CINCINNATI, September 18, 2003 — Cintas Corporation(Nasdaq:CTAS) today reported revenue for the first quarter of fiscal 2004 of $678 million, a 2 percent increase from the previous year’s first quarter revenue of $666 million. The company also reported a 7 percent increase in pre-tax profits before a one-time charge (3 percent increase after the charge). Net income and earnings per share, after the one-time charge, were $63.3 million and $.37, respectively, or a 3% increase from the first quarter results a year ago.
Scott D.Farmer, Chief Executive Officer, stated, “Our government reports that the economy is growing, however, it is a jobless recovery. In fact, in the month of August, U.S. government statistics showed a continued decline in the workforce of 93,000 jobs. Many of our customers’ businesses continue to experience the pressure of a sluggish economy and, as a result, our business has been negatively impacted. However, we are pleased with the fact that we continued to grow in this economic environment.”
Mr. Farmer continued, “We are also pleased with the tremendous progress we have made in integrating the Omni operations, which were acquired in May 2002. Omni was the largest acquisition in the Company’s history, and those operations are now fully integrated into our business. With the integration of Omni behind us, our gross margins of 42.4 percent compare very favorably to the fourth quarter gross margins of 41.3 percent. In addition, our balance sheet continues to strengthen as our operations gain efficiencies and generate healthy cash flow. We attribute this constant improvement to our people, who share in a common goal of always trying to make our company better.”
Mr. Farmer stated, “During the quarter, we had a one-time charge of approximately $4 million to write off a receivable from a garment manufacturer. A few years ago, we had provided capital to a garment manufacturer to allow him to improve his operation and to increase capacity. Unfortunately, the supplier’s business has subsequently deteriorated. Although we believe there is some chance for a partial recovery, we believe that the receivable should be written off, in its entirety, at this time.”
The Company’s balance sheet is strong and the company has reduced its long-term debt to total capitalization from 31 percent at August 31, 2002 to 24 percent at August 31, 2003. Cash and marketable securities reached $92 million, an increase of $23 million from August 31, 2002, and shareholders’ equity reached $1.7 billion, compared to $1.5 billion last year.
Mr. Farmer commented, “We reiterate our guidance for the full fiscal year 2004. Our forecast is for revenue to be in a range of $2.75 to $2.95 billion compared to fiscal 2003‘s revenue of $2.69 billion. Our guidance for earnings per share is $1.52 to $1.64 compared to $1.45 for fiscal 2003. Capital expenditures for fiscal 2004 will be approximately $150 million. “
Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products and first aid and safety products for over 500,000 businesses. Cintas is a publicly held company traded over the Nasdaq National Market under the symbol CTAS, and is a Nasdaq-100 company and component of the Standard & Poor’s 500 Index. The Company has achieved 34 consecutive years of growth in sales and earnings, to date.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as estimates, anticipates, projects, plans, expects, intends, believes, should and similar expressions and by the context in which they are used. Such statements are based upon current expectations of the Company and speak only as of the date made. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ from those set forth in this news release. Factors that might cause such a difference include the possibility of greater than anticipated operating costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor, costs and possible effects of union organizing activities, outcome of pending environmental matters, the initiation or outcome of litigation, higher assumed sourcing or distribution costs of products and the reactions of competitors in terms of price and service. Forward-looking statements speak only as of the date made. Cintas undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date on which they are made.
For additional information, contact:
William C. Gale, Senior Vice President-Finance and Chief Financial Officer--513-573-4211
Karen L. Carnahan, Vice President and Treasurer--513-573-4013
| Three Months Ended Aug 31, 2003 Aug 31, 2002 ------------------------------------------- | % Chng. - ------- | ||||||
|---|---|---|---|---|---|---|---|
| Revenue: | |||||||
| Rentals | $ 538,404 | $ 523,656 | 2.8 | ||||
| Other services | 139,252 | 142,070 | -2.0 | ||||
| Total revenue | $ 677,656 | $ 665,726 | 1.8 | ||||
| Costs and expenses (income): | |||||||
| Cost of rentals | $ 298,145 | $ 286,951 | 3.9 | ||||
| Cost of other services | 92,063 | 96,762 | -4.9 | ||||
| Selling and admin. expenses | 176,130 | 176,832 | -0.4 | ||||
| Interest income | (413 | ) | (739 | ) | -44.1 | ||
| Interest expense | 6,880 | 8,024 | -14.3 | ||||
| Write off of loan receivable | 4,343 | 0 | N/A | ||||
| Total costs and expenses | $ 577,148 | $ 567,830 | 1.6 | ||||
| Income before income taxes | 100,508 | 97,896 | 2.7 | ||||
| Income taxes | 37,181 | 36,249 | 2.6 | ||||
| Net income | $ 63,327 | $ 61,647 | 2.7 | ||||
| Per share data: | |||||||
| Basic earnings per share | $ .37 | $ .36 | 2.8 | ||||
| Diluted earnings per share | $ .37 | $ .36 | 2.8 | ||||
| Basic shares outstanding | 170,652 | 170,036 | |||||
| Diluted shares outstanding | 171,922 | 172,199 | |||||
| Three Months Ended Aug 31, 2003 Aug 31, 2002 ---------------------------------------------- | % Chng. - ------- | ||||||
|---|---|---|---|---|---|---|---|
| Rental gross margin | 44.6% | 45.2% | |||||
| Other services gross margin | 33.9% | 31.9% | |||||
| Total gross margin | 42.4% | 42.4% | |||||
| Pre-tax income before one-time charge | $ 104,851 | $ 97,896 | 7.1 | ||||
| One-time charge | 4,343 | 0 | |||||
| Pre-tax income after one-time charge | $ 100,508 | $ 97,896 | 2.7 | ||||
| Net margin | 9.3% | 9.3% | |||||
| Depreciation and amortization | 35,435 | 38,066 | -6.9 | ||||
| Capital expenditures | 31,007 | 21,647 | 43.2 | ||||
| Long-Term Debt to Capitalization | 23.6% | 30.9% | |||||
| Aug 31, 2003 - ---------------------- | Aug 31, 2002 - -------------------- | ||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ 54,914 | $ 33,407 | |||
| Marketable securities | 37,371 | 35,753 | |||
| Accounts receivable, net | 271,766 | 282,351 | |||
| Inventories | 224,845 | 209,513 | |||
| Uniforms and other rental items in service | 299,726 | 292,057 | |||
| Prepaid expenses | 8,759 | 10,963 | |||
| Total current assets | 897,381 | 864,044 | |||
| Property and equipment, at cost, net | 779,552 | 770,291 | |||
| Goodwill | 726,334 | 689,043 | |||
| Service contracts | 140,606 | 155,361 | |||
| Other assets | 52,253 | 57,213 | |||
| $ 2,596,126 | $ 2,535,952 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | $ 48,839 | $ 70,854 | |||
| Accrued liabilities | 85,904 | 115,333 | |||
| Income taxes: | |||||
| Current | 31,415 | 26,233 | |||
| Deferred | 66,484 | 74,290 | |||
| Long-term debt due within one year | 26,653 | 16,736 | |||
| Total current liabilities | 259,295 | 303,446 | |||
| Long-term debt due after one year | 527,714 | 663,590 | |||
| Deferred income taxes | 99,139 | 83,243 | |||
| Shareholders' equity: | |||||
| Preferred stock, no par value, 100,000 shares | |||||
| authorized,none outstanding | -- | -- | |||
| Common stock, no par value, 425,000,000 shares | |||||
| authorized, 170,731,456 shares issued and | |||||
| outstanding (170,142,146 at August 31, 2002) | 77,530 | 68,579 | |||
| Retained earnings | 1,631,398 | 1,426,783 | |||
| Other accumulated comprehensive income (loss): | |||||
| Foreign currency translation | 2,979 | (6,403 | ) | ||
| Unrealized loss on derivatives | (1,929 | ) | (3,286 | ) | |
| Total shareholders' equity | 1,709,978 | 1,485,673 | |||
| $ 2,596,126 | $ 2,535,952 | ||||
Cash flows from operating activities: | Three Months Ended Aug 31, 2003 Aug 31, 2002 - -------------------------------------------- | ||||
|---|---|---|---|---|---|
| Net income | $ 63,327 | $ 61,647 | |||
| Adjustments to reconcile net income to net cash | |||||
| provided by operating activities: | |||||
| Depreciation | 29,017 | 30,428 | |||
| Amortization of deferred charges | 6,418 | 7,638 | |||
| Deferred income taxes | 15,593 | 16,570 | |||
| Change in current assets and liabilities, net | |||||
| of acquisitions of businesses: | |||||
| Accounts receivable | 6,844 | 1,739 | |||
| Inventories | 4,055 | (15,641 | ) | ||
| Uniforms and other rental items in service | 5,995 | (11,121 | ) | ||
| Prepaid expenses | (1,152 | ) | (773 | ) | |
| Accounts payable | (5,075 | ) | 10,388 | ||
| Accrued compensation and related liabilities | (3,801 | ) | (3,776 | ) | |
| Accrued liabilities | (64,051 | ) | (41,562 | ) | |
| Income taxes payable | 14,888 | 14,442 | |||
| Net cash provided by operating activities | 72,058 | 69,979 | |||
| Cash flows from investing activities: | |||||
| Capital expenditures | (31,007 | ) | (21,647 | ) | |
| Proceeds from sale or redemption of marketable securities | 2,137 | 8,686 | |||
| Purchase of marketable securities | (14,088 | ) | 19 | ||
| Acquisitions of businesses, net of cash acquired | (6,480 | ) | (15,931 | ) | |
| Other | 1,533 | 204 | |||
| Net cash used in investing activities | (47,905 | ) | (28,669 | ) | |
| Cash flows from financing activities: | |||||
| Repayment of long-term debt | (1,797 | ) | (48,798 | ) | |
| Stock options exercised | 1,406 | 2,071 | |||
| Other | (1,087 | ) | (1,804 | ) | |
| Net cash used in financing activities | (1,478 | ) | (48,531 | ) | |
| Net increase (decrease) in cash and cash equivalents | 22,675 | (7,221 | ) | ||
| Cash and cash equivalents at beginning of period | 32,239 | 40,628 | |||
| Cash and cash equivalents at end of period | $ 54,914 | $ 33,407 | |||
