FOR IMMEDIATE RELEASE
December 16, 2004
Cintas Corporation Reports Growth in Second Quarter
Fiscal 2005 Revenue and Earnings
CINCINNATI,OH,December16,2004 – Cintas Corporation (Nasdaq: CTAS) today reported revenue for the second quarter of fiscal 2005 of $757 million, an 8 percent increase from last year’s $701 million. The company also reported a 6 percent increase in net income of $73.6 million compared to $69.7 million last year. After-tax margins were 9.7 percent of revenue. Earnings per diluted share of $.43 increased 8 percent from last year’s $.40 per diluted share.
Scott D. Farmer, Chief Executive Officer of Cintas, stated, “On behalf of our Cintas employee-partners, I am pleased to report continued growth in revenue and profits this quarter. Our Rental Revenue increased over 6 percent while Other Services Revenue grew over 13 percent compared to the previous year. Over the past 6 quarters, we have seen continued momentum in the organic growth in Rental Revenue, which has now reached 6 percent for the current quarter.”
Mr. Farmer continued, “We serve a broad and diverse group of customers who use many of our services, such as our uniform rental and sales services, entrance mats, restroom supply and hygiene services, first aid and safety products or document management services. We believe our top line growth and bottom line profits will continue to strengthen as U.S. employment strengthens and customers rely on Cintas for one or more of our services.”
For the six months ended November, revenue of $1.5 billion increased 9 percent compared to $1.38 billion, while earnings per share rose 10 percent from $.77 per diluted share to $.85 per diluted share. Mr. Farmer commented, “We continue to build our sales staff to take advantage of growth opportunities throughout our Company. In addition, we are actively identifying and making acquisitions in order to grow our business and gain market share.”
STRONG BALANCE SHEET
The Company’s balance sheet continues to strengthen. Debt to total capitalization was 18.8 percent as of November 30, 2004, versus 22.1 percent last year. Cash and marketable securities climbed to $356 million as of November 30, 2004, compared to $196 million last year. Total shareholders’ equity has now reached $2.1 billion.
OUTLOOK AFFIRMED
Mr. Farmer continued, “We are reiterating our guidance for fiscal 2005, which was communicated with our fiscal 2004 results. We expect revenue for fiscal 2005 in the range of $3.0 billion to $3.2 billion, with full year earnings per share (diluted) in the range of $1.70 to $1.80, assuming a continued improvement in the economy.”
ABOUT CINTAS
Headquartered in Cincinnati, Ohio, Cintas Corporation provides highly specialized services to businesses of all types throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs, provides entrance mats, restroom supplies, promotional products, and first aid and safety products and services for over 550,000 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 35 consecutive years of growth in sales and earnings, to date.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
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, the 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 under the Act 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 CFO – 513/573-4211
Karen L. Carnahan, Vice President and Treasurer – 513/573-4013
Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)
| Three Months Ended
| Six Months Ended
|
|---|
| Nov. 30, 2004
| Nov. 30, 2003
| % Chng.
| Nov. 30, 2004
| Nov. 30, 2003
| % Chng.
|
|---|
| Revenue: | | | | | | | | | | | | | | | | | | | | |
| Rentals | | | $ | 583,808 | | $ | 548,456 | | | 6.4 | | $ | 1,165,467 | | $ | 1,086,860 | | | 7.2 | |
| Other services | | | | 173,032 | | | 152,853 | | | 13.2 | | | 337,329 | | | 292,105 | | | 15.5 | |
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| |
| |
| |
| |
| |
| |
| Total revenue | | | $ | 756,840 | | $ | 701,309 | | | 7.9 | | $ | 1,502,796 | | $ | 1,378,965 | | | 9.0 | |
| | | | | | | | | | | | | | | | | | | | | |
| Costs and expenses (income): | | |
| Cost of rentals | | | $ | 323,289 | | $ | 305,335 | | | 5.9 | | $ | 641,043 | | $ | 603,480 | | | 6.2 | |
| Cost of other services | | | | 117,596 | | | 102,537 | | | 14.7 | | | 226,960 | | | 194,600 | | | 16.6 | |
| Selling and administrative expenses | | | | 194,431 | | | 176,954 | | | 9.9 | | | 393,240 | | | 353,084 | | | 11.4 | |
| Interest income | | | | (1,514 | ) | | (560 | ) | | 170.4 | | | (2,636 | ) | | (973 | ) | | 170.9 | |
| Interest expense | | | | 6,218 | | | 6,468 | | | -3.9 | | | 12,051 | | | 13,348 | | | -9.7 | |
| Write-off of loan receivable | | | | -- | | | -- | | | N/A | | | -- | | | 4,343 | | | N/A | |
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| |
| |
| |
| |
| |
| Total costs and expenses | | | $ | 640,020 | | $ | 590,734 | | | 8.3 | | $ | 1,270,658 | | $ | 1,167,882 | | | 8.8 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | $ | 116,820 | | $ | 110,575 | | | 5.6 | | $ | 232,138 | | $ | 211,083 | | | 10.0 | |
| Income taxes | | | | 43,260 | | | 40,918 | | | 5.7 | | | 85,912 | | | 78,099 | | | 10.0 | |
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| |
| |
| |
| |
| |
| Net income | | | $ | 73,560 | | $ | 69,657 | | | 5.6 | | $ | 146,226 | | $ | 132,984 | | | 10.0 | |
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| Per share data: | | |
| Basic earnings per share | | | $ | 0.43 | | $ | 0.41 | | | 4.9 | | $ | 0.85 | | $ | 0.78 | | | 9.0 | |
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| |
| Diluted earnings per share | | | $ | 0.43 | | $ | 0.40 | | | 7.5 | | $ | 0.85 | | $ | 0.77 | | | 10.4 | |
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| Basic shares outstanding | | | | 171,638 | | | 170,804 | | | | | | 171,544 | | | 170,727 | | | | |
| Diluted shares outstanding | | | | 172,664 | | | 172,212 | | | | | | 172,634 | | | 172,021 | | | | |
CINTAS CORPORATION SUPPLEMENTAL DATA
| Three Months Ended
| Six Months Ended
|
|---|
| Nov. 30, 2004
| Nov. 30, 2003
| % Chng.
| Nov. 30, 2004
| Nov. 30, 2003
| % Chng.
|
|---|
| Rental gross margin | | | | 44.6% | | | 44.3% | | | | | | 45.0% | | | 44.5% | | | | |
| Other services gross margin | | | | 32.0% | | | 32.9% | | | | | | 32.7% | | | 33.4% | | | | |
| Total gross margin | | | | 41.7% | | | 41.8% | | | | | | 42.2% | | | 42.1% | | | | |
| Net margin | | | | 9.7% | | | 9.9% | | | | | | 9.7% | | | 9.6% | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | $ | 36,636 | | $ | 35,899 | | | 2.1 | | $ | 73,064 | | $ | 71,334 | | | 2.4 | |
| Capital expenditures | | | $ | 38,527 | | $ | 26,014 | | | 48.1 | | $ | 73,863 | | $ | 57,021 | | | 29.5 | |
| | | | | | | | | | | | | | | | | | | | | |
| Debt to total capitalization | | | | 18.8% | | | 22.1% | | | | | | 18.8% | | | 22.1% | | | | |
Cintas Corporation
Consolidated Condensed Balance Sheets
(Unaudited)
(In thousands except share data)
| Nov. 30, 2004
| Nov. 30, 2003
|
|---|
| ASSETS | | | | | | | | |
| Current assets: | | |
| Cash and cash equivalents | | | $ | 113,395 | | $ | 98,596 | |
| Marketable securities | | | | 242,769 | | | 97,519 | |
| Accounts receivable, net | | | | 308,996 | | | 279,588 | |
| Inventories, net | | | | 202,115 | | | 217,237 | |
| Uniforms and other rental items in service | | | | 309,216 | | | 297,542 | |
| Prepaid expenses | | | | 9,019 | | | 6,975 | |
|
| |
| |
| Total current assets | | | | 1,185,510 | | | 997,457 | |
| | | | | | | | | |
| Property and equipment, at cost, net | | | | 799,873 | | | 776,814 | |
| | | | | | | | | |
| Goodwill | | | | 830,492 | | | 730,850 | |
| Service contracts, net | | | | 140,327 | | | 137,501 | |
| Other assets, net | | | | 37,893 | | | 52,321 | |
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| | | | $ | 2,994,095 | | $ | 2,694,943 | |
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| LIABILITIES AND SHAREHOLDERS' EQUITY | | |
| Current liabilities: | | |
| Accounts payable | | | $ | 65,750 | | $ | 56,271 | |
| Accrued liabilities | | | | 133,836 | | | 116,839 | |
| Income taxes: | | |
| Current | | | | 73,804 | | | 68,724 | |
| Deferred | | | | 60,538 | | | 56,925 | |
| Long-term debt due within one year | | | | 10,155 | | | 23,492 | |
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| |
| Total current liabilities | | | | 344,083 | | | 322,251 | |
| | | | | | | | | |
| Long-term debt due after one year | | | | 465,178 | | | 482,850 | |
| | | | | | | | | |
| Deferred income taxes | | | | 129,713 | | | 101,424 | |
| | | | | | | | | |
| Shareholders' equity: | | |
| Preferred stock, no par value: 100,000 shares | | |
| authorized, none outstanding | | | | -- | | | -- |
| Common stock, no par value: 425,000,000 shares | | |
| authorized, 171,689,744 and 170,890,747 shares | | |
| issued and outstanding, respectively | | | | 98,853 | | | 79,178 | |
| Retained earnings | | | | 1,936,773 | | | 1,701,055 | |
| Other accumulated comprehensive income (loss): | | |
| Foreign currency translation | | | | 20,971 | | | 9,951 | |
| Unrealized loss on derivatives | | | | (1,476 | ) | | (1,766 | ) |
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| |
| Total shareholders' equity | | | | 2,055,121 | | | 1,788,418 | |
| | | | $ | 2,994,095 | | $ | 2,694,943 | |
|
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| |
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
| Six Months Ended
|
|---|
| 2004
| 2003
|
|---|
| Cash flows from operating activities: | | | | | | | | |
| Net income | | | $ | 146,226 | | $ | 132,984 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Depreciation | | | | 59,521 | | | 58,460 | |
| Amortization of deferred charges | | | | 13,543 | | | 12,874 | |
| Deferred income taxes | | | | 20,252 | | | 8,319 | |
| Change in current assets and liabilities, net of acquisitions of businesses: | | |
| Accounts receivable | | | | (21,901 | ) | | (978 | ) |
| Inventories | | | | (13,079 | ) | | 16,128 | |
| Uniforms and other rental items in service | | | | (10,969 | ) | | 3,852 | |
| Prepaid expenses | | | | (1,595 | ) | | 632 | |
| Accounts payable | | | | 12,218 | | | 2,357 | |
| Accrued compensation and related liabilities | | | | 1,534 | | | (1,287 | ) |
| Accrued liabilities | | | | (46,290 | ) | | (36,008 | ) |
| Income taxes payable | | | | 37,164 | | | 52,197 | |
|
| |
| |
| Net cash provided by operating activities | | | | 196,624 | | | 249,530 | |
| | | | | | | | | |
| Cash flows from investing activities: | | |
| Capital expenditures | | | | (73,863 | ) | | (57,021 | ) |
| Proceeds from sale or redemption of marketable securities | | | | 18,571 | | | 12,838 | |
| Purchase of marketable securities | | | | (94,376 | ) | | (84,937 | ) |
| Acquisitions of businesses, net of cash acquired | | | | (33,692 | ) | | (13,595 | ) |
| Other | | | | (1,492 | ) | | 1,713 | |
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| |
| |
| Net cash used in investing activities | | | | (184,852 | ) | | (141,002 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | |
| Repayment of long-term debt | | | | (6,660 | ) | | (51,273 | ) |
| Stock options exercised | | | | 2,654 | | | 3,054 | |
| Other | | | | 18,272 | | | 6,048 | |
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| |
| |
| Net cash provided by (used in) financing activities | | | | 14,266 | | | (42,171 | ) |
| | | | | | | | | |
| Net increase in cash and cash equivalents | | | | 26,038 | | | 66,357 | |
| Cash and cash equivalents at beginning of period | | | | 87,357 | | | 32,239 | |
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| |
| Cash and cash equivalents at end of period | | | $ | 113,395 | | $ | 98,596 | |
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