FOR IMMEDIATE RELEASE
July 18, 2007
Cintas Corporation Achieves 38th Consecutive Year of Growth
in Revenue and Earnings
Total Revenue of $3.7 billion, increase of 8.9%
Earnings per Diluted Share also increases 8.9%
CINCINNATI, July 18, 2007 -- Cintas Corporation (Nasdaq:CTAS) today reported revenue for its fiscal year ended May 31, 2007, of $3.7 billion, an 8.9 percent increase from previous year revenue of $3.4 billion. Net income of $334.5 million increased 3.4 percent from $323.4 million last year, and earnings per diluted share of $2.09 increased 8.9 percent from $1.92 per diluted share last year.
For the fourth quarter ended May 31, 2007, revenue was $964.1 million, a 6.2 percent increase over prior year fourth quarter revenue of $907.9 million. Fourth quarter net income of $90.3 million decreased 1.3 percent from $91.5 million in last year’s fourth quarter due to higher interest costs related to increased long-term debt levels, while earnings per diluted share increased 3.6 percent to $0.57 per diluted share from $0.55 per diluted share in last year’s fourth quarter.
Scott D. Farmer, President and Chief Executive Officer, stated, “I am pleased to announce that we have recently completed our 38th consecutive year of growth in both revenue and earnings. This achievement is due to the dedication and effort put forth by our 34,000 employee-partners. They are our driving force, enabling us to provide world-class service to approximately 800,000 business customers.
“Our efforts and success as a company continue to be recognized. This year we were again selected by FORTUNE magazine as one of “America’s Most Admired Companies” and were listed as the number one company in the “Diversified Outsourcing Industry” category. We were presented the Matthew 25 Ministries “Humanitarian Hall of Fame Award” for our assistance to this charitable organization. And, we were ranked as one of the top military-friendly businesses as chosen by G.I Jobs magazine.”
Addressing current year results, Mr. Farmer stated, “We experienced economic pressure throughout the year from the continued off-shoring of manufacturing jobs as well as the ripple effect felt at other customers that serve these manufacturing businesses. In addition, the restructuring of our sales force has taken longer and been more costly in the current year than we anticipated. Despite these conditions, we achieved 8.9 percent revenue growth and experienced growth in all of our business units.”
Mr. Farmer added, “We are a leader in business services, with a wide array of products and services for businesses of any size and any type. There is hardly a business or industry that you can think of that does not need one or more of our products and services. With approximately 14 million businesses in the United States and Canada and our vast field presence allowing us to reach over 90% of the population, we continue to be excited about our future growth opportunities, especially as our new sales organization gains strength.”
The Company’s gross margin for the year was 42.7 percent, which is consistent with the level attained in fiscal 2006. Selling and administrative expenses increased from 26.8 percent of revenue to 27.1 percent of revenue, reflecting increased medical costs and the increased investment in our sales organization. Net income for the year was 9.0 percent of revenue versus 9.5 percent of revenue in fiscal 2006, reflecting increased interest expense on higher long-term debt levels taken on to fund acquisitions and share buybacks. Income before interest and taxes was 15.6 percent of revenue.
The Company’s balance sheet remains strong. Current assets at May 31, 2007, exceeded current liabilities by approximately $754 million, almost a three to one margin. Debt to total capitalization was 28.9 percent at May 31, 2007, versus 27.6 percent as of May 31, 2006.
Outlook
Mr. Farmer stated, “We are excited with the opportunities ahead of us, especially as our new sales organization generates improved levels of new business as we progress through fiscal 2008. We expect revenue for fiscal 2008 to be in the range of $3.9 billion to $4.1 billion, with full year earnings per diluted share in the range of $2.15 to $2.25.”
Mr. Farmer continued, “In addition to striving for these financial results, we continue to focus on the long-term best interests of the Company for the benefit of our customers, our employee-partners and our shareholders. By emphasizing customer service, we will build on existing customer relationships, providing them with more of our products and services. We will continue to expand our customer base as we introduce our products and services to new prospects and as we make strategic acquisitions. And, we will continue to find additional products and services to become an even more valuable resource to businesses of all types. While there will certainly be challenges along the way, we are confident that we have the products, the capital and, most importantly, the people to continue our success.”
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 800,000 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 38 consecutive years of growth in revenue 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”, “predicts”, “projects”, “plans”, “expects”, “intends”, “target”, “forecast”, “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, loss of customers due to outsourcing trends, 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, failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety, 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 whether as a result of new information or to reflect events or circumstances arising after the date on which they are made. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8K and 10-K reports to the SEC.
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
Cintas Corporation | ||||||||||||||||||||||||
Consolidated Condensed Statements of Income | ||||||||||||||||||||||||
(In thousands except per share data) | ||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
May 31, 2007 | May 31, 2006 (Restated)* | % Chng. | May 31, 2007 | May 31, 2006 (Restated)* | % Chng. | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Rentals | $ | 696,833 | $ | 677,856 | 2.8 | $ | 2,734,629 | $ | 2,568,776 | 6.5 | ||||||||||||||
Other services | 267,242 | 230,071 | 16.2 | 972,271 | 834,832 | 16.5 | ||||||||||||||||||
Total revenue | $ | 964,075 | $ | 907,927 | 6.2 | $ | 3,706,900 | $ | 3,403,608 | 8.9 | ||||||||||||||
Costs and expenses (income): | ||||||||||||||||||||||||
Cost of rentals | $ | 385,685 | $ | 367,091 | 5.1 | $ | 1,515,185 | $ | 1,406,829 | 7.7 | ||||||||||||||
Cost of other services | 164,416 | 144,963 | 13.4 | 610,360 | 541,987 | 12.6 | ||||||||||||||||||
Selling and administrative expenses | 258,074 | 241,736 | 6.8 | 1,003,958 | 911,750 | 10.1 | ||||||||||||||||||
Interest income | (1,992 | ) | (1,800 | ) | 10.7 | (6,480 | ) | (6,759 | ) | -4.1 | ||||||||||||||
Interest expense | 13,825 | 9,723 | 42.2 | 50,324 | 31,782 | 58.3 | ||||||||||||||||||
Total costs and expenses | $ | 820,008 | $ | 761,713 | 7.7 | $ | 3,173,347 | $ | 2,885,589 | 10.0 | ||||||||||||||
Income before income taxes | $ | 144,067 | $ | 146,214 | -1.5 | $ | 533,553 | $ | 518,019 | 3.0 | ||||||||||||||
Income taxes | 53,745 | 54,687 | -1.7 | 199,015 | 194,637 | 2.2 | ||||||||||||||||||
Net income | $ | 90,322 | $ | 91,527 | -1.3 | $ | 334,538 | $ | 323,382 | 3.4 | ||||||||||||||
Per share data: | ||||||||||||||||||||||||
Basic earnings per share | $ | 0.57 | $ | 0.55 | 3.6 | $ | 2.09 | $ | 1.93 | 8.3 | ||||||||||||||
Diluted earnings per share | $ | 0.57 | $ | 0.55 | 3.6 | $ | 2.09 | $ | 1.92 | 8.9 | ||||||||||||||
Weighted average number of shares outstanding | 158,657 | 166,854 | 159,769 | 167,951 | ||||||||||||||||||||
Diluted average number of shares outstanding | 158,997 | 167,384 | 160,187 | 168,545 |
CINTAS CORPORATION SUPPLEMENTAL DATA | ||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
May 31, 2007 | May 31, 2006 (Restated)* | % Chng. | May 31, 2007 | May 31, 2006 (Restated)* | % Chng. | |||||||||||||||||||
Rentals gross margin | 44.7 | % | 45.8 | % | 44.6 | % | 45.2 | % | ||||||||||||||||
Other services gross margin | 38.5 | % | 37.0 | % | 37.2 | % | 35.1 | % | ||||||||||||||||
Total gross margin | 42.9 | % | 43.6 | % | 42.7 | % | 42.7 | % | ||||||||||||||||
Net margin | 9.4 | % | 10.1 | % | 9.0 | % | 9.5 | % | ||||||||||||||||
Depreciation and amortization | $ | 45,875 | $ | 42,509 | 7.9 | $ | 175,926 | $ | 160,653 | 9.5 | ||||||||||||||
Capital expenditures | $ | 52,188 | $ | 54,552 | -4.3 | $ | 180,824 | $ | 156,632 | 15.4 | ||||||||||||||
Debt to total capitalization | 28.9 | % | 27.6 | % | 28.9 | % | 27.6 | % |
RECONCILIATION TO GAAP MEASURES | ||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
May 31, 2007 | May 31, 2006 (Restated)* | % Chng. | May 31, 2007 | May 31, 2006 (Restated)* | % Chng. | |||||||||||||||||||
Income before income taxes | $ | 144,067 | $ | 146,214 | -1.5 | $ | 533,553 | $ | 518,019 | 3.0 | ||||||||||||||
Interest income | (1,992 | ) | (1,800 | ) | 10.7 | (6,480 | ) | (6,759 | ) | -4.1 | ||||||||||||||
Interest expense | 13,825 | 9,723 | 42.2 | 50,324 | 31,782 | 58.3 | ||||||||||||||||||
Earnings before interest and taxes | $ | 155,900 | $ | 154,137 | 1.1 | $ | 577,397 | $ | 543,042 | 6.3 |
*Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.
Cintas Corporation | ||||||||
Consolidated Condensed Balance Sheets | ||||||||
(In thousands except share data) | ||||||||
May 31, 2007 | May 31, 2006 (Restated)* | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 35,360 | $ | 38,914 | ||||
Marketable securities | 120,053 | 202,539 | ||||||
Accounts receivable, net | 408,870 | 389,905 | ||||||
Inventories, net | 231,741 | 198,000 | ||||||
Uniforms and other rental items in service | 344,931 | 337,487 | ||||||
Prepaid expenses | 15,781 | 11,163 | ||||||
Total current assets | 1,156,736 | 1,178,008 | ||||||
Property and equipment, at cost, net | 920,243 | 863,783 | ||||||
Goodwill | 1,245,877 | 1,136,175 | ||||||
Service contracts, net | 171,361 | 179,965 | ||||||
Other assets, net | 76,263 | 67,306 | ||||||
$ | 3,570,480 | $ | 3,425,237 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 64,622 | $ | 71,635 | ||||
Accrued compensation & related liabilities | 62,826 | 50,134 | ||||||
Accrued liabilities | 200,686 | 188,927 | ||||||
Income taxes: | ||||||||
Current | 18,584 | 43,694 | ||||||
Deferred | 52,179 | 51,669 | ||||||
Long-term debt due within one year | 4,141 | 4,288 | ||||||
Total current liabilities | 403,038 | 410,347 | ||||||
Long-term debt due after one year | 877,074 | 794,454 | ||||||
Deferred income taxes | 122,630 | 130,244 | ||||||
Shareholders' equity: | ||||||||
Preferred stock, no par value: 100,000 shares | ||||||||
authorized, none outstanding | - | - | ||||||
Common stock, no par value: 425,000,000 shares | ||||||||
authorized | ||||||||
FY 2007: 172,874,195 shares issued and 158,676,872 | ||||||||
shares outstanding | ||||||||
FY 2006: 172,571,083 shares issued and 163,181,738 | ||||||||
shares outstanding | 120,811 | 109,948 | ||||||
Paid in capital | 56,909 | 58,556 | ||||||
Retained earnings | 2,533,459 | 2,260,917 | ||||||
Treasury stock | ||||||||
FY 2007: 14,197,323 shares; FY 2006: 9,389,345 shares | (580,562 | ) | (381,613 | ) | ||||
Other accumulated comprehensive income | 37,121 | 42,384 | ||||||
Total shareholders' equity | 2,167,738 | 2,090,192 | ||||||
$ | 3,570,480 | $ | 3,425,237 |
*Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.
Cintas Corporation | ||||||||
Consolidated Condensed Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
Twelve Months Ended | ||||||||
May 31, 2007 | May 31, 2006 (Restated)* | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 334,538 | $ | 323,382 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 135,181 | 127,117 | ||||||
Amortization of deferred charges | 40,745 | 33,536 | ||||||
Stock-based compensation | 4,500 | 4,725 | ||||||
Deferred income taxes | (332 | ) | (52 | ) | ||||
Change in current assets and liabilities, net of acquisitions of businesses: | ||||||||
Accounts receivable | (11,460 | ) | (44,154 | ) | ||||
Inventories | (32,090 | ) | 22,033 | |||||
Uniforms and other rental items in service | (6,968 | ) | (26,683 | ) | ||||
Prepaid expenses | (4,502 | ) | (2,305 | ) | ||||
Accounts payable | (7,654 | ) | 2,329 | |||||
Accrued compensation and related liabilities | 12,600 | 11,424 | ||||||
Accrued liabilities and other | 9,981 | (1,905 | ) | |||||
Tax benefit on exercise of stock options | (44 | ) | (306 | ) | ||||
Income taxes payable | (25,104 | ) | 11,884 | |||||
Net cash provided by operating activities | 449,391 | 461,025 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (180,824 | ) | (156,632 | ) | ||||
Proceeds from sale or redemption of marketable securities | 118,174 | 87,477 | ||||||
Purchase of marketable securities and investments | (48,515 | ) | (31,932 | ) | ||||
Acquisitions of businesses, net of cash acquired | (160,707 | ) | (346,363 | ) | ||||
Other | (1,836 | ) | 7,404 | |||||
Net cash used in investing activities | (273,708 | ) | (440,046 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of debt | 252,460 | 333,500 | ||||||
Repayment of debt | (169,987 | ) | (7,303 | ) | ||||
Stock options exercised | 10,863 | 14,402 | ||||||
Tax benefit on exercise of stock options | 44 | 306 | ||||||
Dividends paid | (61,996 | ) | (58,823 | ) | ||||
Repurchase of common stock | (198,949 | ) | (323,409 | ) | ||||
Other | (11,672 | ) | 16,066 | |||||
Net cash used in financing activities | (179,237 | ) | (25,261 | ) | ||||
Net decrease in cash and cash equivalents | (3,554 | ) | (4,282 | ) | ||||
Cash and cash equivalents at beginning of year | 38,914 | 43,196 | ||||||
Cash and cash equivalents at end of year | $ | 35,360 | $ | 38,914 |
*Restated to reflect the adoption of FAS 123(R) using the modified-retrospective method.