The Reynolds and Reynolds Company

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The Reynolds and Reynolds Company

115 South Ludlow Street
Dayton, Ohio 45402
U.S.A.
Telephone: (937) 485-2000
Toll Free: (888) 473-9739
Fax: (937) 449-4213
Web site: http://www.reyrey.com

Public Company
Incorporated: 1889
Employees: 4,763 (2001 est.)
Sales: $1,004 billion (2001)
Stock Exchanges: New York
Ticker Symbol: REY
NAIC: 541512 Computer Systems Design Services

The Reynolds and Reynolds Company is one of the world’s leading information management companies. Reynolds and Reynolds primarily serves the automotive industry, supplying them with software and services to manage a variety of operations, including parts procurement, retail and management enterprise systems, customer loyalty programs, document management, sales force education, accounting, leasing services, and the installation and maintenance of computer hardware and software. Reynolds and Reynolds also sells printed business forms, provides information technology consulting and training services, and offers integrated document solutions that combine paper and electronic capabilities. Reynolds and Reynolds also supplies document management services to companies outside of the automotive industry. Reynolds and Reynolds’ success is due largely to their ability to expand with technology, offering their customers cutting-edge resources and ensuring that the tools they introduce are integrated seamlessly into their customers’ business practices.

The Formative Years: 1866-1960

In 1866, Lucius D. Reynolds, a former Beliefontaine, Ohio, newspaper publisher, and his brother-in-law, James R. Gardner founded Gardner and Reynolds. The company made ledgers with removable carbon to allow originals and copies to be made simultaneously. Only one year later, Gardner sold his portion of the company to Lucius’ father, Ira Reynolds, changing the firm’s name to Reynolds and Reynolds. In 1869, Ira patented a system for duplicating sales books that utilized an inserted carbon leaf, and a removable and reusable hardcover.

The company’s big break came when they won a contract in 1927 to produce business forms and paper-based accounting systems for Chevrolet’s nationwide dealerships. The organization of data that Reynolds and Reynolds achieved while working this contract helped Chevrolet to overtake Ford in the marketplace. This success led Reynolds to establish an automotive division and set the wheels in motion for their becoming the major supplier of business forms to the entire automobile dealer market. The next ten years were spent expanding Reynolds and Reynolds’ reach; they were busy opening sales offices across the United States. In 1939, when the Richard Hallam Grant family bought controlling interest in Reynolds and Reynolds, the company’s ties to the automobile industry were strengthened; R.H. Grant, Sr., had played a leading role in General Motors’ rise in the automobile market. At this point, 19 Reynolds and Reynolds sales offices were spread across the country. The opening of an office in Detroit to act as liaison between Reynolds and Reynolds and the automobile manufacturers’ business management offices tied the knot, sealing the company’s dedication to the automobile industry.

Expansion During the 1960s

The 1960s were an extremely eventful time period for Reynolds and Reynolds. With the purchase in 1960 of Controlomat, a Boston company that had computerized accounting for area auto dealers since 1956, Reynolds and Reynolds expanded their paper-only business approach to include electronic data processing. After two years of creating and testing a computerized accounting system specially designed for auto dealers, they released a product called Electronic Accounting.

In 1961 the company went public, and in 1963 the firm expanded internationally, forming Reynolds and Reynolds (Canada) Ltd. with the purchase of the automotive division of Windsor Office Supply at Windsor, Ontario, Canada. The purchase of the auto dealer forms business of Alger Press Ltd. based in Oshawa, Ontario, made Reynolds and Reynolds (Canada) Ltd. the predominant supplier of standard forms and systems to Canadian auto dealers.

Electronic Accounting took off immediately and the company opened more and more data processing centers across the United States. In 1963 the first centers were opened in Celina, Ohio, and Glendale, California. The year 1965 brought with it the opening of Electronic Accounting data processing centers in Burlingame (near San Francisco) and Chicago.

In 1966, Reynolds and Reynolds announced a new data processing service for auto dealers called EPIC (Electronic Parts Inventory Control). The service was offered to a limited number of firms until it was released for sale to all of the company’s electronic data processing customers in 1967, when it emerged renamed RAPIC. Two other data processing tools were released in conjunction with RAPIC, a management report and account system for automobile lessors called LEASe and an accounts receivable system. With an eye to the future, the company installed their first third-generation computer in the Celina, Ohio, data processing center in 1968. They intended to install the same computers at all of their data processing centers spread across the United States. Soon the company entered the data transmission field, offering data transmission (as an alternate input method) to their Electronic Accounting customers.

A Technological Decade: The 1970s

In 1970 the company completed installation of third-generation computers at all seven of their data processing centers. The company’s expansion reached a critical mass, and Reynolds and Reynolds broke ground on a $1.75 million expansion that would add 49,000 square feet of space to the Electronic Data Processing building. Another major milestone was reached in 1971 when the company launched their first electronic accounting service, called Vital Information Property (VIP), with online capability. VIP was soon renamed Vital Information for Management (VIM), and Reynolds and Reynolds added to the value of this product with the purchase and assimilation of two firms’ business and customer base—Dealer-Management Analysis Corp. (D-MAC) and Computer Systems Corp. D-MAC provided computerized analyses of financial statements for auto dealers and Computer Systems Corp. carried an annual volume of about $120,000 in electronic data processing services to auto dealers in the Denver area. The purchase of these two companies was just the beginning of an acquisitions spree for Reynolds and Reynolds. The company quickly followed the purchase of these two organizations with the 1973 purchase of World Wide Time Sharing, Inc. and Diversified Online Computing, Inc. (DOC). These two companies helped Reynolds and Reynolds expand their market into Chicago and Tucson and to expand their offerings by integrating World Wide Time Sharing, Inc.’s knowledge of online order-writing-invoicing and inventory control and DOC’s minicomputer accounting and parts inventory technology. Minicomputer technology formed the basis of Reynolds and Reynolds’ VIM II service.

The company followed the successful release of the VIM II service with the announcement in 1975 that they planned to offer a VIM III system that would provide services similar to the VIM II but would afford the customer a choice to either lease or purchase the software and hardware. A Dayton-based Chevrolet dealership was the first company to install the VIM III system. In order to market their VIM II service farther afield, Reynolds and Reynolds agreed in principle to a deal with an English company called Kalamazoo Limited of England to market VIM II in the United Kingdom.

By 1977 computer-related sales at Reynolds had risen to 45.5 percent of total sales, and to 50.6 percent in 1978. A reorganization of the company’s sales and marketing operation resulted in dealer computer services and business forms becoming the two main groups. The end of the decade was marked with the company’s first manufactured computer by ReyZon Computers, a joint-venture formed with Zonic Technical Laboratories, Inc. ReyZon was soon (in 1980) purchased outright by Reynolds and Reynolds, forming Reynolds and Reynolds’ Computer Manufacturing Operation (CMO). Soon the computer ReyZon had designed, TC 1000, was upgraded to include two new systems for the dealer market. The updated computer system was called TC 1000 Dealer Management Systems and offered remote intelligent processing, low-cost accounting and parts inventory control applications. Computer manufacturing was not to be a long-lived aspect of the company’s business plan. CMO was eventually phased out and the company returned its full attention to the more lucrative practice of purchasing the hardware their customers would need to run Reynolds and Reynolds software from others.

Company Perspectives:

Reynolds is the leading provider of integrated solutions that help retailers manage change and improve their profitability. We enable car companies and retailers to work together to build the lifetime value of their customers. Our core values: We focus on our customers. We remember that people are the essence of our company. We understand that speed is essential for gaining competitive advantage. We constantly strive for innovation. We maintain the highest standards of integrity. We recognize that sustained, profitable growth is the key to our long-term success.

Growth Continues Throughout the 1980s

Reynolds and Reynolds continued their practice of constant growth throughout the 1980s. During this time, they acquired multiple companies that allowed them to continue adding value to the services they offered the automobile market. They formed a financial subsidiary, called Reyna Financial Corporation to assist customers in purchasing computers, hardware and software; they offered a new group of computer systems to auto dealers called VIM/NET that provided expandability, an array of systems for all sizes of dealers, and networking capabilities. The VIM/NET systems grew and expanded constantly, with the company frequently offering updated versions and expanding the VIM/NET reach into both France and Australia in 1983. The company also expanded in other areas including: marketing more of their products to auto dealers in Canada, Australia, France, New Zealand, and the United Kingdom; and purchasing the printing plant of the business forms division of Burroughs Ltd. at Sydney, Australia. The plant, under the management of Reynolds and Reynolds (Australia) Ltd., produced forms for Australian auto dealers.

In 1984, Reynolds and Reynolds brought David R. Holmes on board to head and revive their computer operation. The company’s software was out-of-date; it did not allow for multiple users to access information. Holmes oversaw the development of a computer system called ERA (introduced in 1987) that allowed car dealerships to communicate with suppliers, databases, and to generate reports drawing from information found on 1,000 workstations. This new product addressed the needs of many different departments of a car dealership, giving salespeople a tool to access prices of vehicles and service department employees a tool to search for used-car parts. The same year the ERA system hit the market, Reynolds and Reynolds introduced an electronic parts catalog system, which used a combination of computer and CD-ROM technology to electronically deliver parts information and graphics to dealerships.

In 1988 when Holmes was named president and CEO, he addressed Reynolds and Reynolds’ financial and organizational problems. For the first time in its 123-year history, the company went through a large-scale layoff. The downsizing of the company did not affect the string of successes and contracts that Reynolds and Reynolds signed in the last years of the 1980s. Reynolds broke into the Fortune 500; became the exclusive supplier of dealer communications systems for American Isuzu Motors Inc. (AIMI) and Saab-Scania of America, Inc.; signed agreements to market electronic parts catalog systems for Jeep/Eagle, Mercedes-Benz, Nissan, Honda Cars of North America, General Motors and Chrysler; and won a contract with Chrysler Motors to provide interactive video technology for Chrysler’s Sales Effectiveness Training (SET). Reynolds also began expanding beyond the exclusivity of the automobile market with a contract to supply business forms and forms and management services to Insurance Services Office, General Dynamics, and General Electric.

Some of Reynolds’ success may have been due to an innovative management move by new CEO Holmes. He observed that one of the byproducts of the acquisition of so many different companies in the past decade was that Reynolds and Reynolds was awash in many different management styles and personalities. Holmes and his corporate Vice-President of Human Resources Tom Momchilov devised a plan to create a formal education and training program that would give the company’s executives a chance to come together to help create the vision and strategies that would focus the entire company in the years ahead. The education program was a success. Holmes noted “The process defined, focused, and shaped our core values. In addition, it made management perceptibly more accountable for company performance.”

Additional Information Management Opportunities Arise During the 1990s

Throughout the 1990s, Reynolds and Reynolds continued its process of acquiring companies that possessed desired technology or market share, and integrating those companies’ technology and reach into their offerings. The company continued to expand upon the ERA system’s features. In 1994, Reynolds embarked upon a strategy to grow its medical system’s business by purchasing PD Medical Systems and merging it with NMC Services, their wholly owned subsidiary, to form Reynolds and Reynolds Healthcare Systems. That same year, the company sold its subsidiary located in France and exited the French automobile market.

Key Dates:

1866:: Lucius D. Reynolds and James R. Gardner found “Gardner and Reynolds.”.
1867:: Gardner sells his share of the business to Lucius Reynolds’ father Ira Reynolds. The firm becomes Reynolds and Reynolds.
1889:: The firm is incorporated as The Reynolds and Reynolds Company.
1927:: The company begins producing standard business forms and accounting systems for Chevrolet dealers.
1947:: The company opens an office in Detroit to establish closer contact with the entire business offices of the automobile manufacturers.
1960:: Reynolds and Reynolds becomes the first company to offer computer services to automobile dealers.
1961:: The company sells its stock to the public.
1963:: The company begins to expand in Canada, and in Ohio, California and Chicago.
1971:: The company purchases Dealer-Management Analysis Corp. (D-MAC) and Computer Systems Corp.
1973:: The company acquires World Wile Time Sharing, Inc. and Diversified Online Computing, Inc. (DOC).
1977:: Annual sales hit $100 million.
1982:: Reynolds and Reynolds announces a family of computer systems for auto dealers that includes networking—a feature new to the auto dealer market.
1994:: The company purchases PD Medical Systems as part of its strategy to begin its expansion into the medical systems business.
1995:: Reynolds and Reynolds is named one of InfoWorld magazine’s ‘Top 100 in Business Technology Innovations.”.
2000:: The company sells its Information Solutions Group to The Carlyle Group for $360 million cash.
2001:: Reynolds and Reynolds is named in the top 25 percent of eWeek’s list of “2001 FastTrack 500 eBusiness Innovators.”.

Among the slew of products that Reynolds and Reynolds offered to their customers in the 1990s, including the Vehicle Locator and Marketing Network (which allowed dealers to tap into an online database, locate, acquire, and resell used vehicles) was a product called Sales Vision. Sales Vision was a prospect—and management application that was designed to be a useful sales tool for dealerships of all sizes. It provided salespeople with all of the tools they might need to be successful, including a built-in prospective customer database, a daily list of contacts for calls and follow-ups, the ability to create personalized letters to clients, and even multimedia sales training that the salesperson could watch while not actively selling.

With the portion of Reynolds and Reynolds’ business that focused on automobile dealerships doing well, Holmes focused some of his attention on expanding the company’s burgeoning non-automotive integrated information management business. In 1997 alone, Reynolds Healthcare Systems acquired Crane-Drummond, a leading Canadian provider of business and document management services, and Fiscal Information, a company that primarily focused its business of providing management systems for radiologists in Florida and Colorado. In 1999 the company expanded its customer base with contracts to provide document management and other services to John Deere & Co. and TransAmerica Life, the insurance arm of Transamerica Corporation. InfoWorld magazine took note of Reynolds and Reynolds’ practice of consistently offering innovative technologies by recognizing them as one of the “Top 100 in Business Technology Innovations.” The company also won the largest contract in their history, a document-outsourcing contract with Novation a Texas-based supply firm.

The man chosen to replace Holmes upon his retirement was Lloyd “Buzz” Waterhouse. Waterhouse joined the company after working 26 years for IBM, where he had recently served as general manager of e-business services and was an early participant in the formation of the Internet. Waterhouse wasted no time in the formation of an eBusiness Group, a team tasked with making use of Internet technology to the benefit of Reynolds’ automotive and document services markets. In February 2000, the company announced their intention to form a joint venture with Automatic Data Processing, Inc. and CCC Information Services, Inc. to build a Web-based dealer-to-dealer auto parts exchange. The company also quickly released the Internet-enabled version of their successful ERA system (ERA2). The purchase of HAC Group LLC, the world’s leading provider of learning, customer relationship management, and Web services to automotive retailers and manufacturers, prompted the creation of Reynolds Transformation Services. They also changed the name of their National Customer Support service to the Technical Assistance Center (TAC). TACs across the country were repeatedly given awards like the STAR (Software Technical Assistance Recognition) Award from groups like The Help Desk Institute for high-quality technical assistance.

Also in 2000, the company sold its Information Solutions Group (ISG), the company’s document-outsourcing and customer relationship management business, to Washington, D.C.-based global, private equity firm The Carlyle Group for $360 million cash. Carlyle, a firm that organizes, structures, and acts as lead equity investor in management-led buyouts, private placements, and venture capital transactions, renamed the business The Relizon Company. At the time of the sale, ISG’s 12-month revenue run rate was about $800 million. Reynolds’ intentions were to use the proceeds from the sale to fund its growth initiatives and share repurchase programs, as well as for general corporate purposes.

David R. Holmes, Reynolds chairman and CEO, said, “We’re very proud of the ISG team. They’ve created a business with solid revenue growth and profitability, and the industry’s highest customer satisfaction level and return on net assets. Now, with a clear focus on value-added document management and marketing solutions, we believe the future looks even brighter for ISG… . This is a great day for our ISG associates, the community and the ‘new Reynolds,’ which is now focused exclusively on leading the transformation of automotive retailing.” In 2001, Reynolds and Reynolds formally entered the online automobile retail market when they launched CarsDirect Connect with CarsDirect.com, a buying process that offered consumers choices in the way they shop for and purchase vehicles.

The announcement in 2002 that Reynolds and Reynolds would phase out its Unix-based dealer system and replace it with a Microsoft system that utilizes .NET technology caused a flurry of discussion in the automobile dealership market. Some dealers were happy to hear of the change, noting that many of the released operating programs that their dealerships used were based on Microsoft Windows and that the switch would make future data transfer simpler. Other dealers were unhappy with the prospect of purchasing an entirely new system of hardware to support Reynolds’ switch, particularly with the .NET platform being relatively new and untested compared with the familiar Unix-based system. The company announced that the transition to the .NET platform would be complete by 2012.

Principal Subsidiaries

Choiceparts LLC (founded jointly with Automatic Data Processing, Inc. and CCC Information Services); DealerKid; HAC Group LLC; Networkcar Inc.; Reyna Capital Corp.

Principal Competitors

Accenture Ltd.; Automatic Data Processing, Inc.; Avery Dennison Corporation; The Cobalt Group; Compaq Computer Corporation; Electronic Data Systems Corporation; Computer Sciences Corporation; Deluxe Corporation; The Standard Register Company.