Cintas (CTAS) 8-K Results of Operations and Financial Condition

CINTAS CORPORATION ACHIEVES 37TH CONSECUTIVE YEAR OF GROWTH IN REVENUE AND EARNINGS; TOTAL REVENUE OF $3.4 BILLION, INCREASE OF 11%; EARNINGS PER DILUTED SHARE INCREASES 11.5%

        CINCINNATI — (BUSINESS WIRE) — July 13, 2006 — Cintas Corporation (Nasdaq:CTAS) today reported revenue for its fiscal year ended May 31, 2006 of $3.40 billion, an 11 percent increase from previous year revenue of $3.07 billion. Net income of $327.2 million increased 8.9 percent from $300.5 million last year, and earnings per diluted share of $1.94 increased 11.5 percent from $1.74 per diluted share last year.

        For the fourth quarter ended May 31, 2006, revenue was $908 million, a 12.2 percent increase over prior year fourth quarter revenue of $809 million. Fourth quarter net income of $92 million increased 10.8 percent from $83 million in last year’s fourth quarter, and earnings per diluted share increased 14.6 percent to $0.55 per diluted share from $0.48 per diluted share in last year’s fourth quarter.

        Scott D. Farmer, President and Chief Executive Officer, stated, “I am proud to report another record year at Cintas. By striving to exceed our customers’ expectations on a daily basis, our 32,000 employee partners have provided Cintas with our 37th consecutive year of growth in both revenue and earnings.

        “We continue to become a more valuable resource to our customers by taking care of important details for them, adding new products and services as we find opportunity. For example, during our fiscal year 2006 we added a restroom cleaning service, a service we call Sanis UltraClean, to our growing list of business services. After an initial test of this service, we have successfully rolled out this new service throughout the United States and Canada. This service is just another example of how we continue to evolve as ‘Cintas, The Service Professionals’. Our expanding distribution network now extends to over 93% of the population in the United States and Canada. Be it uniform rental or sales programs, entrance mat programs, restroom supply or cleaning services, first aid and safety supplies, fire protection equipment and services or document management services, we believe all businesses in North America can use at least one, and many times more than one, of the products and services that we offer.”

        During February 2006, Cintas announced the acquisition of certain assets of Van Dyne Crotty, Inc. In providing an update on that acquisition, Mr. Farmer commented, “We have been very pleased with this acquisition and are at or ahead of schedule in all aspects of assimilating their business with ours. As of May 31, 2006, the Van Dyne Crotty corporate functions have been completely assimilated into Cintas.”

        Mr. Farmer stated, “We continue to be excited about the growth opportunities in all of our businesses. We currently service approximately 700,000 business customers, the majority of whom only use one or two of our services. In addition there are approximately 14 million businesses in the United States and Canada alone, which means we are only doing business with 5 percent of these businesses.

        “Despite higher energy costs, our gross margins improved to 42.7 percent for the year, up from 42.5 percent for the prior year and to 43.6 percent for the fourth quarter as compared to 43.1 percent for the fourth quarter of fiscal 2005. Our after-tax margins remained healthy, at 9.6 percent of sales for the year and 10.1 percent for the fourth quarter.”

        The Company’s balance sheet remains strong. Current assets at May 31, 2006, exceeded current liabilities by approximately $766 million, almost a three to one ratio. Debt to total capitalization was 27.6 percent at May 31, 2006, versus 18.3 percent as of May 31, 2005. The increased borrowings were due to the acquisition of certain assets of Van Dyne Crotty and additional purchases under the Company’s stock repurchase program. Mr. Farmer commented, “On May 2, 2005, the Company announced that our Board of Directors authorized a $500 million stock repurchase program at market prices. The Company has now expended approximately $496 million of the $500 million authorized repurchase level.”

        Mr. Farmer stated, “We are also proud to be included in NASDAQ’s newly created Global Select Market. The Global Select Market has the highest initial listing standards of any exchange in the world based on financial and liquidity requirements. Our inclusion in this newly created market is a further testament to our results.”

Outlook

        Mr. Farmer commented, “We expect revenue for fiscal 2007 to be in the range of $3.77 billion to $3.85 billion, with full year earning per share (diluted) in the range of $2.10 to $2.20. These ranges assume a steady economy with no significant increases in energy costs from the levels seen in the fourth quarter.”

        Mr. Farmer continued, “We believe the future continues to be bright for Cintas, with opportunities within our current customer base as well as opportunities with new customers. We will also continue to search out additional products and services to become an even more valuable resource for our customers. We look forward to the challenges of fiscal 2007 with the intention of continuing our track record of consecutive growth in sales and profits.”

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 Global Select Market under the symbol CTAS, and is a Nasdaq-100 company and component of the Standard & Poor’s 500 Index. The Company has achieved 37 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,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas 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 or implied by this news release. Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor including increased medical costs, costs and possible effects of union organizing activities, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002, the initiation or outcome of litigation, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic events, changes in federal and state tax laws and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.

Cintas Corporation
Consolidated Condensed Statements of Income
(In thousands except per share data)

	Three Months Ended								Twelve Months Ended
	May 31, 2006			May 31, 2005			% Chng.		May 31, 2006			May 31, 2005			% Chng.
Revenue:
Rentals	$	677,856		$	615,311			10.2	$	2,568,776		$	2,363,397			8.7
Other services		230,071			193,935			18.6		834,832			703,886			18.6
Total revenue	$	907,927		$	809,246			12.2	$	3,403,608		$	3,067,283			11.0
Costs and expenses (income):
Cost of rentals	$	367,091		$	334,225			9.8	$	1,406,829		$	1,295,992			8.6
Cost of other services		144,963			126,509			14.6		541,987			466,532			16.2
Selling and administrative expenses		241,336			213,080			13.3		907,954			810,232			12.1
Interest income		(1,800	)		(2,129	)		-15.5		(6,759	)		(6,914	)		-2.2
Interest expense		9,723			5,898			64.9		31,782			24,448			30.0
Total costs and expenses	$	761,313		$	677,583			12.4	$	2,881,793		$	2,590,290			11.3
Income before income taxes	$	146,614		$	131,663			11.4	$	521,815		$	476,993			9.4
Income taxes		54,687			48,703			12.3		194,637			176,475			10.3
Net income	$	91,927		$	82,960			10.8	$	327,178		$	300,518			8.9
Per share data:
Basic earnings per share	$	0.55		$	0.48			14.6	$	1.95		$	1.75			11.4
Diluted earnings per share	$	0.55		$	0.48			14.6	$	1.94		$	1.74			11.5
Basic shares outstanding		166,854			171,828					167,951			171,679
Diluted shares outstanding		167,384			172,490					168,545			172,649

CINTAS CORPORATION SUPPLEMENTAL DATA

	Three Months Ended								Twelve Months Ended
	May 31, 2006			May 31, 2005			% Chng.		May 31, 2006			May 31, 2005			% Chng.
Rentals gross margin		45.8	%		45.7	%				45.2	%		45.2	%
Other services gross margin		37.0	%		34.8	%				35.1	%		33.7	%
Total gross margin		43.6	%		43.1	%				42.7	%		42.5	%
Net margin		10.1	%		10.3	%				9.6	%		9.8	%
Depreciation and amortization	$	42,509		$	37,990			11.9	$	160,653		$	148,175			8.4
Capital expenditures	$	54,552		$	39,771			37.2	$	156,632		$	140,727			11.3
Debt to total capitalization		27.6	%		18.3	%				27.6	%		18.3	%

Cintas Corporation
Consolidated Condensed Balance Sheets
(In thousands except share data)

	May 31, 2006			May 31, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	38,914		$	43,196
Marketable securities		202,539			266,232
Accounts receivable, net		389,905			326,896
Inventories, net		198,000			216,412
Uniforms and other rental items in service		337,487			305,450
Prepaid expenses		11,163			8,358
Total current assets		1,178,008			1,166,544
Property and equipment, at cost, net		863,783			817,198
Goodwill		1,136,175			889,538
Service contracts, net		179,965			146,596
Other assets, net		67,306			39,868
	$	3,425,237		$	3,059,744
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	71,635		$	69,296
Accrued compensation & related liabilities		51,615			38,710
Accrued liabilities		188,927			166,428
Income taxes:
Current		43,694			32,864
Deferred		52,343			41,883
Long-term debt due within one year		4,288			7,300
Total current liabilities		412,502			356,481
Long-term debt due after one year		794,454			465,291
Deferred income taxes		125,007			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: 172,571,083 shares issued and 163,181,738
shares outstanding
FY 2005: 172,127,502 shares issued and 170,658,601
shares outstanding		122,912			114,171
Retained earnings		2,304,280			2,035,992
Treasury stock
FY 2006: 9,389,345 shares; FY 2005: 1,468,901 shares		(381,613	)		(58,204	)
Other accumulated comprehensive income (loss):
Foreign currency translation		34,389			13,507
Unrealized gain/(loss) on derivatives		15,135			(1,331	)
Unrealized loss on available-for-sale securities		(1,829	)		0
Total shareholders' equity		2,093,274			2,104,135
	$	3,425,237		$	3,059,744

Cintas Corporation
Consolidated Condensed Statements of Cash Flows
(In thousands)

	Twelve Months Ended
	May 31, 2006			May 31, 2005
Cash flows from operating activities:
Net income	$	327,178		$	300,518
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		127,117			119,813
Amortization of deferred charges		33,536			28,362
Deferred income taxes		257			4,191
Change in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable		(44,154	)		(36,317	)
Inventories		22,033			(26,321	)
Uniforms and other rental items in service		(26,683	)		(7,168	)
Prepaid expenses		(2,305	)		(892	)
Accounts payable		2,329			15,727
Accrued compensation and related liabilities		12,905			6,906
Accrued liabilities		(1,905	)		12,444
Income taxes payable		11,578			(3,050	)
Net cash provided by operating activities		461,886			414,213
Cash flows from investing activities:
Capital expenditures		(156,632	)		(140,727	)
Proceeds from sale or redemption of marketable securities		87,477			102,997
Purchase of marketable securities		(25,613	)		(202,265	)
Acquisitions of businesses, net of cash acquired		(346,363	)		(109,076	)
Other		1,085			(1,663	)
Net cash used in investing activities		(440,046	)		(350,734	)
Cash flows from financing activities:
Proceeds from issuance of debt		333,500			0
Repayment of debt		(7,303	)		(10,575	)
Stock options exercised		7,680			4,621
Dividends paid		(58,823	)		(54,968	)
Repurchase of common stock		(323,409	)		(58,204	)
Other		22,233			11,486
Net cash used in financing activities		(26,122	)		(107,640	)
Net decrease in cash and cash equivalents		(4,282	)		(44,161	)
Cash and cash equivalents at beginning of period		43,196			87,357
Cash and cash equivalents at end of period	$	38,914		$	43,196