounting
changes, was 20.2% and 14.8%, respectively.
In 1993, the company adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." This statement required the company to record an expense
recognizing postretirement benefits, such as medical and life insurance
benefits, already earned by employees. Historically, the company recognized
these expenses when paid to retirees. The cumulative effect of adopting SFAS
No. 106 was to reduce net income by $19,106 or $.44 per share. See Note 9 to
the Consolidated Financial Statements for additional disclosures related to
SFAS No. 106. In 1992, the company adopted SFAS No. 109, "Accounting for
Income Taxes" and recorded a tax benefit of $1,100 or $.03 per share.
COMPUTER SYSTEMS (excluding financial services)
Computer systems revenues increased $82,243 in 1994 and $27,513 in 1993
representing growth of 29% in 1994 and 11% in 1993. Excluding the effect of
acquisitions and divestitures, revenues rose $58,244 in 1994 and $13,361 in
1993. In 1994, this increase resulted from a 69% increase in the number of ERA
computer systems sold and a substantial increase in related recurring service
revenues. The company was able to increase ERA sales dramatically because
strong sales orders provided the opportunity to expand installation capacity.
The automotive computer systems order backlog was substantial at September 30,
1994 and should support continued strong sales into 1995. Recurring service
revenues continued to grow because strong computer systems sales increased the
number of software applications supported. These recurring service revenues
result from monthly billings for technical support, software updates and
hardware maintenance that allow customers to maximize the value of their
computer systems. In 1993, sales increased because of the same trends that
affected 1994. Healthcare computer systems sales declined for the second
straight year in 1994 as medical practices were hesitant to purchase computer
systems because of the uncertainty surrounding healthcare reform. Recently,
healthcare computer systems sales orders have increased and the year-end order
backlog was at its highest level since 1992.
Computer systems operating income grew $15,173 or 34% to $59,254 in 1994. In
1993, operating income of $44,081 represented an increase of $9,821 or 29%. As
a percentage of revenues, operating income was 16% in both 1994 and 1993 and
13% in 1992. Gross profit was 46.5% of revenues in 1994, compared to 48.1% in
1993 and 46.3% in 1992. The gross margin declined in 1994 as the company
incurred additional training expenses to expand installation capacity to meet
increased demand for its products and because of the full year effect of COIN's
product mix. Gross profit rose to 47.3% in the second half of 1994 when many
new employees completed training and began installing computers. In 1993,
gross margins increased because of the sales growth and lower computer
equipment costs. The sales growth increased both ERA and recurring service
gross margins in 1993 because of the relatively fixed nature of many software
development and support expenses. The company's costs for computer equipment
remained relatively stable in 1994 after declining in 1993. Selling, general
and administrative (SG&A) expenses were 30.2% of revenues in 1994, compared to
32.4% in 1993 and 32.8% in 1992. The decline in 1994 resulted primarily from
the full year effect of successfully integrating COIN into the company's
operations. Bad debt expenses decreased $600 in 1994 and $3,200 in 1993.
BUSINESS FORMS
Business forms net sales increased $29,315 in 1994 and $24,601 in 1993
representing a 7% increase each year. Excluding the effect of acquisitions and
divestitures, net sales increased $16,991 in 1994 and $9,287 in 1993. In 1994,
this increase occurred primarily in automotive forms, which grew 8% because of
both higher volume and modest price increases. General business forms sales
also grew in 1994 because of the addition of many new forms management services
accounts. In 1993, exclusive of acquisitions, sales rose principally because
of an increase in general business forms sales.
Restructuring charges of $12,400, restructuring related expenses of $1,043 and
environmental expenses of $1,750 caused business forms operating income to
decline in 1994. Excluding these expenses, operating income of $40,934
represented an increase of $4,483 or 12% compared to 1993. In 1993, operating
income was $36,451 and represented an increase of $5,925 or 19% over 1992.
Gross profit, excluding the restructuring charge, improved to 44.7% of sales in
1994 compared to 43.6% in 1993 and 42.9% in 1992. In both 1994 and 1993, gross
profit improved because of the strong growth in higher margin automotive forms
and forms management services sales.
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In 1993, gross profit also improved because of the successful integration of
Norick Brothers. The company was able to improve Norick's gross profit through
the effective integration of Norick into the company's cost structure resulting
in lower paper and freight costs and the closing of two smaller manufacturing
plants. From 1990 through 1992 the company saw its overall paper costs decline
because of intense competition among paper manufacturers. The company passed
much of this cost reduction to customers to meet competitive pressures. In
1993 and 1994 the overall paper costs remained about the same and did not
impact the company greatly. However, in 1994, paper costs declined during the
first half of the year and increased during the second half of the year. In
1995, the company expects higher average paper costs than in 1994. The company
intends to raise prices to offset these increased costs. SG&A expenses were
35.8% of sales in 1994, compared to 34.4% in 1993 and 34.7% in 1992. The 1994
increase consisted primarily of environmental expenses, restructuring related
expenses and additional goodwill amortization from acquisitions.
FINANCIAL SERVICES
Financial services revenues increased only slightly in both 1994 and 1993.
Finance receivables increased because of strong computer systems sales in both
years. However, interest income remained relatively flat because of the decline
in interest rates. Financial services operating income increased $2,507 in
1994 and $8,021 in 1993 primarily because of lower bad debt expenses. Bad debt
expenses declined $1,800 in 1994 and $6,222 in 1993. Lower interest expense
also contributed to improved operating income. Interest expense declined $506
in 1994 and $1,402 in 1993 because of lower interest rates.
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 it has reduced interest expense by using interest rate management
agreements and variable rate debt instead of directly obtaining fixed rate
debt. See Note 6 to the Consolidated Financial Statements for additional
disclosures regarding the company's interest rate management agreements.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Information systems strong cash flow from operating activities of $94,956
resulted from record net income. The company invested this cash in working
capital, acquisitions and capital expenditures. Working capital increased
because of higher sales, however, this increase was offset by a reduction in
working capital related to the stock tab divestiture. During 1994, the company
acquired Formcraft for $5,106 and MCS for $4,708. The Law acquisition was a
non-cash transaction whereby the company exchanged 612,692 Class A common
shares valued at $13,075 for Law's assets. Accordingly, the Statement of
Consolidated Cash Flows does not reflect the Law purchase. Capital
expenditures of $27,888 occurred in the normal course of business. Proceeds
from asset sales related primarily to the French divestiture. The company also
returned cash to shareholders by repurchasing $39,083 of capital stock and
paying $14,226 of cash dividends. See the shareholders' equity section for a
discussion of dividends and share repurchases.
Financial services operating cash flow and collections on finance receivables
were invested in new finance receivables for the company's computer systems and
used to make scheduled debt repayments.
CAPITALIZATION
The company's ratio of total debt (total information systems debt) to
capitalization (total information systems debt plus shareholders' equity) was
12.4% at September 30, 1994 and 13.2% at September 30, 1993. Available credit
under existing revolving credit agreements was $31,050 at September 30, 1994.
In addition to committed credit agreements, the company also has a variety of
other short-term credit lines available. It is expected that cash balances and
internally generated cash will be sufficient to fund 1995 normal operations,
which include anticipated capital expenditures of about $30,000.
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. The company also
has an authorized class of 60 million preferred shares with no par
11
12
value. As of November 14, 1994, none of these preferred shares were
outstanding and there were no agreements or commitments with respect to the
sale or issuance of these shares.
The company paid cash dividends of $14,226 in 1994, $11,139 in 1993 and $9,831
in 1992. Dividends per Class A common share were $.33 in 1994, $.26 in 1993
and $.225 in 1992. Dividends are typically declared each November, February,
May and August and paid in January, April, June and September, respectively.
Dividends per Class A common share must be twenty times the dividends per Class
B common share and all dividend payments must be simultaneous. In November
1994, the board of directors increased the quarterly dividend to $.10 per Class
A common share, an increase of 18%. This increase followed increases of 13% in
February 1994 and 15% in November 1993. The company has increased cash
dividends eight times since 1989 and paid dividends each year since the
company's initial public offering in 1961.
The company has conducted an active share repurchase program during recent
years to provide increased returns to shareholders. The company repurchased
$39,083 of Class A common shares in 1994, $16,500 in 1993 and $34,700 in 1992.
Average prices paid per share were $23.61 in 1994, $13.50 in 1993 and $10.85 in
1992. The company could repurchase an additional 1,925,800 Class A common
shares under existing board resolutions as of September 30, 1994.
ENVIRONMENTAL MATTERS
See Note 12 to the Consolidated Financial Statements for a discussion of the
company's environmental contingencies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by Item 8 is contained in Item 14 of
Part IV (pages 13-14) of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age and background information for each of the Company's
directors and nominees are incorporated herein by reference to the section of
the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders
captioned "ELECTION OF DIRECTORS."
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are elected by the Board of
Directors at its meeting immediately following the Annual Meeting of
Shareholders to serve generally for a term of one year. The executive officers
of the Company, as of December 1, 1994, are:
12
13
NAME AGE POSITION
- - --------------------------------------------------------------------------------------------------
Richard H. Grant, Jr. 81 Chairman of the Steering Committee and Director
David R. Holmes 54 Chairman of the Board, President and Chief
Executive Officer
Robert C. Nevin 54 President, Business Forms Division and Director
Joseph N. Bausman 51 President, Computer Systems Division and Director
Dale L. Medford 44 Vice President, Corporate Finance and Chief
Financial Officer, and Director
Michael J. Gapinski 44 Treasurer and Assistant Secretary
Adam M. Lutynski 52 General Counsel and Secretary
A description of prior positions held by executive officers of the
Company within the past 5 years, to the extent applicable, is set forth in the
section of the Proxy Statement incorporated by reference above.
ITEM 11. EXECUTIVE COMPENSATION
Information on compensation of the Company's executive officers and
directors is incorporated herein by reference to the section of the Company's
Proxy Statement for its 1995 Annual Meeting of Shareholders captioned
"EXECUTIVE COMPENSATION."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The number of Common Shares of the Company beneficially owned by each
five percent shareholder, director or current nominee for director, and by all
directors and officers as a group as of December 1, 1994 is incorporated herein
by reference to the section of the Company's Proxy Statement for its 1995
Annual Meeting of Shareholders captioned "VOTING SECURITIES OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning transactions with management, certain business
relationships and indebtedness of management is incorporated herein by
reference to the section of the Company's Proxy Statement for its 1995 Annual
Meeting of Shareholders captioned "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
PART IV
(Dollars in thousands)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(A) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are set
forth on pages 21 through 42.
13
14
Statements of Consolidated Income - for the years ended
September 30, 1994, 1993 and 1992
Consolidated Balance Sheets - September 30, 1994 and 1993
Statements of Consolidated Shareholders' Equity - for the years ended
September 30, 1994, 1993 and 1992
Statements of Consolidated Cash Flows - for the years ended
September 30, 1994, 1993 and 1992
Notes to Financial Statements (Including Supplementary Data)
(A) (2) FINANCIAL STATEMENT SCHEDULES FOR EACH OF THE THREE YEARS IN
THE PERIOD ENDED SEPTEMBER 30, 1994 ARE ATTACHED HERETO:
Schedule VIII - Valuation Accounts Page 43
Schedule IX - Short-Term Borrowings Page 44
Schedule X - Supplementary Income
Statement Information Page 45
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this Report.
(C) EXHIBITS
The exhibits as shown in "Index of Exhibits" (pages 46-54) are filed as a
part of this Report.
(D) CONSOLIDATED FINANCIAL STATEMENTS
Individual financial statements and schedules of the Company's
consolidated subsidiaries are omitted from this Annual Report on Form 10-K
because consolidated financial statements and schedules are submitted and
because the registrant is primarily an operating company and all subsidiaries
included in the consolidated financial statements are wholly owned.
-------------------------------------------------------------
The Company will provide a copy of its 1994 Annual
Report to Shareholders to those persons receiving a
copy of the Form 10-K without the exhibits upon
written request to:
ADAM M. LUTYNSKI, GENERAL COUNSEL & SECRETARY
THE REYNOLDS AND REYNOLDS COMPANY
P. O. BOX 2608
DAYTON, OHIO 45401
-------------------------------------------------------------
14
15
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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
By /S/ ADAM M. LUTYNSKI
---------------------------------------
ADAM M. LUTYNSKI
General Counsel and Secretary
Date: December 20, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
Date: December 20, 1994 By /S/ DAVID R. HOLMES
---------------------------------------
DAVID R. HOLMES
Chairman of the Board,
President and Chief Executive
Officer
(Principal Executive Officer)
Date: December 20, 1994 By /S/ DALE L. MEDFORD
---------------------------------------
DALE L. MEDFORD
Vice President, Corporate
Finance and Chief Financial
Officer (Principal Financial
and Accounting Officer) and
Director
Date: December 20, 1994 By /S/ JOSEPH N. BAUSMAN
---------------------------------------
JOSEPH N. BAUSMAN
President, Computer Systems
Division and Director
15
16
Date: December 20, 1994 By /S/ DR. DAVID E. FRY
---------------------------------------
DR. DAVID E. FRY, Director
Date: December 20, 1994 By /S/ RICHARD H. GRANT, JR.
---------------------------------------
RICHARD H. GRANT, JR.
Chairman of the Steering
Committee and Director
Date: December 20, 1994 By /S/ RICHARD H. GRANT, III
---------------------------------------
RICHARD H. GRANT, III, Director
Date: December 20, 1994 By /S/ ROBERT C. NEVIN
---------------------------------------
ROBERT C. NEVIN
President, Business Forms
Division and Director
Date: December 20, 1994 By /S/ GAYLE B. PRICE, JR.
---------------------------------------
GAYLE B. PRICE, JR., Director
Date: December 20, 1994 By /S/ WILLIAM H. SEALL
---------------------------------------
WILLIAM H. SEALL, Director
Date: December 20, 1994 By /S/ KENNETH W. THIELE
---------------------------------------
KENNETH W. THIELE, Director
Date: December 20, 1994 By /S/ MARTIN D. WALKER
---------------------------------------
MARTIN D. WALKER, Director
16
17
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2); 14(c) and (d)
Financial Statements, Schedules and Exhibits
Year Ended September 30, 1994
The Reynolds and Reynolds Company
Dayton, Ohio
17
18
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
November 14, 1994
To Our Shareholders:
The management of The Reynolds and Reynolds Company is responsible for
accurately and objectively preparing the company's consolidated financial
statements. These statements are prepared in accordance with generally
accepted accounting principles and include amounts based on management's best
estimates and judgements. Management believes that the financial information
in this annual report is free from material misstatement.
The company's management maintains an environment of multilevel controls. The
COMPANY BUSINESS PRINCIPLES, for example, is distributed to all employees and
communicates high standards of integrity that are expected in the company's
day-to-day business activities. The COMPANY BUSINESS PRINCIPLES addresses a
broad range of issues including potential conflicts of interest, business
relationships, accurate and timely reporting of financial information,
confidentiality of proprietary information, insider trading and social
responsibility.
The company also maintains and monitors a system of internal controls designed
to provide reasonable assurances regarding the safeguarding of company assets
and the integrity and reliability of financial records. These internal
controls include the appropriate segregation of duties and the application of
formal policies and procedures. Furthermore, an internal audit department,
which has access to all financial and other corporate records, regularly
performs tests to evaluate the system of internal controls to ensure the system
is adequate and operating effectively. At the date of these financial
statements, management believes the company has an effective internal control
system.
The company's independent public accountants, Deloitte & Touche LLP, perform an
independent audit of the company's consolidated financial statements. They
have access to minutes of board meetings, all financial information and other
corporate records. Their audit is conducted in accordance with generally
accepted auditing standards and includes consideration of the system of
internal controls. Their report is included in this annual report on page 19.
Another level of control resides with the audit committee of the company's
board of directors. The committee, comprised of four directors who are not
members of management, oversees the company's financial reporting process.
They recommend to the board, subject to shareholder approval, the selection of
the company's independent public accountants. They discuss the overall audit
scope and the specific audit plans with the independent public accountants and
the internal auditors. This committee also meets regularly (separately and
jointly) with the independent public accountants, the internal auditors and
management to discuss the results of those audits, the evaluation of internal
controls, the quality of financial reporting, and specific accounting and
reporting issues.
David R. Holmes Dale L. Medford
Chairman, President and Vice President, Corporate Finance
Chief Executive Officer and Chief Financial Officer
18
19
INDEPENDENT AUDITORS' REPORT
The Reynolds and Reynolds Company
Dayton, Ohio
We have audited the accompanying consolidated balance sheets of The Reynolds
and Reynolds Company and its subsidiaries as of September 30, 1994 and 1993,
and the related statements of consolidated income, shareholders' equity and
cash flows for each of the three years in the period ended September 30, 1994.
Our audits also included the financial statement schedules listed in the Index
at Item 14(a)(2). These financial statements and financial statement schedules
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Reynolds and Reynolds Company
and its subsidiaries at September 30, 1994 and 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
As discussed in Note 9 to the consolidated financial statements, in 1993 the
company changed its method of accounting for postretirement benefits other than
pensions to conform with Statement of Financial Accounting Standards (SFAS) No.
106. As discussed in Note 1 to the consolidated financial statements, in 1992
the company changed its method of accounting for income taxes to conform with
SFAS No. 109.
/s/ DELOITTE & TOUCHE LLP
____________________________
Dayton, Ohio
November 14, 1994
19
20
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement No.
33-56045 of The Reynolds and Reynolds Company on Form S-8 and the
Post-Effective Amendments No. 1 and No. 2 to Registration Statement No.
33-48546 of The Reynolds and Reynolds Company on Form S-3 and the
Post-Effective Amendment No. 1 to Registration Statement No. 33-51895 of The
Reynolds and Reynolds Company on Form S-3 of our report dated November 14,
1994, which includes an explanatory paragraph concerning a change in the method
of accounting for post-retirement benefits other than pensions in 1993 and a
change in the method of accounting for income taxes in 1992, appearing in this
Annual Report on Form 10-K of The Reynolds and Reynolds Company for the year
ended September 30, 1994 and to the reference to us under the heading "Experts"
in the Prospectus, which is part of such Registration Statements.
/s/ DELOITTE & TOUCHE LLP
______________________________
Dayton, Ohio
December 16, 1994
20
21
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In thousands except per share data)
FOR THE YEARS ENDED SEPTEMBER 30 1994 1993 1992
- - ------------------------------------------------------------------------------
Net Sales and Revenues:
Information systems:
Products $564,976 $497,974 $470,056
Services 224,330 179,774 155,578
-------- -------- --------
Total information systems 789,306 677,748 625,634
Financial services 19,488 19,218 19,190
-------- -------- --------
Total net sales and revenues 808,794 696,966 644,824
-------- -------- --------
Costs and Expenses:
Cost of sales:
Products 333,630 297,339 284,531
Services 96,284 72,375 63,998
-------- ------- --------
Total cost of sales 429,914 369,714 348,529
Selling, general and
administrative expenses 261,997 227,502 212,319
Restructuring charge 12,400
Financial services 6,416 8,653 16,646
-------- -------- --------
Total costs and expenses 710,727 605,869 577,494
-------- -------- --------
Operating Income 98,067 91,097 67,330
-------- -------- --------
Other Charges (Income):
Interest expense 3,820 3,690 5,106
Interest income (1,449) (1,701) (2,700)
Other (1,626) (176) 488
-------- -------- --------
Total other charges 745 1,813 2,894
-------- -------- --------
Income Before Income Taxes 97,322 89,284 64,436
Provision for Income Taxes 31,118 36,762 26,344
-------- -------- --------
Income Before Effect of Accounting Changes 66,204 52,522 38,092
Effect of Accounting Changes (19,106) 1,100
-------- -------- --------
Net Income $ 66,204 $ 33,416 $ 39,192
======== ======== ========
Earnings Per Common Share:
Income before effect of accounting changes $1.51 $1.20 $.81
Effect of accounting changes (.44) .03
----- ----- ----
Net income $1.51 $ .76 $.84
===== ===== ====
Average Number of Common Shares Outstanding 43,781 43,787 46,921
====== ====== ======
See Notes to Consolidated Financial Statements.
21
22
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
SEPTEMBER 30 1994 1993
- - -----------------------------------------------------------------------------------------------
INFORMATION SYSTEMS ASSETS
Current Assets:
Cash and equivalents $ 20,230 $ 9,437
-------- --------
Accounts receivable (less allowance for doubtful accounts:
1994--$2,683;1993--$6,090) 101,872 105,713
-------- -------
Inventories:
Finished products 31,027 29,478
Work in process 1,720 1,851
Raw materials and supplies 4,527 6,977
-------- ---------
Total inventories 37,274 38,306
-------- ---------
Deferred income taxes 8,832 8,576
-------- ---------
Prepaid expenses and other assets 7,308 6,880
-------- ---------
Total current assets 175,516 168,912
-------- -------
Property, Plant and Equipment:
Land and improvements 7,659 6,451
Buildings and improvements 65,900 69,744
Machinery and equipment 158,303 144,742
Furniture and other 26,242 24,778
Construction in progress 2,748 1,547
-------- --------
Total property, plant and equipment 260,852 247,262
Less accumulated depreciation 143,367 136,085
-------- --------
Net property, plant and equipment 117,485 111,177
-------- -------
Intangible Assets - Net:
Goodwill 78,277 71,760
Software licensed to customers 14,413 17,500
Other 10,816 11,195
-------- --------
Total intangible assets 103,506 100,455
-------- --------
Other Assets 34,085 27,217
-------- --------
Total Information Systems Assets 430,592 407,761
-------- --------
FINANCIAL SERVICES ASSETS
Finance Receivables - Net 202,620 161,711
Cash and Other Assets 1,487 1,079
-------- ---------
Total Financial Services Assets 204,107 162,790
-------- ---------
Total Assets $634,699 $570,551
======== =========
SEPTEMBER 30 1994 1993
- - -----------------------------------------------------------------------------------------------
INFORMATION SYSTEMS LIABILITIES
Current Liabilities:
Current portion of long-term debt $ 287
Accounts payable:
Trade 28,853 $ 25,824
Other 4,340 2,314
Accrued liabilities:
Compensation 23,407 23,268
Other 30,100 24,503
Deferred revenues 3,052 7,500
-------- --------
Total current liabilities 90,039 83,409
-------- --------
Long-Term Debt 41,014 40,000
-------- --------
Other Liabilities:
Postretirement medical 33,566 33,324
Pensions 16,028 16,384
Other 2,823 2,378
-------- --------
Total other liabilities 52,417 52,086
-------- --------
Total Information Systems Liabilities 183,470 175,495
-------- --------
FINANCIAL SERVICES LIABILITIES
Notes Payable 104,363 87,688
Deferred Income Taxes 51,602 42,064
Other Liabilities 2,225 1,979
-------- --------
Total Financial Services Liabilities 158,190 131,731
-------- --------
SHAREHOLDERS' EQUITY
Capital Stock:
Preferred
Class A common 26,067 13,199
Class B common 313 188
Additional Paid-In Capital 2,557 2,693
Other Adjustments (2,566) (3,316)
Retained Earnings 266,668 250,561
-------- --------
Total Shareholders' Equity 293,039 263,325
-------- --------
Total Liabilities and Shareholders' Equity $634,699 $570,551
======== ========
See Notes to Consolidated Financial Statements.
22
23
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In thousands except per share data)
FOR THE YEARS ENDED SEPTEMBER 30 1994 1993 1992
- - ----------------------------------------------------------------------------
Capital Stock:
Class A common:
Balance, beginning of year $ 13,199 $ 13,401 $ 13,674
Stock split effective March 1, 1994 13,199
Capital stock issued 670 199 388
Converted from Class B common 63 358
Capital stock repurchased (1,035) (382) (999)
Capital stock retired (29) (19) (20)
------- -------- --------
Balance, end of year 26,067 13,199 13,401
------- -------- --------
Class B common:
Balance, beginning of year 188 188 546
Stock split effective March 1, 1994 188
Converted to Class A common (63) (358)
------- -------- --------
Balance, end of year 313 188 188
------- -------- --------
Additional Paid-In Capital:
Balance, beginning of year 2,693 7,221 34,940
Stock split effective March 1, 1994 (13,387)
Capital stock issued 15,315 3,446 5,018
Capital stock repurchased (2,177) (8,518) (33,701)
Capital stock retired (999) (746) (539)
Tax benefits from stock options 1,112 1,290 1,503
------- -------- --------
Balance, end of year 2,557 2,693 7,221
------- -------- --------
Other Adjustments:
Balance, beginning of year (3,316) (22) 1,140
Foreign currency translation (328) (2,460) (531)
Minimum pension liability 1,078 (834) (631)
------- -------- --------
Balance, end of year (2,566) (3,316) (22)
------- -------- --------
Retained Earnings:
Balance, beginning of year 250,561 235,884 206,272
Net income 66,204 33,416 39,192
Cash dividends:
Class A common (1994--$.33 PER SHARE;
1993--$.26 per share; 1992--$.225
per share) (14,036) (10,983) (9,507)
Class B common (1994--$.0165 PER SHARE;
1993--$.013 per share;
1992--$.01125 per share) (190) (156) (324)
Capital stock repurchased (35,871) (7,600)
Transactions of pooled entities 251
-------- -------- --------
Balance, end of year 266,668 250,561 235,884
-------- -------- --------
Total Shareholders' Equity $293,039 $263,325 $256,672
======== ======== ========
See Notes to Consolidated Financial Statements.
23
24
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
FOR THE YEARS ENDED SEPTEMBER 30 1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------
INFORMATION SYSTEMS
Cash Flows Provided by Operating Activities $94,956 $63,967 $65,390
------- ------- -------
Cash Flows Provided by (Used for) Investing
Activities:
Acquisitions (9,814) (40,072)
Capital expenditures (27,888) (18,895) (17,366)
Net proceeds from sales of assets 8,312 2,285 896
Capitalization of software licensed to
customers (2,695) (391) (3,241)
Repayments from financial services 336 3,637 3,385
------- ------- -------
Net cash used for investing activities (31,749) (53,436) (16,326)
------- ------- -------
Cash Flows Provided by (Used for) Financing
Activities:
Additional borrowings 1,250 11,716
Principal payments on debt (2,266) (9,429) (16,860)
Cash dividends paid (14,226) (11,139) (9,831)
Transactions of pooled entities 251
Capital stock issued 1,882 2,880 4,847
Capital stock repurchased (39,083) (16,500) (34,700)
------- ------- -------
Net cash used for financing activities (52,443) (22,472) (56,293)
------- ------- -------
Effect of Exchange Rate Changes on Cash 29 (2,460) (531)
------- ------- -------
Increase (Decrease) in Cash and Equivalents 10,793 (14,401) (7,760)
Cash and Equivalents, Beginning of Year 9,437 23,838 31,598
------- ------- -------
Cash and Equivalents, End of Year $20,230 $ 9,437 $23,838
======= ======= =======
FINANCIAL SERVICES
Cash Flows Provided by Operating Activities $10,767 $ 7,201 $ 8,183
------- ------- -------
Cash Flows Provided by (Used for) Investing
Activities:
Finance receivables originated (81,940) (62,898) (60,376)
Collections on finance receivables 55,038 58,179 55,647
------- ------- -------
Net cash used for investing activities (26,902) (4,719) (4,729)
------- ------- -------
Cash Flows Provided by (Used for) Financing
Activities:
Additional borrowings 41,650 40,000 25,000
Principal payments on debt (24,975) (38,812) (25,296)
Repayments to information systems (336) (3,637) (3,385)
------- ------- -------
Net cash provided by (used for) financing
activities 16,339 (2,449) (3,681)
------- ------- -------
Increase (Decrease) in Cash and Equivalents 204 33 (227)
Cash and Equivalents, Beginning of Year 996 963 1,190
------- ------- -------
Cash and Equivalents, End of Year $ 1,200 $ 996 $ 963
======= ======= =======
See Notes to Consolidated Financial Statements.
24
25
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and its domestic and foreign subsidiaries and present details of
revenues, expenses, assets, liabilities and cash flows for both information
systems and financial services. Information systems is comprised of the
company's business forms and computer systems businesses. Financial services
is comprised of Reyna Financial Corporation, the company's wholly-owned
financial services subsidiary and a similar operation in Canada. In accordance
with industry practice, the assets and liabilities of information systems are
classified as current or non-current and those of financial services are
unclassified. Intercompany balances and transactions between the consolidated
companies are eliminated.
CASH AND EQUIVALENTS
For purposes of reporting cash flows, cash and equivalents includes cash on
hand, cash deposits and investments with maturities of three months or less at
the time of purchase.
CONCENTRATIONS OF CREDIT RISK
The company is a leading provider of information management systems to
automobile dealerships. Finance receivables and a significant portion of
accounts receivable are from automobile dealerships.
ALLOWANCE FOR LOSSES
An allowance for losses on finance receivables is established based on
historical loss experience, portfolio profile, industry averages and current
economic conditions. Finance receivables are charged to the allowance for
losses when an account is deemed to be uncollectible, taking into consideration
the financial condition of the customer and the value of the collateral.
Recoveries of finance receivables, previously charged off as uncollectible, are
credited to the allowance for losses.
INVENTORIES
Inventories are stated at the lower of cost or market. Costs of domestic
business forms inventories are determined by the last-in, first-out (LIFO)
method. At September 30, 1994 and 1993, LIFO inventories were $29,341 and
$32,234, respectively. These inventories determined by the first-in, first-out
(FIFO) method would increase by $4,256 in 1994, $4,203 in 1993 and $4,605 in
1992. For other inventories, cost is determined by specific identification or
the FIFO method. Market is based on net realizable value.
25
26
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided over the estimated useful service lives of the assets
or asset groups, principally on the straight-line method for financial
reporting purposes. Estimated asset lives are:
Years
- - ---------------------------------------------------------------------
Land improvements 10
Buildings and improvements 3--33
Machinery and equipment 3--18
Furniture and other 3--15
Generally, upon asset disposal any gain or loss is included in current income.
Improvements and expenditures for maintenance that add materially to productive
capacity or extend asset lives are capitalized.
INTANGIBLE ASSETS
The excess of cost over net assets of companies acquired is recorded as
goodwill and amortized on a straight-line basis typically over seven to forty
years. At September 30, 1994 and 1993, the accumulated amortization was $17,114
and $13,012, respectively.
The company capitalizes certain costs of developing its software products.
Upon completion of a software product, amortization is determined based on the
larger of the amounts computed using (a) the ratio that current gross revenues
for each product bears to the total of current and anticipated future gross
revenues for that product or (b) the straight-line method over the remaining
estimated economic life of the product, ranging from five to seven years.
Amortization expense for software licensed to customers was $4,059, $3,936 and
$3,065 during the years ended September 30, 1994, 1993 and 1992, respectively.
At September 30, 1994 and 1993, the accumulated amortization was $35,626 and
$31,982, respectively.
Other intangible assets are amortized over periods ranging from three to
fifteen years. At September 30, 1994 and 1993, the accumulated amortization
was $8,252 and $9,490, respectively.
REVENUE RECOGNITION - INFORMATION SYSTEMS
Information systems revenues consist of both product sales and service
revenues. Product sales, including business forms, computer hardware and
software licenses, are generally recorded upon shipment to customers. In
certain instances, computer systems sales are not recognized until installation
is completed. In most cases, computer systems product sales are financed for
customers through the company's wholly-owned financial services subsidiary.
Upon shipment of computer systems, the company records sales and finance
receivables pending customer acceptance. These receivables pending customer
acceptance are transferred to interest bearing receivables when installation is
completed. Service revenues, which include computer hardware maintenance,
software support, training and forms
26
27
management services, are recorded ratably over the contract period or as
services are performed. Forms management services represent fees for inventory
management and warehousing services. Forms management services may be included
in the product sales price or separately billed to customers.
Certain costs, such as software amortization and product development, were
allocated because they relate to both products and services.
REVENUE RECOGNITION - FINANCIAL SERVICES
Financial services revenues consist primarily of interest earned on financing
the company's computer systems product sales. Revenues are recognized over
lives of financing contracts, generally five to seven years, using the interest
method.
LEASE OBLIGATIONS
The company leases premises and equipment under various operating lease
agreements. As of September 30, 1994, future minimum lease payments relating
to these agreements were $13,275 in 1995, $9,270 in 1996, $4,705 in 1997,
$2,117 in 1998 and $535 in 1999. Rental expenses were $19,600 in 1994, $18,100
in 1993 and $16,600 in 1992.
RESEARCH AND DEVELOPMENT COSTS
The company expenses research and development costs as incurred. These costs
were about $18,100 in 1994, $12,400 in 1993 and $9,600 in 1992.
INCOME TAXES
The parent company and its domestic subsidiaries file a consolidated U.S.
federal income tax return. Deferred income taxes are provided for temporary
differences between the tax basis of an asset or liability and its reported
amount in the financial statements as prescribed by Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The company
adopted SFAS No. 109 in 1992, which increased deferred tax assets and net
income by $1,100 or $.03 per share. Temporary differences result principally
from financial services product financing activities, postretirement benefits
and different depreciation methods. No deferred income tax liabilities are
recorded on undistributed earnings of the foreign subsidiary because, for the
most part, those earnings are permanently reinvested. Undistributed earnings
of the foreign subsidiary at September 30, 1994 were $17,133. The calculation
of the unrecognized deferred income tax liability on these earnings is not
practicable.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by the weighted
average number of Class A common shares and Class A common share equivalents
outstanding during each year. Class A common share equivalents consist of
those shares which would be outstanding, assuming all Class B common shares
were converted into Class A common shares and assuming all dilutive stock
options were exercised and the proceeds used to repurchase Class A common
shares at the average market price. The dilutive effect of stock options is
not material.
27
28
2. BUSINESS FORMS RESTRUCTURING
During the third quarter of 1994, the company recorded a restructuring charge
of $12,400 for costs to be incurred in the disposal of part of its stock tab
product line and the consolidation of certain custom business forms printing
operations. The company discontinued the manufacture of certain low-margin
stock tab products and closed its Chambersburg, Pennsylvania plant. To
facilitate this process, the company sold a minority interest in a subsidiary
to Willamette Industries Inc. for $4,000 in cash. Willamette, based in Oregon,
is a forest products company and a leading supplier of stock tab products.
Willamette and the company will jointly own and operate this subsidiary during
the transition of manufacturing operations to ensure continuous quality
customer service. After this transition period (anticipated to be less than
one year), the subsidiary will be liquidated with no effect on net income.
This transaction generated $11,500 of income tax benefits which more than
offset the negative after-tax effect of the restructuring charge.
The company also consolidated its east coast custom business forms
manufacturing operations to maximize plant efficiencies. The company closed
its Chestertown, Maryland plant and consolidated operations primarily into its
Hagerstown, Maryland plant. In addition, a number of distribution facilities
and sales offices were closed and related sales and administrative positions
were eliminated.
Significant components of the restructuring charge are included in the
following table.
1994
- - -----------------------------------------------------------------------
Write-off of goodwill $ 4,000
Plant closure 3,850
Severance and outplacement 2,990
Other 1,560
-------
Total $12,400
=======
The severance and outplacement component represents benefits for 288 employees,
comprised principally of manufacturing employees and some sales and
administrative employees. Through September 30, 1994, 249 employees were
terminated and $1,919 of severance, fringe and outplacement benefits were paid.
3. BUSINESS CHANGES
BUSINESS COMBINATIONS
During 1994 and 1993 the company completed several business combinations. On
May 9, 1994, the company acquired all outstanding shares of Management Computer
Services Inc. (MCS) for $4,708 of cash. MCS, a leading provider of parts
locator services to automobile dealers under the name of One Touch, had annual
sales of about $4,000. On January 5, 1994, the company acquired all outstanding
shares of Formcraft Inc. for $5,106 of cash. Formcraft, a manufacturer of
general business forms with strong forms management services, had annual sales
of about $17,000 in 1993. On January 3, 1994, the company acquired
substantially all of the assets and assumed certain liabilities of Law Printing
Company Inc. for $13,075. The purchase price was paid by issuing 612,692
Class A
28
29
common shares. Law, a manufacturer of business forms primarily for automobile
dealerships, had annual sales of about $11,000 in 1993. The acquisition of Law
was a non-cash transaction for accounting purposes and was not included in the
statement of cash flows.
On June 29, 1993, the company acquired COIN Inc. for $29,633 cash, which
included the retirement of $19,604 of COIN's debt. COIN had one of the larger
installed bases of customers in the automobile dealership systems industry and
had historically been a leader in automating the finance and insurance function
of the dealership. On May 4, 1993, the company purchased certain net assets of
BVI Information Systems Ltd., a Montreal-based provider of computer systems for
automobile dealerships. On March 3, 1993 the company purchased certain net
assets of Woodbury Business Systems, a sales organization for a regional
business forms supplier.
All 1994 and 1993 business combinations were accounted for as purchases. The
accounts of the acquired businesses were included in the company's financial
statements since their respective acquisition dates. Goodwill is being
amortized on a straight-line basis over seven to ten years.
On May 29, 1992, the company issued 3,545,336 Class A common shares in exchange
for all of the outstanding common stock of Norick Brothers Inc. and operating
net assets of a related entity. Norick was a manufacturer of business forms,
primarily for automobile dealerships. This business combination was accounted
for as a pooling of interests.
ALLOCATION OF PURCHASE PRICES
1994 1993
- - ----------------------------------------------------------------------------------------------------------------
Current assets $ 6,121 $15,482
Property, plant and equipment 4,943 7,372
Software licensed to customers 12,473
Goodwill 18,979 20,603
Other assets 242 2,229
Liabilities assumed (7,396) (18,087)
------- -------
Totals $22,889 $40,072
======= =======
DIVESTITURE
On June 10, 1994, the company completed the sale of its French subsidiary,
Reynolds and Reynolds S.A., to Turbodata N.V. of Belgium, and recorded an
after-tax gain of $236. In 1993, this subsidiary reported sales of $18,000 and
a net loss of $500.
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30
4. INCOME TAXES
PROVISION FOR INCOME TAXES
1994 1993 1992
- - -----------------------------------------------------------------------------
Current:
Federal $20,340 $31,225 $21,456
State and local 4,121 7,212 3,739
Foreign (380) 410 2,488
Deferred:
Financial services product
financing activities 9,538 2,321 (1,452)
Depreciation (5,778) 73 (866)
Capital losses (3,900) (169) (537)
Capital losses valuation allowance 2,198 169 537
Other - net 4,979 (4,479) 979
------- ------- -------
Provision for income taxes $31,118 $36,762 $26,344
======= ======= =======
Income taxes paid (net of refunds) $24,017 $36,340 $29,208
======= ======= =======
RECONCILIATION OF INCOME TAX RATES
1994 1993 1992
AMOUNT PERCENT Amount Percent Amount Percent
- - ----------------------------------------------------------------------------
Statutory federal
income taxes $34,062 35.0% $31,026 34.8% $21,908 34.0%
State and local
taxes less federal
income tax effect 5,631 5.8 4,609 5.2 3,022 4.7
Divestiture of stock tab
business (11,500) (11.8)
Goodwill amortization
and write-off 3,207 3.3 900 1.0 567 .9
Revaluing deferred taxes 939 1.0
Settlement of tax audits (1,047) (1.2)
Other - net (282) (.3) 335 .4 847 1.3
------- ----- ------- ---- ------- ----
Provision for income
taxes $31,118 32.0% $36,762 41.2% $26,344 40.9%
======= ===== ======= ==== ======= ====
In August 1993, the federal income tax rate was increased from 34% to 35%,
retroactive to January 1, 1993.
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31
INFORMATION SYSTEMS DEFERRED INCOME TAX ASSETS (LIABILITIES)
1994 1993
- - --------------------------------------------------------------------
Current $ 8,832 $ 8,576
------- -------
Non-current:
Postretirement medical 13,603 13,465
Pensions 5,134 5,372
Depreciation (8,507) (14,285)
Capital losses 4,667 767
Capital losses valuation allowance (2,965) (767)
Other - net (11,662) (5,916)
------- -------
Total non-current 270 (1,364)
------- -------
Totals $ 9,102 $ 7,212
======= =======
The carryforward of capital losses expires primarily in 2000.
5. FINANCIAL SERVICES
INCOME STATEMENTS
1994 1993 1992
- - -----------------------------------------------------------------------------------------------
Revenues $19,488 $19,218 $19,190
------- ------- -------
Expenses:
Interest expense 5,044 5,550 6,952
Allowance for losses provision (benefit) (700) 1,100 7,322
General and administrative 2,072 2,003 2,372
------- ------- -------
Total expenses 6,416 8,653 16,646
------- ------- -------
Income before income taxes 13,072 10,565 2,544
Provision for income taxes 5,199 5,420 986
------- ------- -------
Net income $ 7,873 $ 5,145 $ 1,558
======= ======= =======
FINANCE RECEIVABLES
1994 1993
- - -----------------------------------------------------------------------------
Product financing receivables $205,178 $174,617
Receivables pending customer acceptance 27,447 15,100
Unguaranteed residual values 11,117 10,218
Allowance for losses (4,854) (5,846)
Unearned interest income (37,302) (33,219)
Other - net 1,034 841
-------- --------
Totals $202,620 $161,711
======== ========
As of September 30, 1994, product financing receivables due for each of the
next five years were $66,741 in 1995, $55,789 in 1996, $43,988 in 1997, $27,200
in 1998 and $10,507 in 1999.
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32
5. FINANCIAL SERVICES (continued)
ALLOWANCE FOR LOSSES
1994 1993
- - -----------------------------------------------------------------------------
Balance, beginning of year $5,846 $5,871
Provision (benefit) (700) 1,100
Net losses (292) (1,125)
------ ------
Balance, end of year $4,854 $5,846
====== ======
6. FINANCING ARRANGEMENTS
INFORMATION SYSTEMS
1994 1993
- - -----------------------------------------------------------------------------
Fixed rate notes, weighted average interest rates
of 6.7% in 1994 and 8.6% in 1993, maturing
through 2003 $41,301 $40,000
Current portion 287
------- -------
Long-term portion $41,014 $40,000
======= =======
Loan agreements limit consolidated indebtedness and require a minimum current
ratio of 1.50. Loan agreements also limit dividend payments to $23,571 as of
September 30, 1994. The fair value of information systems debt was $37,590 and
$40,000 at September 30, 1994 and 1993, respectively. At September 30, 1994,
debt maturities were $287 in 1995, $231 in 1996, $6,313 in 1997, $5,898 in
1998, and $5,714 in 1999. Interest paid was $3,153 in 1994, $3,428 in 1993 and
$5,372 in 1992.
FINANCIAL SERVICES
The company maintains various interest rate management agreements to limit
interest rate exposure on its variable rate financing arrangements. 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. Ceiling agreements allow the company to borrow at variable interest
rates, but limit the maximum interest rates the company pays. Fixed interest
rates do not change over the life of the swap agreements. Variable interest
rates are reset at least every ninety days and are based on LIBOR or commercial
paper indices. Net interest received or paid on these contracts is reflected
in interest expense.
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33
Notional Amounts
Debt Swaps Ceilings
----------------------------------------------------------------------------------
1994
----------------------------------------------------------------------------------
Short-term borrowings, 5.3% at September 30, 1994 $ 2,000
Variable rate debt, maturing through 2000 49,200 $21,155 $18,750
Weighted average interest rates paid 4.2% 5.4%
Weighted average interest rate received 3.8%
Fixed rate debt, maturing through 1998 53,163
Weighted average interest rate paid 5.7%
-------- ------- -------
Totals $104,363 $21,155 $18,750
======== ======= =======
1993
----------------------------------------------------------------------------------
Variable rate debt, maturing through 1998 $42,425 $34,682
Weighted average interest rates paid 3.6% 6.5%
Weighted average interest rate received 3.3%
Fixed rate debt, maturing through 1997 45,263
Weighted average interest rate paid 6.9%
------- -------
Totals $87,688 $34,682
======= =======
Loan agreements require financial services to maintain a minimum ratio of
income before income taxes and interest expense to interest expense of 1.25.
The fair value of financial services debt was $103,266 and $88,442 at September
30, 1994 and 1993, respectively. At September 30, 1994, debt maturities were
$29,725 in 1995, $23,825 in 1996, $24,313 in 1997, $15,250 in 1998 and $7,500
in 1999. Interest paid was $5,141, $5,515 and $6,830 in 1994, 1993 and 1992,
respectively.
At September 30, 1994, notional amount maturities of interest rate management
agreements were $15,217 in 1995, $14,063 in 1996, $6,875 in 1997 and $3,750 in
1998. The fair value of interest rate management agreements was $559 and
$(632) at September 30, 1994 and 1993, respectively.
REVOLVING CREDIT AGREEMENTS
Information systems and financial services share variable rate revolving credit
agreements which total $60,000 and require commitment fees on unused credit.
At September 30, 1994, available balances under these agreements were $31,050.
FAIR VALUES
Fair values were determined using interest rates available to the company for
debt and interest rate management agreements with the same remaining
maturities.
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34
7. CAPITAL STOCK
1994 1993 1992
- - ------------------------------------------------------------------------------------------------------------------
Preferred:
No par value
Authorized shares 60,000,000 60,000,000 60,000,000
Class A common:
Par value per share $.625 $.625 $.625
Authorized shares 60,000,000 60,000,000 30,000,000
========== ========== ==========
Issued and outstanding shares:
Balance, beginning of year 42,238,022 42,883,624 43,755,608
Issued 1,072,134 637,978 1,240,472
Converted from Class B common 100,000 1,149,856
Repurchased (1,655,400) (1,222,000) (3,196,800)
Retired (47,180) (61,580) (65,512)
---------- ---------- ----------
Balance, end of year 41,707,576 42,238,022 42,883,624
========== ========== ==========
Class B common:
Par value per share $.03125 $.03125 $.03125
Authorized shares 30,000,000 30,000,000 30,000,000
Issued and outstanding shares 10,000,000 12,000,000 12,000,000
Dividends on Class A common shares must be twenty times the dividends on Class
B common shares and must be paid simultaneously. Each share of Class A common
and Class B common is entitled to one vote. A Class B common shareholder may
convert twenty Class B common shares to one share of Class A common. In 1994
and 1992, 2,000,000 and 22,997,120 Class B common shares were converted into
100,000 and 1,149,856 Class A common shares, respectively. The company has
reserved sufficient authorized Class A common shares for Class B conversions
and stock option plans.
Each outstanding Class A common share has one preferred share purchase right.
Each outstanding Class B common share has one-twentieth of a right. Rights
become exercisable if a person or group acquires or seeks to acquire, through a
tender or exchange offer, 20% or more of the company's Class A common shares.
In that event, all holders of Class A common shares and Class B common shares,
other than the acquiror, could exercise their rights and purchase preferred
shares at a substantial discount. At the date of these financial statements,
the company had no agreements or commitments with respect to the sale or
issuance of the preferred shares.
On February 17, 1994, the company's board of directors approved a two-for-one
common stock split. As a result of the split, on March 15, 1994, common
shareholders received one additional share for each share held as of March 1,
1994. Par value remained $.625 per Class A common share and $.03125 per Class
B common share. The company reclassified $13,199 to Class A common and $188 to
Class B common from additional paid-in capital because par value did not
change. Share and per share information presented in the accompanying
financial statements was restated to reflect the stock split.
The company repurchased Class A common shares for treasury at average prices of
$23.61 in 1994, $13.50 in 1993 and $10.85 in 1992. The remaining balance of
shares authorized for repurchase by the board of directors was 1,925,800 at
September 30, 1994. Treasury shares at September 30 were 4,519,512 in 1994,
4,036,246 in 1993 and 3,452,224 in 1992.
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35
8. EMPLOYEE STOCK OPTION PLANS
The company's stock option plans consist of incentive stock options and
non-qualified stock options to purchase Class A common shares which are awarded
to certain key employees. Stock options are typically granted at a price equal
to fair market value on the date of grant. Options may be granted at any price
not less than par value ($.625 at September 30, 1994). No options were granted
at a price less than fair market value in 1994. At September 30, 1994, options
to purchase 880,944 Class A common shares were exercisable and options to
purchase 1,366,856 additional Class A common shares were available for future
awards.
Weighted Average
Shares Under Option Prices
Option Per Share
- - -------------------------------------------------------------------------------
Outstanding, September 30, 1991 2,275,184 $ 4.64
Granted 615,000 6.17
Exercised (1,240,472) 4.22
Canceled (77,916) 6.61
---------
Outstanding, September 30, 1992 1,571,796 5.47
Granted 411,000 10.43
Exercised (637,978) 5.38
Canceled (4,432) 6.27
---------
Outstanding, September 30, 1993 1,340,386 7.03
Granted 2,735,640 24.76
Exercised (459,442) 6.51
Canceled (9,960) 20.00
---------
Outstanding, September 30, 1994 3,606,624 20.51
=========
9. POSTRETIREMENT BENEFITS
PENSION EXPENSE
1994 1993 1992
- - -------------------------------------------------------------------------------------------------------
Defined benefit plans:
Service cost $5,314 $3,817 $3,250
Interest on projected benefit
obligation 7,546 6,543 6,127
Actual return on plan assets (85) (8,156) (8,680)
Net amortization and deferral (5,781) 1,444 1,997
------ ------ ------
Net periodic pension cost 6,994 3,648 2,694
Foreign benefit plan 19 92 (85)
Domestic defined contribution plans 1,897 1,575 1,515
Multi-employer plans 255 423 399
------ ------ ------
Totals $9,165 $5,738 $4,523
====== ====== ======
Actuarial assumptions of defined benefit plans:
Discount rate 7.5% 8.0% 8.75%
Rate of compensation increase 4.5% 5.0% 5.5%
Expected long-term rate of
return on assets 9.0% 9.5% 10.0%
Actuarial cost method PROJECTED UNIT CREDIT
Measurement period JULY 1 - JUNE 30
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36
9. POSTRETIREMENT BENEFITS (continued)
The company sponsors non-contributory, defined benefit pension plans for most
full-time employees. Pension benefits are based on years of service and
compensation during an employee's final ten years of employment. The company's
funding policy is to make annual contributions to the plans sufficient to meet
or exceed the minimum statutory requirements. The company and its actuaries
review the pension plans each year. The actuarial assumptions are intended to
reflect expected experience over the life of the pension liability.
The company sponsors defined contribution savings plans covering most domestic
employees. Generally, contributions are funded monthly and represent 40% of
the first 3% of compensation contributed to the plan by participating
employees. The company also participates in several multi-employer plans which
provide defined benefits to union employees.
FUNDED STATUS OF DEFINED BENEFIT PENSION PLANS
September 30, 1994 September 30, 1993
ABO ABO
Assets Exceeds Assets Exceeds
Exceed ABO Assets Exceed ABO Assets
- - --------------------------------------------------------------------------------------------------------
Defined benefit plans:
Vested benefit obligation $(61,791) $(16,331) $(67,062) $(16,146)
======== ======== ======== ========
Accumulated benefit obligation (ABO) $(64,004) $(21,013) $(69,141) $(19,441)
======== ======== ======== ========
Projected benefit obligation (PBO) $(79,695) $(25,159) $(81,119) $(21,258)
Fair market value of plan assets 75,835 2,664 76,047 1,877
-------- -------- -------- --------
PBO greater than plan assets (3,860) (22,495) (5,072) (19,381)
Unrecognized net loss 7,364 4,924 7,103 4,654
Minimum pension liability (6,257) (6,102)
Unrecognized prior service cost 775 2,838 3,399 470
Unrecognized net liability (asset)
being amortized over 9 to 16 years (3,631) 2,784 (4,681) 3,159
-------- -------- -------- --------
Net pension asset (liability) 648 (18,206) 749 (17,200)
Multi-employer liability (225) (241)
-------- -------- -------- --------
Totals $ 648 $(18,431) $ 749 $(17,441)
======== ======== ======== ========
Actuarial assumptions of defined benefit plans:
PBO discount rate 8.25% 7.5%
Rate of compensation increase 5.0% 4.5%
At September 30, 1994, the minimum pension liability was offset by a $5,607
intangible asset and a $387 charge to shareholders' equity net of income taxes.
At September 30, 1993 the intangible asset was $3,644 and the charge to
shareholders' equity net of income taxes was $1,465. There was no effect on
income or cash flow.
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37
At September 30, 1994 and 1993, about 56% and 62% of the plans' assets were
invested in cash, cash equivalents, U.S. treasury bonds and mortgage backed
government agency securities. The balance of the plans' assets were invested
in equities.
ACCOUNTING CHANGE
Effective October 1, 1992, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 106
requires accrual of postretirement medical and life insurance benefits over the
period in which employees provide services. The company elected to immediately
recognize the transition obligation and recorded the cumulative effect of the
accounting change of $31,500 ($19,106 or $.44 per share net of income tax
benefits) in the first quarter of 1993.
POSTRETIREMENT MEDICAL AND LIFE INSURANCE EXPENSE
1994 1993
- - ---------------------------------------------------------------------------
Defined contribution plan $3,416
------
Defined benefit plans:
Service cost 1,016 $ 981
Interest on accumulated benefit obligation 2,460 2,315
------ ------
Total defined benefit plans 3,476 3,296
------ ------
Totals $6,892 $3,296
====== ======
Actuarial assumptions of defined benefit plans:
Discount rate 7.5% 7.5%
Healthcare cost trend rate through 2007 6.0% 6.0%
Healthcare cost trend rate thereafter 5.0% 5.0%
In 1994, the company introduced Retiree Medical Savings Accounts, a company
funded defined contribution plan. This plan, which covers substantially all
employees, will enable future retirees to purchase postretirement medical
insurance from the company. Contributions are funded annually based on the
company's return on equity and are the same for each eligible employee.
The company sponsors a defined benefit life insurance plan for substantially
all employees. Upon retirement, this plan provides for a fixed death benefit
to be paid to the designated beneficiary. The company also sponsors a defined
benefit medical plan for employees who retired prior to October 1, 1993. The
cost sharing provisions of the plan depend on the medical plan provisions in
effect at the date of retirement. Effective October 1, 1993, the company no
longer provides a defined benefit medical plan for new retirees. Future
retirees may purchase postretirement medical insurance from the company using
Retiree Medical Savings Accounts. Discounts from the market price of
postretirement medical insurance will be provided to certain retirees based on
age and length of remaining service as of October 1, 1993. These discounts are
included in the determination of the accumulated benefit obligation. The
company funds medical and life insurance benefits on a pay-as-you-go basis.
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38
9. POSTRETIREMENT BENEFITS (continued)
POSTRETIREMENT MEDICAL AND LIFE INSURANCE OBLIGATION
1994 1993
- - ---------------------------------------------------------------------------
Accumulated benefit obligation:
Retirees $17,968 $16,616
Fully eligible active plan participants 6,366 4,874
Other active plan participants 10,802 12,042
Unrecognized net gain (45) (208)
------- -------
Totals $35,091 $33,324
======= =======
Actuarial assumptions:
Discount rate 8.25% 7.5%
Healthcare cost trend rate through 2007 6.0% 6.0%
Healthcare cost trend rate thereafter 5.0% 5.0%
The effect of a 1% increase in the assumed healthcare cost trend rate would
have increased the service and interest cost components of postretirement
medical insurance in 1994 by $153 and the accumulated benefit obligation at
September 30, 1994 by $2,003.
10. CASH FLOW STATEMENTS
1994 1993 1992
- - -----------------------------------------------------------------------------------
INFORMATION SYSTEMS
Cash flows provided by (used for) operating
activities:
Net income $58,331 $28,271 $37,634
Adjustments to reconcile net income to
net cash provided by operating activities:
Effect of accounting change 19,106
Depreciation and amortization 34,934 25,092 24,406
Deferred income taxes (2,484) (4,552) (1,017)
Deferred income taxes transferred to (from)
financial services 6,026 1,737 (416)
Loss on sales of assets 3,743 1,072 600
Changes in operating assets and
liabilities:
Accounts receivable (10,184) (7,135) 13
Inventories 2,687 2,135 (1,095)
Prepaid expenses, intangible and other
assets (6,013) (1,695) (3,584)
Accounts payable 5,879 (4,319) 3,924
Accrued and other liabilities 2,037 4,255 4,925
------- ------- -------
Net cash provided by operating activities $94,956 $63,967 $65,390
======= ======= =======
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39
1994 1993 1992
- - -----------------------------------------------------------------------------------
FINANCIAL SERVICES
Cash flows provided by (used for) operating
activities:
Net income $ 7,873 $5,145 $1,558
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred income taxes 9,538 2,321 (1,453)
Deferred income taxes transferred to (from)
information systems (6,026) (1,737) 416
Changes in receivables, other assets
and other liabilities (618) 1,472 7,662
------- ------ ------
Net cash provided by operating activities $10,767 $7,201 $8,183
======= ====== ======
11. SEGMENT REPORTING
The company operates principally in two industry segments, business forms and
computer systems.
The business forms segment manufactures and distributes printed business forms
and systems, custom continuous and snap out forms, specialty printed products
and provides forms management services to automotive, healthcare and general
business markets.
The computer systems segment provides integrated computer systems products and
services to automotive and healthcare markets. The segment's products include
integrated software packages and computer hardware, hardware and software
installation, customer training and consulting, hardware maintenance, software
support and financial services.
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39
40
11. SEGMENT REPORTING (CONTINUED)
Computer Systems
Business Products & Financial
Forms Services Services Corporate Totals
- - -------------------------------------------------------------------------------------------
1994
- - -------------------------------------------------------------------------------------------
Net sales and revenues $425,543 $363,763 $ 19,488 $808,794
Operating income(1) 25,741 59,254 13,072 98,067
Income before income taxes(1) 25,448 61,760 13,072 $(2,958) 97,322
Identifiable assets 242,838 139,038 204,107 48,716(2) 634,699
Depreciation and amortization 16,746 17,218 970 34,934
Capital expenditures 8,502 13,933 5,453 27,888
1993
- - -------------------------------------------------------------------------------------------
Net sales and revenues $396,228 $281,520 $ 19,218 $696,966
Operating income 36,451 44,081 10,565 91,097
Income before income taxes 36,425 44,601 10,565 $(2,307) 89,284
Identifiable assets 235,900 145,365 162,790 26,496(2) 570,551
Depreciation and amortization 11,121 12,972 999 25,092
Capital expenditures 8,110 9,889 896 18,895
1992
- - -------------------------------------------------------------------------------------------
Net sales and revenues $371,627 $254,007 $ 19,190 $644,824
Operating income 30,526 34,260 2,544 67,330
Income before income taxes 30,197 34,085 2,544 $(2,390) 64,436
Identifiable assets 232,114 94,633 155,672 39,426(2) 521,845
Depreciation and amortization 11,488 12,054 864 24,406
Capital expenditures 8,535 8,070 761 17,366
(1) Business forms income was reduced by a $12,400 restructuring charge.
(2) Principally cash and equivalents, and corporate headquarters office building and contents.
12. 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 three environmental remediation sites. 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.
The first site relates to a privately owned and operated solid waste disposal
facility. The EPA has issued a Record of Decision mandating certain
remediation activities. The company has shared costs with other PRPs for the
remedial investigation and feasibility study of the site. The company believes
it is a minor participant, and has accrued its estimated share of response
costs as of September 30, 1994. The company believes that the reasonably
foreseeable resolution will not have a material adverse effect on the financial
statements.
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41
The second 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 the
quarter ended June 30, 1994, the PRP coalition received an engineering
evaluation/cost analysis of the presumed remedy for the site from its private
contractor. However, because the EPA has not yet selected a remedy, potential
remediation costs remain uncertain. Remediation costs for a typical CERCLA
site on the National Priorities List average about $30,000. The engineering
evaluation/cost analysis was consistent with this average. During the quarter
ended June 30, 1994, the company recorded $1,750 of expense and increased its
accrual balance to $2,500 where the balance remained at September 30, 1994.
The company believes that the reasonably foreseeable resolution will not have a
material adverse effect on the financial statements.
In January 1994, by means of a special notice letter, the EPA notified the
company that it was considered to be one of more than three hundred PRPs at a
former drum reconditioning facility. A remedial investigation and feasibility
study is complete. A record of decision has been issued, and a statement of
work for the remedial design and remedial action is in circulation. The
company was unable to substantiate any previous involvement with this facility
and believes that the reasonably foreseeable resolution will not have a
material adverse effect on the financial statements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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13. QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
- - -------------------------------------------------------------------------------------------------------------------
1994
- - -------------------------------------------------------------------------------------------------------------------
Net sales and revenues:
Information systems $187,832 $200,644 $197,477 $203,353
Financial services 4,810 4,815 4,836 5,027
-------- -------- -------- --------
Totals $192,642 $205,459 $202,313 $208,380
======== ======== ======== ========
Costs and expenses:
Cost of sales $103,839 $111,445 $106,649 $107,981
Selling, general and
administrative expenses 62,160 65,770 67,187 66,880
Restructuring charge 12,400
Financial services 1,462 1,495 1,762 1,697
-------- -------- -------- --------
Totals $167,461 $178,710 $187,998 $176,558
======== ======== ======== ========
Net income $14,409 $15,469 $18,097 $18,229
Earnings per common share .33 .35 .41 .42
Cash dividends declared per share:
Class A common .075 .085 .085 .085
Class B common .00375 .00425 .00425 .00425
Closing market prices of Class A
common shares:
High 22.81 24.63 25.38 26.50
Low 19.06 21.19 19.88 22.50
1993
- - -------------------------------------------------------------------------------------------------------------------
Net sales and revenues:
Information systems $158,829 $166,316 $164,897 $187,706
Financial services 4,691 4,826 4,873 4,828
-------- -------- -------- --------
Totals $163,520 $171,142 $169,770 $192,534
======== ======== ======== ========
Costs and expenses:
Cost of sales $ 86,757 $ 91,824 $ 89,554 $101,579
Selling, general and
administrative expenses 53,219 54,739 55,150 64,394
Financial services 3,140 2,051 1,823 1,639
-------- -------- -------- --------
Totals $143,116 $148,614 $146,527 $167,612
======== ======== ======== ========
Income before effect
of accounting change $11,775 $13,339 $13,425 $13,983
Net income (7,331) 13,339 13,425 13,983
Earnings per common share:
Income before effect
of accounting change .27 .30 .31 .32
Earnings per common share (.17) .30 .31 .32
Cash dividends declared per share:
Class A common .065 .065 .065 .065
Class B common .00325 .00325 .00325 .00325
Closing market prices of Class A
common shares:
High 12.78 17.63 19.25 21.81
Low 10.38 12.06 16.00 18.38
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43
SCHEDULE VIII
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
--------------------------------------------------
VALUATION ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
(Dollars in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE --------ADDITIONS------- ----------DEDUCTIONS----
AT CHARGED WRITE-OFFS BALANCE
DESCRIPTION BEGINNING TO COSTS OTHER NET OF OTHER AT END
OF YEAR AND (a) RECOVERIES (a) OF YEAR
EXPENSES
Valuation Accounts - Deducted From Assets to Which They Apply
INFORMATION SYSTEMS
Reserves for Accounts Receivable:
Year ended September 30, 1994 $8,052 $1,625 $52 $4,543 $397 $4,789
Year ended September 30, 1993 $4,964 $2,393 $5,288 $4,516 $77 $8,052
Year ended September 30, 1992 $5,411 $4,395 $0 $4,891 $(49) $4,964
Reserves for Inventory:
Year ended September 30, 1994 $1,887 $1,761 $0 $1,943 $202 $1,503
Year ended September 30, 1993 $1,832 $1,380 $175 $1,463 $37 $1,887
Year ended September 30, 1992 $1,675 $1,717 $0 $1,571 $(11) $1,832
Reserves for Notes Receivable:
Year ended September 30, 1994 $3,023 $575 $0 $2,867 $0 $731
Year ended September 30, 1993 $2,858 $247 $142 $224 $0 $3,023
Year ended September 30, 1992 $1,115 $1,769 $0 $26 $0 $2,858
FINANCIAL SERVICES
Reserves for Finance Receivables:
Year ended September 30, 1994 $5,846 ($700) $0 $292 $0 $4,854
Year ended September 30, 1993 $5,871 $1,100 $0 $1,125 $0 $5,846
Year ended September 30, 1992 $4,084 $7,322 $0 $5,535 $0 $5,871
(a) Includes adjustments from translation of foreign currency to United States
dollars and the effects of acquisitions and disposals of businesses.
43
44
SCHEDULE IX
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
--------------------------------------------------
SHORT TERM BORROWINGS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
(Dollars in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT MONTH-END AVERAGE
BALANCE AVERAGE OUTSTANDING BALANCE INTEREST RATE
CATEGORY AT END OF INTEREST DURING THE DURING THE DURING THE
PERIOD RATE PERIOD PERIOD PERIOD(2)
INFORMATION SYSTEMS
Amounts Payable to Banks For Borrowings (1)
Year ended September 30, 1994 $0 $900 $226 6.24%
Year ended September 30, 1993 $0 $0 $0 3.29%
Year ended September 30, 1992 $0 $1,000 $0 4.31%
FINANCIAL SERVICES
Amounts Payable to Banks For Borrowings (1)
Year ended September 30, 1994 $2,000 5.30% $15,000 $5,167 4.05%
Year ended September 30, 1993 $0 $25,805 $14,667 3.43%
Year ended September 30, 1992 $30,000 4.25% $30,000 $17,676 4.67%
(1) All borrowings were made against unsecured lines of credit at prevailing interest rates.
(2) Weighted average interest rate is the quotient of total short-term borrowing interest expense divided by the
cumulative products of the principal times the period outstanding for each individual borrowing.
44
45
SCHEDULE X
THE REYNOLDS AND REYNOLDS COMPANY AND SUBSIDIARIES
--------------------------------------------------
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
(Dollars in thousands)
COLUMN A COLUMN B
CHARGED TO COSTS AND EXPENSES
1994 1993 1992
Amortization of Intangibles $15,454 $8,345 $6,361
Maintenance and Repairs $8,482 $7,931 $6,435
NOTE: Taxes, other than payroll and income taxes, advertising and royalty costs were each less than
1% of the total revenues for the years indicated and consequently have not been reported above.
45
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INDEX OF EXHIBITS
Securities Exchange Act of 1934
Page in
Form
Exhibit No. Item 10-K
------------------------------------------------------------------------------------------------------------------
(3)(a) Amended Articles of Incorporation; incorporated by reference to Exhibit A of
the Company's definitive proxy statement dated January 8, 1990 filed with
the Securities and Exchange Commission. Amendment to Article Fourth of the
Amended Articles of Incorporation, incorporated by reference to the
Company's definitive proxy statement dated January 6, 1993 filed with the
Securities and Exchange Commission.
(3)(b) Consolidated Code of Regulations; incorporated by reference to Exhibit B to
the Company's definitive proxy statement dated January 8, 1990 filed with
the Securities and Exchange Commission.
(4)(a) Loan Agreement with Metropolitan Life Insurance Company dated September 17,
1986, incorporated by reference to Exhibit (4)(a) to Form 10-K for the
fiscal year ended September 30, 1986.
(4)(b) Copies of the agreements relating to long-term debt, which are not required
as exhibits to this Form 10-K, will be provided to the Securities and
Exchange Commission upon request.
(4)(c) Shareholder Rights Plan incorporated by reference to Exhibit I to the
Company's Form 8-A (File No. 1-10147), which was adopted on May 6, 1991 and
filed with the Securities and Exchange Commission on May 8, 1991.
(9) Not applicable.
(10)(a) Form of Amended and Restated Employment Agreement with Robert C. Nevin and
David R. Holmes dated as of November 9, 1987; incorporated by reference to
Exhibit (10)(c) to Form 10-K for the fiscal year ended September 30, 1987.
(10)(b) Amendment to Amended and Restated Employment Agreement with David R. Holmes
dated as of May 8, 1989; incorporated by reference to Exhibit (10)(e) to
Form 10-K for the fiscal year ended September 30, 1989.
(10)(c) Amendment to Amended and Restated Employment Agreement with David R. Holmes
dated as of December 1, 1989; incorporated by reference to Exhibit (10)(f)
to Form 10-K for the fiscal year ended September 30, 1989.
(10)(d) Amendment to Amended and Restated Employment Agreement with Robert C. Nevin
dated as of December 1, 1989; incorporated by reference to Exhibit (10)(g)
to Form 10-K for the fiscal year ended September 30, 1989.
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Page in
Form
Exhibit No. Item 10-K
------------------------------------------------------------------------------------------------------------------
(10)(e) Amended and Restated Employment Agreement with Robert C. Nevin dated as of
September 30, 1992; incorporated by reference to Exhibit (10)(e) to Form 10-
K for the fiscal year ended September 30, 1992.
(10)(f) Employment Agreement with Joseph N. Bausman dated as of May 8, 1989;
incorporated by reference to Exhibit (10)(h) to Form 10-K for the fiscal
year ended September 30, 1989.
(10)(g) Amendment to Employment Agreement with Joseph N. Bausman dated as of
December 1, 1989; incorporated by reference to Exhibit (10)(i) to Form 10-K
for the fiscal year ended September 30, 1989.
(10)(h) Amendment to Employment Agreement with Joseph N. Bausman dated as of May 31, 55
1994.
(10)(i) Settlement Agreement with Wayne C. Jira dated as of November 9, 1987;
incorporated by reference to Exhibit (10)(f) to Form 10-K for the fiscal
year ended September 30, 1987.
(10)(j) General form of Indemnification Agreement between the Company and each of
its directors dated as of December 1, 1989; incorporated by reference to
Exhibit (10)(m) to Form 10-K for the fiscal year ended September 30, 1989.
(10)(k) Non-Qualified Stock Option Plan -- 1980, Amended and Restated August 11,
1987; incorporated by reference to Exhibit (10)(h) to Form 10-K for the
fiscal year ended September 30, 1987.
(10)(l) Amendment to Non-Qualified Stock Option Plan -- 1980 dated as of December 8,
1989; incorporated by reference to Exhibit (10)(o) to Form 10-K for the
fiscal year ended September 30, 1989.
(10)(m) Amended and Restated Stock Option Plan -- 1989, effective September 29,
1993; incorporated by reference to Exhibit (10)(l) to Form 10-K for the
fiscal year ended September 30, 1993.
(10)(n) Performance Options Policy of the Compensation Committee of the Board of
Directors of The Reynolds and Reynolds Company under the Non-Qualified Stock
Option Plan -- 1980, effective October 1, 1986; incorporated by reference to
Exhibit (10)(i) to Form 10-K for the fiscal year ended September 30, 1987.
(10)(o) Amendment and Restatement No. 1 to the Performance Options Policy of the
Compensation Committee of the Board of Directors of The Reynolds and
Reynolds Company under the Non-Qualified Stock Option Plan -- 1980,
effective October 28, 1987; incorporated by reference to Exhibit (10)(j) to
Form 10-K for the fiscal year ended September 30, 1987.
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Page in
Form
Exhibit No. Item 10-K
---------------------------------------------------------------------------------------------------------------
(10)(p) Amendment and Restatement No. 2 to the Performance Options Policy of the
Compensation Committee of the Board of Directors of The Reynolds and
Reynolds Company under the Non-Qualified Stock Option Plan -- 1980,
effective November 12, 1987; incorporated by reference to Exhibit (10)(k) to
Form 10-K for the fiscal year ended September 30, 1987.
(10)(q) The Reynolds and Reynolds Company Supplemental Retirement Plan; incorporated
by reference to Exhibit (10)(G) to Form 10-K for the fiscal year ended
September 30, 1980.
(10)(r) The Reynolds and Reynolds Company Supplemental Retirement Plan; Amendment
No. 2, adopted on August 17, 1982; incorporated by reference to Exhibit
(10)(j) to Form 10-K for the fiscal year ended September 30, 1982.
(10)(s) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 3, adopted on August 16, 1983; incorporated by reference to Exhibit
(10)(j) to Form 10-K for the fiscal year ended September 30, 1983.
(10)(t) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 4, adopted on November 6, 1984; incorporated by reference to Exhibit
(10)(l) to Form 10-K for the fiscal year ended September 30, 1984.
(10)(u) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 5, adopted on May 13, 1985; incorporated by reference to Exhibit (10)(s)
to Form 10-K for the fiscal year ended September 30, 1985.
(10)(v) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 6, adopted on February 11, 1986; incorporated by reference to Exhibit
(10)(r) to Form 10-K for the fiscal year ended September 30, 1986.
(10)(w) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 7, adopted on August 12, 1986; incorporated by reference to Exhibit
(10)(s) to Form 10-K for the fiscal year ended September 30, 1986.
(10)(x) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 8, adopted on February 10, 1987; incorporated by reference to Exhibit
(10)(s) to Form 10-K for the fiscal year ended September 30, 1987.
(10)(y) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 9, adopted on August 11, 1987; incorporated by reference to Exhibit
(10)(t) to Form 10-K for the fiscal year ended September 30, 1987.
(10)(z) The Reynolds and Reynolds Company Supplemental Retirement Plan, Amendment
No. 10, adopted on May 8, 1989; incorporated by reference to Exhibit
(10)(dd) to Form 10-K for the fiscal year ended September 30, 1989.
(10)(aa) The Reynolds and Reynolds Company Restated Supplemental Retirement Plan
adopted November 9, 1988; incorporated by reference to Exhibit (10)(ee) to
Form 10-K for the fiscal year ended September 30, 1989.
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Page in
Form
Exhibit No. Item 10-K
--------------------------------------------------------------------------------------------------------------
(10)(bb) Resolution of the Board of Directors amending The Reynolds and Reynolds
Company Supplemental Retirement Plan dated as of December 1, 1989;
incorporated by reference to Exhibit (10)(ff) to Form 10-K for the fiscal
year ended September 30, 1989.
(10)(cc) Resolution of the Board of Directors amending The Reynolds and Reynolds
Company Supplemental Retirement Plan, dated as of November 13, 1990;
incorporated by reference to Exhibit (10)(ff) to Form 10-K for the fiscal
year ended September 30, 1990.
(10)(dd) Resolution of the Board of Directors amending The Reynolds and Reynolds
Company Supplemental Retirement Plan, dated as of July 23, 1991;
incorporated by reference to Exhibit (10)(dd) to Form 10-K for the fiscal
year ended September 30, 1991.
(10)(ee) Description of The Reynolds and Reynolds Company Annual Incentive
Compensation Plan adopted as of October 1, 1986; incorporated by reference
to Exhibit (10)(t) to Form 10-K for the fiscal year ended September 30,
1987.
(10)(ff) Description of The Reynolds and Reynolds Company Intermediate Incentive
Compensation Plan adopted as of October 1, 1986; incorporated by reference
to Exhibit (10)(v) to Form 10-K for the fiscal year ended September 30,
1987.
(10)(gg) Description of The Reynolds and Reynolds Company Contingent Deferred Bonus
Plan adopted as of October 1, 1986; incorporated by reference to Exhibit
(10)(w) to Form 10-K for the fiscal year ended September 30, 1987.
(10)(hh) Resolution of the Board of Directors amending The Reynolds and Reynolds
Company Intermediate Incentive Compensation Plan and Contingent Deferred
Bonus Plan dated as of December 1, 1989; incorporated by reference to
Exhibit (10)(jj) to Form 10-K for the fiscal year ended September 30, 1989.
(10)(ii) The Reynolds and Reynolds Company Salaried Retirement Plan Restatement
adopted as of October 1, 1986; incorporated by reference to Exhibit (10)(x)
Form 10-K for the fiscal year ended September 30, 1987.
(10)(jj) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 1
adopted October 1, 1986; incorporated by reference to Exhibit (10)(y) to
Form 10-K for the fiscal year ended September 30, 1987.
(10)(kk) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 2
adopted October 1, 1986; incorporated by reference to Exhibit (10)(z) to
Form 10-K for the fiscal year ended September 30, 1987.
(10)(ll) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 3
adopted September 29, 1988; incorporated by reference to Exhibit (10)(nn) to
Form 10-K for the fiscal year ended September 30, 1989.
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Page in
Form
Exhibit No. Item 10-K
--------------------------------------------------------------------------------------------------------------
(10)(mm) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 4
adopted January 3, 1989; incorporated by reference to Exhibit (10)(oo) to
Form 10-K for the fiscal year ended September 30, 1989.
(10)(nn) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 5
adopted September 29, 1989; incorporated by reference to Exhibit (10)(pp) to
Form 10-K for the fiscal year ended September 30, 1989.
(10)(oo) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 5-
A (formerly Amendment No. 7), effective December 1, 1989; incorporated by
reference to Exhibit (10)(qq) to Form 10-K for the fiscal year ended
September 30, 1990.
(10)(pp) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 6
adopted November 13, 1990; incorporated by reference to Exhibit (10)(rr) to
Form 10-K for the fiscal year ended September 30, 1990.
(10)(qq) The Reynolds and Reynolds Company Salaried Retirement Plan, Amendment No. 7
adopted January 31, 1991; incorporated by reference to Exhibit (10)(pp) to
Form 10-K for the fiscal year ended September 30, 1992.
(10)(rr) The Reynolds and Reynolds Company Retirement Plan (formerly The Reynolds and
Reynolds Company Salaried Retirement Plan), Amendment No. 8 adopted November
17, 1992; incorporated by reference to Exhibit (10)(qq) to Form 10-K for the
fiscal year ended September 30, 1992.
(10)(ss) The Reynolds and Reynolds Company Retirement Plan (formerly The Reynolds and
Reynolds Company Salaried Retirement Plan), Amendment No. 9 adopted August
19, 1993; incorporated by reference to Exhibit (10)(rr) to Form 10-K for the
fiscal year ended September 30, 1993.
(10)(tt) The Reynolds and Reynolds Company Retirement Plan (formerly The Reynolds and 57
Reynolds Company Salaried Retirement Plan), Amendment No. 10 adopted June 1,
1994.
(10)(uu) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan), effective November 1, 1983; incorporated by reference to
Exhibit (10)(n) to Form 10-K for the fiscal year ended September 30, 1983.
(10)(vv) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) First and Second Amendments ratified on May 13, 1985;
incorporated by reference to Exhibit (10)(x) to Form 10-K for the fiscal
year ended September 30, 1985.
(10)(ww) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Third Amendment effective January 1, 1986; incorporated by
reference to Exhibit (10)(bb) to Form 10-K for the fiscal year ended
September 30, 1986.
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Exhibit No. Item 10-K
--------------------------------------------------------------------------------------------------------------
(10)(xx) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Fourth Amendment adopted February 6, 1987; incorporated by
reference to Exhibit (10)(dd) to Form 10-K for the fiscal year ended
September 30, 1987.
(10)(yy) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Fifth Amendment adopted February 9, 1987; incorporated by
reference to Exhibit (10)(ee) to Form 10-K for the fiscal year ended
September 30, 1987.
(10)(zz) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Sixth Amendment adopted September 30, 1987; incorporated by
reference to Exhibit (10)(ff) to Form 10-K for the fiscal year ended
September 30, 1987.
(10)(aaa) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Seventh Amendment adopted September 21, 1988; incorporated
by reference to Exhibit (10)(xx) to Form 10-K for the fiscal year ended
September 30, 1989.
(10)(bbb) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Eighth Amendment adopted January 6, 1989; incorporated by
reference to Exhibit (10)(yy) to Form 10-K for the fiscal year ended
September 30, 1989.
(10)(ccc) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Ninth Amendment adopted September 29, 1989; incorporated by
reference to Exhibit (10)(zz) to Form 10-K for the fiscal year ended
September 30, 1989.
(10)(ddd) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Tenth Amendment adopted December 15, 1989; incorporated by
reference to Exhibit (10)(aaa) to Form 10-K for the fiscal year ended
September 30, 1989.
(10)(eee) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Eleventh Amendment adopted May 7, 1990; incorporated by
reference to Exhibit (10)(ccc) to Form 10-K for the fiscal year ended
September 30, 1990.
(10)(fff) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Twelfth Amendment adopted July 24, 1990; incorporated by
reference to Exhibit (10)(ddd) to Form 10-K for the fiscal year ended
September 30, 1990.
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Page in
Form
Exhibit No. Item 10-K
--------------------------------------------------------------------------------------------------------------
(10)(ggg) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Thirteenth Amendment adopted November 13, 1990; incorporated
by reference to Exhibit (10)(eee) to Form 10-K for the fiscal year ended
September 30, 1990.
(10)(hhh) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Fourteenth Amendment adopted August 31, 1992; incorporated
by reference to Exhibit (10)(eee) to Form 10-K for the fiscal year ended
September 30, 1992.
(10)(iii) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Fifteenth Amendment adopted December 1, 1992; incorporated
by reference to Exhibit (10)(fff) to Form 10-K for the fiscal year ended
September 30, 1992.
(10)(jjj) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Sixteenth Amendment adopted February 25, 1993; incorporated
by reference to Exhibit (10)(hhh) to Form 10-K for the fiscal year ended
September 30, 1993.
(10)(kkk) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Seventeenth Amendment adopted February 26, 1993;
incorporated by reference to Exhibit (10)(iii) to Form 10-K for the fiscal
year ended September 30, 1993.
(10)(lll) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Eighteenth Amendment adopted November 3, 1993; incorporated
by reference to Exhibit (10)(jjj) to Form 10-K for the fiscal year ended
September 30, 1993.
(10)(mmm) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan
("401(k)" Plan) Nineteenth Amendment adopted December 14, 1993; incorporated
by reference to Exhibit (10)(kkk) to Form 10-K for the fiscal year ended
September 30, 1993.
(10)(nnn) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan 60
("401(k)" Plan) Twentieth Amendment adopted May 9, 1994.
(10)(ooo) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan 61
("401(k)" Plan) Twenty-First Amendment adopted July 1, 1994.
(10)(ppp) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan 63
("401(k)" Plan) Twenty-Second Amendment adopted September 30, 1994.
(10)(qqq) The Reynolds and Reynolds Company Tax Deferred Savings and Protection Plan 65
("401(k)" Plan) Twenty-Third Amendment adopted November 1, 1994.
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Exhibit No. Item 10-K
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(10)(rrr) General Form of Deferred Compensation Agreement between the Company and each
of the following officers; incorporated by reference to Exhibit (10)(p) to
Form 10-K for the fiscal year ended September 30, 1983.
Joseph N. Bausman, R. H. Grant, III, David R. Holmes, Dale L.
Medford and Robert C. Nevin
(10)(sss) Resolution of the Board of Directors and General Form of Amendment dated
December 1, 1989 to the Deferred Compensation Agreements between the Company
and each of the following officers; incorporated by reference to Exhibit
(10)(fff) to Form 10-K for the fiscal year ended September 30, 1989.
Joseph N. Bausman, R. H. Grant, III, David R. Holmes, Dale L.
Medford and Robert C. Nevin
(10)(ttt) General Form of Collateral Assignment Split-Dollar Insurance Agreement and
Policy and Non-Qualified Compensation and Disability Benefit Agreement
between the Company and each of the following officers; incorporated by
reference to Exhibit (10)(dd) to Form 10-K for the fiscal year ended
September 30, 1985.
Joseph N. Bausman, Michael J. Gapinski, R. H. Grant, III,
David R. Holmes, Adam M. Lutynski, Dale L. Medford and Robert
C. Nevin.
(10)(uuu) Resolution of the Board of Directors and General Form of Amendment dated
December 1, 1989 to the Non-Qualified Compensation and Disability Benefit
between the Company and each of the following officers; incorporated by
reference to Exhibit (10)(hhh) to Form 10-K for the fiscal year ended
September 30, 1989.
Joseph N. Bausman, Michael J. Gapinski, R. H. Grant, III,
David R. Holmes, Adam M. Lutynski, Dale L. Medford and Robert
C. Nevin.
(10)(vvv) Agreement dated March 11, 1963, between the Company and Richard H. Grant,
Jr., restricting transfer of Class B Common Stock of the Company;
incorporated by reference to Exhibit 9 to Registration Statement No. 2-40237
on Form S-7.
(10)(www) Amendment dated February 14, 1984 to Richard H. Grant, Jr.'s Agreement
restricting transfer of Class B Common Stock of the Company dated March 11,
1963; incorporated by reference to Exhibit (10)(u) to Form 10-K for the
fiscal year ended September 30, 1984.
(10)(xxx) Exchange Agreement dated May 29, 1992 among the Company, Norick Investment
Company A Limited Partnership, Frances N. Lilly and Majorie K. Norick;
incorporated by reference to Exhibit 2(b) to the Company's Registration
Statement on Form S-3 filed with the Securities and Exchange Commission on
June 11, 1992 (Registration Statement No. 33-48546).
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Form
Exhibit No. Item 10-K
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(10)(yyy) Exchange Agreement dated May 29, 1992 between the Company and Third
Generation Leasing Company; incorporated by reference to Exhibit 2(c) to the
Company's Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on June 11, 1992 (Registration Statement No. 33-48546).
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(18) Not applicable
(21) List of subsidiaries 66
(22) Not applicable
(23) Consent of Independent Auditors 20
(24) Not applicable
(27) Financial Data Schedule
(28) Not applicable
(99) Not applicable
54