IMMEDIATE RELEASE
March 16, 2006
Cintas Corporation Reports Third Quarter Fiscal 2006
Revenue and Earnings
Total Revenue increases 10.7%
Earnings Per Diluted Share increases 12.2%
CINCINNATI,March16,2006—CintasCorporation(Nasdaq:CTAS) today reported revenue for the third quarter of fiscal 2006 of $836 million, a 10.7 percent increase from the previous year’s third quarter revenue of $755 million. Net income of $77.7 million increased 9.0 percent from $71.3 million last year and earnings per diluted share of $.46 increased 12.2 percent from $.41 per diluted share last year.
Scott D. Farmer, President and Chief Executive Officer, stated, “On behalf of our Cintas employee partners, I am proud to report another quarter of solid results. We achieved double-digit growth in our business and delivered increased profit. For the third quarter, our revenue grew about 8 percent on an organic basis. Our gross margins were strong at 42.2 percent, up from 41.9 percent in the second quarter of fiscal 2006. These results continue to reflect historically high energy costs, which increased approximately 8 percent, or 0.3 percent of revenue, from the second quarter of fiscal 2006. In fact, energy costs have risen 39 percent, or 0.8 percent of revenue, from the third quarter of fiscal 2005.”
For the nine months ended February 28, 2006, revenue of $2.50 billion increased 10.5 percent compared to $2.26 billion over the prior year, while earnings per share rose to $1.39 per diluted share from $1.26 per diluted share, a 10.3 percent increase over the prior year.
Mr. Farmer added, “We recently announced our acquisition of certain assets of Van Dyne Crotty, Inc. This acquisition closed three weeks prior to the end of the quarter and we are very pleased with the results and integration progress to date. The Van Dyne Crotty acquisition demonstrates our commitment to the uniform rental industry, but we also continue to expand into other products and services which capitalize on our service expertise and infrastructure. Recently, we expanded our services even further by offering our new Sanis Ultra-Clean service, a restroom cleaning service. We are excited about the long-term potential of this service, which is yet another example of how we have truly become “Cintas, The Service Professionals”.
Cintas was also recently included in the NASDAQ Dividend Achievers Index, a new index designed for dividend-focused investors to track the performance of U.S. companies which are listed on NASDAQ and meet certain long-term dividend performance criteria. Mr. Farmer commented, “Our inclusion in this Index is a tribute to our track record of increasing our annual dividend every year since we went public in 1983. During that timeframe, we have increased our dividend by 21 percent on a compound annual basis. We are honored to be identified and included in this new Index.”
Strong Balance Sheet
The Company’s balance sheet continues to be strong. Despite the increased debt related to the acquisition of certain Van Dyne Crotty assets, debt to total capitalization is only at 22.6 percent as of February 28, 2006, versus 18.5 percent as of February 28, 2005. Cash and marketable securities was $251 million as of February 28, 2006, compared to $368 million a year ago. Total shareholders’ equity was $2.2 billion as of February 28, 2006.
Outlook
Mr. Farmer commented, “Our financial results continue to be negatively impacted by the hurricanes that hit the Gulf Coast region. We are actively pursuing settlement of our losses with our insurance carrier and to date have not offset these losses in our financial statements. Additionally, the rapid rise in energy costs during this fiscal year continues to impact our results and we anticipate continued cost pressure in this area.”
Mr. Farmer continued, “Taking these factors into account, we are refining our guidance for the remainder of fiscal 2006. For our fiscal year 2006, which ends May 31, 2006, our forecast is for revenue to be in the range of $3.38 to $3.42 billion compared to revenues for fiscal 2005 of $3.07 billion. Our guidance for earnings per diluted share is $1.92 to $1.96 compared to $1.74 for fiscal 2005.”
About Cintas
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, first aid and safety products, fire protection services and document management services for approximately 700,000 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 36 consecutive years of growth in sales and earnings, to date.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
ThePrivateSecuritiesLitigationReformActof1995providesasafeharborfrom civillitigationforforward-lookingstatements.Forward-lookingstatementsmay beidentifiedbywordssuchas“estimates”,“anticipates”,“projects”,“plans”, “expects”,“intends”,“believes”,“seeks”,“could”,“should”,“may”,and“will” orthenegativeversionsthereofandsimilarexpressionsandbythecontextin whichtheyareused.Suchstatementsarebaseduponcurrentexpectationsofthe Companyandspeakonlyasofthedatemade.Thesestatementsaresubjectto variousrisks,uncertaintiesandotherfactorsthatcouldcauseactualresults todifferfromthosesetforthinorimpliedbythisnewsrelease.Factorsthat mightcausesuchadifferenceinclude,butarenotlimitedto,thepossibility ofgreaterthananticipatedoperatingcostsincludingfuelcosts,lowersales volumes,theperformanceandcostsofintegrationofacquisitions,fluctuations incostsofmaterialsandlaborincludingmedicalcosts,costsandpossible effectsofunionorganizingactivities,uncertaintiesregardinganyexistingor newly-discoveredexpensesandliabilitiesrelatedtoenvironmentalcompliance andremediation,resultsandongoingassessmentofinternalcontrolsfor financialreportingrequiredbytheSarbanes-OxleyActof2002,theinitiation oroutcomeoflitigation,higherassumedsourcingordistributioncostsof products,thedisruptionofoperationsfromcatastrophicevents,changesin federalorstatetaxlawsandthereactionsofcompetitorsintermsofpriceand service.Forward-lookingstatementsspeakonlyasofthedatemade.Cintas undertakesnoobligationtoupdateanyforward-lookingstatementstoreflectthe eventsorcircumstancesarisingafterthedateonwhichtheyaremade.
For additional information, contact:
William C. Gale, Senior Vice President-Finance and Chief Financial Officer--513-573-4211
Cintas Corporation
Consolidated Condensed Statements of Income
(Unaudited)
(In thousands except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 28, 2006 | Feb. 28, 2005 | % Chng. | Feb. 28, 2006 | Feb. 28, 2005 | % Chng. | |||||||||||||||
Revenue: | ||||||||||||||||||||
Rentals | $ | 631,322 | $ | 582,619 | 8.4 | $ | 1,890,920 | $ | 1,748,086 | 8.2 | ||||||||||
Other services | 205,099 | 172,622 | 18.8 | 604,761 | 509,951 | 18.6 | ||||||||||||||
Total revenue | $ | 836,421 | $ | 755,241 | 10.7 | $ | 2,495,681 | $ | 2,258,037 | 10.5 | ||||||||||
Costs and expenses (income): | ||||||||||||||||||||
Cost of rentals | $ | 350,655 | $ | 320,724 | 9.3 | $ | 1,039,738 | $ | 961,767 | 8.1 | ||||||||||
Cost of other services | 132,796 | 113,063 | 17.5 | 397,024 | 340,023 | 16.8 | ||||||||||||||
Selling and administrative expenses | 223,269 | 203,912 | 9.5 | 666,618 | 597,152 | 11.6 | ||||||||||||||
Interest income | (1,925 | ) | (2,149 | ) | -10.4 | (4,959 | ) | (4,785 | ) | 3.6 | ||||||||||
Interest expense | �� | 7,239 | 6,499 | 11.4 | 22,059 | 18,550 | 18.9 | |||||||||||||
Total costs and expenses | $ | 712,034 | $ | 642,049 | 10.9 | $ | 2,120,480 | $ | 1,912,707 | 10.9 | ||||||||||
Income before income taxes | $ | 124,387 | $ | 113,192 | 9.9 | $ | 375,201 | $ | 345,330 | 8.7 | ||||||||||
Income taxes | 46,642 | 41,860 | 11.4 | 139,950 | 127,772 | 9.5 | ||||||||||||||
Net income | $ | 77,745 | $ | 71,332 | 9.0 | $ | 235,251 | $ | 217,558 | 8.1 | ||||||||||
Per share data: | ||||||||||||||||||||
Basic earnings per share | $ | 0.47 | $ | 0.42 | 11.9 | $ | 1.40 | $ | 1.27 | 10.2 | ||||||||||
Diluted earnings per share | $ | 0.46 | $ | 0.41 | 12.2 | $ | 1.39 | $ | 1.26 | 10.3 | ||||||||||
Basic shares outstanding | 168,038 | 171,802 | 168,321 | 171,629 | ||||||||||||||||
Diluted shares outstanding | 168,599 | 172,790 | 168,915 | 172,700 |
CINTAS CORPORATION SUPPLEMENTAL DATA
Three Months Ended | Nine Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 28, 2006 | Feb. 28, 2005 | % Chng. | Feb. 28, 2006 | Feb. 28, 2005 | % Chng. | |||||||||||||||
Rentals gross margin | 44.5% | 45.0% | 45.0% | 45.0% | ||||||||||||||||
Other services gross margin | 35.3% | 34.5% | 34.4% | 33.3% | ||||||||||||||||
Total gross margin | 42.2% | 42.6% | 42.4% | 42.3% | ||||||||||||||||
Net margin | 9.3% | 9.4% | 9.4% | 9.6% | ||||||||||||||||
Depreciation and amortization | $ | 40,484 | $ | 37,121 | 9.1 | $ | 118,144 | $ | 110,185 | 7.2 | ||||||||||
Capital expenditures | $ | 31,899 | $ | 27,093 | 17.7 | $ | 102,080 | $ | 100,956 | 1.1 | ||||||||||
Debt to total capitalization | 22.6% | 18.5% | 22.6% | 18.5% |
Cintas Corporation
Consolidated Condensed Balance Sheets
(Unaudited)
(In thousands except share data)
Feb. 28, 2006 | May 31, 2005 | |||||||
---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 48,043 | $ | 43,196 | ||||
Marketable securities | 202,758 | 266,232 | ||||||
Accounts receivable, net | 358,033 | 326,896 | ||||||
Inventories, net | 207,921 | 216,412 | ||||||
Uniforms and other rental items in service | 322,044 | 305,450 | ||||||
Prepaid expenses | 9,161 | 8,358 | ||||||
Total current assets | 1,147,960 | 1,166,544 | ||||||
Property and equipment, at cost, net | 848,899 | 817,198 | ||||||
Goodwill | 1,123,795 | 889,538 | ||||||
Service contracts, net | 180,104 | 146,596 | ||||||
Other assets, net | 61,606 | 39,868 | ||||||
$ | 3,362,364 | $ | 3,059,744 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 62,031 | $ | 69,296 | ||||
Accrued compensation & related liabilities | 40,332 | 38,710 | ||||||
Accrued liabilities | 216,371 | 166,428 | ||||||
Income taxes: | ||||||||
Current | 37,105 | 32,864 | ||||||
Deferred | 49,175 | 41,883 | ||||||
Long-term debt due within one year | 4,284 | 7,300 | ||||||
Total current liabilities | 409,298 | 356,481 | ||||||
Long-term debt due after one year | 634,193 | 465,291 | ||||||
Deferred income taxes | 134,342 | 133,837 | ||||||
Shareholders’ equity: | ||||||||
Preferred stock, no par value: 100,000 shares | ||||||||
authorized, none outstanding | -- | -- | ||||||
Common stock, no par value: 425,000,000 shares | ||||||||
authorized | ||||||||
FY 2006: 172,477,911 shares issued and 168,116,977 | ||||||||
shares outstanding | ||||||||
FY 2005: 172,127,502 shares issued and 170,658,601 | ||||||||
shares outstanding | 121,052 | 114,171 | ||||||
Retained earnings | 2,212,419 | 2,035,992 | ||||||
Treasury stock | ||||||||
FY 2006: 4,360,934 shares; FY 2005: 1,468,901 shares | (172,374 | ) | (58,204 | ) | ||||
Other accumulated comprehensive income (loss): | ||||||||
Foreign currency translation | 28,593 | 13,507 | ||||||
Unrealized loss on derivatives | (5,159 | ) | (1,331 | ) | ||||
Total shareholders' equity | 2,184,531 | 2,104,135 | ||||||
$ | 3,362,364 | $ | 3,059,744 | |||||
Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|
Feb. 2006 | Feb. 2005 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 235,251 | $ | 217,558 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 94,014 | 89,459 | ||||||
Amortization of deferred charges | 24,130 | 20,726 | ||||||
Deferred income taxes | 7,797 | 6,856 | ||||||
Change in current assets and liabilities, net of acquisitions of businesses: | ||||||||
Accounts receivable | (14,187 | ) | (12,119 | ) | ||||
Inventories | 11,984 | (27,143 | ) | |||||
Uniforms and other rental items in service | (11,240 | ) | (252 | ) | ||||
Prepaid expenses | (790 | ) | (1,319 | ) | ||||
Accounts payable | (9,210 | ) | 3,476 | |||||
Accrued compensation and related liabilities | 1,622 | (185 | ) | |||||
Accrued liabilities | (32,293 | ) | (24,816 | ) | ||||
Income taxes payable | 4,241 | 15,984 | ||||||
Net cash provided by operating activities | 311,319 | 288,225 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (102,080 | ) | (100,956 | ) | ||||
Proceeds from sale or redemption of marketable securities | 74,820 | 35,099 | ||||||
Purchase of marketable securities | (11,346 | ) | (164,065 | ) | ||||
Acquisitions of businesses, net of cash acquired | (327,983 | ) | (82,186 | ) | ||||
Other | (13,830 | ) | (1,877 | ) | ||||
Net cash used in investing activities | (380,419 | ) | (313,985 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of debt | 173,000 | 0 | ||||||
Repayment of debt | (7,068 | ) | (7,264 | ) | ||||
Stock options exercised | 6,175 | 3,844 | ||||||
Repurchase of common stock | (114,170 | ) | 0 | |||||
Other | 16,010 | 13,683 | ||||||
Net cash provided by financing activities | 73,947 | 10,263 | ||||||
Net increase (decrease) in cash and cash equivalents | 4,847 | (15,497 | ) | |||||
Cash and cash equivalents at beginning of period | 43,196 | 87,357 | ||||||
Cash and cash equivalents at end of period | $ | 48,043 | $ | 71,860 | ||||