FOR IMMEDIATE RELEASE
March 20, 2007
Cintas Corporation Reports Third Quarter Fiscal 2007
Revenue and Earnings
Revenue increases 8%
Earnings Per Diluted Share increases 7%
CINCINNATI, March 20, 2007 -- Cintas Corporation (Nasdaq:CTAS) today reported revenue for the third quarter of fiscal 2007 of $905.4 million, an 8.2% increase from the previous year’s third quarter revenue of $836.4 million. Earnings per diluted share of $0.48 increased 6.7% from $0.45 per diluted share last year, and net income of $76.7 million increased from last year’s net income of $76.6 million. Current year net income is being impacted by increased interest expense related to the Company’s share buyback program.
Scott D. Farmer, President and Chief Executive Officer, stated, “We posted solid growth in revenue and profits for our third quarter, delivering 8.2% revenue growth and 6.7% growth in earnings per diluted share. While all of our businesses are growing, growth in the third quarter was impacted by three things. First, the very mild winter weather into early February impacted the seasonal jacket and mat rental volume that normally occurs in this quarter.
“In addition, we continue to experience economic pressure in our uniform business due to the continued off-shoring of manufacturing jobs and the ripple effect this causes to other businesses serving these operations.
“Finally, our new sales force re-organization was completed at the end of the calendar year. We are encouraged about the early results and the new organization’s impact on cross-selling and overall improved revenue growth. In the short term, this change has caused disruption due to the promotion of many high-performing sales reps into management jobs, the time to train them in their new roles and the time necessary to develop their newly hired replacements. The full benefit of this new organization will be felt as these new sales representatives come up to speed, which is generally a 6-month to 1-year process.”
Mr. Farmer added, “Despite these top line pressures, we achieved solid growth and delivered earnings before interest and income taxes of 14.7% of revenue. We continue to increase our product line and service offerings in all of our businesses. Revenue growth in our First Aid and Safety, Fire Protection and Document Management businesses continues to be strong as we expand our geographic presence.”
Share Buyback Program
During the third quarter, Cintas purchased approximately 1.4 million shares of Cintas common stock under an authorized share buyback program at a cost of $57 million. Since the inception of this program, the Company has bought back approximately 14.2 million of the outstanding shares, or approximately 8% of the total shares outstanding at the beginning of the program, at a cost of approximately $580 million. The Company continues to operate under this program and has $420 million remaining under its current authorization.
Strong Balance Sheet
The Company’s balance sheet continues to be strong. Despite increased debt levels related to acquisitions and the share buyback program, debt to total capitalization as of February 28, 2007, was only 30.1%. Cash and marketable securities were $157.5 million at the end of the third quarter. As marketable securities mature, it is the Company’s intention to use the funds to reduce its outstanding debt under its commercial paper program, contingent upon other cash needs. Total shareholders’ equity was $2.1 billion.
Outlook
Mr. Farmer stated, “Based on our third quarter results and the continuing economic pressure on our customer base, we are lowering our current year revenue and earnings guidance. We now estimate that revenue for fiscal 2007 will be $3.675 to $3.725 billion and earnings per diluted share will be $2.03 to $2.08. We expect this year will be another record year at Cintas, which would result in our 38th consecutive year of growth in sales and earnings.
“We continue to be recognized by our customers and the business community in general for the services we provide our customers. In fact, we were recently named the “Most Admired Company” in the diversified outsourcing industry by FORTUNE magazine. We have consistently ranked among the top five “Most Admired” organizations in our industry sector since 2001 and this marks the fourth time we have topped this prestigious list. We have also been ranked among the “Best Employers in Canada” by Report on Business magazine in 2007 and were named “Reader’s Choice” as the best uniform supplier to the food processing industry by Food Processing magazine. This marks the fifth consecutive year that Cintas received “Golden Supplier” distinction from food industry professionals.”
Mr. Farmer added, “The accolades that we receive are a direct result of our employee-partners servicing our customers every day. We are excited about the future as we continue to expand our role as the professional services company of choice.”
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.
For additional information, contact:
William C. Gale, Senior Vice President-Finance and Chief Financial Officer - 513-573-4211
Michael L. Thompson, Vice President and Treasurer - 513-573-4133
